Wednesday, 10 June 2009
Small Claims (Protection of Small Businesses) Bill 2009: Second Stage
I move: "That the Bill be now read a Second Time."
I wish to share time with Deputies D'Arcy, Creighton, Reilly, Neville, Breen and Crawford. It gives me great pleasure to introduce the Small Claims (Protection of Small Businesses) Bill 2009. I welcome the Government motion, which Fine Gael will be accepting this evening, that the Bill be given a Second Reading within six months. Although I would prefer if the Minister of State could accept the Bill today, I appreciate that the Government accepts the Bill in principle. I expect the Government will introduce its own legislation within six months and that if not we will proceed to Committee Stage with this Bill.
The Bill is made up of two parts. Members will be aware that the small claims court procedure, introduced approximately ten years ago, allows consumers to seek redress in respect of disputes in regard to the sale of products or money owed up to a limit of £1,000 or €1,270, which is a low limit given that a family holiday, a wide screen television or a suite of furniture would cost more than €1,270. The first part of the Bill seeks to increase that threshold to €3,000.
The second part of the Bill, which is in many ways is the most important part, allows businesses, in particular small businesses, to use the small claims court procedure to pursue debtors, including companies and Government agencies who fail to pay their bills. This is a particularly important provision for small business which, as the Minister of State will be aware, employs approximately 800,000 people in 250,000 different businesses. Small business is the largest single employer in the State. It is a sector that is hurting in this time of recession owing to the reduction in the supply of credit due to the banking crisis, rising costs in doing business imposed in the most part by Government and its agencies and from reduced consumer confidence, which relates to the downturn in the economy and the fact that take-home pay has fallen as a result of increased taxes and levies.
Overall, this proposal forms part of 18 proposals put forward by Fine Gael to support small businesses. It is a valuable proposal. As the Minister of State will be aware, the Taoiseach has given a commitment that Departments will pay their bills to businesses, in particular small businesses, within 15 days. A late payment survey has yet to be carried out. I understand that the Department of Enterprise, Trade and Employment has reneged on its offer to carry out such survey. However, from the information available to me so far, Departments are by and large honouring that commitment to pay within 15 or 30 days. Unfortunately, this commitment has not been extended to cover Government agencies or State-owned companies. A person in business will know that his or her client is much more likely to be a Government agency such as the Health Service Executive, HSE, or a State owned company such as Iarnród Éireann or the ESB rather than the Department of Finance or the Department of the Taoiseach. We believe that commitment, that bills be paid within 15, or even 30, days, should be extended beyond Departments to all Government agencies, including the Houses of the Oireachtas and all State-owned companies. This procedure will allow businesses to pursue unpaid debts of a small value, less than €3,000, where it is currently not feasible for them to go to law because of the costs associated with hiring a solicitor and utilising the District Court procedure. It will allow them to pursue small claims without having to incur significant legal costs which will, in turn, help to reduce the cost of doing business.
I would like now to draw the attention of the House to some of the other proposals being put forward by the Opposition in respect of support for small business. In many ways, our economic strategy is based on four main pillars, the first of which is a fiscal and banking strategy that involves balancing the budget over a number of years but in such a way that keeps taxes low by concentrating on reductions in current spending rather than increasing taxes or availing of higher borrowing as proposed by other parties. The second pillar relates to the banking sector and proposes to immediately establish a national recovery bank capitalised with State funds but funded by the European Central Bank. Crucially, this proposal does what no other proposal will do, namely, it will allow the immediate flow of credit to businesses, consumers and home buyers. Irrespective of whether we go for NAMA or nationalisation, everyone accepts it will take a number of years to clean up the balance sheets and that, therefore, credit, the life blood of the economy, will not flow freely for a number of years under either of those models.
Those who continue to advocate the nationalisation policy need only look to Anglo Irish Bank to see how successful it has been. It has cost us €7 billion already and that bank has not loaned money to anyone in the past six months. Another example is Iceland which has nationalised all its banks and has had to raise interest to 17% just to keep them funded. In many ways, NAMA is in my view nationalisation by stealth in that the money one gives to the banks by way of buying loans from them will have to be given back to them by way of recapitalisation. As stated, this will involve the purchase of ordinary shares and, therefore, will result in the de facto nationalisation of at least Allied Irish Banks if not Bank of Ireland. While we may end up there one way or the other, nationalisation should happen as a last option and not as a solution. It will not do what we need it to do, namely, extend money to business, which is what is needed now.
The Bill also includes a proposal for a PRSI exemption or wage subsidy. We understand that the biggest problem facing people is unemployment. Some 400,000 people are currently signing on the live register. It appears that number will continue to rise even though the economy will return to growth, and I accept it will return to growth.
While the Taoiseach is correct that the recession will end in the next six to nine months, the growth that ensues will be jobless and will not fix the problems in the public finances. The recession of the 1980s ended in 1983 yet it was 1991 before we saw real job creation or repaired the public finances. Ending a statistical recession will not on its own solve our problems. We need to improve competitiveness and support businesses in creating jobs.
