Seán Sherlock (Cork East, Labour)

The Minister for Finance, Deputy Lenihan, in response to a Parliamentary Question today in regard to the Mazars review of lending to small and medium enterprises stated:

The third Mazars report on lending to small and medium-sized enterprises, which covers the period from October to December 2009, showed that credit applications in number and value terms rose slightly in the last quarter of 2009 over the previous quarter, which is encouraging. The level of applications for credit appear to be stabilising and Mazars also reported a small improvement in the overall credit approval rate.

However, the reduction in the stock of credit, as repayments exceed new credit, and in credit quality reported by the banks remains a concern for the Government. To address this concern, I announced earlier this month that AIB and Bank of Ireland are to make available a minimum of €3 billion each for new or increased credit facilities, including working capital targeted at small and medium-sized enterprises, in the real economy in each of the next two years.

The small and medium enterprise group appeared before the Joint Committee on Economic and Regulatory Affairs yesterday. Its members constitute more than 98% of all business entities in Ireland and number more than 240,000 in terms of the number of businesses they represent and employ just under one million people. In response to questions on the Mazars report, Mr. Fielding, the representative, stated that, with regard to access to credit, the Mazars report published last week has been hijacked by the banks.

In the first two Mazars reports there was major input from the Department of Finance, the Department of Enterprise, Trade and Employment and small business. We did not even know the third report was coming out and it was launched at a joint press conference by Mazars and the Irish Banking Federation with no Department of Finance, Department of Enterprise, Trade and Employment or small to medium enterprises. It was very disappointing from our point of view. In further deliberations on the difficulties facing small businesses we spoke about the employment subsidy scheme.

Mr. Fielding went on to state that last summer the Tánaiste introduced the employment subsidy scheme. Initially, it was for exporters only but it was extended to all companies. I direct the following comment to the Minister, Deputy Ryan. However, Mr. Fielding went on to state that in the small print one saw it was extended to all companies except those employing fewer than ten people, immediately excluding 90% of all businesses. Therefore, Government policy on employment relates to firms employing ten or more employees. It gives an unfair advantage to those employing 11 as against a firm employing nine people. The Government does not have bottomless pockets but one would think more could be done when one sees the amount of money being invested in the banks. These are the words of the person who represents 98% of businesses in the country. These are his views in respect of funding and the role of banks in this society at the moment.

There is a vacuum at present. It is the view of ISME that there remains a significant lending deficit which undermines competitiveness, constrains productivity, threatens recovery and puts at risk the ability of SMEs to gain access to working capital and growth capital. That is what this motion is about.

The banking crisis has seriously impaired the capacity of Irish banks to lend to the SME sector. I refer to the answer I received to my question on the Mazars report. The Minister stated that a letter was sent to both Bank of Ireland and AIB on 7 April of this year requiring them to prepare an SME lending plan, broken down by sector and geography for submission to the Department by 12 May. What does this tell us about the Government's response to lending in the SME sector in the first instance and the banks response since the guarantee was put in place in September 2008 in respect of lending in the SME sector? It is non-existent; it is not happening. The evidence of a letter on 7 April this year does not inspire confidence into the process being undertaken in respect of the systemic banks and other banks at present. The Minister also stated both banks were expected to make credit available.

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