Joan Burton (Dublin West, Labour)

I wish to share time with Deputy Eamon Gilmore.

The Minister of State, Deputy McGuinness, will be making a grant available for the fairy tales of Enterprise Ireland. I congratulate my colleague Deputy Willie Penrose on putting forward such a positive motion which focuses on the need for small and medium sized businesses to get access to working capital.

Last September, the European Investment Bank, EIB, announced a new package of loans amounting to €30 billion for small and medium sized businesses in Europe. Some €15 billion of that sum will be made available during 2008 and 2009. Despite the acute difficulties faced by Irish small and medium sized businesses in accessing working capital and investment financing, there has been no sign of the banks making their share available to firms. The Minister of State gave no indication that there has been a change in the position of Irish banks, or that they would make available the EIB funding. This must happen as a matter of urgency.

The Labour Party has tabled questions to the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Mary Coughlan, on the matter. She has referred to discussions with the banks and, apparently, some of the banks are considering this action. It seems the reason the banks do not wish to make these funds available is that the profit margin from such activity is not high enough. If the banks are not prepared to do it, perhaps the Minister of State, an enterprising person, could do so in the spirit of Mr. Seán Lemass? Will the Minister of State find a way of unleashing this money, as Deputy Penrose suggested? Some 22 European countries are using this fund but Ireland is not. The matters referred to by the Minister of State make no difference in this regard.

At present, small and medium enterprises throughout the country are being squeezed hard. We heard yesterday there will now be a 6% differential between our VAT rate and that charged in the North, some 90 minutes drive north of Dublin, Athlone, Sligo or Donegal. One can shop in the North a good deal more cheaply that here and such a price differential is what we are competing against.

The Minister of State mentioned the situation in the Irish banking sector. We acknowledge there is an international situation which makes the position of Irish banks especially difficult. However, it is our own home-grown construction bubble which has caused major problems. Last night, Deputy Penrose referred to long-standing construction firms, or firms allied to the construction industry, which are now making redundant people they have employed for decades because they simply cannot continue to operate without reasonable support from the banks. They need working capital.

What is the solution with which Fianna Fáil and the Minister for Finance are so taken? The Minister wants to invite private equity funds such as the Carlyle Group and JC Flowers to rescue the Irish banks. This is like being rescued from a whale by a shark. What is the difference? If these groups take a stake in the Irish banks they will require the investment to be turned over or flipped within a period of three to five years. There will be substantial job losses in the short term in what was previously considered good, stable employment in the banking sector.

At the same time there is a National Pensions Reserve Fund and a National Treasury Management Agency about which the Government often boasts. However, the Government has decided to sideline these agencies rather than have them take an active role in providing a flow of credit to Irish businesses, small and large throughout the country. Those is Fianna Fáil would be well-advised to be wary of the day private equity funds come knocking on the door, posing as good samaritans to respond to our financial difficulties. The solution to our problems lies partly within our own resources. We should also take up the invitation from the European Investment Bank to use the funds it has made available. However, we should look to the resources of the State and make an equity injection into the banks that are profitable and sound, but which need to be recapitalised. Is it some kind of bizarre ideology that is holding Fianna Fáil back when even people such as George Bush are acknowledging that some kind of State investment in the banks may be appropriate to save a sound financial system? Does the Minister not recognise that if this State made an equity investment, for example, through preference shares with a coupon rate, it would be possible to convert these and then sell them at some profit to the taxpayer when we experience the upturn we know will eventually come? What I find terrifying is the mention of "made men" in all the weekend papers. They are suggesting that the former Taoiseach and people with Drumcondra affiliations are, to quote Royston Brady in the television documentary, "like something out of 'Goodfellas'". Made men are circling the Irish banks to offer their help by selling us out not just to venture capitalists but to vulture capitalists. Is that all the Government has to offer?

Deputy Penrose has made admirably concise and detailed proposals that would help firms of the type he is talking about — a firm that has given good employment in a rural area outside Mullingar but is now letting up to 140 people go. The Minister of State himself has a very successful record in business. I ask him to give some serious attention, in the context of his own responsibilities, to the positive proposals put forward by the Labour Party. The Minister should not be afraid of an active State. An active State would save tens of thousands of Irish jobs. The vulture capitalists will only gobble them up.

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