Damien English (Meath West, Fine Gael) | Oireachtas source

I got a chance to touch on this briefly on Second Stages. I will first explain what section 5 is about. It introduces a new section 4A into the Act of 2012. This new section 4A provides the Minister with the power, subject to the consent of both the Minister for Finance and the Minister for Public Expenditure and Reform, to give guarantees in accordance with the Covid-19 credit guarantee scheme. The Covid-19 scheme will be open for guarantees to be put in place until December of this year, or no later than 24 December 2021 if the change is in the framework. The later date allows the Minister, with the consent of the other two Ministers, to extend the scheme if the European Commission extends the provision in the temporary framework on state aid beyond 2020. As of now there has been no confirmation from the Commission with regard to any extension.

The focus of the amendment is actually about the temporary framework. In the framework put forward it guarantees that the loans will not extend beyond six years in duration, which is in line with the flexibility contained in the Commission's temporary framework on state aid responses to Covid-19. The maximum amount of credit, as we know, is up to €2 billion, but the six years is the issue. The timeframe of loans specified in this section of the Act is in direct correlation with the timeframe for permissible loans in the European Commission's state aid temporary framework. Under the framework, within which the Covid-19 framework would operate, the maximum permissible duration of a loan is six years. While we recognise the average loan performs over seven years, and we would not be against this ourselves in the context of normal schemes, we must work within this framework. If loans are offered outside the terms of the framework it runs the risk of not being complaint, which can in turn have state aid costs implications for our small and medium businesses and the small mid-caps that borrow money under the scheme.

I draw Deputy O'Reilly's attention to the future growth loan scheme, which offers longer-term loans of up to ten years. During the discussion on this legislation and on the microfinance scheme, we were at pains to stress that this is not the only tool in the box. It is one mechanism being put forward to try to guarantee credit out there. It is only one of many. The future growth loan scheme has a longer timeframe of ten years and might have better conditions for certain customers, depending on who they are. The future growth loan scheme will be available to eligible SMEs and smaller mid-cap businesses and, importantly, to the primary agricultural and seafood producers in Ireland to support strategic long-term investment. It captures the same cohort of businesses as the Covid-19 credit guarantee scheme, but with longer terms also.

In policy terms it is important that these two schemes have different features for business. The Covid-19 credit guarantee scheme is designed to meet the liquidity needs of SMEs in the short to medium term, while the future growth loan scheme is more focused on longer-term strategic investment purposes.

I hope the Deputy understands. It is not that we think the amendment is illogical. It is quite logical, but we have to work within the framework or else there could be an implication in respect of state aid rules later on.

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