Arthur Spring (Kerry North-West Limerick, Labour)

Previously I worked for banking institutions in Ireland and I noticed those who were drawing down funds for the purposes of paying subcontractors and suppliers did so in a fashion which in some cases was not as regular as it could have been. I will not make allegations against individuals, but there is a practice that has gone on heretofore that needs to be stopped. I think there is a solution to this, and it is called wrapping. I have spoken to Senator Quinn, to the Ministers, to the Construction Industry Federation and to a few others on this issue.

I will give an example of how this happens. A quantity surveyor would act on behalf of a bank while another quantity surveyor would act on behalf of the main contractor. The main contractor would seek to draw down the funds with great urgency, in many instances up to €1 million at a time. That money could be sent to another bank rather than drawn down in cheques to pay subcontractors and suppliers. If that fund is put into a deposit account in another bank and if the main contractor has many different contracts, that person could have a float of about €10 million at any given moment. There is a 30 day lag with credit, but we have often heard stories of people waiting for 60 days or more to be paid. If we leverage the €10 million at 90% LTV, the main contractor could ultimately be in a position to become a speculator, with €100 million at his disposal. That bank would not know where the €100 million was coming from, and the contractor would have the potential not only to be a builder, but also a developer and a speculator as well. Therein lay the great problem. I believe we need amending legislation to allow for the provision of funds that are granted by banks for the purposes of working capital only. If we do that, the money that has been deemed appropriate for the project by the surveyor should be ring-fenced at all times for the subcontractors and suppliers. This should be the case particularly for those contracts under €200,000, as Deputies Wallace and Dowds have pointed out.

I know of a big contractor who won a major State contract. He had 75 subcontractors working on the project, which is a phenomenon that has become known as "subbie bashing". When there are small groups of people working under one contractor, their access to the legal profession and to the courts is not as enticing as it might seem. The idea of losing €30,000 through legal fees as opposed to taking the hit the first day and staying away from that main contractor thereafter was a real dilemma faced by many people throughout the country.

I know we have been approached by many lobby groups on this issue, and we should commend Senator Quinn on trying to solve this problem. I am delighted to have been elected to this House and to have a say on how the Bill goes forward. I appreciate the Minister of State's advisers will take this on board. The people with contracts less than €200,000 need to be protected. Deputy Heather Humphreys and I organised a presentation to be given by MABS in which we were given an example of this. We heard of an architect who had sought advice from the MABS because his financial status was making it difficult for him to carry on his business. He is owed and owes money and it becomes a scramble thereafter. This is not an issue for upper level businesses. It relates to day-to-day life, the very survival of a business and the stress communicated throughout society.

The Bill is a step in the right direction, but more needs to be done. I would like to see a working group in the Dáil examine the issue of the protection of small businesses, particularly construction businesses. I do not know how one can legislate for contracts that were signed in the past, but I would like to see an end to the practice I have described, of funding being drawn down, leveraged and used for other purposes. I imagine NAMA has a great deal of property on its books for which loans should never have been granted because the equity provided initially was contributed for the sole purpose of giving a contract the capacity to be realised and to be passed on to subcontractors.

There is overwhelming support for this initiative. The current level of lending is 9% of what it was at the height of the boom, or the craziness. That will extend again. With the availability of credit, there must be better regulation and knowledge of what we are trying to achieve. Loan to deposit ratios in Ireland might be reflected in some areas, but that is not true of all. When people draw down funds and use them for a purpose for which they were not intended, there is a problem in society.

I also make a recommendation to builders. Builders are best at building, not at speculating and developing. The idea that a speculator can look at a town or county development plan and then seek to lean on politicians to achieve his or her own purpose will have to be written out of existence. Tribunals have flushed out much of the craziness in this regard.

The Bill is a step in the right direction, but more needs to be done. Therefore, I welcome suggestions from non-Government parties and Independent Deputies.

Those on the very smallest of contracts must be protected. The €200,000 limit must be looked at again. With regard to retrieving supplies, owners of small quarries must also be protected. We should also have shorter contract terms. Working capital facilities should have sole designations, in the supervision of which for the banks quantity surveyors might have a role. I would be happy to work with individuals in the Cabinet and throughout out the House to make this a better Bill.

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