We have put forward proposals on reducing VAT and abolishing the travel tax. I understand the Labour Party is preparing a Private Members' Bill which will provide for a prohibition on upward only rent reviews. Retailers in particular have been locked into leases which prevent them from negotiating reductions in their rents. As someone who managed to negotiate a 20% reduction in rent for my constituency office, I have great sympathy for retailers and other businesses who are locked into clauses which prevent such reductions.
My party's proposals for greater flexibility in wage costs and conditions are particularly relevant to the hotel, catering and security sectors, in respect of which current employment regulations mitigate against employment. We have sought a reverse of the cutbacks in SkillNets and the Government has partially acceded to this. We have also asked for proposals on reducing red tape and forced a commitment out of the Government on reducing by 25% the cost of red tape to businesses. However, little real progress has been made in that regard and the Government has not yet shown us how it plans to calculate the baseline cost of regulation.
We want to see proposals on making it easier for small businesses to win Government tenders. I hope that the commission appointed by the Tánaiste to consider this issue will report quickly. An obvious measure would be to break large tenders into lots which could be bid on by small businesses. I am surprised at how many printing contracts, for example, go to other countries, as well as by the limited number of Irish companies tendering for them. I learned from the response to a parliamentary question that every element of Garda uniforms, from hats to jackets, is made in other countries. In many cases, these are Asian and other low cost economies but parts are also made in places such as Scotland and Belgium where costs are not dramatically lower than here. It seems our systems do not give Irish companies a fair crack of the whip on tenders.
We have also made proposals on reducing energy costs, which are 30% higher than is the case in Northern Ireland, the UK and elsewhere in Europe. If the Government set a target for reducing energy costs to the EU average within two years, it could thereby make a significant impact on the costs for small businesses and increase the likelihood of investment in Ireland by businesses which use large amounts of energy. As Deputy Coveney has noted on many occasions, the current regulatory system drives up the cost of gas and electricity to encourage competition but, particularly in electricity, we now have such competition. Tens of thousands of people have transferred their accounts to Bord Gáis and Airtricity and it is time we reviewed the system and gave the regulator a role in setting the price ceiling rather than the floor.
We have also raised the issue of local authority rates. Considerable efforts have been made by councillors, including some from Fianna Fáil, to keep rates low. Given that Fianna Fáil has lost control over virtually every county council and that the Green Party has only three councillors, I am concerned that the Government might further reduce funding for local governments in order to force councils to increase rates or to vote for their own abolition.
We have proposed a redrafting of the Employment Law Compliance Bill 2008, which establishes the national employment rights authority on a statutory footing and gives it extreme powers to raid businesses and seize documents. I am pleased the Department of Enterprise, Trade and Employment has decided to defer Committee Stage of that Bill until September or October. That is a recognition by the Government that the Bill as originally introduced by the Tánaiste in March 2008 was highly deficient and needs to be redrafted.
Small and medium enterprises deserve proper recognition within the social partnership structure, which for too long excluded important interests such as taxpayers, elected Members of this House, small businesses and consumers. If we intend to continue with this process, it must be modified to include proper and full representation for the small business sector and for the self-employed. The Minister for the Environment, Heritage and Local Government, Deputy Gormley, who seems to have some influence on the Government, has managed to include an environmental pillar in the social partnership so that environmental NGOs will have a place at the table. However, there is no place at the table for the self-employed, the unemployed or ISME, which represents independent small and medium enterprises. If we are to retain social partnership, its structure will have to be very different from the one which contributed to our present mess.
I am happy to move this Bill, which represents a small but important victory for consumers and small businesses. I thank the Government for accepting it in principle and look forward to either seeing new legislation within the next six months or proceeding with it to Committee Stage.
Like Deputy Varadkar, I welcome the Government's support in principle for this Bill. Too many Private Members' Bills have been voted down for the sake of politics. This legislation will greatly benefit businesses. I have long noted that the Cabinet is lacking people with backgrounds in business. It has been decades since Ministers have pulled a pint, sold a newspaper, milked a cow, ran an office or traded in any form. They do not understand what it means to be a sole trader or to go for weeks without receiving payment while having to pay wages and rates.
Deputy Varadkar spoke about the Government's commitment to paying bills within 15 days. This is the first opportunity I have had in the House to raise an issue involving a State contract for a school building project on which payment remains outstanding. The company which won the tender gave part of the work to a subcontractor that subsequently went out of business. When a State contract is awarded, people should be paid. As the service has been provided, the State is liable for payment. It is unfair of the State to claim it is a matter for another Department or the subcontractor. I have put down several parliamentary questions on this matter. If the State asks somebody to construct a building, it should pay for the work.
It is important that businesses are paid because the banks are closed to them in terms of cashflow and overdrafts. I have been approached by a number of good businesses which have found that their overdraft facilities have been reduced to 10% of their original limits of €15,000 or €20,000. That is destroying businesses and putting people out of work. Not only are they out of work but they are seeking social welfare benefits and not contributing to taxation. They are dominos being removed from the chain and when removed, it is very difficult to get them back into employment when they will be of benefit to the State rather than costing it moneys in unemployment benefits.
