Patrick Nulty (Dublin West, Labour)

I welcome the opportunity to contribute to this important debate. I commend the Minister for bringing forward this very positive legislation which represents a small step forward in our collective endeavours to restore economic growth and create jobs. On 3 May I submitted a parliamentary question on the progress of the Bill and I am very pleased to see it finally being brought forward. Ensuring small businesses can thrive in a small open economy such as ours is crucial to our economic welfare. There are some 200,000 small and medium-sized enterprises in the State which between them employ approximately 650,000 people. With more than 400,000 on the live register, the important role played by the small business sector in the economy is clear to see. Foreign direct investment is vital to our long-term economic prospects, but promoting ingenuity and creativity within the indigenous SME sector is of equal importance.

The maximum of €150 million to be allocated annually under the credit guarantee scheme represents a moderate but concrete step in our efforts to support the small business sector. However, given that it includes no element of compulsion, the question must arise as to whether it will be sufficient to encourage our dysfunctional banking system to recommence normal lending. The data for 2011 which allow for a comparison between credit facilities withdrawn as against new lending sanctioned show that support from the banking system to the small business sector contracted by some €800 million in that year. There is a major problem with the banking system, as Deputy Peter Mathews and others eloquently outlined. As such, the credit guarantee scheme is merely a small part of what is required to drive the economy forward and encourage growth and job creation.

Deputy Mattie McGrath referred to the bank guarantee scheme introduced in 2008. I was not a Member of the House at that time, but it is clear in my mind that this was the most disastrous decision ever made by an Irish Government and the Oireachtas. It has decimated the economy. I am 29 years old and I see thousands of my generation facing negative equity and mass emigration. The bank guarantee is a crucial factor in the situation in which we find ourselves. I hope that in time those who voted for it will acknowledge that they were mistaken. My own party stood alone in opposing it and was absolutely correct in doing so. The State now controls Allied Irish Banks and has a majority stake in Bank of Ireland. As such, it must flex its muscles in an effort to ensure they return to normal banking practices. That is not, of course, to say they should return to the rampant financial speculation of the middle years of the last decade but rather that they resume their function of lending to people with viable business proposals that will lead to the creation of jobs. I hope the credit guarantee scheme will encourage them to do so. The State has pumped some €64 billion into the banks and ordinary people face the consequences of the bailout every day of their lives. It is about time the banking sector showed some semblance of interest in the future economic well-being of the country.

Before the election the Labour Party called for the establishment of a strategic investment bank and such an undertaking was included in the programme for Government. Will the Minister of State indicate when there will be progress in this regard? It is the type of economic stimulus the country needs, given that the existing pillar banks are not functioning. There is nothing new in the concept of strategic or sovereign investment which is commonplace in other countries. In France, for example, a strategic investment fund was established in 2008 in order to enhance the supply of equity to the business sector. It was endowed with an allocation of €20 billion, with the French Government, with a 49% stake, and a state-owned bank, with a 51% stake, each contributing €7 billion and the remaining €6 billion being raised by other means. For example, Renault-Nissan, which produces electric car batteries, is investing in information technology companies and electrical companies. The aim of the FSI was to stop the asset-stripping and buying out of French companies at discount prices by foreign companies - vulture investments, if you like. It also plays a role in supporting the development of small and medium-sized enterprises.

I am glad to be able to say in the House that Nicolas Sarkozy is the former French President. He did untold damage to the entire Continent through his approach to austerity and by driving vicious spending cuts and tax increases for people on very low and moderate incomes. This has had a disastrous impact, and I hope history judges him with the contempt in which I hold him and his right-wing politics. Even Mr. Sarkozy acknowledged, on 20 November 2008, that an austerity plan does nothing except depress further an economy that is already depressed. If this acknowledgment by the very architect of austerity is not a damning indictment, I do not know what is. In this country we have had swingeing spending cuts of about €12 billion. In an economy such as Ireland's, austerity is like quicksand: the harder we push, the further we sink. It is quite simply not working. All Deputies who speak to small business owners, people who are struggling on social welfare payments or PAYE workers who are struggling to get by must know that instinctively.

In Britain, for example, a strategic investment fund of €750 million was established in April 2009 by the Labour Party. It invested in UK emerging industries including low-carbon vehicles, wind and wave power and renewable chemicals. It provided seed capital for the roll-out of swift broadband to almost every home and business, and for high-tech companies and advanced manufacturing, including printable electronics, industrial biotechnology and low-carbon aircraft engine technology. It was a limited fund which was essentially designed to assist and speed along new developments and innovations in technology. It is clear that such funds can play a major role. That investment fund, which was established by our sister party, the Labour Party in Britain, played a major role in supporting new and environmentally friendly technologies. It was, if you like, a green stimulus plan. There is much potential for a similar fund in Ireland. For example, my Labour Party colleague Senator John Kelly has introduced a Bill dealing with wind energy, which I welcome. That is the type of innovative proposal this country needs if we are to recover.

