Louise O'Reilly (Dublin Fingal, Sinn Fein) | Oireachtas source

I am sharing time with Teachta Doherty, who is on his way to the Chamber. I welcome the opportunity to speak on the Bill, which Sinn Féin will not oppose.

The legislation is quite technical in nature and makes significant changes to the Covid-19 credit guarantee scheme. It is an important scheme and the changes to its workings are to be welcomed. I know from speaking to many businesses and various representative groups that there are issues with regard to the structure and workings of the loan scheme.

The creation of the scheme on 1 May to facilitate bank lending of up to €2 billion to SMEs, primary producers and small mid-cap companies was a welcome development. A figure of €2 billion for SMEs was reported in the media. SMEs and other businesses saw the scheme as a significant development in the context of measures to help them to bounce back from the challenge of Covid-19. However, as time went on the difficulties and flaws in the scheme became apparent to businesses and politicians. The proof of its limitations is evidenced in the amount of money that has been loaned. According to the reply I received last week to a parliamentary question, only €1,606,000 in loans has been approved and sanctioned to date for successful applicants under the scheme. If just €1.6 million in loans has been issued under a scheme with funding of €2 billion, there is clearly a problem. In contrast, in Britain £30.9 billion has been approved through the bounce back loan scheme which is widely regarded as being much easier and significantly less risky to access than the Irish scheme.

Sinn Féin has spoken to SMEs and others on the issue. They immediately pinpointed the limitations of the scheme and identified what needs to be done to address them. The first difficulty they identified was the portfolio cap. The removal of the cap is very welcome. On 13 May, Sinn Féin wrote to the previous Minister for Business, Enterprise and Innovation, Deputy Humphreys, and the Minister for Finance, Deputy Donohoe, calling for its removal. We stated that the removal of the cap would remedy a problem in the scheme as a result of which banks were refusing to lend to small businesses in dire need of affordable credit. The portfolio cap meant that banks saw it as unattractive to loan moneys through the scheme to SME. It also resulted in extremely high interest rates being charged on loans that were issued. The removal of the cap should make it easier and more attractive for banks to lend to SMEs. However, its removal alone will not improve the loan scheme.

The interest rates charged on the loans are the normal business loan rates charged by the respective banks with an additional 0.5% charge as a result of the Government guarantee. Furthermore, the Department with responsibility for enterprise, trade, and employment, which funds the scheme through the guarantee, plays no role in the application or decision-making process which is fully delegated to the participating lenders. As a result, the loans that are issued are subject to the respective banks' market interest rate. In other words, as pointed out by Unite the Union, the banks that administer the scheme decide whether to issue loans based on their own for-profit criteria for loan issuance, rather than the priorities of a Department that is trying to keep companies afloat during a global pandemic.

Nothing in the scheme speaks to the pressures that thousands of businesses across the State are under as a result of Covid-19. Businesses have pointed out these flaws in the scheme, as have organisations such as Chartered Accountants Ireland. It has highlighted the problems inherent in businesses accessing loans at high interest rates such as those charged under the scheme. It stated in its document The Next Financial Year: Making Irish Business More Competitive that the Covid-19 credit guarantee scheme is too onerous and complex to administer and that the interest rates charged are prohibitive. It stated that the interest rates need to be closer to ECB rates than to commercial rates.

For several months, Sinn Féin has been calling for similarly low interest rates. We raised the issue in the letter to which I referred which was sent on 13 May. We have been calling for interest rates that are capped at 2.5%. Preferably, the interest rate applied should only be sufficient to cover the overheads of administering the loan scheme. Low interest rates would encourage SMEs to take up the available loans. We have heard that first-hand from businesses and their representatives. They further stated that it would be a significant incentive and help if the loans were interest-free and there were no repayments for the first 12 months of the loan, as is standard practice for many Covid-19 credit guarantee loan schemes across the EU. It would make a significant difference to the loan scheme here. The Government should really be considering providing 90% to 100% State-guaranteed loans with no repayments for the first 12 months, the State covering the cost of interest over that period and significantly reduced interest rates thereafter. The implementation of such measures would make the credit guarantee loan scheme much more attractive to businesses in this unprecedented and extremely difficult period. The scheme would also be significantly improved if the Government guarantee of the loans was increased to 90%, with a review of its effectiveness to see if further increase was needed. The trajectory of the loan scheme in Germany went from a Government guarantee of 80% to 90% on review and, eventually, to 100%.

