Access to Finance for SMEs: Statements

I welcome the Minister of State at the Department of Jobs, Enterprise and Innovation to the House.

I am very pleased to be here this afternoon. This is the first opportunity I have had to address this august Chamber and I look forward to doing so. I also look forward to the engagement this afternoon and the development of our ongoing relationship.

I thank Members for the invitation to address the House on the important issues of SME access to finance and financing for growth. The Government has clearly identified SMEs as the lifeblood of the economy and recognises that they play a crucial role in economic and employment growth. The onset of the international financial crisis and the systemic problems within our national banking system, collectively combined with cultural payments issues, all conspired to create an extremely challenging environment for SMEs when it came to accessing finance and prompt payments, which have continued to be an issue for Irish business. Both pre and post-crisis, Irish SMEs are among the most reliant on banking finance in Europe. Consequently, Irish SMEs have been disproportionately exposed to the weaknesses in the banking sector relative to other European countries.

Increasingly one hears that, as the economy continues to recover and grow stronger, there will be a focus on financing for growth and a move away from securing finance to simply stay in business. The Government will continue to work across the economy, and through its Departments and agencies, to deliver appropriate programmes that work for the growing SME sector.

In my new job I have tried to consider the issues that affect access to finance and financing for growth in a practical way and I will now focus on some of the State supports that are available. First, communications and communication in general are essential. The Government recognises that the array of State funding options can be quite confusing and an SME may, in some cases, not know who to contact. In order to bring some clarity, a "supporting SMEs" online tool has been developed and is live on the local enterprise office website and on various other websites. The tool acts as a signpost, which is very easy to use, comprises eight short filter questions. SMEs are then signposted to some possible State resources and supports that they may be able to avail of. I ask Senators to test the tool because it really is useful, practical and straightforward.

Communication of the support environment for SMEs has also been enhanced by the establishment of the network of local enterprise offices, LEOs, that provide a first-stop-shop service for anyone seeking information and support on starting or growing a business in Ireland. The LEOs provide a basis for delivering an improved suite of services to start-ups and small businesses across the country.

In terms of accessing loans, LEOs are also available to assist microenterprises in applying for a Microfinance Ireland loan. It should be borne in mind that companies can get a lower interest rate by applying through their LEO than by applying directly to MFI. We have supported 333 micro enterprises with over €5 million worth of loans up to the end of September. That number is growing all the time. We have also put in place a credit guarantee scheme but its performance has been lower than anticipated. Nevertheless, we have supported 106 companies with over €14.5 million in guaranteed loans as at 14 November. We are working on the legislative process to amend the guarantee scheme to make it more effective in the SME lending market.

The Government is committed to ensuring there is a diversified funding market available to SMEs. We also understand that banks have and will continue to play a vital role in supporting SMEs. To this end, where a business has been refused credit by a bank, I would encourage it to lodge an internal appeal and, if necessary, contact the Government's Credit Review Office. Many solutions have been found for SMEs through these mechanisms.

Upskilling is very important. If an SME needs to upskill in the area of financial capability, my Department has funded the Finance4Growth programme which is offered by Skillnets through ManagementWorks. It means people can get access to an SME finance expert who will explain the different sources of finance available, guide them to those most relevant to their business, and advise on how banks, investors and agencies make decisions. It is a very practical option that is available to SME owners and managers. It is a free service with the option of a one day finance workshop and a further two hours of mentoring for a small fee.

As Members will be aware, the Government has recently established the Strategic Banking Corporation of Ireland. It is still in infancy but I have high hopes that it can be a market disrupter. I hope it will provide SMEs with access to new innovative financial products and a lower cost longer-term funding. I hope that the SBCI will encourage competition in the Irish banking system which is something that is really needed. Very shortly I will meet senior officials from the SBCI to make it very clear to them how I see its position on the landscape in terms of supporting SMEs in a practical way.

Unlike many European countries, Ireland did not have a state development institution to sustain funding to businesses throughout the financial crisis as banks reduced their lending exposure to small and medium-sized businesses. The persistent premium in the cost of finance available to Irish SMEs, compared with other European SMEs, puts our indigenous businesses at a competitive disadvantage. It results in the need for a local conduit vehicle to enable the channelling of low cost European finance into the Irish economy.

The SBCI will not just be part of Ireland's recovery but will be a permanent feature of the Irish funding landscape for many decades to come. The building of a recognisable brand and ongoing franchise will set this apart from previous discrete SME finance initiatives.

The Strategic Banking Corporation of Ireland, SBCI, will keep providers of finance focused on providing a good service to SMEs, first, by challenging them through the introduction of bespoke well publicised SME credit products and, second, by introducing competitive pressures into the marketplace because of the SBCI's explicit support for new market entrants.

