Deirdre Clune (Cork South Central, Fine Gael)
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Question 58: To ask the Tánaiste and Minister for Enterprise, Trade and Employment the action she is taking to protect and support small business here; her views on the continued lack of credit available to viable businesses; the effect she estimates the credit shortage will have on small business; the further action she will take to deal with the problem of credit flows and small business; and if she will make a statement on the matter. [20228/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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A properly functioning banking sector is an essential element for the maintenance and development of enterprises, especially SMEs. Government focus has been on creating a fit for purpose banking system as is evidenced by the bank guarantee scheme, the recapitalisation scheme, the nationalisation of Anglo Irish and the establishment of the National Asset Management Agency. Substantial guarantees and funding have been committed to the banking sector in order to keep the banks functioning to support the broader economy.

A key principle of all these actions is the recognition of the importance of business lending particularly to SMEs. Small and medium-sized enterprises are central to our economy and the provision of bank credit to the sector is a primary target of all these initiatives. The banks' recapitalisation package contains a range of initiatives to assist directly our enterprise sector, including that the recapitalised banks have committed to increasing their lending capacity to SMEs by 10% over 2008, which should ensure that sound businesses will receive support from their banks; and a €100 million environmental and clean energy innovation fund is also being established by each bank, as well as a further €15 million each to new or existing seed capital funds. Much of this funding will flow to small and medium-sized enterprises.

SMEs are also covered by the code of conduct on business lending to SMEs. This code, which was published by the Financial Regulator, came into effect on 13 March 2009. The application of the code will promote fairness and transparency in the treatment of SMEs by the banks and should facilitate access to credit.

The recapitalised banks have also agreed to pay for and co-operate with the carrying out of an independent review of bank lending to SMEs. Additional banks have now agreed to participate in this review.

Allied Irish Banks, Bank of Ireland and Ulster Bank will also provide funding for SMEs on foot of a €300 million facility provided by the European Investment Bank to assist developing SMEs.

The banks have undertaken public campaigns to actively promote their lending to SMEs. Recently, they have used recent press and television advertisements and announcements, together with information sessions with businesses, to demonstrate this commitment.

Deirdre Clune (Cork South Central, Fine Gael)
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How does the Tánaiste's answer square with last week's ISME survey, which found that 58% of companies have been refused credit by banks, an increase from what was found in a previous survey? The survey also found that 83% of SMEs feel the banks are making it difficult for them to access credit and that European Investment Bank loans have not been marketed to SMEs. Following the banks' recapitalisation and last September's guarantee scheme, funding is still not flowing to small and medium-sized enterprises and many of them are finding it extremely difficult to operate in the current financial circumstances. These are not fledgling businesses; they have been established for ten years or more and have a sound profitable base. Many of them have to let staff go and others fear for their future.

Will the Tánaiste outline how European Investment Bank loans will be channelled to small businesses? Many candidates in the European elections, particularly those in the Tánaiste's party, have commented on how valuable these will be for small and medium-sized enterprises, yet surveys and feedback to Members of this House tell us that this is not happening. It is a constant source of concern.

Mary Coughlan (Donegal South West, Fianna Fail)
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I am aware that there are concerns and that is why a considerable period of time ago we set up a round table forum. Today, I will announce the establishment of a clearing group that will include the Minister for Finance and I. It will be chaired by my Department and the Department of Finance and will include the Irish Banking Federation, AIB, Bank of Ireland, Ulster Bank, National Irish Bank, Bank of Scotland Ireland, Anglo Irish Bank, representatives of ISME, the Small Firms Association, SFA, Chambers Ireland, the IFA, Forfás, Enterprise Ireland, the IDA and Fáilte Ireland. This is the framework in which we will assess and analyse lending capacity and what is happening.

I agree that there are significant issues for small and medium-sized enterprises. I want to be able to ascertain in a serious way the specific pattern of events that are happening and, most particularly, to identify some of the credit supply solutions that need to be provided to address the concerns that every Member of the House has raised.

We have seen that access to working capital is difficult. We have also seen difficulties with other capital mechanisms such as overdrafts and the methods by which stock is purchased. One must also appreciate that there will be clearer thinking on how people will lend and on the difficult issue of the availability of cash. We will use the clearing group as a method by which we can address many of the concerns raised.

Deirdre Clune (Cork South Central, Fine Gael)
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Has the Tánaiste considered providing a State-backed Government-guaranteed loan scheme specifically for SMEs, similar to that which operates successfully in the UK? This would be of benefit. It has worked to facilitate loans directly to SMEs in the UK.

Mary Coughlan (Donegal South West, Fianna Fail)
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Under the temporary framework that was signed off by the European Union, all of those mechanisms are available to Irish industry. For example, loan guarantees are also available in this State-----

Deirdre Clune (Cork South Central, Fine Gael)
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Not a specific State-backed guarantee.

Mary Coughlan (Donegal South West, Fianna Fail)
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Yes, they are and they have worked, contrary to Deputy Clune's opinion. These mechanisms are available and part of the recapitalisation programme is to ensure that more capital is made available to these companies.

I also want to advise the House that the method by which grant aid is provided by Enterprise Ireland, the IDA, Údarás na Gaeltachta and Shannon Development is a tripartite approach between the agency, the bank and the client, which never happened before. This is to assure the client that, when grant aid is available and due diligence is done, it will stand up from a banking perspective. I am not saying it is easy to get access to finance; some of the rules have changed. However, the criteria for lending have also changed. That being said, it is my clear intention to use the round table forum and the clearing house to pursue this matter vigorously on behalf of the people that I must represent, namely, the business sectors.

