Loan Guarantee Scheme: Motion (Resumed)

The following motion was moved by Deputy John Perry on Tuesday, 19 October 2010:
That Dáil Éireann:
recognises that up to 80,000 small firms employ approximately 800,000 people in every city, town, village and region in the country;
recognises that small and medium enterprises, SMEs, are heavily involved in emerging sectors in areas such as green energy, bio-technology, tourism, healthcare, agri-food and creative industries;
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 in the same period in 2009 and 2008 despite assurances of the economy turning a corner;
notes with concern that small businesses are still having difficultly 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 promised by the Minister for Finance;
acknowledges broken Government promises to introduce a loan guarantee scheme for small and medium sized businesses;
recognises that similar schemes in countries like Chile and Taiwan have resulted in increased lending to SMEs and delivered business growth and increased trade at little or no cost to the taxpayer; and
recognises that in the aftermath of a banking crisis, a temporary loan guarantee scheme can support the goal of re-establishing strong and long lasting links between SMEs and banks and to encourage entrepreneurship;
calls on Government to introduce a loan guarantee scheme for small and medium-sized businesses based on the following operational principles:
risk-sharing between financial institutions and the State;
auctioning of loan guarantee contracts to financial institutions;
credit assessment carried out by the banks and the Credit Review Office;
an emphasis on start-ups and export-oriented companies; and
exclusion of financial institutions that approve high rates of non-performing loans.
Debate resumed on amendment No. 1:
To delete all words after "Dáil 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 small and medium enterprises, SMEs, credit initiatives while at the same time ensuring that banks fulfil their commitments given to Government to lend to this sector; and
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; and
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 county enterprise boards, 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 2007-13 to promote sustainable employment creation in the rural economy; and
preserving a low tax regime for business."
—(Minister for Enterprise, Trade and Innovation)

Ten minutes remain in this slot.

I ask to share my time with Deputy Mary Upton.

Will that be for five minutes each?

Yes. I am delighted to have the opportunity to speak on the Fine Gael Private Members' motion on small and medium enterprises and small businesses and I commend Fine Gael for tabling this critical motion given the profound crisis situation in which many such companies find themselves.

As the motion indicates, 1,132 businesses have been declared insolvent since the beginning of 2010, an incredible loss rate. It is astonishing that with so many critical businesses going to the wall, with 800,000 jobs involved and the job losses that accompany each closure, the Fianna Fáil-Green Party Government has been largely silent on supports for promoting SMEs.

This haemorrhaging of small business jobs can be clearly seen across my own constituency of Dublin North East. If one walks through estates such as Clonshaugh Industrial Estate, Baldoyle Industrial Estate and the various industrial estates around Dublin Airport, for example, one will find that numerous local small and medium business people, from printers to creche owners and small shopkeepers are in difficulty. They have been in touch because they fear they will lose their business or the tragic day will come where people will be made redundant. The scale of retail closures is also shockingly obvious if one walks into the shopping centres in Dublin North East, a constituency I am proud to represent. For example, in Northside, Clare Hall, Donaghmede and Sutton shopping centres and on the high streets in Sutton Cross, Howth, Artane and Coolock one can see the very debilitating situation for the business and wider community. Retail outlets and businesses close down with no sign of any succeeding business. If one walks down any street in Dublin city centre or through any of the cities or towns in the country one will see boarded up windows where once there were thriving businesses. This contributes to a spiral of degradation when one should be trying to promote thriving commercial and shopping activities.

We constantly hear the mantra from the Fianna Fáil-Green Party Government and their senior banker associates pals that credit is flowing to small businesses and entrepreneurs. Many businesses have had overdrafts slashed or cut back completely. What is worse is that many of these firms are stable, viable businesses employing people but given the severity of the current recession they cannot operate wages and stock outgoings, for example, on a severely reduced credit line. Other self-employed people such as taxi drivers are being told by banks they will not qualify for new financing arrangements because the outlook for that industry is so dismal.

A survey by ISME in September found that 42% of companies were refused credit in the third quarter of 2010 and an incredible 55% were refused in the second quarter. ISME has flagged major concerns that nearly half of businesses over the past three months who applied for credit have been turned down, a measure that may result in even more job losses. There is a crisis in the sector.

NAMA simply has not worked in freeing up credit. This significant flaw with the NAMA construct was highlighted at the time by economists such as Dr. Karl Whelan of UCD who cogently argued there was no evidence to believe that NAMA would get credit flowing to the people in our economy who need it most, the entrepreneurs. Of course, the NAMA legislation contained no provision to allow credit to move after the banks had been changed substantially by the NAMA procedure. Under the Labour Party's nationalisation plan, banks would have been mandated with this key responsibility.

I note and warmly commend the proposal in the motion for a loan guarantee scheme for small and medium-size businesses. Fine Gael colleagues will remember that my own colleague, Deputy Joan Burton, originally proposed an SME working capital guarantee scheme. It is good to see Fine Gael taking up long-established Labour Party policies. I look forward to our Fine Gael colleagues being able to support a future Labour Government.

Deputy Burton has outlined a co-guaranteed, risk-sharing scheme whereby the banks would make the lending decision but the Government would step in to guarantee 50% to 75% of the loan which aligns the interests of the loan originator and the guarantor. This guarantee would reduce the level of the risk-weighted assets and reduce the recapitalisation requirements of the banks. It has been estimated that the expected loss on these loans, through bad loans, would be less than 5%, ensuring a significant volume of loans being advanced through the scheme. There are similar schemes in operation in the UK, Japan and Hong Kong, for example, and I urge the Minister and his colleagues, as a matter of urgency, to implement the Labour Party's SME working capital guarantee scheme. I again welcome that Fine Gael has adopted this policy.

The Labour Party was a long time coming. The Deputy is very ambitious tonight.

I have been involved for more than a quarter century in supporting small business community enterprise and during that time have been a director of a number of small business centres under the Coolock Development Council, the Northside Centre for the Unemployment and Northside Partnership. I am proud to have worked with, and to have played a role in supporting hundreds——

Tá an t-am caite.

——of small businesses in Dublin North East. I ask the Minister to listen to what has been said on this side of the House and to try to implement some of the proposals made.

I welcome the opportunity to speak on this motion relating to the difficulties being experienced by small and medium enterprises. I believe the difficulties being faced by these enterprises are a serious threat to the economy as a whole because these industries are the backbone of our economy. These enterprises are in every town and village in the country and provide a host of expertise and services that underpin our economy. They employ approximately 800,000 people in a host of areas such as the service industries, manufacturing and technology. As well as being the purveyors of generations of local knowledge and expertise they also hold the creative and dynamic energies that will allow us to capitalise on new areas of enterprise as well as our existing areas of speciality.

Like Deputy Broughan, I am painfully aware of the plethora of small industries, retail outlets and services, etc., that have closed down in my constituency. Apart from every other factor, there is a feeling that derelict areas are developing around us because of that, never mind the unfortunate consequences there are for the owners of these small industries.

One area of speciality we excel in is tourism which I want to address in particular. We have a tourism product that is renowned across the world. With offerings such as our rich cultural heritage and our outstanding natural beauty, we compete and thrive in the global tourism marketplace. Our tourism industry is a real indigenous success story and is often overlooked as the importance of the tourism industry is often underappreciated. Each petrol station and cafe in a rural town or village is a contributor to and beneficiary of the tourism industry. This under-appreciation stems partly from the integrated nature of the sector with tourist spending in the local economy not readily identifiable as tourist revenue. However, the importance of tourism should not be underestimated. In 2009 it contributed €5.2 billion in revenue with over €1.2 billion benefiting the Exchequer in taxation. In 2008, tourism accounted for 4% of GDP.

As in so many sectors of our economy, the past two years have been extremely difficult for the tourism industry. We have seen dramatic falls in visitor numbers from traditional markets such as the UK and continental Europe as well as a drop-off in the long haul market such as from the US. The industry has reacted well by refocusing on its core strengths and innovating to adapt to the rapidly changing and increasingly competitive global tourism market. This change takes time and support if it is to succeed but the problems of lack of access to credit to sustain seasonal businesses, as well as credit to allow businesses to develop their product, is a real threat to the industry.