The SBCI will provide loans that currently are not typically offered in Ireland like loans of longer duration and loans that have built in payment holidays that encourage and enable growth of our SMEs. The SBCI will use lending partners rather than direct lending for three reasons. First, using the operations of established lending partners, the SBCI can get its funding out to SMEs more quickly than by building a direct lending platform from scratch. Second, the SBCI has a mandate to increase the number of finance providers to SMEs and create competition; if it lends directly, it would hamper its ability to generate broader competition. Third, by keeping costs low, it will enable the lower funding costs to be passed on to SMEs. A core objective of the SBCI is to generate competition and choice for SMEs seeking finance in the Irish market. The SBCI will have a lower cost of funding and this cost benefit must be passed on to SMEs. That is a critical point.

The SBCI will aim to maximise Ireland's potential drawdown from multilateral and international supports such as European Investment Bank and European Investment Fund schemes. It will also work with other Government initiatives in this space and the Government has already decided, for example, that the revised credit guarantee scheme should be aligned with the SBCI. The SBCI is working with its first lending partners, AIB, Bank of Ireland and Bibby Financial Services, to provide initial funding to the SME sector by the end of 2014. A full roll-out will occur during January 2015 with traditional bank lenders and, importantly, with new credit providers from beyond the traditional banking sector. All of this will allow for the distribution of SBCI funding to the SME sector in Ireland on a prudent and sustainable basis.

In terms of what the State is doing for equity investment, my Department through Enterprise Ireland and the Irish Strategic Investment Fund, ISIF, which is due to take over from the National Pensions Reserve Fund, will continue to invest in a range of SMEs in Ireland. Legislation has been passed to transition the NPRF into the Irish Strategic Investment Fund, which will operate as a sovereign development fund with the capacity to make €6.8 billion of resources available for investment on a commercial basis to support economic activity and employment in Ireland. The Government's message in regard to the ISIF is that its door is open to proposals from the SME business community to develop a portfolio of SME finance investments. The SBCI and the ISIF will operate as enabling institutions, working with public and private actors to both augment the impact of existing initiatives and, where appropriate, to develop new measures.

Regarding our primary focus for 2015, given the progress that has been achieved to date, I believe that the emphasis should be less on developing new supply side measures and rather more on supporting and influencing the effective implementation of the major policy initiatives the Government has already introduced to support the SME sector and in regard to prompt payments. In 2012, the ESRI undertook a major research programme on the issue of SME financing and the final report from this considerable body of work, entitled Financing SMEs in Recovery, was published in October 2014. The Senators may have read about that because it was widely covered in the media. Significantly, the suite of policy recommendations contained in this report focused strongly on the need to enhance and embed the existing range of policy measures already in place.

We need to concentrate on how to maximise the potential benefits for SMEs of the evolving financial architecture that now exists in Ireland. In particular, there must be a concerted focus on ensuring that the extensive suite of initiatives now in place facilitate the availability of appropriate, diverse and sustainable funding options across the life cycle of an SME, not just at the start. Key policy areas for 2015 will include the roll out of the SBCI; the export finance strategy; co-operation with the European Investment Bank and other national promotional banks; equity financing; communication; Government sponsored initiatives; data infrastructure; capacity building; alternative financing instruments; and EU financing.

I am fortunate to have been given the opportunity of late to serve as a Minister of State at Cabinet at what I see as a hugely exciting time for Ireland and for the Irish business community. I am most pleased that this Ministry will see me working with businesses which essentially are at the centre of Ireland's recovery. We must not forget that SMEs directly employ 70% of our entire workforce. We are very good in this country at promoting Ireland as a destination for foreign direct investment, but SMEs are the lifeblood of our economy and our society and are our key employment generator.

I have made a commitment across the landscape that as Minister of State with responsibility for business and employment I will be as vigorous supporting small and medium enterprises in this country as we are as a nation at supporting foreign direct investment because that is critical. SMEs are present across our country in every town, village and city and if we are to have the type of balanced economic recovery we need, we must ensure that we have proper finance for growth packages for sustainable businesses across this country into the future. We have a job to do in terms of communicating the range of opportunities that are available to companies across the country.

I look forward to continuing to work with the Senators to ensure we can promote the opportunities that are available to businesses in the communities we represent across the country.

The Minister of State is very welcome. Is this his first occasion in the Seanad?

He is very welcome and I congratulate him on his appointment.

Small and medium-size companies are the lifeblood of the Irish economy, representing 70% of all employment, but the recovery of SMEs is being strangled by a lack of access to credit. They also report that bank fees and charges are rising, and the trend is likely to continue.

The decision by Danske Bank to join ACC in winding down its presence in the Irish market was another blow to hopes of real competition in the financial services sector. A former employee in the Central Bank, Fiona Muldoon, said that no institution applied for a banking licence during the time she served in the Central Bank. Just as the Government seeks to attract foreign direct investment in the manufacturing and services sector, the Government must make a concerted effort to get international banks to establish retail and commercial operations here.