Small and medium enterprises are a huge cog in employment provision in the State. I agree that ISME should be considered a pillar of partnership. IBEC no longer represents small businesses; it represents enormous State companies such as the ESB and private companies such as Google. It does not represent small employers such as small book shops and newsagents who provide hundreds of thousands of jobs that are vital to the economy. We must get them involved in partnership.
We must stop enacting legislation that impacts on jobs. This time last year we wrapped up the debate on the Intoxicating Liquor Act. When it was being discussed, nightclub owners said that if it was passed, they would close. In recent days we heard that Reynard's - not a place I frequent - would close. They told Members of the House that if we passed the Bill, they would go out of business. The Bill was passed and while it has made no difference to the impact of excessive drinking, we have put people out of business. For too long I have been stating we cannot ignore what businesses say to us. Yes, they are vested interests but on this occasion they have been proved correct. We cannot continue to ignore the likes of nightclub owners who stated that if we acted in a certain way, they would go out of business. There are more people unemployed and more families being impacted upon.
I am delighted to have an opportunity to speak to this important Bill, the importance of which should not be understated. I congratulate Deputy Varadkar on introducing it and the work he has done in highlighting the plight of businesses over the course of recent months, in particular.
A significant problem faces us; SMEs are the lifeblood of the economy, yet they are struggling to cope, stay alive and afloat. Those who are staying afloat are struggling to keep the one, two or three people they may have in employment. This is a major challenge which I am sure everybody in the House has had to deal with in terms of businesses in their constituencies. In my constituency for the past eight or ten months as one drives through what was a particularly vibrant urban village, Ranelagh, one sees "To let" signs on at least ten or 12 premises in the heart of the village. This is indicative and symptomatic of the fundamental problem facing us; the small businesses which are the lifeblood of our communities are going to the wall and the main problems facing them are cash flow and credit flow.
The Bill proposes to deal with this problem to an extent by enabling SMEs to use the Small Claims Court to pursue debtors, an avenue not open to them until now. The proposal to increase the threshold to €3,000 is also significant. What has become a feature for small companies and businesses is that when they are owed money, they are not in a position to pursue their debtors because the sums may be too small to merit or warrant litigation because of the costs involved. They are caught between a rock and a hard place and there is nothing they can do. This legislation will enable them an avenue of pursuit without the high costs, legal bills and overheads that apply to ordinary court procedures. This is very welcome. I am absolutely delighted that the Government has seen the light on this issue and agreed to support this tenet of the Bill. It will benefit small businesses and make life a little easier for them.
ISME is a wonderful organisation which does a huge amount of work in highlighting the plight of businesses throughout the country and the difficulties facing them. It has conducted interesting surveys and research in recent months which bring home how difficult the situation is for small businesses. The survey it conducted at the end of May shows that 70,000 SME jobs are in immediate danger. We know this is due to high labour and other costs associated with running small businesses and the real and pressing factor of credit flow. It is alarming, yet many people, particularly on the Government benches, do not seem to be fully cognisant or aware of how serious the problem is.
ISME also conducted an important survey at the start of May which showed that 58% of companies had been refused credit by banks. This is a significant increase on the figures indicated in previous surveys. Despite all of the measures adopted by the Government on the banks - the guarantee, recapitalisation and so on - credit is still not flowing to SMEs. The Government must address this as a matter of priority and I urge it to do so.
I agree with Deputy Varadkar on the urgent need to have the voice of consumers and small businesses heard around the social partnership table. Social partnership in its current form has failed and is redundant. It needs to be abolished and reconfigured with a fully representative voice because as it is constituted at present it is essentially a sham.
I thank Deputy Varadkar for bringing the Bill before the House. This issue is a matter of concern up and down the country and everybody one meets or speaks to, whether involved in trade or trying to run factories or small businesses which are holding on by their fingernails, is looking to the Government and asking what is it doing to help him or her but he or she is not seeing that help coming through. Consider the amount of money going into Anglo Irish Bank, none of which is being made available to those who need overdraft facilities for their business. I will cite one particular instance of an electrician who has a small number of men working for him. Two years ago it was not an issue for him to obtain an overdraft of €90,000; today he has been waiting three months for an answer to his request for an overdraft of €10,000. He cannot do business. A number of opportunities are coming his way but he cannot afford to take them because he cannot take the risk without an overdraft.
Small businesses are suffering. The car trade, to mention but one, is on its knees. In Stephenstown Industrial Estate in Balbriggan in north County Dublin there were 360 jobs, of which 80 are gone. Of the 280 jobs remaining, 80 are under threat. I met the business people concerned a couple of weeks ago and they are completely frustrated. They pointed to Northern Ireland which is only 40 miles from them. They wonder why people would want to set up in Fingal in the South when they could travel to the North where set-up costs are much lower.
