Joe McHugh (Donegal North East, Fine Gael)

Small and medium-sized enterprises are in a vicious circle at present. Members of this House find themselves in a similar position to an extent in that Members on all sides are all saying the same thing on this subject but they will vote differently on this motion. That does not make sense. The vicious circle in terms of this sector relates to overdrafts. These are based on turnover and one does not need to be a rocket scientist to know that the turnover of businesses has gone down. The banks have now turned such overdrafts into term loans, thereby introducing a racket effect. What happens then is that businesses cannot to afford to pay fees such as insurance premiums. The most significant development in this vicious circle is that there has been a loss of confidence in spending. Turnover cannot be maintained by these existing companies because people are either saving or are just surviving and cannot afford to spend. We need to examine the overall economy and introduce measures that would restore confidence. As Deputy O'Donnell said, restoring confidence, positivity and growth are key in this respect.

Deputy Perry, who tabled this motion, has his ear to the ground and he knows that banks are not lending. We must be experimental in our thinking. We should note what Alistair Darling did with the VAT rate in the UK a few years ago. In the pre-Christmas period people will travel North to buy certain merchandise such as toys because they are cheaper. We need to look at a bundle of goods and reduce or remove the VAT rate on some of them. We need to be experimental and creative in our thinking. If we want to get people to spend, we must offer cheaper products; if there are cheap options across the Border, the current position will not suffice.

I will outline the conundrum we face. Every person who is in a position to pay back his or her mortgage in the country pays his or her money into the bank on a monthly basis. Mortgage holders in the Minister of State's constituency are making their repayments to the banks but the banks are not paying out. Given the amount of money that is continually going into the banks in terms of mortgage repayments and the austerity measures that will come down the line, the conundrum facing our country is reflected in the John Maynard Keynes's theory, namely, the issue is not the cuts themselves but the expectation of cuts. That is where the Government has made the mistake, and it is by this that it will be measured into the future.

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