While SME lending approval rates are increasing, the level of lending is still very low. The current level of expertise among the Irish banks for dealing with non-property related lending is very low and needs to be increased substantially. That has been going on for the past three years. It has become clear that people in the banks do not understand how to deal with the needs of small and medium-size businesses.

The legacy of debt held by SMEs must also be considered. This was highlighted by media reports that Danske Bank is planning to sell off over €500 million worth of SME loans across 4,000 different customer accounts. Legislative protection must be introduced for SME customers in such circumstances.

Efforts to encourage non-banking funding have been inadequate to date. High profile announcements around seed capital loan guarantees and microfinance have not been matched by the delivery of funding. The credit guarantee scheme is supporting lending at a rate of €1 million a month. It will take 40 years at the current pace to achieve its target of €450 million.

The long-term well-being of the economy requires both effective competition and regulation. The forthcoming report from the Committee of Public Accounts affords an opportunity to put in place a fit for purpose regulatory regime to underpin a competitive market. There is a need to protect SMEs whose loans are sold by departing banks to vulture funds.

It is five years since the onset of the banking crisis and the Irish banking sector is still not fit for purpose. It is imperative that the Government brings forward a White Paper on a strategy for competition and regulation and not simply react to each development. There is clearly a lack of competition but I do not have time to go into that.

The Minister referred to the establishment of the Strategic Banking Corporation of Ireland. Anyone who understands the situation knows that this is a half-hearted effort to tackle the problem of access to credit for small and medium-size enterprises.

The Minister of State spoke glowingly about it but it is well known this is only a half-hearted effort. It falls well short of what is needed by the SME sector.

The establishment of the Strategic Banking Corporation of Ireland, SBCI, was long over due. It was promised as part of the programme for Government more than three and a half years ago and it will be several more months before it starts lending. However, even though it is called the Strategic Banking Corporation of Ireland, it will not have a banking licence, instead it will provide funding to existing banks who will lend on to SMEs. It is farcical that the credit decision will still remain in the hands of the existing banks.

I would like to speak about Sparkassen Bank in Germany. It is one of a number of banks in Germany. It was set up 200 years ago and it has 400 outlets around Germany. It was deliberately set up to provide services for people who are less well off in the German economy. People were fleeing rural areas and moving to the towns and the Germans wanted to support people who wanted to remain engaged in agriculture. The bank provided for small farmers, small business people and people who were not well off. We are missing a big opportunity here in that we are not doing something similar with our post offices and credit unions. The networks of credit unions and post offices could be turned into a facility such as the German Sparkassen Bank to serve local communities, rather than our relying on the two pillar banks that have not changed a whit. I wish the Minister of State every luck in his role.

I welcome the Minister of State to the House. He has told us this is the first occasion he has been to the House.

The reality with respect to SMEs is that finance becomes irrelevant if people have no spending power. The latest figure indicates that 70,000 more people are back in work; the figure of 1.9 million has been crossed in terms of people who are now back in work. That has a major impact upon small and medium enterprises. Those people who are back in work are able to spend money and are not fearful of doing so.

In terms of Government finances, the deficit in 2011 was €22 billion and the deficit for the next year calendar will be €5 billion. The State is able to step up to the plate on this occasion. It has done so with the SBCI which will be able to provide €800 million of additional credit, which the Minister of State discussed and I do not want to go over that ground again, and the Irish Strategic Investment Fund, ISIF, which was the National Pensions Reserve Fund, NPRF, making €6.8 billion available. That will be the important factor.

A fair criticism was made by a Member on other side of the House that the NPRF was investing worldwide and businesses here were withering on the vine without funds being made available. The Minister of State said that the ISIF is in a transition period. It is crucial that we move on from the transition period and that the fund is up and running as quickly as possible. I am also informed that the amount involved must be €5 million or over. I have a concern about that and I know extra work is involved with smaller amounts. The National Pensions Reserve Fund will have to carry out due diligence on every project that comes before it. I congratulate my colleague, Senator Barrett, who insists on the carrying out of due diligence in that regard and I also support that. The same due diligence is required to be carried out on a small €1 million, €2 million, €3 million or €5 million project as a €50 million project but projects involving these smaller amounts are probably those that will get people back to work in terms of SMEs generating employment. That puts money into people's pockets which will give them spending power.