I welcome and support the Bill, but if we continue to strangle domestic demand in our economy, it is small business that will be hit hardest. Such businesses will have to lay off or reduce the hours of their workers. That is a damning indictment of the politics and policies of austerity, which do not work. I have heard this time and again in public debate, but I do not think it can be said enough. What everyone in this House wants is to create jobs and build a society in which everyone has equality and in which wealth is redistributed from those who have significant amounts of private wealth and shared with people who are struggling. I am sure Deputies see in their advice clinics week after week people who cannot pay their rent at the end of the month, who cannot heat their homes or who cannot give their kids a packed lunch for school. This is a reality for tens of thousands of people the length and breadth of the country. Some of them are self-employed. Some may have a car in the drive, but they cannot afford to put petrol in it. We must be cognisant of what is happening in the real economy. In fairness, this Bill recognises that in its own moderate way.

I agree with comments made recently, on May Day, by the general secretary of the European Trade Union Confederation, Bernadette Ségol, who said:

Making jobs insecure, and especially jobs for young people, is not a solution to the crisis. Flexible employment contracts and low salaries do not pave the way to growth. The ETUC recommends an economic recovery plan that supports quality employment. In the face of populism, it is vital to build a Europe of solidarity.

This is important for small businesses that are under pressure to ensure they do not succumb to the drive to lower the wages and conditions of their own employees. Ultimately, if a company is making products or selling goods or services, it simply will not thrive if there is no one there to purchase them. It is absolutely critical that we institute a change in how we deal with the economic crisis. Unfortunately, that has not happened to date, although there have been some welcome steps forward, including this Bill.

Other contributors touched on the broader economic context, and so will I, if I may. In the 1980s, we had a significant revisionist phase which played a role in reassessing the history and future of our island. I fear that at the moment we are encountering a revisionist phase with regard to the economic crisis. We are being told that Ireland's economic problems are a consequence of public spending gone wild and lavish expenditure on health, education and social welfare. That is absolute nonsense which bears no resemblance to the facts. In 2010, Government revenue was 34% of GDP. The only countries with a lower proportion were Bulgaria, Romania, Lithuania and Slovakia. Certainly, it was not investment in health, education and transport that created our economic crisis. Incidentally, the Irish Congress of Trade Unions estimates that by 2015, Ireland will be bottom of the league in terms of investment and public expenditure. I hope that in his earlier contribution Deputy McGrath was not being flippant about ethics in public office. The cause of our economic crisis was threefold. First, we had a completely deregulated banking system which invested irresponsibly and was purely driven by greed and corruption. The second reason was a planning system in which county councillors, particularly those from Fianna Fáil and Fine Gael although I do not include all councillors of those parties, participated in massive rezoning of land. My area of Dublin West saw land rezoned day in and day out, purely to inflate its price. We debated the Mahon report recently in the House. The third reason for our economic crisis was right-wing, Fianna Fáil economics which resulted in the provision of tax breaks to very wealthy developers for projects such as hotels, when that money should have been used to invest in social infrastructure such as child care and education facilities, or in our health service. If that money had been used correctly, we would now have a much firmer base on which to make adjustments. I accept that adjustments must be made and that we must meet our international obligations, but the way in which we do that is a political choice. We need to choose options that will create growth and stimulate our economy. If we listen to economists from the Nevin Economic Research Institute and TASC, we will find that the balance between the types of taxation and the spending cuts we are implementing, as against what we should be doing such as closing off property-based tax loopholes, is wrong. I hope we will move towards an evidence-based approach to economic recovery. As far as I understand it, the EU-IMF troika has always been crystal clear that budgetary policy and the balance between tax and spending are matters for the Government.

It is clear that as a country we have choices. The credit guarantee scheme does provide some options for us in terms of supporting small businesses, but how can we compel the banks to lend?

Commercial rates are crippling small businesses and many are struggling to pay them. In addressing the problem of upward-only rent reviews we would have dealt with this issue. The Government considered it very closely. It was given advice that addressing upward-only rent reviews was not possible in the current constitutional and legal framework. Surely there will be an opportunity at the constitutional convention the Government has established to determine whether a referendum or other mechanism is necessary to tackle the issue of upward-only rent reviews. In my constituency of Dublin West retailers in the Blanchardstown Centre tell me every day that a review of the issue would have a significant impact on them, their workers' job security and, most important, the local economy.

If the country is to recover, it is critical that we examine the relationship between the economy, the dysfunctional banking system and generating jobs and growth. In that context, the Government must return to the promissory notes issue.

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