Gerald Nash (Louth, Labour) | Oireachtas source

I am pleased to speak on behalf of the Labour Party on this important Bill. Members will be more pleased to hear that I will not use my full 20 minutes. I will keep to the standard set by previous speakers. As the Minister of State mentioned in his contribution, I was involved in amending the Credit Guarantee Act 2012. The work I did was in 2015. The beauty of the parent legislation, if I can describe it as such, is that it is capable of being amended to address issues facing our economy from time to time as they arise. We have had various iterations and forms of schemes in place since, most recently, of course, the Covid-19 guarantee scheme to which the Minister of State and previous speakers referred. Systems have evolved since 2012. Each subsequent scheme has been informed by the lessons learned from the operation of the previous schemes. That is a good thing. As the Minister of State said, the previous schemes send a strong signal that the State is prepared to invest and to put money at the disposal of SMEs during rocky economic periods. Credit guarantee schemes such as the Ukraine scheme will provide SMEs with the ability to spread the increases in their costs arising directly from inflation caused by the illegal war being waged on Ukraine. It should also have the effect of increasing the appetite risk of lenders and facilitate them in providing additional liquidity to businesses at a time liquidity will be critical for all the reasons we are only too well aware of. Simply put, no viable business should have to fold because of the war in Ukraine and the increase in energy costs. As it stands some SMEs may struggle to survive in any case, notwithstanding support schemes like the TBESS and the €200 million Ukraine support scheme referred to earlier, which was initially announced in September. That scheme provides supports of up to €2 million for manufacturing businesses that intensively use gas and are involved in the international traded sector. Access to credit and liquidity is vital for business and for jobs. That is why we need to be open to more agile ways of responding to the needs of jobs and business at this challenging time. We should not rule out the addition of supplementary support schemes as the need arises into the future and as the challenge evolves.

When we talk about a credit guarantee scheme, we need to be sure that the rates and the premia are set at the right rate. What I hear about the banks’ response in the context of interest rates is that we will ask them to go easy on the interest rate because the reality is that the interest rate has to reflect the reality of the reduced risk that the banks have given the fact that the Government has decided essentially to take on 80% of that risk. That is not insubstantial. That is significant State and taxpayer support in any language. The risk of default is largely borne by the State. We also know and the Minister of State will know from his own experience that the last thing that challenged businesses want is take on even more debt at a difficult time and, therefore, the conditions need to be as positive and as minimal as possible to allow as many impacted businesses to take up the benefits of a scheme like this.

I am aware of concerns, for example, about the uptake of the credit guarantee scheme notwithstanding the figures that he referred to earlier. I hope that lessons can be applied from that scheme and I have no doubt that they were. This scheme is targeting the companies most at risk of a downturn in the economy. We are sure that the rate of economic growth will slow next year and modified domestic demand will be down. That is bad news for locally traded firms in the everyday economy. It is important that when the scheme becomes operational that the firms that would stand to benefit most are aware that these supports are available. There is a job of work to be done then by Enterprise Ireland and the local enterprise offices to promote the scheme.

Have Enterprise Ireland, the local enterprise office network and the Department more generally undertaken any formal assessment of the number and nature of jobs that are at risk as a result of the high price of gas due to the illegal war being waged on Ukraine? It is important that as we discuss the Bill that the House be informed of this. I have no doubt that Enterprise Ireland has modelled some projections in regard to where those jobs are most at risk and what sectors or subsectors of the economy are most at risk.

It is important that we design the schemes that are available to us with those companies in mind and that an evidence base informs the design. That was something that I raised with Enterprise Ireland a couple of short months ago in the work that I did with it, the trade unions and the employer, namely, the Premier Periclase plant in Drogheda, which the Minister of State will be familiar with, that has been in existence since the 1970s. It is a heavy, intensive user of gas and it has a heavy manufacturing process. It is an exporting company. It came out for examinership last May and because of the difficult circumstances relating to the ever-rising cost of gas, to cut a long story short, it let approximately 40 of its 50 staff go and now has a skeleton staff of approximately ten. By the way, I pay tribute to Enterprise Ireland and the work directly of Mr. Leo Clancy, the chief executive, in working with us to do everything the agency could with the tools it has available to assist the retention of jobs in that employment. Unfortunately, notwithstanding the fact that under the Ukraine scheme there is a €200 million fund for intensive users of gas in the manufacturing exporting sector, the reality quickly dawned on that company that, in fact, if you leave that aside and while that support is welcome, what that would do is essentially pay two months of its gas bill with the increases it has experienced over the recent period. This company is transitioning from being an intensive user of gas to more sustainable ways of using energy to fire and power its plant over the next two years. It is in the process of doing that. At that stage, it made a very interesting point during the 30-day consultation process on redundancies, that what would have been even more useful for it in retaining employment was the development of a form of a furlough scheme alongside energy supports to keep people in employment.

This has been a hobby horse of mine for the past two and half years since Covid hit. This country needs to create a scheme like the German-style short-time working scheme to target sectors or subsectors of an economy that might be experiencing difficulties at a particular period to keep people in employment. The German Kurzarbeitscheme was one of the primary reasons the German economy did not go into the kind of recession we experienced and it did not experience as many job losses as we did back in the late 2000s into the early 2010s. The argument might be made that we do not need a wage subsidy scheme or a form of a German-style short-time working scheme when we are nearing full employment. The question then is: what do we do to retain skills? The skills, for example, in the Premier Periclase plant in Drogheda involving fitters, electricians, experienced engineers, experts in quality control and so on, are lost as those jobs are lost now and they will not come back. Once they are gone, they will not come back. It is about protecting our indigenous enterprise base and its skills.

We should not rule out the evolution of schemes to assist companies and jobs into the future. I have said time and time again that one thing that is lacking in the tools available to the State to support jobs and businesses during downturns is that form of a German-style short-time working scheme that was proven successful in that country. A scheme of that nature could be introduced here to make sure that when the next downturn comes we are not scrambling around to find a new way to support jobs and businesses and we would have a scheme that we can customise and tailor to different sectors of the economy during difficult periods.

When we do that - nobody has promoted this idea more than myself over the past two and a half years – why do we not attach conditions to the development and accessing of these schemes by businesses? It is insane that, despite my protestations, back in March 2020, we did not introduce conditions, for example, as a previous speaker said, or lay-off policies or lay-off conditions to State support. The idea that dividends and bonuses should not be paid is something that we have to interrogate again. With the way the economy is going and the reality that we may be at least facing a technical recession next year, these issues will come into public view again and they need to be examined and addressed once and for all.

In conclusion, the Labour Party supports the principles of the scheme. We are proud to be involved in the development of the previous schemes, which worked reasonably well. It is important that lessons are learned from the development and practical use of the previous schemes; I think some of those lessons have been learned. I will reiterate the point that I made earlier relating to premium and interest rates and so on. On interest rates, it should not be the case of merely asking the banks to do something and go easy on the interest rate. We should use the power we have to ensure that the interest rates, the premium and so on reflect the reality of the reduced risk for banks given the ratio of the risk the State is taking compared to them.

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