Terence Flanagan (Dublin North East, Fine Gael)

I congratulate the Minister, Deputy Bruton, and the Minister of State, Deputy Perry, for introducing the Credit Guarantee Bill. Deputy Perry knows at first hand the lack of credit that exists for small and medium enterprises. The Government is determined to address the issue, to allow businesses to expand, to operate on a day-to-day basis and to face the difficult economic challenges that exist, as well as to protect and create jobs in the process. The Bill is important because it provides for the much-needed introduction of a temporary partial credit guarantee scheme. The scheme will ensure there will be an adequate flow of credit in the economy to support economic recovery. Even though the banking industry has been recapitalised and restructured there is an issue with small business, in particular specialist businesses, that are not getting an adequate supply of credit.

We are aware that 96% of the goals have been achieved in the Government's action plan for jobs. That reinforces the Government's determination to encourage job creation and job retention and to help rebuild the economy. The temporary partial credit guarantee scheme will provide vital support and assistance to businesses in my constituency in Dublin North-East which are finding it very difficult to secure credit from banks.

SMEs are the backbone of the economy. It is vital that they are allowed to survive through this difficult economic climate. They are significant employers. SMEs throughout the country are struggling. The scheme will provide a lifeline to businesses which operate in sectors where banks are not particularly friendly, do not have experience and are not currently providing credit. The scheme will provide a Government guarantee for lender banks in the order of 75% on eligible individual loans to viable companies. The guarantee will only be paid where an SME defaults and will apply to the unrecovered outstanding balance. A crucial component of the scheme is its focus on viable businesses. None of us wants a situation where scarce resources are applied to enterprises which have little chance of survival in the long term. There was too much of that in the past. An annual premium of 2% on outstanding loan balances will be paid to the Department of Jobs, Enterprise and Innovation. The State will enter into an agreement with the lender and a guarantee will be given to the latter based on its portfolio of loans rather than on a loan-by-loan basis. I welcome the appointment of Capita Asset Services, a subsidiary of Capita PLC, to manage the operation of the scheme. The 800 businesses expected to benefit immediately from the rolling out of this initiative will be in a position to contribute to the recovery of the domestic economy by paying taxes and providing jobs for people currently claiming social welfare payments.

The problem of lack of credit for business was raised by almost every speaker. This time last year I was approached by a businessman who was seeking to set up a pizza business in my constituency. This individual had encountered difficulties with every bank he had approached, before one of them finally offered him a partial loan. Fortunately, he was able to proceed on that basis and the business finally got up and running some months ago. He would be much further down the road if this scheme had been available previously. By facilitating the provision of credit that is vital to every small business, it will have a positive effect on the sector and improve the competitiveness of Irish SMEs. Ireland is one of only a small number of European Union countries that do not have a credit guarantee scheme in place. By introducing these provisions the Government is ensuring Irish businesses can compete with their counterparts elsewhere on the Continent.

This is a constructive and welcome initiative for the SME sector. It has been widely welcomed, including by Chambers Ireland and the Irish Small and Medium Enterprises Association, as the beginning of a process of investment that will lead to job creation and retention. Its introduction was signalled by previous Administrations and the Government is now delivering on that undertaking. It will offer comfort to business people and help viable small businesses to get trading, employ people and contribute to the economy.

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