The rateable valuation here is far too high. It was calculated at the height of the boom when property values and economic activity levels were significantly higher. That is not the situation now, as we all know. Fine Gael asked that all rates be frozen, but that has not happened in all areas. We need to examine that issue again. Landlords are being asked to review rents downward to reflect the reality for business, but how many landlords have cut rents? Many tenants have been able to renegotiate. I ask county councils to also reconsider and reset their rates, particularly for businesses which are trying to sustain themselves through these tough times. They might consider a discount of, say, 20% for two years and then review the position again. Half a cake is better than none. If the 80 jobs mentioned are lost, it will cost the Exchequer €20,000 each in lost revenue, tax payments and welfare payouts. Everybody will lose in that case.
Another issue is that development levies were set when the economy was at an all-time high and property was three or four times the price. The levies have not changed. They must be reviewed downward. If one sets up a factory in the North, the nominal charges for connection to services are of the order of €2,000. In the South they are more than €100,000. That is unrealistic. We must cut our cloth to suit our measure.
Deputy Varadkar mentioned other issues, including the need to reduce the VAT rate downward and a PRSI holiday for those who take on new employees, but I wish to raise an issue I mentioned yesterday. We are trying to create a green economy, yet there is a connection charge to the grid of an outrageous sum such as €1.2 million to €1.7 million. That kills business before it gets off the ground.
I would like to see the Government take on board the recommendations made in Deputy Varadkar's Bill which I commend to the House.
I welcome the opportunity to support the Bill. Small and medium enterprises are the backbone of the economy and my constituency. The economy of County Limerick is dependent on them. Even though we have big towns, we do not have large industries in towns such as Rathkeale, Newcastle West and Kilmallock. The economy is totally dependent on small businesses. Nationally, more than 800,000 people are employed in small small and medium-sized enterprises which contribute substantially to the economy. The increase in costs, including fuel and other business inputs, has significantly impacted on such enterprises and caused a level of job losses which is unacceptable.
Prompt payment by the Government and creditors is crucial. I spoke to a small businessman recently who told me that this was one of his difficulties. He told me also that organisations and companies which could afford to pay small businesses for services were not doing so and were using current circumstances to imply they were in difficulty. It is obvious that many of them are not in difficulty. There must be a mechanism, similar to the one outlined in the Bill, to ensure those who can should pay and not misuse current difficulties to delay payment and exert extra pressure on small and medium-sized businesses.
In recent months the Government has made the position worse with the increase in taxes and the absence of political leadership. On the issue of confidence, leadership is required from the Government. There is money in the economy. There are people working; some have increased wages and salaries, yet they are afraid to spend. They are worried about their future and that of their children. They are frightened of losing their jobs. The majority will not lose their jobs, but the failure of the Government to instill confidence in them to spend is one of the crucial issues affecting the current state of the economy and inhibiting an upturn.
There have been job losses in high profile industries. Dell in Limerick is located outside my constituency but a large number of people living in my constituency work there. The position at the company has severely affected us. There has also been a silent haemorrhaging of jobs from small and medium-sized enterprises across the country. This week we saw a considerable increase in unemployment in my constituency, most of which occurred in May in small and medium-sized industries.
I commend Deputy Varadkar on bringing forward the Bill. I am delighted he has a keen interest in small and medium-sized enterprises because, as Deputy Neville said, they are the backbone of the economy. There are approximately 250,000 small and medium-sized enterprises in Ireland employing approximately 800,000 people. Unfortunately, the latest live register figures show there has been a 94% increase in the number signing on. Many of the 400,000 signing on were employed in small and medium-sized enterprises. The closure of many small industries has gone unnoticed by the media and often is not reported. Only large company closures are reported. Some 35% of small and medium-sized enterprises expect redundancies at a level of 20% in the next three months. Many of the workers in the companies involved have already taken pay cuts and the companies are barely ticking over. More of them will go to the wall because they cannot get access to credit.
In my constituency of Clare 25 to 30 small retail units in Ennis have closed in the past 12 months. Following the figures announced yesterday, I note there are 9,688 people employed in the county. Some are employed in the construction sector and service industries, but many are employed in small and medium-sized enterprises. Many architects, engineers, auctioneers, solicitors and those involved in retail shopping units are already working short-time hours and have taken pay cuts. How often have we seen retail units lying idle, many of which have never been occupied? An employee in an auctioneer's office told me the other day that there were two in her house working, that she worked for an auctioneer and that her husband was employed in the public sector, but since last October their disposable income has been reduced by €700 a month, which effectively means they are paying a second mortgage every month to bail out the bankers who created this crisis.
We must get the banks to start lending again. Businesses are starved of credit. That is the reason Fine Gael has proposed the establishment of a national recovery bank which would buy good debts from the guaranteed banks, thereby providing them with the capital they need to cover their losses and bad loans and free up their resources to enable them to lend again. Many small businesses are already finding it difficult to access capital and face further financial difficulties in trying to recover small debts. Deputy Varadkar's Bill is important because he has inserted a provision to provide that any debts not exceeding €3,000 could be dealt with by the Small Claims Court. That is an important measure. Currently, only consumers can use this court. This measure would alleviate some of the problems many small businesses are experiencing in trying to recover debts.
Other issues were raised, including those related to VAT and a freezing of local authority rates. They must be taken on board. I hope many of the new local authority members will do so before the end of the year.