Deirdre Clune (Cork South Central, Fine Gael)
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Question 59: To ask the Tánaiste and Minister for Enterprise, Trade and Employment her plans to reduce Government controlled costs imposed on small businesses; and if she will make a statement on the matter. [20229/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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The issue of competitiveness is key to my response to business needs, especially for the SME sector. Ireland has consistently been an economy in which it is easy to do business, and it has seen the growth of a large number of successful new enterprises, many of them SMEs.

Ireland is a leader in having the lowest cost for setting up a business and is lightly regulated, which in itself lowers costs for business. Ireland also has the third lowest rate in the EU of corporation tax, which lightens the tax burden on businesses and gives them an advantage over competitor countries.

Current trading conditions for companies are difficult and challenging because of various issues such as the devaluation of sterling, energy and wage costs, tough competition and the decline in exports. Some issues are outside the control of the Government as a whole, but where possible and appropriate, we can address some key areas, for example, energy and local charges. We are addressing our cost competitiveness as an essential element of our economic recovery. Nothing should come in the way of these firms to inhibit or stop them from growing their businesses.

I am conscious that energy costs for businesses in Ireland are a source of concern, particularly as businesses are attempting to cut costs to remain competitive in the current economic environment. However, in recent months, the trend of energy prices has been downward. In response to this trend, the Commission for Energy Regulation lowered electricity prices for residents and SMEs by 10% from 1 May. Gas prices were reduced by an average of 12%. According to the latest published Eurostat comparisons, smaller SMEs are paying 1% below the average EU 27 price. Approximately 60% of ESB's SME customers are in this category.

On 8 May, the Government launched the national energy efficiency plan. This reiterates that the best method for businesses to cut energy costs is through energy efficiency. The new plan includes advice and mentoring for SMEs on how best they can reduce these costs. In addition, we have provided incentives to business to purchase energy efficient equipment and we will continue to promote energy efficient best practice. Sustainable Energy Ireland also offers a broad range of assistance to enterprises in achieving significant cost savings.

The Minister for the Environment, Heritage and Local Government, Deputy John Gormley, and I have impressed on local authority managers the concerns of Government about costs for enterprise, including local authority charges, and asked them to consider measures to support new or existing enterprises in their area by, for example, reduced development contribution rates, or deferral of payments.

The Government has also implemented an 8% reduction in professional fees for public service bodies from 1 March of this year.

Deirdre Clune (Cork South Central, Fine Gael)
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The Minister referred to energy, wages and local authority charges, which are the bugbear of many small and medium enterprises. This country has extremely high energy costs; they are the second highest in Europe. These costs could be controlled through a different approach to our regulatory model. Labour costs are very high. Already this year the retail sector will be obliged to introduce a 2.5% increase in October, due to joint labour committees, JLCs. This is out of employers' control and they must implement it. The same thing happened in the hospitality sector. What plans does the Minister have to address wage costs? Does she believe the minimum wage should be reduced?

Mary Coughlan (Donegal South West, Fianna Fail)
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With regard to JLCs and employment regulation orders, EROs, I noted the discussion that took place in the House on the Employment Law Compliance Bill. There was a variety of views and perspectives and I look forward to bringing that legislation to a conclusion. How we will manage that I do not know, but with such a variety of views it will be difficult to anticipate how the final legislation will look.

Leo Varadkar (Dublin West, Fine Gael)
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There should be a free vote in the House. We will see how many Fianna Fáil Deputies vote for the Minister's Bill.

Mary Coughlan (Donegal South West, Fianna Fail)
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There is an issue with the JLCs in the catering, hotel and tourism sectors. When Deputy Billy Kelleher was in the Department he finalised the amalgamation of two of the JLCs and was dealing with the issue of Sunday working hours. The new Minister of State, Deputy Dara Calleary, is pursuing the issue and will bring it to finality. I will introduce new legislation very soon dealing with the issue of EROs and I look forward to the response of Opposition Members to it.

With regard to the minimum wage, it is important that we have a framework on wage policy. We must not deal with it in isolation. On that basis the minimum wage issue is being evaluated. The work and research on the issue is ongoing and the minimum wage will be taken into consideration in the context of overall wage structures and wage policy. This work is being supplemented by Forfás.

Deirdre Clune (Cork South Central, Fine Gael)
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Our party has called for a freeze of local authority charges. I noticed the Taoiseach commented on this issue recently as well. Has the Minister held consultations on this issue with local authorities and county and city managers? It is an enormous cost burden on small businesses but, having been a member of a local authority, I am aware that it can be a soft touch for local authorities at budget time. Has the Minister conveyed her views? Does she have concerns about this? Has she conveyed the views of small and medium enterprises?

Mary Coughlan (Donegal South West, Fianna Fail)
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I have met the local authority managers and discussed this matter with them. I indicated that businesses are of the view that they must reduce their costs. As a former local authority member as well, I appreciate that financing local government is difficult but rates are a huge issue for businesses and their sustainability. The Minister for the Environment, Heritage and Local Government, Deputy John Gormley, indicated last year that there should be no increase in rates for businesses. Unfortunately, not every local authority abided by that.

Leo Varadkar (Dublin West, Fine Gael)
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He cut local government funding.

Mary Coughlan (Donegal South West, Fianna Fail)
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The overall issue of tax policy, particularly for financing local authorities, will have to be dealt with once and for all so a final determination can be made. Work to examine how that can be done is ongoing by the Minister for Finance and the Minister for the Environment, Heritage and Local Government. I met with the city managers and I will meet them again shortly. I appreciate their difficulties but there must be an equal appreciation of the tax burden that falls on the small and medium enterprises.

Deirdre Clune (Cork South Central, Fine Gael)
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Perhaps the Minister for the Environment, Heritage and Local Government could increase the local government fund.

Brendan Howlin (Wexford, Labour)
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That concludes priority questions. We will now proceed to other questions.