In order to continue to develop our tourist industry it is vital that budding tourism small and medium enterprises are able to access the start up and development funding required to produce technological and innovative products and services which can enhance the tourism product in Ireland and be exported to other countries. As we have been told on many occasions, credit is the lifeblood of the economy but the fact that we are having this discussion now is a clear indication that attempts to free up credit are simply not working. We have figures showing that over 1,100 businesses have been declared insolvent so far this year. These figures are as alarming as the headline figures for unemployment in the economy.

Credit must be unfrozen by banks owned by the State and covered by the State guarantee. What is the point of virtually nationalising AIB and being the largest shareholder in Bank of Ireland if we cannot use them to pump credit into the economy to support businesses and jobs? The Labour Party has already set out a strategy for the creation of a strategic investment bank to improve the ability of SMEs to access credit. This approach would bypass the main banks which seem too shell-shocked by their fall from grace to be able to do what we need them to do to save our economy.

The Labour Party is steadfast in its belief that to protect these indigenous businesses and to help them survive and eventually grow is the surest way of ensuring we are competitive in the growth industries of the smart economy. The tourism industry is a very good example of an industry that traverses both traditional skills and state-of-the-art technology. Our visitors want to savour the traditional Ireland with a modern twist and they need the best and most modern technologies to access the traditional through iPods, the Internet, broadband and so on. The developers of the technology such as is found in the Digital Hub in Thomas Street, for example, are co-dependent with traditional services and facilities. Each needs credit facilities to set up, stay in business and create employment. We cannot allow any further haemorrhage in these industries because the knock-on effect will be felt across the community. Therefore, credit must be freed up to allow the industries to recover and grow.

The next speaker is Deputy Charlie O'Connor. There are a number of other speakers, including Deputy Margaret Conlon——

Deputies Michael McGrath, Thomas Byrne and Frank Fahey.

There are 30 minutes in this slot. I am not clear as to the division of the time.

I shall make it clear, a Cheann Comhairle. I wish to share my time with Deputies Margaret Conlon, Michael McGrath, Thomas Byrne, Frank Fahey, Timmy Dooley and Cyprian Brady.

I welcome the opportunity to make a contribution in this important debate, and I compliment our colleague, Deputy John Perry, on his initiative in tabling the motion. I apologise for not being here last night, but I had to cheer on Shamrock Rovers and St. Patrick's Athletic in Richmond Park——

Sligo Rovers will deal with them, now.

I now look forward to being in the Aviva stadium if I can get a ticket on 14 November to watch Sligo Rovers and Shamrock Rovers.

Will the Deputy please come back to the loan guarantee scheme?

It is all about jobs, a Cheann Comhairle.

Members will know that I live in Tallaght, which I shall mention somewhat. Long before I had any ambitions in politics I was involved in founding an organisation called the Get Tallaght Working group. This has been operating for 26 years and has developed into Partas, which is a community developing group in the general Tallaght region dealing with the need for employment and enterprise. Tallaght, 26 years ago, was a different place to what it is today, and we have made much progress in the interim. It is good to remember that this week on Saturday, The Square in Tallaght will celebrates 20 years. It was opened by a Fianna Fáil Taoiseach and was a very proud day for the people of Tallaght, emphasising as it did the need for job creation. It was the catalyst to get Tallaght working and other groups have shared in this success over the years.

We have many great things there, in what is a city in all but name. I am always encouraging people to jump on the Luas here in the city and go out to Tallaght. However, we still have challenges, as with other communities. In the last year the unemployment figures have increased substantially, so it is important to speak up for jobs. Whatever about all the issues that will be raised over the 48 days between now and budget day, the issue of jobs is crucial. I looked with envy at television pictures on Monday of the Minister of State, Deputy Dara Calleary, in Mayo with his senior Minister, Deputy Batt O'Keeffe. I do not often get the opportunity to stand behind Ministers in front of television cameras, but——

I am always inviting the Deputy.

——I look forward to the time when that will happen in Tallaght as well, because we need jobs.

I was glad that the Minister, Deputy Batt O'Keeffe, visited the institute of technology recently in Tallaght to turn the sod for a new centre of applied science for health. My good friend and colleague, Deputy Conor Lenihan, will share the view I expressed to the Minister, that it is important to impress on him not only the negatives as regards job creation needs but also the positives that I have already listed.

I know that everyone in the House, particular on the Fianna Fáil benches, will mention the needs of their communities, and I am not afraid to speak up for Dublin South-West. I shall continue to do that and it is important that I should look for the support of Government in that regard. I want to briefly mention the Point.

I have seven speakers in this slot, Deputy, so we are talking about roughly four minutes each.

I am following what I understood to be my written instructions, a Cheann Comhairle. However, I am happy to concede. This is an important debate and I look forward to its conclusion and to getting the message across to Government that jobs is the big issue in Dublin South-West and everywhere else.

I, too, welcome the opportunity to make a brief contribution this evening. We are all very aware of the difficulties being encountered by small to medium-sized businesses the length and breadth of the country. I am no different from any other Member of the House. I have received calls from the businesses that are struggling and finding it very difficult to manage. While the details of each individual case is different, the theme is the same.

These are businesses that prospered during the years of the Celtic tiger. They expanded their facilities and took on more workers because demands for their goods and services were on the increase. During that time the financial institutions were only too happy to lend money to them. Sometimes they did not solicit overdraft increases, but got them, nonetheless, without even looking for them. Now that activity is falling, businesses find they have to make employees redundant — not something that any business likes doing, downsize facilities and are unable to get access to credit. Worse still, they find that the overdraft limits on which they had relied as very important tools of the business have been reduced overnight, often without any warning or consultation. If suppliers' cheques bounce, employees remain unpaid and businesses cannot operate in such a regime.

In other cases, people have been told by the banks that they must change their overdrafts to term loans. They have no option but to take this route, and it is not something they are happy about. I have been advising people who might believe they have been unfairly treated by a financial institution to go to the credit review office. If a business is viable, with a good track record and good future prospects, then it deserves and needs the necessary tools to enable it to continue. The credit review office is providing businesses with independent reviews of bank refusals, and in some cases overturning the decisions of the banks.

I hoped last week I would not have to speak about this again, and here I find myself talking about the common question the media and public are fixated with. It is, in effect: "Why are you bailing out the banks, the builders, the developers and your friends?" I said before that we were not bailing out banks, builders or developers but society in general because without a proper fully functioning banking system, we would have no businesses. Everything would grind to a halt.

No matter how unpalatable the bank recapitalisation is, we have to see it through and ensure that the flow of credit to businesses continues. Another problem facing businesses is rates. They are struggling to pay their rates and while I acknowledge that local authorities need money to fund the necessary services, constituents who speak to me are finding it extremely difficult. There is no provision for rates holidays or deferred payments schemes and perhaps this is an area that should be looked at.

While I welcome all the initiatives made by Government to create jobs, I believe the efforts we have made to sustain jobs is equally important. I conclude by lauding the work of the country enterprise boards. I welcome the recent announcement by the Taoiseach of €3.3 million funding for the CEB network throughout the country. They are acting in a proactive manner. In my constituency, particularly in Monaghan which I visited last week, unfortunately the CEB is not getting the attention it deserves, but I am happy to support the Government's amendment to the motion, this evening.

I welcome the opportunity to make some brief comments in support of the Government's amendment of the motion before the House. All political parties in the House recognise the importance of the SME sector, supporting as it does in excess of 700,000 jobs in the economy. At the heart of the motion tabled by Fine Gael is the issue of access to credit, which of course is fundamentally important for all small to medium-sized enterprises in Ireland.

I agree with the comments of the Minister, Deputy Batt O''Keeffe, last night to the effect that the preferred option is that the banking system should function normally, without any direct intervention from the State in terms of loan guarantees. Having said that, the Government has had to introduce a number of unprecedented policy initiatives to get the banking system working normally by the setting up of NAMA, for example, which has forced the financial institutions to face up to the full extent of the loan losses from the toxic loans in relation to property and so forth. NAMA will help to cleanse the banking system of those loans and as part of the recapitalisation we have insisted that AIB and Bank of Ireland lend €12 billion between them over the course of 2010-11. Mr. Trethowan's credit review office is reporting on the implementation of that on a monthly basis, both by sector and indeed, by geographic area.