Another important initiative, which was part of budget 2014 which should not be forgotten, is the two-year tax exemption for a person who was long-term unemployed starting his or her own business. The increase in the threshold to €3 million in respect of the review of a loan refusal by the Credit Review Office is also important. The credit guarantee scheme in terms of 500 to 600 new jobs and 200 to 400 jobs being maintained together with the microfinance loan fund are also important. The Horizon 2020 programme, which we discussed earlier, is also important. The coming together of all those elements was important. I had a self-criticism of us and the State agencies and bodies. One of the best newsletters I have seen is this SME Credit and Funding Newsletter from the Department of Finance, but unfortunately if one goes to meet people in business they do not know what is available. I heard the Minister, Deputy Bruton, say on one occasion that only 16 people applied for funding under one of the schemes that was made available. There is a failure somewhere in the system when only 16 people applied for funding due to a lack of information.

The roll-out of the local enterprise offices will be important. I can only speak about the local enterprise office that I know best.

Does the Senator think they will be successful?

I think they will.

I will hold him to that.

I can only give the Senator the information that I know. The staff in the local enterprise office in Wexford know much more than I know. The staff in those offices are up to speed on what is available and they pass that information on to businesses throughout the country.

I will conclude by referring to the banks, God bless them. Significant funds are available and the banks are improving, but my criticism of them relates to the structure of their underwriters. I asked a colleague in the Dáil to table a parliamentary question about the banks' underwriters. Nobody seems to know who they are. Their identity seems to be kept a closely guarded secret. I am told that they are independent of the banks. That is a lovely position for the banks to be able to keep them at arm's length and a bank can say in response to a question that it was a matter for the underwriters. It is not good enough. It is a clever position for the banks if they want to refuse one credit. Bank lending is about risk. Senator White spoke about risk and the banks not being good enough and not being capable. From what I am experiencing, while the risk being taken has increased a little, it has not increased enough. The entrepreneurs, the business people in SMEs throughout the country, are taking a far greater risk than the banks. I would like something to be done about that.

The Minister of State is welcome to the House and I wish him well in his role.

As there is less than a 30 minutes remaining for these statements, I ask Members to be brief in their contributions.

I welcome the Minister of State and I thank him for the enthusiasm and vision he has brought to his work. I want to focus my remarks on one aspect of the access to finance for SMEs, which the Minister of State referred to in his speech as the "market disrupter", namely, the Strategic Banking Corporation of Ireland. I would make three points in regard to it. First, I congratulate the Minister, Deputy Noonan, and the Government on its establishment. It is an extremely important initiative. I supported it during the legislative process. I was grateful for an engagement with the Department of Finance officials with regard to some suggestions I had in terms of its memorandum and articles. It is extremely important that the banking corporation will be able to provide €800 million of additional credit. That is hugely positive. It is a job well done.

I am especially delighted that the Minister, Deputy Noonan, accepted my proposals that the overall mission of the SBCI would include a commitment to social innovation and environmental protection as well as contributing to economic development of the State. The memorandum and articles that were agreed relatively recently state that the SBCI is to consider economic and social development of the State and hence, where appropriate, to provide credit to financially viable social businesses and environmental projects. I hope and expect that mechanisms will be put in place to ensure that these kinds of enterprises do have access to funding.

I appreciate the open-mindedness of the Government on the issue. The growth potential of social businesses and green enterprise has not been fully exploited due to the difficulty of this highly innovative sector accessing funding from the retail banking sector. SMEs in general have that difficulty but particularly these types of SMEs.

There may be additional European resources that we could draw on for the SBCI within the sector of social innovation European venture funds.

There is a concern about ensuring the effective delivery of the SBCI’s mission to finance SMEs in a way that truly provides flexible conditions and lower cost finance. There are reasons to be concerned that the SBCI funding may not reach the companies it is set up for. When low-cost funding for SMEs was available from the EU in the late 1990s, the funds were often not granted to SMEs. The money was sometimes used for larger businesses to replace existing funding because they were perceived as being less risky. It is important for the Central Bank to conduct stringent oversight of the SBCI and not allow the mistakes of the past recur. Every effort should be made to ensure that the low-cost funding reaches SMEs, including social and green businesses. I support the Irish Small and Medium Enterprises Association, ISME's, advocacy in this matter.

There also needs to be appropriate oversight of SBCI’s on-lenders to make sure that the benefit of the lower cost finance is carried to the companies and not consumed by the on-lenders as often happened in the past. We know that the European Central Bank's refinancing rate is at an historic low of 0.05% following a series of cuts. While tracker customers have benefited from this, SMEs and variable rate mortgage holders have not. I believe that banks that benefit from the ECB rate cuts should pass the benefit on to the customers, and this is an opportunity, particularly for SMEs.

It is expected that the loans through SBCI will be approximately 1% less expensive than current market rates. We need to be absolutely sure that the benefits of the lower cost credit will be passed on to SMEs and not to the on-lenders. The Minister of State might update us on how that will be monitored and controlled. The SMEs in my community are not accessing the funding they need. They have not experienced any consistent recovery yet. I spoke with the management of the sustainable business programme in South Dublin County, run in conjunction with the council and the Chamber of Commerce. They have contact with more than 4,500 companies in the area and according to those companies, access to finance, not only loans but also access to overdrafts and short-term finance, is a critical issue. That affects not only the survival and success rates of small businesses, but those of the communities within which they reside.

