Brian Lenihan Jnr (Dublin West, Fianna Fail)

I move amendment No. 1:

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

"recognises:

that the global banking crisis is impacting on economic activity across the global and Irish economies;

that small and medium sized enterprises are experiencing a more challenging environment for business;

the importance of ensuring that credit, including short term credit such as overdrafts and current account facilities are made available to small and medium-sized businesses;

that the purpose of the EIB facility for SMEs is to provide medium to long-term funding for investment projects through the commercial banks; and

that the Government has taken decisive action to stabilise the banking sector to maintain credit facilities across business sector including SMEs;

commends the Government for:

bringing forward the Credit Institutions (Financial Support) Scheme which:

secured the stability of the major domestic credit institutions and the Irish financial system overall in the face of unprecedented international financial turbulence;

promotes confidence in the economy by ensuring the stability and sustainability of our financial system;

promotes through the realisation of the objectives of the Scheme sustainable lending practices and the appropriate availability of credit for the enterprise sector of the economy; and

facilitates the structured dialogue initiated with the covered institutions to ensure that the Irish banking system continues to be able to access liquidity and funding to meet the credit needs of the economy;

requesting the banks to avail of the facility for medium to long-term lending to SMEs from the EIB;

the very considerable progress made on the implementation of the recommendations of the Report of the Small Business Forum to assist small business;

its decision of March 2008 to set a 25% target for the reduction of administrative burdens on business arising from domestic legislation, to be achieved by 2012;

its schemes and supports already in place to assist SMEs through the enterprise development agencies;

the very significant 16% increase in the capital allocation for 2009 to County and City Enterprise Boards in recognition of the importance of the micro-enterprise sector to our economic development;

and

expresses its confidence in the Government to take further appropriate, concrete measures to assist small and medium-sized business through the current difficult period."

I wish to share time with the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Kelleher, and Deputy Calleary.

I am pleased to have this opportunity to put to the House the Government amendment, which sets out the urgent and serious action taken by us to assist business in these present difficult conditions. All Members of the House appreciate the global nature of the financial turmoil which has impacted on the financial system across the developed world. The scale of the dislocation being experienced in international financial markets has been unprecedented in recent historical experience. Ireland, as a small, highly open economy with a significant domestic and international financial sector, could not expect to be immune from such developments.

It has been necessary to respond to a rapidly changing economic and financial environment. The Government took swift and decisive action at the end of September last to safeguard the Irish banking system so as to ensure our financial system continued to meet the needs of the economy and, in particular, the needs of small and medium-sized enterprises, which have been a key driver of our economic success and employment growth of the last decade, and have a crucial role to play in underpinning the competitiveness and future growth potential of the Irish economy.

Over 250,000 small businesses operate in our economy and employ about 800,000 people. The development of the strength and depth of our indigenous sector will be critical if we are to return to the levels of prosperity achieved in recent years. We will need to foster the emergence of significant numbers of new indigenous businesses that are export-driven and, above all else, productive and sustainable. We will only be able to foster the emergence of such enterprises if the operating environment for business, particularly small business, is supportive. This has been, and will continue to be, a key focus of Government policy.

Access to credit and finance, including short-term credit, is the engine of the small and medium-sized enterprise sector and the Government is very conscious of the need to ensure that credit lines continue to be extended to viable businesses and this sector in particular. To support this objective and to secure the stability of the major domestic credit institutions and the financial system, the Government moved decisively to introduce the credit institutions (financial support) scheme. The focus has been to promote confidence in the economy and to ensure the Irish banking system continues to be in a position to access liquidity and funding to meet the credit needs of the economy. I must underline this was, and continues to be, the strategic objective of the scheme.

Let us be clear about one point. The guarantee scheme is not about protecting the interests of the banks; it is about safeguarding the economy and everyone who lives and works in this country. The objective is to reinforce the strength of Ireland's economy by supporting the financial sector in a manner that protects the interests of the taxpayer. This support is being provided in the public interest to protect the real economy from the consequences of the severe financial disruption that would otherwise have arisen.

The provision of the guarantee in the first instance and the access to the liquidity it has provided for our banks and building societies is an important benefit in ensuring finance is both available and affordable throughout the economy. As has been pointed out by many commentators, the availability of finance is of course a critical element of our overall competitiveness and a key part of our national economic and financial infrastructure.

The Government's guarantee has already helped ensure that credit institutions in Ireland have access to the normal liquidity and funding they require to fund their business. The Government, on behalf of the Irish taxpayer, has performed a major service for the banking community. The boards and senior executives of the banks now must meet the legitimate financial needs of business and assure the general consumer that their needs will be facilitated. Indeed, the first priority of the banks should be to ensure the flow of funding is channelled appropriately to support and underpin sustainable economic activities on the necessary prudent and responsible basis that is clearly in the interest of the bank, the borrower and the wider economy.