I commend the Ministers, Deputy Brian Lenihan and Batt O'Keeffe, on the hands-on approach they have taken in ensuring that the banks extend credit in an appropriate manner to the SME sector. I welcome the recent quarterly report by ISME, whose survey shows that there has been some easing of credit conditions in recent times, although we cannot be complacent in that regard. We must acknowledge that in previous times, credit conditions were at an artificially high level, although they have gone to an exceptional low in recent times. We are trying to strike an appropriate balance. There is some evidence that many sanctioned credit facilities are not being drawn down in full because many SMEs do not have the confidence in the economy to take on that extra debt. Thus, in the forthcoming budget, while we must work towards the four-year plan to reduce the deficit, we must also see some targeted measures to stimulate more consumer spending in certain sectors. That would clearly benefit SMEs.

The guarantee scheme proposal put forward by the Fine Gael Party has merit in principle but only on a limited basis. It would have onerous conditions because ultimately, the taxpayer will be at the end of the hook. The burden will need to be shared between the institutions and the State and if the scheme were to be implemented it would have to be linked directly to the creation of employment. For example, a State loan guarantee would not be extended to a business applying for additional working capital but only in the case of a project that would directly create additional employment. That is what we all want to see. We must recognise how exposed the State already is to the banking system and take a responsible and cautious approach to becoming involved in any further guarantee initiatives, although there may be scope for it on a targeted and limited basis.

I support the point made by Deputy Conlon about the burden of local authority charges, which is something that all parties in this house can contribute to resolving. Many councils across Ireland are controlled by Opposition parties, and we do need to take practical steps to reduce the burden of local authority rates, development charges and so on so that viable businesses can continue to retain the jobs they have and create additional jobs. I support the Minister, Deputy Batt O'Keeffe, in his efforts to reduce the amount of red tape and bureaucracy for SMEs.

I welcome the opportunity to contribute to this debate, although I am not necessarily in agreement with the Opposition in terms of the approach it takes. It is important that we take every available opportunity to discuss the area of job creation and retention in the House. There is no point in getting into the difficult economic situation in which we find ourselves but at the heart of our current difficulties was our inability to retain the level of employment we had. We must consider every measure, and that is why it is worth considering the idea put forward by the Opposition. However, as the previous speaker mentioned, we must be careful not to put the taxpayer further in hock than is absolutely necessary.

We are right to focus on small- to medium-sized enterprises. We often pat ourselves on the back when IDA Ireland succeeds in bringing foreign direct investment to the country, which is important and beneficial even in the current climate because it contributes towards exports. However, SMEs must be seen as the bedrock of employment in this State, as is the case throughout Europe. The type of support they need is not overly burdensome credit support but assistance in running their businesses in a careful and efficient way. What they need is an effective banking system and an effective flow of credit, which has not been the case up to now. Although the Government has had to introduce policy initiatives — in particular, the requirement for Bank of Ireland and AIB to generate new borrowing by providing €3 billion in new loans this year and next year — my view is that this is not filtering through. I have heard reports, as Deputy Conlon mentioned, of institutions converting overdrafts into term loans, which is ultimately not new money. It is not providing any additional comfort to companies that are vulnerable in the current environment but will have a viable existence and be able to create and retain jobs as we come out of this difficult international climate.

Much has been achieved in resolving the problems in our banking system, whether it be through the nationalisation of certain elements of our financial institutions, the recapitalisation or the existence of NAMA and the work it has done. However, continuous monitoring is required and further pressure should perhaps be put on financial institutions to improve their policies, either through their boards or by implementing additional measures if necessary. We need to continue to monitor this.

The community enterprise boards are a vital and valuable component of support for the emergence of SMEs, providing assistance from the very start. We need to focus more on that. I was disappointed during the week to see that some of these community enterprise boards have not sought extra money or have not been in a position to draw down the additional money. In the current climate they should be pushing it out to the boundary. For that reason we need to have a greater focus on this area.

I will conclude with a view I hold, which is that we need to change our bankruptcy laws. If we force the owners of SMEs into the wilderness for 12 years — or even for six years, as mentioned in the report of the Law Reform Commission — we are robbing ourselves of some outstanding entrepreneurs. They are the people who will ultimately get us out of the mess we are in through the creation of employment. There is much work to be done in dealing with the political fallout of this, but we do need to reduce the length of time for which people find themselves locked in bankruptcy.

I support the amendment to the motion. As far back as December 2008, the Tánaiste and then Minister for Enterprise, Trade and Employment, Deputy Coughlan, stated that every action and initiative being taken by the Government was about jobs, jobs, jobs. The actions taken then, which are continuing now, were aimed at stabilising the public finances, fixing the banking system, improving our competitiveness and making sure we were ready to take full advantage of any upturn when it came. In fairness, the Government has stuck to that plan. The vast majority of the actions have worked and are working. We continue to compete successfully with other countries in attracting foreign direct investment, as recent job creation announcements have shown. However, there is still much more we could be doing. We should be out there selling Ireland around the world and explaining the benefits of doing business in Ireland. The five-year integrated trade, tourism and investment plan is going some way towards achieving that. We had to do this back in the 1980s when former Deputy MacSharry and Padraic White, at the behest of the then Taoiseach, Charles Haughey, went out and sold Ireland as a country and a place to do business. We must continue to do that.

When we consider in detail the measures that have been put in place, it is obvious that they are not just about creating new jobs. There is an equal emphasis on protecting the approximately 1.8 million people who are in employment, which is a major responsibility for the Government. Previous speakers have mentioned, and I know from speaking to people in my own area, that many business people are struggling. Some of them have managed to adjust the way they do their business, but unfortunately, others are just not in a position to do that and are suffering. They need more support and they also need co-operation from the banks. The measures that have been established, including forcing AIB and Bank of Ireland to provide €3 billion this year and next year specifically for SMEs, must go some way towards ensuring that those companies that find themselves struggling and need extra support are able to get it.

We have also seen the introduction of the Credit Review Office. My fear is that SMEs that seek credit who are refused and continue to fight the case would be targeted for special treatment further down the line. I hope this is not happening. I know that businesses are finding it difficult to get overdrafts and credit. In the majority of cases, there are probably good reasons for that, but the measures that have been put in place should ensure those businesses which need the support get it.

The cost of doing business is continuing to come down. For many years we have listened to how over-regulation has affected businesses. We have gone a long way towards improving that. As a member of the Joint Committee on Enterprise, Trade and Innovation, I know that every effort is being made to listen to the concerns of as many small and medium enterprises as possible and to talk to the statutory agencies that are dealing with them on a daily basis. We will continue to do that.

I am pleased to have the opportunity to speak on the Government's amendment to the Fine Gael motion. I listened with interest to speakers on both sides of the debate. There is a general consensus across the floor that small and medium enterprises are the cornerstone of our economy and if we do not protect the cornerstone, the whole thing will collapse. We must support small and medium enterprises if we are to get out of the current economic crisis.

In the spirit of the cross-party consensus I hope will build up, I recognise Deputy Perry's own experience of small business from his various businesses in south Sligo, which is from where my wife comes. He certainly has a knowledge of small business and I pay tribute to Fine Gael for not using the usual language to slam the Government in the motion. At the same time, I would suggest that some things are going right, particularly exports. The economy will probably have overall growth this year and it is important to recognise that. While it is certainly the duty of the Opposition to oppose and criticise, it would be helpful if it recognised the export performance of the country and the increase in foreign direct investment. My hope is that the more foreign direct investment into this country, the more products they need from small and medium indigenous companies here, and that a knock-on effect can be created.

The Government is providing concrete measures to support the small and medium enterprise sector. I want to look at the city and county enterprise boards throughout the country and in particular, the board in Meath which does much work in assisting members of the public and potential business people in my own county with jobs and training. A further €3.3 million in funding was announced last week for county enterprise boards. This relatively small amount of funding has the capacity to create more than 450 jobs in small firms, which highlights the importance of a good capital budget in creating jobs. The money will be used to help people set up new businesses, support entrepreneurial spirit and to help local communities through job creation. The Government has provided €18 million to county enterprise boards, helping smaller businesses in 2010.