I welcome the Minister of State to the Chamber. He said it is his first time here. Many stellar political careers have started here and there is no doubt that his will follow that trajectory. Many people have commented on how rapidly the Minister of State has read into his brief and on his deep understanding of it, which is to be commended.

SMEs are crucial to the recovery of our economy. The only way we will ensure our people’s prosperity is by creating employment. The companies best placed to create employment are not foreign direct investors but SMEs. It is said that if every SME took on one new employee, it would end the unemployment crisis overnight. Anything we can do to support that sector is vital.

SMEs, particularly start-ups, have difficulty navigating their way through the system and finding the finance. The establishment of the local enterprise offices, LEOs, will, when they are embedded and expanded, address that problem. The SME sector has been disproportionately reliant on bank finance which has been a problem. I do not have a great deal of confidence in the banking sector and do not believe that it is fully compliant with our objectives for it. It is very hard to know how to address this. The last thing we want is political interference in the running of the banks but anything we can do to encourage competition in this area must be welcomed.

The Minister of State spoke about the establishment of the SBCI which will provide a very flexible funding package on a sustainable level. Often during the boom time we noticed that while the banking sector produced plenty of financial packages, very few of them were sustainable, leaving us with a great debt overhang in the SME sector, which inevitably will be a drag on the sector’s development. In addition, legislation was passed several months ago to establish the Ireland Strategic Investment Fund, which was a very important element of the Government’s pre-election and programme for Government platforms. It has been overseen by the National Treasury Management Agency, NTMA, which, by contrast with the banks, is an agency in which we can have full confidence. It has proved its value and understanding of the financial sector and markets over the past few years. A total of €19.9 billion is available in the National Pensions Reserve Fund of which €13 billion or thereabouts is invested in the banks. That leaves €6.8 billion available for investment in the economy, much of which should go to the SME sector. Although these agencies are welcome, it will take some time for the finance to sink into the economy.

Senator White mentioned that the SBCI does not have a banking licence but when the Minister for Finance, Deputy Noonan, spoke here several months ago, he was very clear that he will keep this under review and if there is a need for a banking licence he will take the appropriate steps.

How can we ensure that the financing, which is being made available through these agencies, does not just displace existing money? It is a complex and thorny area but if it were to displace money it will not achieve our objectives. There is a theory that new money displaces old money. Does the Minister of State have any comments on that point?

I welcome the Minister of State and wish him every success in this endeavour which is most important because we have had to reorientate the Irish economy away from the banks because they no longer served us. We have had to curtail the growth of public sector employment and we still have a problem identified by the troika today that too many of the sheltered sector services, in particular legal services, are far too expensive. It is a difficult place for a start-up.

I welcome the Department’s announcement of the 24 finalists in Ireland’s best young entrepreneur competition which had over 1,000 entries. That is the re-orientation which is needed. We did a lot of things wrong and made many mistakes and that is what we are trying to correct. We tabled an amendment when the Minister for Finance was here to try to keep the funds in the SBCI for entrepreneurial activities and out of property. He changed the articles of association so that this will be used for counter-cyclical purposes while property must be the definition of pro-cyclical purposes, particularly the way we ran it here.

Why is it not possible now to buy a house for 2.5 times average income as was possible many decades ago? Our parents were able to do that. What is wrong with the construction industry that it is unable to meet a target like that? Has its productivity gone wrong? These are some of the criticisms of it by Ronan Lyons, a property economist in Trinity College Dublin. The extremely high price of property is a major obstacle to doing business in this country. I regularly dissent when people wrongly hail higher house prices as an indication of prosperity. They add to the cost base of the economy.

That is something we must avoid. Regarding the LEOs, and I do not know if that is a reflection on any candidate for the next leadership of the current leading Government party, what does a LEO do that the county enterprise boards did not do? Are we progressing or are we just putting new labels on old bottles?

I am glad the Minister of State is addressing the issue of finance for growth. Irish banks did nothing except invest in property, and the numbers show it. Would they know a small and medium enterprise if it presented itself right in front of them? They have not been doing it. Can the Minister of State change the corporate culture of Irish banking?

I note that the Minister of State said that our lending partners are AIB and Bank of Ireland. We could not have Anglo Irish Bank as a lending partner. I hope that the corporate culture of those bodies has changed. We want some thing different. I am concerned that many of the previous developers are in league with NAMA. Perhaps we need the assistance of AIB and Bank of Ireland for a while, but they did not do the job. That is what we are trying to correct now. The Minister of State has our support for his endeavour in this regard.