Reviewing the effectiveness of the scheme and enacting the necessary changes if it is not working is the only way we can be sure that it is meeting the needs of SMEs, microbusinesses and family businesses. Sinn Féin has proposed a loan scheme with these features. It has been shaped for SMEs and microbusiness by SMEs, small family-run businesses and microbusiness. It draws on the best aspects of European and international loan schemes. If the Government persists with the current scheme minus the portfolio cap, its uptake will not going to increase in any significant way. The failure of the loan scheme would mean the failure of our SMEs.

In advance of the July stimulus, I wish to raise the issue of debt through loans. Thus far, supports for SMEs have largely involved their taking on further debt in the form of loans, but that is precisely what small and medium businesses are saying they do not want. Increased debt will not help SMEs and microbusinesses to get back to work or drive economic recovery. The Taoiseach spent the recent days in Brussels, warning against pouring further debt onto European states. He has instead called for the use of grants to help economies to recover from Covid-19. It is essential that the Government take that approach in the July stimulus and include a comprehensive scheme of grants for SMEs, microbusinesses, the self-employed and sole traders. In its Supporting SMEs and Protecting Jobs plan, Sinn Féin has called for grants ranging from €12,000 to €25,000 to be given to affected SMEs and microbusinesses. In addition to this grant system, we outlined the need for a €5,000 grant scheme for the self-employed and sole traders who have been adversely affected by Covid-19. Such grant schemes have been successfully rolled out across the EU and beyond. The policy of preferring grants to loans which the Taoiseach advocated in Brussels must be reflected in the Government’s July stimulus package. Loans are essential, especially in the longer term, but affected SMEs, microbusinesses and family businesses need significant liquidity injections.

In addition to injecting significant liquidity into SMEs and microbusinesses, the July stimulus must also reduce businesses' non-pay expenses. A rates wavier and a cut in the VAT rate for the tourism and hospitality sector until the end of the year, with built-in extension review mechanisms, would suppress non-payroll expenses and allow some breathing space for affected SMEs and microbusinesses.

The central plank of economic recovery from Covid-19 must be a real commitment to microbusinesses, the SME sector and family businesses, as well as a steadfast commitment to workers’ rights embedded in legislation and the creation of decent jobs with decent pay and conditions. Some people have argued that every shilling of Government support should be linked to workers' rights. I point out to those making such arguments that workers' rights cannot be bought and there should be no attempt to buy them in that way. If an employer is allocated €2,000 on the basis of such an understanding but the grant is not renewed, would it be acceptable for the employer to then cease recognising its workers' union?

Workers' rights need to be legislated for - absolutely - but they cannot just be linked to schemes in this way because it is not going to work. In the long run, it is not going to help workers.

Some of the most negatively impacted sectors of our economy are also some of those with the lowest pay and worst conditions for workers. Therefore, the recovery for affected sectors cannot be a reconstitution of the past. As we try to help SMEs and microbusinesses recover from Covid-19, we must also try to rebuild our economy in a different way. The vast majority of our economic base is low wage, low growth, and low value added. We have to change that, and the Government has to be central in changing it. We must progress to build an economy that is robust, diverse, decent wage, high growth, and high value added. We cannot enviously look at the economic bases of Germany or Denmark as a pipe dream that we could never have here. We need to strive for the best aspects of such economies and try to replicate them here on a domestic level.

We must also reject the negative aspects of such economies. We must reject the negative economic policies which exploit workers, stifle growth and deprive Governments of tax revenue. Worker and community-owned co-operatives offer new ways forward for businesses; so too does investment in social enterprises. These are the areas which should be focused on and encouraged as we move through the Covid-19 recovery. The difficulties our economy and SMEs face are unprecedented, and grant schemes and loans will provide much-needed corporate welfare to businesses. However, it is imperative that as a State we have a much broader plan for our economy. We need an economy that works for the people. That can be done, and it should be a priority.

We will not be opposing this Bill as we support the general thrust of it. However, we would prefer if the scheme had a greater Government-backed guarantee and lower interest rates as well as a number of other changes. We can of course thrash that out on Committee Stage.

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