Meath County Enterprise Board is doing tremendous work. For the year up to September 2010, it has approved 19 projects with a potential of 42 jobs, which is an average cost of €7,000 per job. It paid out €106,000 for another 18 projects that created 27 full-time jobs at an average cost of just under €4,000 per job. A total of 457 people have completed training or are on training courses with the Meath County Enterprise Board this year. The number is divided fairly evenly between men and women and I would like to pay tribute to our female entrepreneurs in my constituency, and throughout the country as well. Out of that figure of 457, 184 received "start your own business" training. It created many jobs in the county even though it is a relatively small operation. The county enterprise board is working with neighbouring boards in Kildare and Fingal on training and support for former SR Technics employees. That is a big issue for my constituency, with Dublin Airport being so close.

The county enterprise board employs only the equivalent of four and a half full-time staff, so it does a great amount of work with such a small number of staff. I pay tribute to it. It is another reminder of the work the Government is doing and which is being delivered on the ground to support job creation.

I support the amendment to the motion in respect of small and medium enterprises. Three critical areas are being addressed, namely, the ability of the banking sector to make cash flow available to small business, the need for a major reduction in the amount of regulation, bureaucracy and red tape that small businesses have to endure and — the most important area — the return of confidence in the small business sector.

The support from Enterprise Ireland and from the IDA to assist small businesses to get into new markets is encouraging. That we are getting into markets such as Brazil, China, India, Russia, Japan, the Gulf states and former Soviet states is an example of the opportunities that exist for small businesses in Ireland. We must be export orientated and in that respect I note what the Minister had to say about the guarantee scheme being put in place. That scheme must be put in place as a matter of urgency.

The banking situation is critical. There is no doubt, no matter what anybody says, both Bank of Ireland and AIB have made life very difficult for small businesses in this country. We understand this is because the banks themselves do not have the cash to give out, but they have to move from the culture we have seen in the past two years whereby they have not been prepared to take any risk. It is vitally important that we capitalise the banks as soon as possible, but it also vitally important that we give back to the local bank manager the ability to be able to make decisions. Every decision in Bank of Ireland and AIB currently has to be sent to a credit department in Dublin that has no concept of what is going on across the country. The Minister for Enterprise, Trade and Innovation must get the banks to give back decision making powers to the local bank manager. He knows his customers. He knows what is a good risk and a bad risk. This is the most critical issue.

The second most critical issue is the need to put an end to the crazy aspects of regulation. How many agencies are involved in the regulation of small businesses at present? We have an army of inspectors making life difficult for them. NERA is the biggest offender. NERA was set up because of a number of cowboy employers that needed to be dealt with a few years ago. However, the majority of employers are not cowboy employers. I am not advocating for one moment that there should be any diminution in standards or workers' rights, but there is no need for this plethora of inspectors from NERA, the Health and Safety Authority, local authorities, the HSE and so on. They are making life impossible for small business people who are trying to make a go of things.

As we are now bringing confidence back into the sector and are coming out of the recession in spite of difficulties, I believe people will spend more and small businesses will benefit. I am satisfied we will see a return to growth in this sector, provided we deal with the first two issues I mentioned.

In the next slot I have nine speakers offering. There are 30 minutes available, so there is a need for discipline.

I wish to share time with the speakers on the list. Do you need to read the list, a Cheann Comhairle?

No, it is fine, I will call them.

I commend Deputy Perry on tabling this motion which is appropriate and apt. I want to speak on a positive note. What we need is recovery through growth and key to that is the SME sector. I came from that sector myself having set up as self-employed many years ago. We need to look after start-up companies, particularly in the export area. I have a simple ten-point plan starting with the need to foster an entrepreneurial culture. People should be encouraged to set up as self-employed rather than that being seen to be a dirty term. People should not be afraid of failure and be encouraged to take risks, which is not the case here.

The main banks, Bank of Ireland and AIB, need development wings dealing specifically with the SME sector. At the moment the banks are more interested in repairing the balance sheets and are giving no attention to SME lending. People from the private sector should be brought in to head up those development wings. There should be an ancillary board comprising representatives from ISME and the Small Firms Association, who have the knowledge and can track what lending is taking place.

The VAT registration limits for people setting up businesses need to be increased as they are too low. For goods the limit is €75,000 and for services it is €37,500, which is an excessive burden on an SME setting up. The high-level review group investigating regulation in the SME sector has only met five times in 2009. There is a target for a 25% reduction in the regulation burden on the SME sector by 2012. We should have yearly targets with, perhaps, a target reduction of 10% by the end of 2010, another 10% by the end of 2011 and 5% by 2012. That high-level group should meet on a monthly basis.

There is an exemption from corporation tax for people setting up as self-employed for the first three years. Most self-employed people set up as sole traders. There is a major burden of having to be audited and they worry about being directors. From my experience as a chartered accountant, people would only establish companies when their tax levels were sufficiently high to justify it. They should be exempt from tax for the first three years.

Deputy Fahey spoke about funding to be provided by Enterprise Ireland and IDA Ireland. The funding to the enterprise boards was cut in the past year. As start-up companies get their funding from the enterprise boards, funding must be given to that area and proper mentoring must be put in place. Based on what I saw today, a venture fund should be set up for start-up businesses to allow risks to be taken with them. At the moment the self-employed are entitled to virtually no social welfare benefits; they do not qualify for FIS or job seeker's benefit because they are on an S stamp rather than an A stamp. We need to find ways to get people in small businesses over the hump. If those points were implemented it would have a major effect on business.

We need a link between graduates and colleges and the business sector because college graduates represent the future. We have one of the highest proportions of graduates in Europe and we need to ensure they do not emigrate and that we keep them here. We need an enterprise culture to drive recovery through growth. While the multinationals are very important, the indigenous SMEs, particularly those that export must be supported.

I am glad to have the opportunity of making a few points on this crucial debate and I commend Deputy Perry on tabling the motion and outlining how the implementation of these suggestions would have a positive effect on the survival and growth of small businesses. I was present in Ballina on Monday last when the Minister, Deputy Batt O'Keeffe, and the Minister of State, Deputy Calleary, announced 250 new jobs in Hollister Ireland. I shook the hand of the Minister of State and it was a happy occasion. There is universal welcome for those jobs. I would like to think there would be similar announcements for my county every week or month, but I do not hold my breath. These jobs were badly needed in Ballina and in the county because many more than 250 were lost in Ballina in recent times, most of them in the small business sector whose credit has been shut off in the past two years because of the financial crisis.

Nobody is suggesting that non-viable businesses should be supported by handing out buckets of cash to businesses without a chance of success but we have gone from a situation a few years ago, when money was being shovelled out, to the present state of affairs. I know one small business at that time that sought €50,000 and was offered €300,000. The businessperson was so cautious at the time that the company did not proceed but later figures proved that it could have taken on two or three additional staff if it had proceeded as originally proposed. Now it can get nothing. I emphasise those two or three jobs because it is the two or three jobs lost that make up the majority of the 450,000 people who are unemployed. These twos and threes will not make national or even local headlines but they have the same effect on those losing jobs and their families.

Much has been spoken about in recent weeks and months by our economic experts and on all sides of this House about getting the balance right between spending cuts and tax increases, and the balance between savings and stimulation. One area where balance has not been fair is in the small business sector. Charges and costs have gone through the roof and income and turnover gone through the floor. I would agree with the point Deputy Fahey made about the increased regulation in recent years.

The Fine Gael motion is an honest effort to redress that balance and deserves the support of this House. I will finish by quoting from a letter to today's edition of The Irish Times:

One does not need to hold an economic title to know that small businesses need access to finance (i.e. cash) to support their businesses and to pay their 800,000 taxpaying employees. Business owners do not need more talk, more interdepartmental discussion, more economic assessment; they need action on making finance available and accessible, and they need it now.

Our proposal is self-financing and would not cost anything. It was implemented in Northern Ireland in 2008 and has worked there. We hear much about consensus; I ask for consensus from across the floor for this motion.

I thank Deputy Perry for tabling this important motion and I endorse his proposal for a loan guarantee scheme for SMEs. I have done considerable work in recent months in meeting and consulting with small and medium-sized enterprises in my constituency. What I have gleaned from my many meetings is essentially the same as my colleagues have encountered across the country. It is that urban and rural areas are all facing the same challenges. The lack of access to credit is well defined and has been well aired. We have now reached a point where we need action by the Government on this matter and less discussion.