We need legal reform and energy costs reform. The economist, Cormac Lucey, wrote about that in the newspapers last Sunday. The regulator has not paid sufficient attention to the needs of small and medium enterprises. They are buying energy at 20% to 30% in excess of what businesses in other countries are paying. Regulators in Ireland tend to be captured.

I welcome the initiative of the Musgrave Group owners of SuperValu who have launched the Food Academy whereby new entrepreneurs start to supply their local store and grow until their products are on the market. We sometimes talk about small and medium enterprise and do not do anything about it.

There is a proposal to have 10% of bus routes open to competition but this is being held up all the time. People have made a substantial difference in the Minister of State's constituency and other businesses can enter the bus service and increase the market share of public transport. Something similar happened in taxis.

A small and medium enterprise that wished to tender for the postcode competition was ruled out of the competition because its turnover was not over €40 million a year. That seems a very strange way to promote small and medium enterprises. I doubt the wisdom of the postal code system in general.

This strategy should be entrepreneurial and not agency driven. The low corporate tax rate should be as productive as possible and not one in which fiscal termites chisel out, that is, too many tax lawyers and accountants. Let us have real entrepreneurship. I am sure the Minister of State supports that and we support him.

We have three speakers and they should all make it. I call Senator Coghlan.

I welcome the Minister of State to the House. I acknowledge his encouragement and enthusiasm for this important role in our economy. I welcome the measures he has rolled out, such as the local enterprise offices , which are very important, as well as the recently established Strategic Banking Corporation of Ireland and the Irish Strategic Investment Fund.

As the Minister of State has said, more than 70% of our workforce are engaged in SMEs. I have been particularly concerned that many SME owners and farmers are refusing to ask questions of their banks when they have been refused credit. We have discovered from the most recent report of John Trethowan, the credit reviewer, that the Credit Review Office has overturned 56% of the banks' decisions to refuse credit. This has meant that €30 million in credit has been released and more than 2,000 jobs have been protected or created. It is noteworthy therefore that only 3% of those refused credit from their banks challenged the decisions. The remaining 97% of applicants walk away disappointed and empty handed. It is vital that this is changed. It is a matter of educating people about it.

While many businesses have taken advantage of the function of the CRO, there are still too many who do not have access to credit and who are unaware of the assistance the CRO can provide. SMEs need to challenge banks' decisions, as on many occasions the banks reverse their decisions. If they do not, the CRO is there to help.

The Government is dedicated to ensuring that credit is made available to SMEs and farmers, as the Minister of State has outlined. Last year the Minister for Finance, Deputy Michael Noonan, increased the limit for loan applications that can be reviewed by the CRO from €500,000 to €3 million. This increase allowed for requests from a broader range of SMEs and also assisted borrowers banking with non-trading banks. More than €800 million of additional credit has been made available to Irish SMEs through the new Strategic Banking Corporation of Ireland, to which the Minister of State referred. I appeal to all farmers and SME owners in need of credit to approach their banks to gain access to these funds. If they are refused, they should ask the reason.

The Minister for Finance also announced in the Budget Statement 2015 that Permanent TSB will shortly participate in the CRO process and Ulster Bank is considering making a similar commitment. We need them involved because we need more competition in banking. It is very important that farmers and business owners are aware of the supports available, and it is vital that they challenge their bank as to why they have been refused access to credit.

I welcome the Minister of State's enthusiasm for this role, which is so vital to the future of the economy. Please God, he will be back again soon.

I thank the Senator for his co-operation.

I too welcome the Minister of State, Deputy Nash to the House. I am delighted to see him in this Chamber.

One of my major concerns about cash for small businesses comes from the Construction Contracts Act 2013, which was signed by the President 480 days ago. It was not the Minister of State's baby until last week, but it is now his baby. In the past 480 days nothing has happened. I would love to see the Minister of State grab this issue and show that he can actually do it. I think that would be a major benefit.

I wish to raise the issue of crowdfunding. I am connected with linked finance in that I made a small investment and I believe in crowdfunding. One of the reasons it has not taken off in Ireland as well as it should have is because we do not have any regulation whatsoever. If there is no regulation, people are concerned they might walk themselves into a problem.

New Zealand is regarded as first in the world of easy access to credit for small businesses. We are not even second, third or fourth but 23rd. We can actually do something about this. We can move on that quickly and readily.

I have spoken about pension release in the past. I welcome the move in recent years to allow people access to 30% of their additional voluntary contributions to pensions. It seems to me there are things we can do. I would love to draw the Minister of State's attention to news from the United Kingdom. The plan is that people will be able to use their pension pots like bank accounts from the age of 55 years to withdraw thousands of pounds to save, invest or spend as they wish on whatever they want to do. I think that is very worthy and it is something we can do something about. I think it is a very sensible move. Under current rules in the United Kingdom, people from the age of 55 years can take 25% of pension savings as a tax-free lump sum. In the future, however, savers will be able to dip into their pension pot when they want and, each time, 25% of what they take out will be tax-free. That has to develop more business for small and medium-sized businesses.