This is what the Government expects and the boards and senior executives of the banks must ensure they can meet this expectation. The banks are very conscious of what is expected of them under the guarantee in so far as business lending is concerned. They have confirmed to me that, notwithstanding the challenging economic and financial environment with which we all have to contend, they remain open for business for creditworthy customers and will continue to support sound business projects.

The banks' principal area of focus is on their existing customers or new business customers with good, commercially sound projects. Of course, it makes commercial good sense for the banks to continue to support economic activity. In this context, the CEO of one of the main banks recently highlighted to the Small Firms Association that lending had increased to consumers and new small and medium-sized firms, and it had not changed its lending rules. He highlighted that the banks' primary focus was to support credit growth in key segments critical to economic recovery, including small and medium-sized businesses. It must be a priority for the Irish banking system as a whole to work to support the achievement of this objective to provide the basis for sustainable and balanced economic growth and the long-term commercial success of our banking system.

The Government will also use whatever other instruments are available to support access to credit to business. Deputies will be aware that the European Investment Bank, EIB, recently announced it was making €30 billion available to small and medium-sized enterprises in the EU member states to fund medium and long-term investment projects. The money is to be made available in two tranches, with €15 billion up to the end of 2009 and a further €15 billion for 2010 and 2011. It will be lent by the EIB in the first instance to commercial banks who will in turn lend it to small and medium-sized enterprises.

This is a very valuable facility and I understand the EIB has already been in discussion with a number of Irish banks about participation in it. I have urged the banks to utilise the facility to the maximum extent possible so funding can be made available to small and medium-sized enterprises as soon as possible. This is a source of funding that will, I am confident, be of interest to a considerable number of small and medium-sized enterprises but, clearly, it may not meet the needs of all such enterprises, particularly those for whom working capital is primarily the issue.

Access to finance has traditionally been a difficulty for small and medium-sized enterprises at start-up phase and development phase. In this context, grant schemes, seed capital schemes, business expansion schemes and venture capital arrangements all contribute positively to these enterprises' financial requirements. In particular, the Government's investment in venture capital funds of €175 million, promoted through Enterprise Ireland, has resulted in seven new venture funds which have raised over €500 million which is available for investment in the Irish small and medium-sized enterprise sector. All financial options for viable businesses need to be explored and exploited as we move forward.

The Government has put in place policies and programmes that encourage the emergence of new business creations and facilitate long-term business survival, including the following: the positioning of our tax system as one of the most supportive of business in the world, the development of Ireland as a knowledge-based economy through the dedication of significant Exchequer resources to the promotion of research and development and the introduction of the Better Regulation programme to tackle regulatory burdens, particularly those faced by the business community.

The adoption of new strategies to support the enterprise sector, including small business, is based on the report of the Small Business Forum. This report was published in May 2006 and contains a detailed analysis of the factors that drive the small business sector and has provided us with a blueprint for its further development. The Government has already made very considerable progress on the implementation of the findings of the report.

The ongoing implementation of the report also supports enterprise development and entrepreneurship. Recommendations implemented to date include the following: the threshold for the exemption from the requirement that companies have their accounts audited has been increased from €1.5 million to €7.3 million; the extension and radical improvement of the business expansion and seed capital schemes up to 2013 — the Revenue Commissioners data for these schemes show that 279 companies raised investments in this form since January 2007, amounting to a total of €80 million in the 12-month period; important increases in the VAT cash accounting threshold, which now stands at €1 million, and VAT registration turnover threshold, which now stands at €75,000, have been introduced in order to simplify administration and reduce working capital requirements on small businesses; changes to the preliminary tax obligations of certain companies so that small companies are now permitted to calculate their preliminary tax payments based on 100% of the prior-period tax liability if their tax liability for the prior period did not exceed a threshold now specified at €200,000; and new companies which do not expect their tax liability for the first year to exceed €200,000 are no longer obliged to pay preliminary tax in that first year. In addition, my recent budget announced tax relief measures for start-up businesses by way of remission in corporation tax and capital gains tax in the first three years for new and start-up businesses.

The "Tech-Check" programme was launched in April 2007 through the county enterprise boards. This programme provides small businesses with the opportunity to access a highly subsidised, independent technology check-up and helps them to identify ways to boost their productivity and profitability through the better use of technology. This programme is being delivered by the county and city enterprise boards and some 850 of these check-ups have, I understand, been carried out up to the end of 2007.

The enterprise development agencies are focused on helping Irish businesses through the current economic difficulties to develop and grow their exports by continuing to prioritise investment in science, technology and innovation. Enterprise Ireland recognises the varied challenges facing small and medium-sized enterprises in the context of the changing environment and partners with companies to address their needs. In line with its strategy, Transforming Irish Industry 2008-2010, Enterprise Ireland provides supports, including finance and advice, aimed at developing all aspects of the critical business functions. Financial supports focus on supporting start-ups with a high potential to grow, providing comprehensive funding for research and development, driving growth and innovation capabilities and supporting major projects for large-scale development.

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