The other issue that needs to be addressed, which is politically sensitive and which the Government has failed to touch on up to this point, is the enormous challenge we face due to the cost of labour in our economy and the utter lack of competitiveness in that respect compared to the position that pertains in most of our European neighbours and in other parts of the globe. If we are to recover our economy and return to growth, we must make our economy competitive. The minimum wage rate in Ireland at €8.65 an hour is the second highest in the European Union and considerably higher than that in our biggest and nearest trading partner, the UK. This wage rate is not sustainable. It must be reviewed in the current context to give a break to employers who literally have been dipping into personal and family savings to keep people on the payroll. Business owners and employers have gone way above and beyond the call of patriotism and duty to try to keep people in employment in this country, but that is not going to last. My fear is that after the Christmas season and come the New Year, even more haemorrhaging of jobs will occur in the private sector because employers are not being assisted or given a break in any way by the Government. I call on the Government to review the issue of the minimum wage. It is essential it is reviewed now in the context of the budgetary crisis, the relentless cost and competitive challenges that face employers and the further job losses we will face in the New Year if the Government does not act.

I commend Deputy Perry on tabling this important motion. What comes across loud and clear is that Fine Gael can see the wood from the trees when it comes to the support necessary for our small and medium-sized businesses. However, this awareness contrasts starkly with the extraordinary lack of will by the Taoiseach and his Government to face reality and get the country back to work through a dynamic lending scheme and jobs strategy.

A fact that must be acknowledged is that small and medium-sized businesses are facing liquidity problems. This follows a decade in which small and medium-sized businesses have been virtually ignored while the focus has been on foreign direct investment despite the fact that small and medium enterprises provide 70% of employment in the non-financial sector.

Last June, a Longford man, Dr. Ciarán Mac an Bhaird, published a new academic book on financing small and medium-sized enterprises. He described such businesses as the cornerstone of the Irish economy. However, he highlights the fact that small firms in Ireland are in deep trouble and are struggling to stay alive. I am very much aware of this from speaking to people in small businesses throughout my constituency in both Longford and Westmeath. Dr. Mac an Bhaird said that these businesses need a level playing field with regard to tax incentives and that the old bank lending system must be replaced by a different means of forwarding finance to small and medium enterprises.

It had been hoped that the Government loan guarantee scheme would boost the small and medium businesses sector. Once again, however, we see the Taoiseach wriggling like a worm on a hook to escape another commitment to Irish businesses. It is very revealing that there is an absence of reference to the scheme in the Government's amendment to the motion. What the Government cannot deny is that it has sidestepped this issue, and this has always been the case.

It is now nearly a year since the Taoiseach first proposed the loan guarantee scheme in a statement worthy of his predecessor. He has since said that the issue needs to be looked at very carefully because we have already given credit lines from the banks to ensure, on the basis of their successful recapitalisation, that they will be in a position to have credit lines to business. I wonder does he know what he means by that. It is as confusing as something Deputy Bertie Ahern would say, only the Taoiseach is using bigger words. This is an example of Cowen language.

Also last April, the Minister for Enterprise, Trade and Innovation promised 40 jobs for Mullingar, raising hopes that have since been dashed of increased jobs in a local company. Such false promises are a normal part of the Government's spin, grabbing the headlines in the name of the Government with no follow up and no regard for those who have been conned.

I again commend my colleague, Deputy Perry, on putting forward this important motion. Hopefully, common sense will prevail and it will be agreed by all Members of this House.

Small and medium-sized enterprises are in a vicious circle at present. Members of this House find themselves in a similar position to an extent in that Members on all sides are all saying the same thing on this subject but they will vote differently on this motion. That does not make sense. The vicious circle in terms of this sector relates to overdrafts. These are based on turnover and one does not need to be a rocket scientist to know that the turnover of businesses has gone down. The banks have now turned such overdrafts into term loans, thereby introducing a racket effect. What happens then is that businesses cannot to afford to pay fees such as insurance premiums. The most significant development in this vicious circle is that there has been a loss of confidence in spending. Turnover cannot be maintained by these existing companies because people are either saving or are just surviving and cannot afford to spend. We need to examine the overall economy and introduce measures that would restore confidence. As Deputy O'Donnell said, restoring confidence, positivity and growth are key in this respect.

Deputy Perry, who tabled this motion, has his ear to the ground and he knows that banks are not lending. We must be experimental in our thinking. We should note what Alistair Darling did with the VAT rate in the UK a few years ago. In the pre-Christmas period people will travel North to buy certain merchandise such as toys because they are cheaper. We need to look at a bundle of goods and reduce or remove the VAT rate on some of them. We need to be experimental and creative in our thinking. If we want to get people to spend, we must offer cheaper products; if there are cheap options across the Border, the current position will not suffice.

I will outline the conundrum we face. Every person who is in a position to pay back his or her mortgage in the country pays his or her money into the bank on a monthly basis. Mortgage holders in the Minister of State's constituency are making their repayments to the banks but the banks are not paying out. Given the amount of money that is continually going into the banks in terms of mortgage repayments and the austerity measures that will come down the line, the conundrum facing our country is reflected in the John Maynard Keynes's theory, namely, the issue is not the cuts themselves but the expectation of cuts. That is where the Government has made the mistake, and it is by this that it will be measured into the future.

I congratulate Deputy Perry on bringing this motion before the House. Everybody in the business world understands that access to credit is their most important lifeline. Given that there are 80,000 small businesses in this country employing approximately 800,000 people, surely a Government that ignores that fact is falling flat on its face and is devoid of policies that will create employment in the future. One of the Government's efforts to make the banks lend again and to make them work and function properly was to set up a credit review process, as it had promised. That has been established and functioning since last June. Only 20 applicants have come forward to have their applications reviewed. That in itself shows that the Government has not been serious about advertising this facility for people who have been deprived of proper finance by the banks. Of those 20 applications, only ten have been processed and, of those ten applications, the decisions in only five of them have been upheld. Surely that in itself indicates the level of failure of this Government to do anything worthwhile.

The Government introduced this agency which has been nothing short of a talking shop with no clout to deal with the banks. I agree with Deputy Fahey on the Government side on how important it is to restore discretion and power to local bank managers. Any request for funding or credit at a local bank branch is now sent to its head office in Dublin to be decided on by officials who know nothing about the customers in question. These customers, who have been honourable in all their dealings with their banks in the past, are refused credit and loans for no particular reason.

Along with Deputy Perry's proposal for a loan guarantee scheme, we need to establish a national loan scheme, particularly considering the amount of money still in the economy. Such a scheme was a success in the past and should be introduced again by the Government.

This motion calls on the Government to introduce a loan guarantee scheme for small and medium-sized businesses based on a realistic operational system. When I hear my colleagues on the Government side questioning how it can be done and how much it would cost, it is clear they did not read the motion thoroughly. Deputy Perry spelled out clearly how it was not an open door but a scheme that would be guaranteed and maintained.

It is also ironic the Government questions the logic of such a scheme when it has already committed up to €100 billion to save the banks, of which €40 billion went to Anglo Irish Bank and Irish Nationwide Building Society, which will never create one job.

It is welcome some Members opposite realise local authority rates are a burden which must be dealt with. They have also realised many family businesses are keeping themselves afloat by raiding their savings. This is not good enough. The Government promised the introduction of a support scheme for small businesses last January. Unfortunately, last week the Taoiseach told the Dáil this scheme was a non-runner.

Everyone can talk about the issues but action and creating jobs is the only way this country will ever get out of its present mess. It is not good enough when one thinks of all the jobs once provided by furniture manufacturing, bacon processing and retail in County Monaghan which have been lost. In September 2009, the Minister for Finance, Deputy Brian Lenihan, promised a wall of cash would be available once NAMA came into existence. As we all know now, the opposite is the case.

Up to 2,000 similar schemes to this one have been introduced in 100 countries. Ireland is the only one in Europe not to have such a scheme. Will the Minister of State think again about voting against this motion tonight?

Fifteen months ago the Ceann Comhairle suspended me from the House for unruly behaviour when I challenged the Taoiseach's claims of a wall of cash being available in the economy. While the Ceann Comhairle was right then, the Taoiseach certainly was not. Coming from a small business background, I knew there was no credit available and many small businesses were going to the wall.

