Paul Connaughton (Galway East, Fine Gael)

I welcome the opportunity to speak to this extremely important Bill. In the current difficult financial climate access to credit for small and medium sized businesses is crucial. The Bill is an important step in providing a platform that businesses can use to drive their enterprises forward.

Small and medium businesses are the lifeblood of the economy. Job creation by large multinationals investing in Ireland is most welcome, but it is the small and medium business sector that is the real barometer of commercial life in Ireland. That barometer is indicating stormy weather. Businesses which are still standing after the economic tornado of recent years are operating because of canny management, courage and determination. Now they need to plan for an expanded future and credit is the key to putting these plans into action.

The Bill provides for a three year partial credit guarantee scheme which will see the State providing a 75% guarantee to banks on loans that qualify for the scheme. It is envisaged that the scheme will facilitate the injection of €140 million into the small and medium business sector for each of the three years. It is important to note that the lending that will take place as a result of this mechanism will be in addition to, rather than instead of, normal day-to-day bank lending to enterprises.

The cost of lending during the three year lifetime of the Bill will be €19 million. This will be money well spent. The size and nature of the guarantee involved and the sums of money to be lent are dwarfed by some of the guarantee facilities available in other EU countries. For example, Italy's largest public guarantee fund, SGS, guaranteed €4.6 billion worth of loans in the first six years of operation. Many OECD countries have similar programmes. For example, the guarantee in the Netherlands is up to 50%, with up to 75% available for start-ups and innovative companies; Belgium and the United Kingdom offer 75%, the same guarantee provided for in the Bill; and in Germany up to 80% is guaranteed, with the average being between 50% and 80%. It is worth noting that the Bill provides a guarantee for a duration of three years, as opposed to the lifetime of the loan. This is somewhat shorter than those on offer elsewhere: in the Netherlands the guarantee is for a maximum of six years, or 12 if real estate is involved; in Denmark and Belgium it is up to ten years; and in Germany it is up to 15 years.

The Bill is just one part of a suite of supports the Government is establishing to help small and medium enterprises. I am glad to note that it takes a common-sense approach to the matter, simply removing some of the risk for banks contemplating loans to small businesses. Further supports must also be established and further efforts made to drive down the costs faced by small and medium businesses, including costs imposed by central and local government. Rates are a major issue for many small and medium businesses. The upward spiral in rates went somewhat under the radar in the distant days of the Celtic tiger, but in these days of extremely tight margins, they are causing difficulties. The Minister for the Environment, Community and Local Government has taken some commendable steps, including amalgamating councils, in an effort to drive down costs, but it is time to have a national conversation about the nature and extent of local government and the level to which small and medium businesses can be expected to contribute.

Given the well publicised events of recent years in the banking sector, when calamitous and imprudent lending decisions were made, the pendulum appears to have swung to the other extreme, with banks proving to be positively risk-averse and turning off the flow of credit to small businesses. The Bill will do much to address this issue in the next three years. It will, I hope, allow small and medium enterprises across the country to access the credit needed to put their plans into action - plans that are the key to Ireland's economic future and a healthy and thriving commercial sector.

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