Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

There is a lot of food for thought in all of the contributions that have been made. I want to say, first, that I am not in a position to accept the proposed amendments because they are beyond the scope of the Long Title of the Bill and, as a consequence, I cannot incorporate them in the Bill.

Many of the contributions that have been made are very interesting but, effectively, they are a further analysis of the crisis that started six years ago, in particular the crisis brought about by personal debt and the indebtedness of the SME sector. This Bill is not intended as a vehicle for getting people out of debt. It is intended as an initiative for the future to ensure there is sufficient credit available to small and medium size enterprises to grow the economy, grow their own businesses and create additional jobs. It is in a different space to the space where many of the speeches were made.

I take the point made by Deputy Donnelly that it is possible to make the two ends meet. If there are supply-side initiatives such as this, we have to ensure there is sufficient demand, and if people are totally indebted, they do not provide the demand. However, we have the Central Bank's responsibility for running the programme on restructuring mortgages and getting people out of debt, and regular reports are brought before the House and before the finance committee in that respect. The Department responsible for planning and housing is responsible for social housing, under the Minister of State, Deputy Jan O'Sullivan, and the Housing Finance Agency is responsible for the financing of houses. While I agree with the Deputies' assertions that more could be done in those areas, there are organisations, agencies, institutions and personnel dealing with these problems already and we have had innumerable debates about them. Some people are critical and some are supportive, but I believe there would be a general view that progress has been made and will continue to be made.

This initiative is in a different space. This is to provide lending at lower interest rates and with different lending products to existing SMEs so they can expand, grow their businesses more rapidly, make a contribution to the general growth of the Irish economy and provide additional jobs. Some of what they will be doing is traditional and some will be innovative in the new economy. Any analysis of the availability to SMEs at present would indicate there are flaws in the type of products being provided, some of them to do with the interest rate charged, others to do with the length of the payback period and others to do with the fact it is very difficult for an SME to borrow in Ireland and have a payback holiday for, say, 20 or 24 months before the repayments pick up. As one moves from cash flow to profitability, it should be possible to design products, in the same way as KfW, that would fit the progress of a company from its loss-making early start-up years to years in the middle phase when it becomes profitable.

I am not challenging any of the views held by Deputies and expressed here today.

I am simply saying that they are not in this space. What we are doing here is looking to the future and seeing whether we can provide credit in new ways that would better suit the SME sector, which wants and intends to expand and whose expansion is being inhibited in many respects by the lack of credit or the fact that credit is not available in the way that best suits the needs of companies.

That being said, the first priority of the Bill is to take existing SMEs with a plan to expand that requires the investment of capital and make capital available in a user-friendly way. People will then set up new companies, many of which will be in the new economy, and credit should be available for them as well. In respect of housing, the test is whether it is an enterprise that will be run by an SME and has an identifiable commercial return, rather than being based on the particular activity people are engaged in. The German model is different. There is not the same level of home ownership in Germany. Much of the German housing supply is provided on the rental market, so obviously there are many SMEs and large housing companies that effectively provide the housing stock that people rent, and there is an identifiable income stream and commercial return. Germany has many SMEs and larger companies in the business. We do not have as many like that in Ireland. We have a buy-to-let sector which is quite strong but we do not really have a construct-to-let sector, although there are signs it may be starting. This is an area into which this credit institution could move in due course, but its primary purpose is to do what it says on the tin, namely, provide credit to existing SMEs and move on from there to new SMEs. To that extent, I think and hope it will be successful.

The other types of response the Deputies are talking about, whether it is through the insolvency legislation, bankruptcy, the work of the Central Bank in restructuring mortgages or the work of the individual banks in restructuring SME debt, all run in parallel. This is not a vehicle that is intended to support that activity. There are other agencies and people who have responsibility for that. Bank of Ireland says it has restructured over 90% of its SME loans that are indebted, and AIB says it is at 65%, so the percentage of SME debt being dealt with is higher than the percentage of domestic debt that is being dealt with, which we get in the quarterly reports from the institutions.

Another thing that is worth saying, but with which many Deputies will not agree, is that many of the problems we have had over the past four or five years are legacy problems that arose from the greatest and most disastrous recession the country has experienced and probably the greatest economic downturn since the Second World War. There are always problems in politics. The idea that there will be some kind of problem-free zone in a brave new world where politicians will have nothing to do is fantasy. It is just that the nature of the problems switches. We are in that switch year in 2014 where the problems of the future are coming strongly on board. It is a problem of the future economy. How do we deal with all the people who are unemployed? How do we create jobs for them? How do we provide the credit across the economy that is necessary in all the sectors? How do we deal with people whose confidence is beginning to build, who feel they are entitled to some reward and whose representatives in the trade union movement will be putting in pay claims? How do we deal with people have not received a pay increase or tax break for quite a while and who have expectations around budget time that they will receive one? As one works out the kind of models that might be effective, one can use as a rule of thumb the idea that a share of the legacy problems are going off the agenda and being replaced by the problems of the future.

This is addressing the future. It is not addressing the past. It is not addressing legacy debt issues either in the SME space or in the mortgage space. This is addressing a foreseeable lack of investment capital in the future to grow SMEs and the economy and, as Deputy Donnelly said, to complement what is happening with regard to foreign direct investment. I am not saying we should replace foreign direct investment with this, but if one looks at the model of economy we have, increasingly, foreign direct investment is going into the main cities and larger towns. The future of smaller towns is in doing what we were always very good at - agriculture, agrifood, food production and processing and tourism. One can name the tourist hot spots all around the country. While Dublin is very strong, there are others such as Dingle, Galway, Westport, Kilkenny and Kinsale. One can build the industry around them. We need a new tapestry where we modernise our traditional industry, invest in it, put people back to work and develop the agrifood and tourism industries in particular. To service that, one needs a strong construction sector and a strong retail sector. Of course, foreign direct investment runs in parallel but, increasingly, foreign direct investment tends to be in the larger urban areas to which quite a lot of people commute. Foreign direct investment is not the only game in town. Foreign direct investment is only part of how we rebuild the economy, and SMEs are absolutely vital. They have been vital all over Europe in growing successful economies. The availability of appropriate credit is crucial to the development of the SMEs. It is in that space that we should be resolving the problems that are quite clearly evident now but which take us into the future, rather than constantly analysing the ashes of the past.

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