It is still happening. The banks continue to run the country while repairing their balance sheets. When my local bank branch shut down, I was told to use the local post office for certain transactions. Recently, I went to the post office to settle my credit card bill for €1,000 with cash only to be told such a transaction could not be carried out there until 15 November. When I went to the bank's regional branch, I was informed it could not take cash for the payment because it was now a cashless bank. When I told the bank official I had just lodged a cheque from Revenue for €4,000 which could be offset against this, I was told it would clear the payment for the amount owed on the card, €1,000, but the remainder would not be cleared for another five days. This five-day rule for clearing cheques is ridiculous. It is obvious the banks are controlling the Government's actions. The sooner the Government wakes up to this the better.

Many people cannot sell their assets and release credit because they are competing with NAMA-held assets. I know one man who wanted to purchase a factory site near me. He was warned by his accountant not to buy it as there would be many more empty sites around the country for half nothing because of NAMA.

Those who are trying to work their way out of this recession receive no support. Many businesses have been forced on a three-day week with some staff on a two-day week. The Government has to pick up the tab for this through lower PRSI contributions and welfare payments. Will the Government give these companies financial support to get back to full-time work instead of funding them through welfare?

It is time the Government got real. It has been all talk for the past 15 months while many businesses have shut down and their employees joined the dole. Those who invested their time and every penny they ever had in their small or medium-sized enterprise have not survived. The Government has done nothing for these innovators. Instead, it gave them the two fingers and told them they are on their own.

I compliment Deputy Perry, the small businesses' champion, on tabling this motion. When he becomes Minister responsible for this area, he will ensure small businesses will have every opportunity to survive.

I apologise to the Minister of State, Deputy Calleary, for not being in Ballina, County Mayo, last Monday for the recent jobs announcement there. My clinics are on a Monday from 9 a.m. to 1 p.m. so last week I had to attend to those with no jobs.

Several weeks ago Westport had good news from Allergan, an American company, which will invest €750 million in its local plant there. It is the company's largest and most profitable factory outside of California and when its board met in Westport recently, it complimented its wonderful workforce there.

The Government can make changes in several areas to support small and medium-sized businesses. During the boom, small businesses were ripped off by local authority rates. No matter the authority's budget requirements, the rates always rose. The Minister of State must give a directive to local authorities to reduce their rates by 10% for small businesses.

Recently when purchasing a major home product I had a choice between one made in England and one in Portlaoise. While I liked the former, I decided for the product made in Portlaoise, simply because it was Irish. Last year there was a problem with the VAT rate. Now with the VAT rate reduced, in the run-up to Christmas this year I urge people to shop local and buy local to keep their local small businesses viable. It also has a knock-on effect on the tax take and the State's ability to pay social welfare.

I commend the amendment to the House. I thank Deputies on all sides of the House for their contributions in this debate.

The nub of the Opposition's motion and the contributions of all Deputies is how to get access to credit and finance. It is clear that the Government's actions in addressing the financial crisis within the banking sector are fundamental to providing a capacity for banks to support our enterprise sector, including SMEs. As part of the recapitalisation process, banks have begun to retrain their staff in the basic skills of lending, as a number of Deputies have mentioned this evening, and this process should be accelerated.

The purpose of NAMA is to remove uncertainty about the banks' balance sheets, clean them up and provide them with an ability to access liquidity, thereby facilitating the availability of credit to the real economy. To date, NAMA has removed €27 billion of risky assets from the balance sheets of the participating institutions, with €13 billion in NAMA bonds being issued in return. These bonds are a direct source of liquidity for the participating institutions as they are market tradeable in addition to being eligible as collateral for eurosystem operations. It is from this source that credit should now be available.

Banks are committed to meeting their lending target for new lending of €12 billion through 2010 and 2011 and are confirming that they are open for business. Today's annual conference of the Irish Banking Federation, IBF, placed considerable emphasis on the banks' willingness to lend and to engage with their stakeholders——

Too late for many.

——in re-establishing their customer relationships and credibility. Banks are currently providing lending to businesses in the order of €32 billion.

However, it is not just being left to the banks to give assurances. There is close measurement of their performance in meeting lending targets, in disclosing their lending policies and in reviewing cases where credit has been refused to viable SMEs. The work of Mr. John Trethowan and the Credit Review Office is central to this process. The Opposition Members have made specific reference to the work of the Credit Review Office. While I accept there was no personal criticism of Mr. Trethowan there has been comment that the Credit Review Office is irrelevant and ineffective. This is an unfair comment and shows a lack of understanding of the Credit Review Office. The office is making a major contribution to dealing with the outflow of credit, not just in reviewing cases where credit has been refused but in reviewing bank lending policies and in driving the process of providing our businesses with a proper, professional banking service.

There were 20 applications and only ten dealt with.

The reference to 20 cases fails to have regard to the huge volumes of other inquiries handled by the office and the impact the office has had on the main banks in establishing formal internal appeals mechanisms for handling their own review processes.

It is still not happening.

For the first quarter of its operations, the Credit Review Office had 2,650 visits to its website and nearly 200 calls to its helpline, which is much more than the review of 20 cases mentioned in the office's first quarterly report. The House should support the work of the office and encourage SMEs to refer cases to the Credit Review Office.

I draw the attention of Members to the remarks by the Minister, Deputy Brian Lenihan, today at the IBF conference in which he asked other banks, the non-supported institutions, to come within the remit of the Credit Review Office as well as to provide an effective internal review process for SME customers. Everybody appreciates the extremely difficult trading environment in which SMEs find themselves at present. The Minister in my Department, working with the Minister for Finance, requested that new guidelines issue for public contract procurement to make it easier for small and medium enterprises to compete for Government contracts. Under these new guidelines, all advertised contracts up to €250,000 for work and €125,000 for supplies and general services must now be open to all potential tenderers without a pre-qualification process. The threshold for advertising supplies and general services on eTenders has also been halved, from €50,000 to €25,000, reducing red tape and making it easier and less costly to tender for public contracts.

I will summarise some of the other actions the Government has taken. It has provided continued capital funding of €15 million in 2010 to the county and city enterprise boards and last week provided an additional capital funding of €3.3 million, creating more than 450 jobs. It has provided financial support totalling €135 million for almost 2,000 companies through the employment subsidy scheme and the enterprise stabilisation fund. There is a range of other incentives in place through Enterprise Ireland and the enterprise boards for SMEs.

These measures are a concrete example of action by the Government in support of the SME sector and show how it values the contribution, commitment and energy of our entrepreneurs. This Government has and continues to put enterprise and jobs growth at the centre of its economic strategy. I acknowledge the remarks made by Deputy Ring and Deputy O'Mahony regarding Hollister and emphasise that it is to the credit of the workforce involved. It is because of the Government's record in this area that I commend the amendment to the House.

I congratulate Deputy Perry for putting down this motion. It is very timely in this enormous crisis. The problem is that we have a Government that is trying to steer this economy by looking out the back window and it continually misses every obstacle on the road ahead.

I recall what we were told when this banking crisis started — this was going to be the cheapest banking solution of all time; that Anglo Irish Bank, at worst, would cost us €4 billion; it was a going concern. Those calculations were totally beside the point. Anglo Irish Bank could cost us ten times what the Government estimated. We were told only a few months ago that the size of the deficit was manageable at €7.5 billion. Three months later, it is now double that according to the ESRI. How can there be credibility in the recital the Minister gives? It is like whistling past the graveyard. The Minister is reciting the same things the Government is doing, and has been doing for years, which are producing no results but he expects the House to believe they will suddenly transform the situation.

There is no urgency whatsoever on the Government side of the House about the jobs crisis. Consider the PRSI concession, which was the big idea in last year's budget. This was to encourage employers to take people off the dole. It was first announced in December but did not emerge until the middle of this year. What has been achieved with regard to the 10,000 promised jobs? Not even 1,000 have been achieved. The Government is not even 10% of the way with the flagship of its employment strategy in last year's budget.

The same applies to its credit strategy. It is in tatters, and the sooner it wakes up to that reality, the better. It is not driving credit through the banks and there was no hope that it ever would. The banks are in a situation where they must do one thing, shrink their loan books relative to their deposits. We all know they must do that. What does that mean? It means they are closing down lending at every opportunity. They are making it harder to get credit. They are not in a position to take a punt on a bright start-up idea that might create a job for an individual and some jobs for his neighbours. They are not in that space; it is not what they are doing. They are trying to survive and shrink their loan books. The Government thought, foolishly, that NAMA acquiring their impaired loan books would change that. It was not going to change it. The Government thought some recapitalisation to fill the hole created by appalling losses would change it, but it was not going to change it.

