Willie Penrose (Longford-Westmeath, Labour)

This is one of the most important motions to come before this House for a considerable period and one that we in the Labour Party genuinely hope will jolt this Government out of its complacency and lethargy in dealing with one of the most important issues it has not confronted to date, namely, unemployment. By the beginning of 2011, 14% of our working population could be registered as unemployed. Were it not for the 60,000 who have emigrated to date, we could well have reached that level by today.

Notwithstanding the cold winds of recession which are echoing across the world, Ireland did not arrive at its current position by chance; it arrived here by a devotion to unregulated speculative capitalism, as our party president, Deputy Michael D. Higgins, has described it. This has been at a great cost to our population and has been underpinned, with equal force and vigour, by a rejection of any market regulation. Where market regulation was effected, it was of such a minimalist, light-touch variety as to be largely ineffective. There has been, of course, a rigorous rejection of State intervention. The net result of this let-it-rip and spend-like-there-is-no-tomorrow economic philosophy is the number of people who are languishing on the unemployment register, devoid of hope and deserted by the uncaring Government.

Unemployment has negative effects that go beyond the loss of income on people of any age. Unemployment is associated with illness, mental stress, depression and a reduction in life expectancy, and it sometimes impacts negatively on relationships. Sustained unemployment has very negative long-term consequences for those who experience it when young. Young people who are unemployed at the beginning of their working lives tend to have lower productivity, lower incomes and poorer labour market experiences later in life. As the UK economist David Blanchflower, an authority on youth unemployment, has written, "Unemployment while young creates permanent scars rather than temporary blemishes."

The Labour Party strongly believes that research, development and innovation have a key or central role to play in the development of the Irish economy. Recently IDA Ireland launched Horizon 2020, its strategic blueprint and roadmap for attracting foreign direct investment into Ireland for the next decade. Under this strategy, the aim is to create 105,000 new jobs by the end of 2014. The plan is to attract 640 new foreign direct investments into the country, 50% of which would be targeted for location outside the major centres of Dublin and Cork. By 2014, IDA Ireland plans to spend in excess of €1.7 billion annually on research, development and innovation to transform the economy and to create high-quality jobs.

I acknowledge IDA Ireland's document is highly ambitious. The Labour Party acknowledges the important role that foreign direct investment will play in helping to turn around our economy and rejuvenate enterprise and business. Attracting and developing high-tech enterprise and investing in research and development will be the key to developing a strong economy and helping to pull Ireland out of the current recession because these measures will create sustainable jobs, increase competitiveness and boost exports.

I have no problem saluting the IDA and Enterprise Ireland for the work they are doing in their respective areas, but I must ask why the Government has not prepared a ten-year blueprint to ensure SMEs will prosper and develop. Up to the beginning of the recession, SMEs numbered about 250,000 in total and created 750,000 jobs.

There has been an abject failure on the part of the Government to recognise that these small businesses, many of which are family owned or operated, were the backbone of the economy and were resilient and adaptable. They provided from three to 12 jobs in many villages and towns across this country and were instrumental in maintaining the social fabric of rural communities. Instead of coming to the aid of some of these enterprises to help secure them against the cold winds of this recession, the Government has virtually abandoned them. They feel this and tell us so every day. The Labour Party is committed to supporting enterprise and supporting in every way possible the job creation capacity and potential of our indigenous small to medium firms.

The Government has concentrated its energy and resources on fixing the banking crisis and on attempting to address the fiscal circumstances but has failed to address the significant and fundamental problems of the real economy, such as the plight of the unemployed. We have witnessed an increase of 250,000 in the number of people who have been registered as unemployed in the past two years and there are forecasts that there could be another 60,000 to 70,000 on the live register before the end of the year. That is assuming a do-nothing approach, which seems to have the Government in a state of paralysis. It is a case of doing nothing to tackle this fundamental issue. Let us not forget that these figures would be significantly worse were it not for the fact that the emigration ships and aeroplanes have started up again and in the space of two short years they will take 100,000 of our people - who number among them those best educated and best-equipped to help get us out of this recession - to foreign shores. That is the legacy of this failed Government's policies.

We know the banks have lost their edge in small business lending. They do not appear to have the capacity to lend to SMEs and to firms with high growth potential. Therefore, it is abundantly clear that we need a new investment bank to address the project capital and SME funding gaps that are glaringly apparent and which will play a crucial role in helping to reduce unemployment. Viable businesses are being forced out of business. I do not want the Minister of State to tell me that is an exaggeration because it is happening. Others are being prevented from expanding by the shortage of credit and new ones with potential are being denied an opportunity to get off the ground at all. This is why the Labour Party has launched a proposal for the establishment of a strategic investment bank, which we believe would play a central role in the recovery and transformation of the economy. We believe that Ireland must be weaned off its dependence on property and consumer credit, and be re-invented as an export-led sustainable investment economy.

The strategic investment bank, which we propose here again this evening and as alluded to in great detail by our party leader, Deputy Gilmore, would represent a new greenfield bank modelled on a mixture of the ICC-ACC concept, a model which was kernel to the KfW banking group in Germany. It would have a clear mission to support investment in SMEs and innovative firms and to assist in the funding of infrastructural investment. Labour has always argued that necessary action to deal with the banking crisis and the budget deficit must be accompanied by a strategy for jobs. The party's deputy leader and finance spokesperson, Deputy Joan Burton, has always indicated a tripod approach in this regard. One could never balance a tripod stool with only two legs and I am sure Deputy Calleary knows about milking a cow with a tripod - perhaps he did not do this, but some of us did. To this end, we know that the SIB would play a vital role in that jobs strategy, securing the existing jobs and creating new ones.