I have pointed out that Ireland has the highest rate of inheritance tax in Europe and that it is almost six times that of Italy and double that of Germany. Yesterday, in the UK, they announced they will be changing their inheritance tax laws. At present if people die without exhausting their pension funds, the funds their children or grandchildren over 23 years inherit is taxed at a massive 55%. From April 2015, the tax will be abolished altogether, bringing it into line with money left to spouses. I know that Senator Healy Eames is worried about competition from Britain, particularly for small and medium-sized businesses. She took the example of what happened in Galway last week, when the British made great efforts to get Irish SMEs to move to Britain to develop their business there. That is a reminder that we live in a competitive world and whether it is a competitive world in regard to death taxes, inheritance taxes or pension funds, we have to recognise that we are not living on our own. There is competition and it is making sure that our SMEs do not get the money they deserve or otherwise would have had.

I thank the Senator again for finishing on time.

I welcome the Minister of State, Deputy Nash, and wish him well with his new brief. Senator Quinn has led into what I wanted to say. As I said on the Order of Business yesterday, I am very concerned. I do not know whether the Minister of State is aware that the UK trade department is coming to many roadshows in Ireland to entice Irish small and medium-sized enterprises to set up over there. It offers them six months of free rent and rates, which is incredibly attractive. Who would blame any small or medium-sized business for taking up this offer? I spoke to some businesswomen who were in the House last night. They have already set up an office in London. They are testing the market. The issue is that these businesses might eventually leave. The Minister, Deputy Bruton, and the Minister of State need to wake up to this reality so they do not sleepwalk us into a huge crisis.

Senator Quinn especially will appreciate the startling fact that Ireland is ranked 93rd in the world for lack of competitiveness due to the effective taxation on incentives to work in Ireland. The source for that is the World Economic Forum report. The UK, which is just across the water - in fact, it is just 60 miles up the road - is 33rd in the world. It was explained to me that this is happening in Northern Ireland. I ask the Minister of State to address this issue when he sums up at the end of the debate. Our high marginal income taxes are a significant barrier to labour entry. We have incredible taxes on employment. We have very high PRSI. If an employer offers €10 to a worker, that comes at a cost of €15 to him or her. If an employer offers €16 to a worker, that comes at a cost of €22 to him or her. These taxes are untenable. Why are we taxing our employers out of business? That is what we are doing.

The sad fact is that we will not need to offer access to finance to small and medium-sized enterprises in Ireland if we cannot keep them here. It is bad enough that we are leaking graduates, but it is pure stupid to be leaking small and medium-sized enterprises. I have a word to say here. When Ireland was very attractive for foreign direct investment - it remains attractive - Mr. Cameron hit the roof and pushed on it so much that we had to provide for corrective measures - the double Irish system, etc. - in our recent budget. I think we should have something to say about our nearest neighbour being able to poach our businesses. We live in a democracy. I cannot blame an export-led small or medium-sized enterprise for testing the market. This is the only point I am making today and I ask for it to be addressed. Anything else would take from what I have to say. I am really keen to hear the Minister of State's response.

I would have concerns about the local enterprise offices. Entrepreneurs have been saying to me, without the detail, that they are not attractive at all. This is for another day because I need to get the detail there. I will make a final point on the issue of tax competitiveness. Does the Minister of State know that if one sells a business in this country, one has to pay capital gains tax of 40%, whereas one pays 0% if one sells a property? What are we saying? We are actually saying we value property more than business. It is very dangerous. We need entrepreneurs and businesses to hire our people and take them off social welfare. This is necessary if the economy is to grow. If we manage that, everybody will have more money in their pockets.

I will respond in reverse order, if that is agreeable. I thank Senator Healy Eames for her remarks. It would be very useful if she could send me on the information to which she referred. I will be happy to respond to her in that regard in due course. I was interested to hear her refer to a particular index or score sheet. Ireland is at the top, or very close to the top, of many global, EU and OECD indices and indicators with regard to our competitiveness and our taxation regime for foreign direct investment. It has been said by the business community over the last period of time that work needs to be done with our taxation measures to make Ireland a more attractive place for the owners and managers of small and medium-sized enterprises. Now that the country is clearly recovering from the economic situation it has been in, all these issues can be addressed over time by the Minister for Finance and the Government. I am particularly interested in the notion of competitiveness regarding where start-up companies might locate. Ireland is competing on the world stage as it tries to attract high-potential start-ups from the US, Canada and elsewhere to locate in this country.

I would like to move on to one of the points made by Senator Barrett about property. Issues with the supply of adequate office facilities in some parts of the country have been raised with me informally by small start-up companies from the other side of the Atlantic that might wish to locate here. I think we need to address the supply issue. Clearly, our financial institutions will have a role in that regard.