I urge the Minister to examine the cutback of funding for Skillnet companies. Many companies testify to the value of that network model which delivers relevant training but which also provides crucial support for companies, their owners and employees. Many Skillnet participants may lose their jobs as the recession deepens, but rather than segregating the unemployed, they should be integrated through enterprise-led training and allowed to participate alongside people already in employment.
I welcome Deputy Varadkar's Bill and I am delighted the Government has indicated it will accept it.
I thank Deputy Varadkar for introducing the Bill and welcome the fact that the Government has decided to accept it in principle. As someone who has been a Member in the Dáil longer than many others who have spoken, I am concerned at the Government's commitment to leave it for six months, which can often be elastic. Small businesses simply do not have the time. They require these issues to be dealt with as a matter of urgency. They require not only the passage of this Bill, but also to get cash circulating as quickly as possible and to be guaranteed that bills for services provided to Government, whether to Departments or agencies, are paid on time. One still hears of cases of agencies which are very slow to make payments.
There is not a scarcity of money as some people have made out. Credit unions and post offices have never had as much money as at present. The real problem is that while the Government has poured €7 billion into Allied Irish Banks, AIB, and Bank of Ireland, customers cannot get money out today. Before going to the Dáil for a vote I heard from a young man who is in business. He had a sizable loan with a small overdraft, but he was told today by AIB that the facility would be no longer available. I make no apology for mentioning the name of the bank concerned in the House because the Government and taxpayers are bailing out and supporting that bank. The Government must get agreement from the banks, whether AIB, Bank of Ireland, Anglo Irish Bank or whichever, that if taxpayers' money is being poured into them, they must provide a service and relieve small industry such that it can continue to work.
There is also a problem with costs generally. Deputy Reilly referred to businesses in Finglas competing with those over the Border, but let us consider the position for those in Cavan-Monaghan competing with businesses across the Border. People there have a choice and they need only travel a short distance. They can still live at home and start up a new business in Northern Ireland. Change must be made. The VAT issue was brought to the attention of the Minister for Finance between the budget and the supplementary budget. He admitted he made a mistake initially but when he introduced the supplementary budget he did nothing about it. I welcome the leeway the Government has given towards this Bill, but I refer again to the six month period in question. Small businesses cannot wait six months for the Bill to make progress or for more red tape. This should be sorted out as a matter of urgency.
John Moloney (Minister of State, Department of Education and Science; Minister of State, Department of Health and Children; Minister of State, Department of Enterprise, Trade and Employment; Minister of State, Department of Justice, Equality and Law Reform; Laois-Offaly, Fianna Fail)
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I move amendment No. 1:
To delete all words after "That" and substitute the following:
— welcoming the extensive measures already taken by the Government to ensure access to credit and support for small business generally;
— noting that the Department of Justice, Equality and Law Reform in consultation with the Department of Enterprise, Trade and Employment is engaged in a review of the limits and scope of the current small claims procedure;
— accepting the Government's intention to bring forward a measure, as soon as possible, to widen the scope of the current procedure;
resolves that the Small Claims (Protection of Small Businesses) Bill 2009 be read a second time this day six months.".
I wish to share time with the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Calleary.
At the outset, I genuinely welcome the Bill. As someone involved in a small business for years I wish to put on record my appreciation for the efforts involved in introducing the Bill. For the purpose of clarification, the issue of six months is not an attempt to reduce the importance of the Bill or to sideline it. It is simply to allow the working out of the detail and I trust Deputy Varadkar accepts this explanation. I refer to the issue raised concerning the reduction of council seats on local authorities. This is not an attempt to reduce grants and that suggestion is somewhat impossible to accept.
I appreciate the efforts made to introduce this proposal and I am pleased to respond to Deputy Varadkar's proposed Private Members' Bill on behalf of the Government. I have no doubt his motivation and objectives are sincere in terms of what he seeks to achieve and the Government is in broad agreement with his proposal. The Government has made clear that it is open to ideas and it will not vote against this Bill this evening. However, there are several concerns with the detail of the Bill and, therefore, the Government proposes that the second reading be postponed for six months to reconsider the issue in detail and to ensure the issues do not have any adverse effect on the operation of the current small claims procedure.
Before turning to the specific proposals contained in the Bill, I take this opportunity to remind the House that the Government fully appreciates that all businesses, especially small businesses, have been significantly affected by the very difficult economic situation the country is experiencing. Many Deputies have spoken during the course of the debate about the difficulties facing the banks and small businesses, especially legitimate small businesses, which have always operated within the constraints of their overdraft agreements. It now appears these businesses are being penalised. I understand the thinking behind the Bill and the comments made in support of it.
The Government is very aware that small and medium sized businesses are key to maintaining employment in the immediate future and to improving employment and the economy as we move through the current difficult international economic crisis. It is obvious that consumers and businesses have been severely impacted by the economic circumstances. This has manifested itself in difficulties on the part of both consumers and businesses in terms of making payment for goods and services, mortgages, rent on premises or fulfilling other contractual obligations. The point has been made by many Deputies also about small businesses being owed money by State organisations and companies. It is very important that the Government takes on board the proposals made in the Bill.