I recall telling the House 18 months ago that we needed a national recovery bank that would provide credit to small businesses to help them through this crisis, because the banks would not help them. The Minister's backbench colleagues, to a man, talked about fantasy banks and said it would never happen. They told us to believe them and that the Government had a cheap banking strategy that would save everyone and provide a wall of cash. When will they wake up, smell the coffee and realise that the banking strategy is not addressing the credit problem?

It was amazing to see the Minister, Deputy Batt O'Keeffe, when he first went into the Department of Enterprise, Trade and Innovation. There was an air of reality as he walked in the door of the Department. He said he could see that bank credit was not getting through. Now, however, he has become totally institutionalised. He now believes the Government rhetoric that its banking solution is solving everything and that all we need is a man sitting in an office somewhere processing 20 complaints and everything in the garden is rosy. Deputy Batt O'Keeffe's first instinct was correct but he has been sucked into the maw of the thinking in that Department that it has everything right.

Consider even the notion of the Minister of State coming to the House to talk about the €3 million for the county enterprise boards. He and I know that at the start of this quarter 40% of county enterprise boards were turning away people with good business ideas. The Government produced this €3 million because there was such a wall of applications which could not be dealt with by the county enterprise boards. They were turning away people who had viable business projects. The banks had closed their doors to them and now the Government is closing the door on them through the county enterprise boards. Even with this decision on the €3 million, the Government has cut the budget by 10% when every county enterprise board will confirm that the demand has rapidly increased. It has increased by 20% according to the Public Sector Times, quoting the chairman of the Donegal County Enterprise Board. The same is true in Dublin and every other county. Out of desperation people are anxious to set up businesses and need a leg up, but the Government has closed even that down. The Government made a mealy-mouthed announcement that it will provide €3 million but the money can only be used for the applications on hand. The scheme closes in December and the Minister of State does not know where it will go from there. That is not a solution to this crisis.

Deputy Perry has come up with a solution that has worked elsewhere. The default level when a similar scheme was applied in Chile was 1.5%. The banks paid a premium to get the cover, the state lost nothing and it has triggered credit to viable businesses. Surely the Minister of State can see the logic in that. The scheme has worked elsewhere because it is tightly targeted. It is not about running loose with public money; this is tightly targeted. The Government needs to think again and back what Deputy Perry has offered.

I very much appreciate the opportunity to contribute to the debate and I thank Deputy Perry for tabling the motion. I am surprised and disappointed that a man of the calibre of the Minister of State would support the Government amendment because I always thought he was an honourable man. The second paragraph of the amendment states, "notes the intensive work underway within the Government in relation to further small and medium enterprises, SMEs, credit initiatives while at the same time ensuring that banks fulfil their commitments given to Government to lend to this sector". The only commitment the Government made this year was to bail out the banks. It has pumped billions of euro into the banks over the past number of years.

Small and medium-sized business are the life, soul and bloodline of the country. The Minister of State comes from a rural constituency, as do many backbenchers who will walk through the lobby tonight to support the amendment. They know the importance of such businesses in their communities because they are the only companies sustaining employment where they can remain open. Since January, a total of 1,132 small businesses have closed. That is a deplorable reflection on the Government. When the bank guarantee scheme was introduced in this Chamber by the Minister for Finance, he said "a wall of cash" would be available to small and medium-sized businesses. Government backbenchers raced to these business owners in their constituencies to tell them this great news but, unfortunately, the complete opposite has happened.

I refer to the tax revenues generated by these businesses for the State over the past number of years. They include €500 million in corporation tax, more than €500 million in PRSI, €3 billion in income tax and €4 billion in VAT. Ministers should be ashamed of themselves that so many small and medium-sized businesses are closing. All one has to do is visit any small town in Ireland to see the number of shops that have closed. Everything from sweet shops and pubs to clothes shops have closed. The Government parties will not listen to alternative solutions, which is why the country is in trouble. They will not listen to the ideas proposed on this side of the House or outside the House. They want to stick to the failed ideas they have implemented over a long number of years.

As Deputy Bruton said, it is about time they got up and smelled the coffee. They are past that though because they cannot even smell the reality of what has happened on the ground over the past two years. They are more interested in protecting bankers and others who have protected them for years and making sure they can remain snug. The Minister for Finance said a wall of cash would be available when NAMA was established. There is a wall but I assure the Minister of State there is no cash. I commend the motion to the House.

I thank every Member who contributed to this important debate. The Fine Gael motion calls on the Government to introduce a credit guarantee scheme, precisely targeted at viable small businesses that have the ability to repay the loan. It is all about jobs, jobs and more jobs. The Government amendment does a trawl through the policy archive and lists all the old news about previously announced scheme and past broken promises to help small business. We are referring to emerging sectors that are very much under pressure such as green energy, biotechnology, tourism, health care, agriculture, construction and creative industries.

The Minister for Enterprise, Trade and Innovation stated that the banks have been recapitalised and have been instructed to make credit available to small business. The Minister for Finance stated, "a wall of cash from NAMA can help to restore the credit flow, even allowing for fewer banks and the retrenchment of many UK-owned banks". Some banks have left the market and transferred their loan book to the banks that remain active in the market. These new loans have not provided additional credit for the small business sector. Other banks are not taking on new clients. They are closed for business and they are only tidying up their affairs by creating their own NAMA or good bank-bad bank structures internally. There is a lack of credit for small business on the ground, regardless of the 2,000 companies that have been supported. The Minister of State did not refer to the other 78,000 companies.

To use the Government's own phrase, "a wall of cash" was provided to bail out the banks. The banks were then expected to support small business and protect jobs. The wall of cash is in the banks to shore up their balance sheets but, as Deputy Burton said, the banks are standing guard in front of this money. Cash is not being made available to viable businesses on the ground, regardless of the commitment made by the State-guaranteed Allied Irish Banks and Bank of Ireland. I again refer to the three supports for business. Does the Minister not agree that, as the Government has bailed out the banks at a cost of billions of euro, the banks should invest in business and, therefore, the third tier should be the retention of jobs, which is not happening?

The Minister failed to acknowledge that small businesses have identified an urgent need for a credit guarantee system. Three weeks ago, Forfás made the same case. It was announced on a Friday evening without any fanfare in case it would get publicity. The experience in other countries is that small businesses are being aggressively supported by use of loan guarantees, as well as export promotion and export insurance schemes. They are self-financing schemes, as is the scheme I have proposed.

Last night, the Minister made an outrageous statement that the Fine Gael motion proposes a loan guarantee scheme to let the banks off the hook. Over the past ten years, the actions of Fianna Fáil and other parties have let the banks off the regulation hook and the result has been a complete lack of confidence resulting in no credit. The Minister certainly is not smelling the coffee. Thanks to this Fianna Fáil-led Administration, the only people on the hook for Government and banking incompetence are the ordinary taxpayers of the country and no one should forget that. Thanks to Government support, the failed bankers and the failed developers are off the hook. The more than 1,000 small businesses that have been forced to close this year are also off the hook. The Government controls the banking sector.

While the banks are on the Government hook, they are hiding behind the code of conduct for SME lending, published in 2009. The code was meant to facilitate access to credit for small business. The Minister of State also mentioned the credit review office. Fine Gael fully intends to expand the functions of the office because it currently can only examine applications that have been refused. An applicant's ability to repay should also be assessed. The code of conduct is not doing the necessary job. It is time to revised code in order that the initial loan application will be completed within 28 days. It can take nine months currently and the banks are hanging people out hoping their businesses will close before they give a decision. The code has failed to deliver. Instead, it has become an obstacle course for anyone trying to access credit. The Minister referred to positive signs in recent weeks and the need for consumer confidence and he stated the Government is doing what it can to provide the best operating environment. This rhetoric does a disservice to the reality on the ground. The banks are not providing credit to small business. Typical small businesses up and down the country need help. They are not getting any help from the Government and the number of small business insolvencies speaks for itself. The number of people now unemployed is 500,000. We need to kick-start the economy. For the past two years we have listened to an endless loop of Fianna Fáil commentary on banks and bank bailouts, but we have heard very little about the needs of small companies.