I thank Senator Quinn for raising with me the Construction Contracts Act 2013, for which I recently took responsibility. I have a personal interest in trying to make sure the legislation originally drafted by Senator Quinn, which was adopted with some changes by the Government, works well. I think the future health of our construction industry will depend on that. I accept that it took some time to develop and adopt the Act, which now has a home. I will be managing it. I will be happy to report back to this House when we are in a position to elaborate further on the mechanics in this area. I appreciate the Senator's interest in this issue and his dedication to bringing it to the floor of this House and making it a priority for the Government. Now that I am responsible for it, I look forward to rolling it out.

I thank the Minister of State.

Senator Gilroy referred to the local enterprise offices as being part of the ecosystem for supporting small and medium-sized enterprises. I think they will be a critical piece of the infrastructure. Now that they are aligned with the local authorities, the really important thing is for them to infuse those authorities with an enterprise culture. As Senator White will be aware, my constituency of Louth is lucky enough to have had a really strong enterprise culture for a long time now. We decided approximately ten years ago to do it ourselves. The local authorities and the local enterprise offices are coming together as part of a really strong initiative to try to create-----

Louth County Council is an exception in this regard.

Absolutely. I accept that. I was one of the people behind the driving of that agenda over an 11 year or 12 year period. A host of supports are available. All of us as public representatives have to do a really critical job. Regardless of whether we are in government or in opposition, we need to alert our constituents and those we represent to the products and supports that are out there. It is difficult to point young entrepreneurs who are in a hurry, and who might not be used to dealing with State agencies, in the right direction. Many of these people do not want to deal with State agencies. It is critical that we put them in contact with people who understand their businesses. The staff of the local enterprise offices understand these businesses. We are monitoring very seriously what these offices are doing. We are keeping an eye on a set of key performance indicators all the time. I assure the House that local enterprise office staff across the country are responding in a positive way to Government policy and to this new arrangement.

Senators Gilroy and Zappone and others made some clear points about the monitoring of the Strategic Banking Corporation of Ireland. They said we need to make sure that the money available to the corporation gets to the businesses that need it very quickly and that new products are made available through the corporation. I do not necessarily believe we need a whole host of new banks in this country. That is probably the last thing we need, in some respects. We need the banks we have to function properly and to meet the needs of citizens and the small and medium-sized enterprise community. We need to make sure the Strategic Banking Corporation of Ireland delivers on its mandate to deliver more and newer longer-term financial products that are more easily accessible and respond to the real needs that exist.

I will be meeting senior officials from the SBCI very shortly to pass on the views of Senators in terms of what needs to happen and how the corporation needs to respond to the needs of SMEs. The last thing we want is for a situation to emerge whereby there is a lack of public confidence in the SBCI because of its close relationship with the pillar banks. We need to make sure that people have confidence in the SBCI because it is potentially a game changer. It has a really serious wedge of money to make available to SMEs which must be delivered properly and in a timely fashion.

Senators made reference to the entrepreneurial culture in this country. The Minister, Deputy Bruton, the Minister of State, Deputy English and I have concluded the work of our Department in developing a new national entrepreneurship policy statement. I found it extraordinary, on entering the Department about four months ago, that we did not have a national policy on entrepreneurship but we have one now. I am particularly interested in supporting entrepreneurs and am glad that Senator Barrett made reference to the competition to find Ireland's best young entrepreneur, the response to which has been truly magnificent.

I attended the Student Slingshot event last night which was organised by Enterprise Ireland. There were approximately 150 participants, most from our universities and institutes of technology where there are now entrepreneurship societies, which is something that did not exist when I entered university 21 years ago. There is a real sense of confidence among young people. They believe they can do the business and see themselves as potential entrepreneurs. As with the saying that there is a good book in everybody, I believe there is a good business idea in everybody and people just need to be encouraged to bring it forward. The State agencies are there to support that. I heard some fantastic ideas last night. If we can get young people to work with the research and development units in their colleges and universities and with Enterprise Ireland to monetise and commercialise their ideas, then we will have a very positive future.

I must ask the Minister of State to conclude as we have gone over time.

Certainly. I thank the Cathaoirleach for his interest in this matter and for agreeing to this discussion. I look forward to the continued engagement of Senators both at committee level and in this House with legislation I will be bringing forward on this matter.

It is important to say that I will be taking direct responsibility for the credit guarantee scheme. We intend to amend the relevant legislation to make the scheme more effective. Microfinance Ireland has also been reviewed because both it and the credit guarantee scheme have not worked as well as they might have. We have accepted that and we understand that we need to make sure that they do work. We intend to amend the legislation and I will be back in this House when we are going through it. At that point, we can have a full and open discussion on the legislation. We must ensure that the products, services and systems that we have in place work better.

I thank the Minister of State.