Recently, I heard an accountant on the radio discuss the fact that he was having difficulty obtaining payment from several long-standing small business clients. What the accountant had to say is very important in the context of what the Bill seeks to achieve. The accountant's clients were viable businesses but were, in the main, having difficulties trading due to cash flow and credit payments. I realise from my own experience that businesses require credit to allow them to continue to trade. I support the notion of this Bill. It is timely and I have no difficulty welcoming its contents and the thinking behind it.
Unfortunately, the very quick financial downturn, which could not reasonably have been anticipated by consumers and business, has resulted in cash flow and credit difficulties with a consequent debt problem. The Government is acutely aware of this problem and has very specific measures to address the serious issues that have arisen for small businesses as a result of the economic and banking crises. Our focus is very much on the needs of the wider economy and especially on the enterprise sector, including the small business element of that sector. We are very aware of the fact that one of the key drivers of our economic recovery is the provision of appropriate credit facilities to small businesses and enterprises.
There is a great deal of anecdotal material to suggest that banks are unwilling to lend in many cases, even to apparently viable businesses. Recently, I heard an interview on RTE Radio 1 with people working in a small family printing business comprising a husband, wife and their daughter-in-law. Traditionally the company always traded within an overdraft agreement. However, it could not renew its overdraft and those involved made the point that they had to modernise the computer back-up facilities. Unfortunately, the business was going to the wall because it could not secure the necessary ongoing finance.
All the main banks have said they remain open for business, are willing to lend where appropriate, and continue to approve a high percentage of credit applications. It is widely believed that demand for credit has fallen and that many businesses are unwilling to approach banks at present. I am pleased the Government has decided that an independent review of bank lending is required. As part of the banks recapitalisation programme, the banks agreed to fund this review. It is very important that people are aware of this and it is currently underway. The report of the review is expected by the end of June or early July.
It must be made very clear to the House that the Government is taking the necessary steps to address the problems faced by small businesses and that we will continue to take whatever action is required to overcome the current situation. The measures we have taken will go a significant way towards addressing the cash flow and credit facility problems facing small businesses.
In this context it is important to understand what the small claims procedure is all about. It was put in place to facilitate consumers with an inexpensive method to resolve small claims without the need to employ legal representation. It operates very much as a consumer-friendly procedure in respect of issues such as faulty goods or bad workmanship in the main and all the evidence is that it operates very effectively at present. The procedure was originally introduced on a pilot basis in 1991 by the then Fianna Fáil-led Government and was extended nationwide some two years later. The procedure is provided for under the District Court rules.
From its inception the procedure was designed to handle consumer claims cheaply without involving a solicitor. The District Court clerk, who is called the small claims registrar, processes the claims. Where possible, the registrar will negotiate a settlement without the need for a court hearing. Nearly half of all current claims are settled in this way. If the matter cannot be settled, the registrar will bring the claim before the District Court.
Currently classes of claims are limited to a claim for goods or services bought for private use from someone selling them in the course of a business - consumer claims; claims for minor damage to property but excluding personal injuries; and claims for non-return of a rent deposit for certain kinds of rented properties, for example, holiday homes. Other matters relating to rented accommodation are dealt with by the Private Residential Tenancies Board. The current procedure excludes claims arising from a hire purchase agreement, a breach of a leasing agreement or debt. With the exception of the European small claims procedure which commenced on 1 January 2009, the procedure is not currently available for use by a business against a consumer or another business.
The procedure is designed to be simple and user-friendly without recourse to legal advice. Once the claim is lodged, the registrar will negotiate with the claimant and respondent to try to reach an agreement without the need for a court hearing. Where necessary, the registrar may arrange a meeting with the parties. However, the process is kept as informal as possible and is held in private. There is no need to engage the services of a solicitor or other legal representative, although the parties are free to do so should they wish. Such costs are not recoverable from the other party. If the registrar cannot settle the dispute, a time and date will be fixed for a District Court hearing.
The court hearing will be heard in public as part of the normal sitting of the District Court. Evidence will be given under oath or affirmation, witnesses may be called and cross-examination is allowed. Costs incurred by either party, whether through the engagement of legal representation or expert witnesses must be borne by the party calling them, regardless of in whose favour the court determines the dispute. If the matter is determined in the claimant's favour, the respondent will be given approximately four weeks to pay the amount awarded by the court. Both parties have the right to appeal the order of the District Court to the Circuit Court.
In recent years, in order to improve the delivery of electronic services to the public in accordance with Government policy on e-Government, an on-line small claims service has been introduced. Initially it was run on a pilot basis in 2004 in the Dublin Metropolitan District Court and in Cavan District Court. Over the intervening period the on-line system has been rolled out throughout the remaining District Court areas and, since May last year, the system is live in all District Court offices throughout the country. It facilitates the public in lodging claims over the Internet, in cases where this is convenient. Claimants can pay the court fee of €15 on-line and follow the application through the various stages of the process using a unique pin number. Some 45% of all small claims in 2008 were received on-line and this is a measure of its success.