This Fine Gael motion proposes a credit guarantee scheme for viable small businesses with the ability to repay the loan. This scheme is a practical solution to the credit problem of the typical small business, 80,000 of which employ 800,000 people. This motion deserves the support of every Deputy and I commend it to the House.

Amendment put.
The Dáil divided: Tá, 78; Níl, 72.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Barry.
  • Andrews, Chris.
  • Aylward, Bobby.
  • Blaney, Niall.
  • Brady, Áine.
  • Brady, Cyprian.
  • Brady, Johnny.
  • Browne, John.
  • Byrne, Thomas.
  • Calleary, Dara.
  • Carey, Pat.
  • Collins, Niall.
  • Conlon, Margaret.
  • Connick, Seán.
  • Coughlan, Mary.
  • Cowen, Brian.
  • Cregan, John.
  • Cuffe, Ciarán.
  • Curran, John.
  • Devins, Jimmy.
  • Dooley, Timmy.
  • Fahey, Frank.
  • Finneran, Michael.
  • Fitzpatrick, Michael.
  • Fleming, Seán.
  • Flynn, Beverley.
  • Gogarty, Paul.
  • Gormley, John.
  • Hanafin, Mary.
  • Haughey, Seán.
  • Healy-Rae, Jackie.
  • Hoctor, Máire.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Kenneally, Brendan.
  • Kennedy, Michael.
  • Killeen, Tony.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • Lowry, Michael.
  • McDaid, James.
  • McEllistrim, Thomas.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • Mansergh, Martin.
  • Moloney, John.
  • Moynihan, Michael.
  • Mulcahy, Michael.
  • Nolan, M.J.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • O’Brien, Darragh.
  • O’Connor, Charlie.
  • O’Dea, Willie.
  • O’Donoghue, John.
  • O’Flynn, Noel.
  • O’Hanlon, Rory.
  • O’Keeffe, Batt.
  • O’Keeffe, Edward.
  • O’Rourke, Mary.
  • O’Sullivan, Christy.
  • Power, Seán.
  • Roche, Dick.
  • Ryan, Eamon.
  • Sargent, Trevor.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Treacy, Noel.
  • Wallace, Mary.
  • White, Mary Alexandra.
  • Woods, Michael.

Níl

  • Allen, Bernard.
  • Bannon, James.
  • Barrett, Seán.
  • Behan, Joe.
  • Breen, Pat.
  • Broughan, Thomas P.
  • Bruton, Richard.
  • Burke, Ulick.
  • Burton, Joan.
  • Byrne, Catherine.
  • Carey, Joe.
  • Clune, Deirdre.
  • Connaughton, Paul.
  • Coonan, Noel J..
  • Costello, Joe.
  • Coveney, Simon.
  • Crawford, Seymour.
  • Creed, Michael.
  • Creighton, Lucinda.
  • D’Arcy, Michael.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Enright, Olwyn.
  • Feighan, Frank.
  • Ferris, Martin.
  • Flanagan, Charles.
  • Flanagan, Terence.
  • Gilmore, Eamon.
  • Hayes, Brian.
  • Hayes, Tom.
  • Higgins, Michael D.
  • Kehoe, Paul.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • McCormack, Pádraic.
  • McEntee, Shane.
  • McGinley, Dinny.
  • McGrath, Finian.
  • McHugh, Joe.
  • McManus, Liz.
  • Morgan, Arthur.
  • Naughten, Denis.
  • Neville, Dan.
  • Noonan, Michael.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O’Donnell, Kieran.
  • O’Dowd, Fergus.
  • O’Keeffe, Jim.
  • O’Mahony, John.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • O’Sullivan, Maureen.
  • Penrose, Willie.
  • Perry, John.
  • Quinn, Ruairí.
  • Reilly, James.
  • Ring, Michael.
  • Shatter, Alan.
  • Sheahan, Tom.
  • Sheehan, P.J.
  • Sherlock, Seán.
  • Shortall, Róisín.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Upton, Mary.
  • Varadkar, Leo.
  • Wall, Jack.
Tellers: Tá, Deputies John Cregan and John Curran; Níl, Deputies Emmet Stagg and Paul Kehoe.
Amendment declared carried.
Question put: "That the motion, as amended, be agreed to."
The Dáil divided: Tá, 78; Níl, 73.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Barry.
  • Andrews, Chris.
  • Aylward, Bobby.
  • Blaney, Niall.
  • Brady, Áine.
  • Brady, Cyprian.
  • Brady, Johnny.
  • Browne, John.
  • Byrne, Thomas.
  • Calleary, Dara.
  • Carey, Pat.
  • Collins, Niall.
  • Conlon, Margaret.
  • Connick, Seán.
  • Coughlan, Mary.
  • Cowen, Brian.
  • Cregan, John.
  • Cuffe, Ciarán.
  • Curran, John.
  • Devins, Jimmy.
  • Dooley, Timmy.
  • Fahey, Frank.
  • Finneran, Michael.
  • Fitzpatrick, Michael.
  • Fleming, Seán.
  • Flynn, Beverley.
  • Gogarty, Paul.
  • Gormley, John.
  • Hanafin, Mary.
  • Haughey, Seán.
  • Healy-Rae, Jackie.
  • Hoctor, Máire.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Kenneally, Brendan.
  • Kennedy, Michael.
  • Killeen, Tony.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • Lowry, Michael.
  • McDaid, James.
  • McEllistrim, Thomas.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • Mansergh, Martin.
  • Moloney, John.
  • Moynihan, Michael.
  • Mulcahy, Michael.
  • Nolan, M.J.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • O’Brien, Darragh.
  • O’Connor, Charlie.
  • O’Dea, Willie.
  • O’Donoghue, John.
  • O’Flynn, Noel.
  • O’Hanlon, Rory.
  • O’Keeffe, Batt.
  • O’Keeffe, Edward.
  • O’Rourke, Mary.
  • O’Sullivan, Christy.
  • Power, Seán.
  • Roche, Dick.
  • Ryan, Eamon.
  • Sargent, Trevor.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Treacy, Noel.
  • Wallace, Mary.
  • White, Mary Alexandra.
  • Woods, Michael.

Níl

  • Allen, Bernard.
  • Bannon, James.
  • Barrett, Seán.
  • Behan, Joe.
  • Breen, Pat.
  • Broughan, Thomas P.
  • Bruton, Richard.
  • Burke, Ulick.
  • Burton, Joan.
  • Byrne, Catherine.
  • Carey, Joe.
  • Clune, Deirdre.
  • Connaughton, Paul.
  • Coonan, Noel J.
  • Costello, Joe.
  • Coveney, Simon.
  • Crawford, Seymour.
  • Creed, Michael.
  • Creighton, Lucinda.
  • D’Arcy, Michael.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Enright, Olwyn.
  • Feighan, Frank.
  • Ferris, Martin.
  • Flanagan, Charles.
  • Flanagan, Terence.
  • Gilmore, Eamon.
  • Hayes, Brian.
  • Hayes, Tom.
  • Higgins, Michael D.
  • Kehoe, Paul.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • McCormack, Pádraic.
  • McEntee, Shane.
  • McGinley, Dinny.
  • McGrath, Finian.
  • McHugh, Joe.
  • McManus, Liz.
  • Morgan, Arthur.
  • Naughten, Denis.
  • Neville, Dan.
  • Noonan, Michael.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O’Donnell, Kieran.
  • O’Dowd, Fergus.
  • O’Keeffe, Jim.
  • O’Mahony, John.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • O’Sullivan, Maureen.
  • Penrose, Willie.
  • Perry, John.
  • Quinn, Ruairí.
  • Reilly, James.
  • Ring, Michael.
  • Shatter, Alan.
  • Sheahan, Tom.
  • Sheehan, P.J.
  • Sherlock, Seán.
  • Shortall, Róisín.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Tuffy, Joanna.
  • Upton, Mary.
  • Varadkar, Leo.
  • Wall, Jack.
Tellers: Tá, Deputies John Cregan and John Curran; Níl, Deputies Emmet Stagg and Paul Kehoe.
Question declared carried.