The SIB would have a mandate to lend directly to the enterprise sector, providing working capital and growth capital, including asset finance for fixtures and fittings or for capital equipment. Those are the lifeblood of sustaining businesses, replacing depreciated items with modern technology. If required, it could make venture capital investments on behalf of the State. That is no longer a poisoned term. Some people recoil at the thought of the State getting involved in anything, but we do not. We believe that, where strategically done, this is very worthwhile and would contribute to addressing the problems. This could be applied especially to innovative SMEs with high growth potential, especially in the digital economy and low carbon technologies.

Ireland needs investment in infrastructure such as renewable energy and next generation communication networks. This will create the environment for a new wave of indigenous companies focused on the significant opportunities that will arise as a result of the expansion of digital technologies and the transition to a low carbon economy over the coming decades. Providing finance for this new innovative economy will be one of the roles of the SIB.

Creating jobs is the key to getting Ireland moving again and the strategic investment bank is just one of a number of proposals that the Labour Party has advanced as part of our jobs strategy. I recoil at journalists who are too lazy to look at our policies and who say we have not made proposals to deal with particular areas. The party leader outlined more of them tonight and the spokesperson on finance is worn out doing this. However, there are journalists who just want to infer that the Labour Party is not doing anything and is being negative. We have many positive proposals and we will be happy to send copies to them in the post if they cannot access them on our website.

We remain autonomous and have sovereign competence, as the Lisbon treaty affirms, in respect of decisions we make on taxation. Why has a proposal we made in relation to a "PRSI holiday" for up to 18 months in respect of employers' PRSI for a firm which takes on a person who is unemployed for a set period to do a real full-time job, not a replacement job, not been taken on board by the Government as a constructive proposal?

We are aware that every person on the live register costs more that €20,000 each year in terms of social welfare payments and tax forgone. We have to be innovative and old solutions dressed up in new clothes are no longer appropriate. We also need to fund a major programme of further education, training and work experience for young unemployed people.

Small businesses and micro entrepreneurs will play a pivotal role in ensuring that we recover quickly and give hope and confidence to our people, especially the 435,000 of our fellow citizens who are currently unemployed. The core objective of our policy is to replace Fianna Fail's casino economy with a sustainable investment economy, one where innovation is promoted across all sectors, there is an environment that promotes firm start ups and expansion and a real commitment to the provision of world class infrastructure. These objectives are all clearly linked and it is essential that companies in these sectors have access to working capital, growth capital and a range of other supports. Improved infrastructure is essential for enhancing Ireland's competitiveness and attractiveness as a location for foreign direct investment. The SIB will have a key role to play in promoting and sourcing funding for infrastructural investment in appropriate projects, such as in transport, energy, communications and innovation.

The Government's obsession to date was to sort out the banks and despite a lot of lip-service, promises of credit reviews, Mazars reports, etc, there has been a downright failure to provide a credit flow to small and medium-sized enterprises. NAMA represents an enormous transfer of public money into private hands. It is a grim example of what the Nobel Prize winning economist, Joseph Stiglitz, has called "socialism for the rich, markets for the poor". We used to be constantly told that markets were all about risk and that in a dynamic market economy, losses and businesses failures are inevitable. I recall some of the great economists for the banks giving us that particular beauty. However, they have disappeared into towers. I know not whether they are ivory, but we have not heard a squeak from them lately. However, the failure of the markets has to be addressed by socialist solutions so we are back in play, thanks be to God.

We are told that NAMA is essential in order that banks can begin to lend to job creating enterprise, but there is little evidence that they are doing this or that the Government is willing to compel them to do so, irrespective of the €3 billion provided to each of the main banks. I have not heard a squeak yet in this regard. Who is monitoring this and who will control it? In truth, the Government has very little capacity to ensure that any bank lends to the productive sector of the economy. Our proposal for the establishment of a strategic investment bank is to remedy this situation, and we are confident that the bank will help address these glaring and obvious market failures.

People might argue that banks are lending and that our argument here tonight is bogus, but it is not, and we are not alone in articulating this position. In the past few weeks, ISME, which carries out a bank watch survey on a quarterly basis, confirmed there was clear evidence of a deterioration in bank credit for SMEs, with more than half of loan and overdraft requests refused for the three months up to 1 March 2010, only seven weeks ago. Everybody is telling us that the sky is blue all the time and the banks are handing out money. Someone I know who sought a €2,000 addition to his overdraft was told he was lucky to be hanging on to the €5,000 facility he had already. This is Walter Mitty stuff from the Government. The survey concluded that 55% of businesses were refused lending, business closures and job losses were directly linked to lack of credit and Government intervention was urgently required to save thousands of businesses. This is not the Labour Party saying this, but rather an institution at the coalface dealing with those businesses.

ISME concluded the reality was that the banks were looking after their own interests and shoring up their balance sheets to the detriment of the rest of the economy. I believe everyone in the House knows that. ISME called for the introduction of a "third banking force to compete with the big two", with a particular emphasis on SME lending, and it said the Government must use the influence of its shareholding in the banks to force them to start supporting their SME customers. The Minister for Finance has announced that he is going to force the banks to lend €6 billion to the SME sector. Although this is welcome, it must be monitored. Who will monitor this and will they come back with the same report?

The recent Mazars report on SME lending, which was funded by the Irish Banking Federation, asserted that there was only a slight decrease in bank lending to SMEs and a higher approval rate by the banks between October to December 2009. ISME and all of us in the real world have rubbished the report findings and from our contact with individuals and businesses who have had contact with their banks, seeking new funding or trying to negotiate the retention of existing facilities, we are of the view that the findings of that report are questionable to say the least.

The time is right for the establishment of a new strategic investment bank – it is right for our national economic and infrastructural development. It is right for small and medium-sized businesses, entrepreneurs and individuals and it is right for our country at this critical juncture. Let us go and do this now.

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