I will give the House an idea of the volume involved. In 2008 there were just over 4,000 applications, an increase of 11% from 2007. The largest increase related to claims about dry cleaners, which more than doubled. Claims about minor building issues, such as painting and decorating, increased from 109 in 2007 to 213, while applications relating to cars, usually servicing and maintenance issues, increased by 48%. Claims about holidays accounted for 10% of the total. It should be noted that there was a considerable decrease in applications that could not be dealt with under the small claims procedure, from 589 in 2007 to 426.
In 2008, a total of 44% of all claims finalised were settled by the small claims registrar with only 26% referred to court. There was an 18% increase, from 294 in 2007 to 349, in decrees by default, where the person against whom the claim was made did not respond or take any part in the case. Last year there were 1,030 cases referred to court, an increase of 20% on the 2007 figure of 857. Of those cases, 587 were dismissed, struck out or withdrawn with decrees granted in the remaining 443. A European small claims procedure commenced operation on 1 January 2009. It provides an alternative method of commencing and dealing with civil and commercial matters in respect of a small claim in cross-border cases only. It is provided for in an EU regulation and in new District Court rules. A cross-border case is one where at least one of the parties lives in a member state of the European Union, excluding Denmark, other than the member state of the court dealing with the claim.
As with the national small claims procedure, the service is provided in Ireland through the District Court offices. The service is not available on-line. The procedure will be mainly dealt with by correspondence although a hearing before a court can be held if the court thinks it is necessary. The service is available for civil and commercial disputes up to a value of €2,000. Where possible, the registrar will negotiate a settlement without the need for a court hearing. The parties do not need to involve a solicitor and the same application fee of €15 applies. The process operates in a similar manner to the national procedure and a judgment given under the European small claims procedure is recognised and can be enforced in another EU member state. Enforcement procedures are governed by the law of the member state where the judgment is being enforced.
The small claims procedure currently allows for claims up to a maximum of €2,000 rather than the €1,269 mentioned in this Bill. The current limit was introduced in 2006 in response to the report of the consumer strategy group which had recommended a move towards a maximum level of €3,000. The matter is kept under review and as the Minister informed the House last November, a review is being undertaken this year. The review being carried out by the Department is considering the resource impact of any increase as well as inflation.
I do not doubt the Deputy's motivation and objectives in putting forward this Bill. However, the Government has a duty to ensure that any legislative proposals are well founded and drafted. The Bill, as drafted, has a number of potentially negative consequences for consumers and small businesses alike which the Deputy may not have taken into account. For example, in the first instance, it may not be necessary to bring forward primary legislation. The current procedure was introduced by statutory instrument amending the District Court rules. It may be possible to achieve considerable widening of the scope of the procedure through an amendment of the District Court rules rather than an Act of the Oireachtas. However, a legal precedent prevents limited companies from being represented in domestic court proceedings by their directors or officials, in the absence of a statutory exception, and it may be necessary to make provision for this in primary legislation. The advice of the Attorney General will be necessary on this point as it would be desirable that the process can be conducted in so far as possible without recourse to expensive representation.
There is a danger that one of Deputy Varadkar's proposals could fundamentally alter the whole ethos of the small claims procedure. Rather than expanding it to act as an aid to business, as currently drafted, it has the potential to transform the focus of the process from an aid and assistance to the individual consumer to that of an anti-consumer measure. Such a move could have negative implications for the whole ethos of the small claims procedure. The measure as proposed, while promoted as one facilitating small business, has far wider implications, in that it would enable any business, irrespective of size, to prosecute claims against consumers and other businesses, large or small, with minimal formality. The measure could prove an advantage for large businesses, especially those with in-house law agents, collecting relatively small debts from large groups of consumers and small businesses. It could be argued that it would make consumers and small businesses more vulnerable. For that reason, this aspect requires very careful consideration and consultation and hence the six-month delay in the Second Reading of the Bill. The financial limit applying to the procedure was increased to €2,000 in 2006. The Minister already indicated to the House, in the context of the Arbitration Bill, that he has an open mind in respect of this limit. It is the subject of an ongoing review which will be brought to a conclusion in consultation with the Department of Enterprise, Trade and Employment as well as with the other stakeholders. The Minister will present proposals as soon as possible.
The majority of citizens will only ever have a short-term or once-off relationship with the courts, as victim, witness, juror, defendant, litigator or seeker of redress, etc. Since its establishment, the Courts Service has been extremely progressive in adapting to new methods and approaches and part of this is to try to ensure the experience is as positive as it can be in the circumstances by providing the necessary and appropriate information. Their dedicated information officer has implemented a wide-ranging and comprehensive strategy. The award-winning courts website has been developed continuously to ensure it meets the needs of its users.
As part of the customer service action plan, a number of user groups have been established to assist in developing a consumer-centred approach to service delivery. These groups help ensure that the views and suggestions of those involved in the courts system are taken into consideration in the development and operation of policy initiatives. Such groups assist greatly in improving the efficiency and effectiveness of the system. They include representatives from professional and representative bodies and provide a useful forum for the exchange of ideas and help to make users aware of each other's needs and concerns. There are also a number of tailored outreach programmes to provide information to groups interested in specific aspects of the work of the courts. This initiative gives the service an opportunity to provide information in a targeted way tailored to meet the needs of a variety of interest groups. I know the service would be happy to provide any assistance or information regarding access to the courts to groups representing business.
In the past 12 months, the Government has greatly increased the resources available to the courts, not least in the number of additional judges appointed. The Courts and Court Officers (Amendment) Act 2007 provided for an additional 14 judges, comprising six judges of the District Court, four of the Circuit Court and four judges of the High Court. The proposals have the potential to provide an inexpensive and speedy mechanism for small businesses to pursue small debts.
I hope the Deputy will appreciate the genuine concerns which give rise to the need for further consideration. The Government does not wish to put at risk the current system which is working well. Detailed analysis is required to identify a means to extend the scope and range of the system without disadvantaging individual consumers who are making good use of the current efficient model. This work will be done quickly and without delay, building upon the review already underway in my Department.
Dara Calleary (Minister of State with special responsibility for Public Service Transformation and Labour Affairs, Department of Enterprise, Trade and Employment; Mayo, Fianna Fail)
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I, too, appreciate the efforts made by Deputy Varadkar in introducing the proposal. Within the House, we all acknowledge that small and medium enterprises are the backbone of the economy, representing 97% of all businesses, and employing 800,000. We share a pro-business policy environment which has been in place for many years. Our enterprise development agencies and our tax system offer strong support to enterprise, especially to SMEs, and that system is shared and supported by all parties in this House.
Despite the constraints on public finances this year, our Department's Vote provides more than €500 million for the support of enterprise, innovation and research and development. We are also investing more than €1 billion of the budget to support a range of labour force measures which will assist those who have lost their jobs. We have launched the enterprise stabilisation fund with additional funding of €100 million to support enterprises through their current severe difficulties and SMEs will benefit from much of this funding.
The Government's focus in dealing with the crisis in our banking system has been to introduce measures to maintain a properly functioning and well-regulated banking infrastructure to support the wider economy and to restore confidence and credibility in this country. The importance of SMEs has been acknowledged and supported in these measures. The banks' recapitalisation package contains a range of initiatives to assist the enterprise sector directly. The recapitalised banks have committed to increasing their lending capacity to SMEs by 10% over 2008 and I reiterate previous calls on them to make that funding available as soon as possible. I heard the Minister of State, Deputy Moloney, refer to the case of the small printing company. We all have those cases and those stories. I ask the banks to start assisting those companies. In addition, a €100 million environmental and clean energy innovation fund is being established by each bank as well as a further €15 million from each to new or existing seed capital funds.
Irish SMEs are covered by the code of conduct on business lending to SMEs. This code was published by the Financial Regulator and came into effect from 13 March 2009. Lenders covered by the code are required to offer their customers an option for an annual review meeting, to include all credit facilities and security, including collateral. Banks are also required to treat all credit applications on their merits, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints.
As previously mentioned by the Minister of State, Deputy Moloney, the main Irish banks have also agreed to pay for and co-operate with the carrying out of an independent review of bank lending to SMEs. The purpose of the review is to ascertain the position on credit availability to Irish SMEs and to recommend appropriate action to improve credit availability. The report will be available by the end of the month. SME representative bodies, including the Small Firms Association, SFA, Irish Small and Medium Enterprises, ISME, and Chambers Ireland are actively participating in this project. Three banks, Allied Irish Banks, Bank of Ireland and Ulster Bank, are providing funding for SMEs on foot of €300 million facilities provided by the European Investment Bank to assist developing SMEs.
The Tánaiste and the Minister for Finance have also established a credit supply clearing group with bank, business and State representation. Formal terms of reference and membership were announced for this group on 19 May. The SFA, ISME, Chambers Ireland, Fáilte Ireland and the IFA are the business representatives on the group which held its first meeting on 28 May. The credit supply clearing group will identify patterns of events where the flow of credit to viable businesses appears to be blocked and will seek to identify credit supply solutions relating to these patterns. However, the group will not be an appeals mechanism for cases where credit has been refused by the banks.
As a further measure to assist SMEs, the Government approved formal arrangements on 19 May to reduce, from 30 to 15 days, the payment period by central Departments to their business suppliers. This is an issue that Deputies Varadkar and Penrose have been pursuing for some time. This commitment will have effect from 15 June 2009. Reducing payment periods to 15 days for Departments should help ease cash flow difficulties for small businesses operating in the current economic climate and should set an example for businesses in the private sector to improve their payment records and pay each other more promptly. As part of the new arrangements, Departments will be required to report quarterly to my Department on the manner in which they have complied with the Government commitment. They will also include information on the implementation of the measures in subsequent annual reports.
Late payment in commercial transactions is addressed by the European Communities (Late Payment in Commercial Transactions) Regulations 2002. The 2002 regulations transposed EU Directive 2000/3 5/EC on late payment in commercial transactions into Irish law. Under these regulations, it is an implied term of every commercial transaction that where a purchaser does not pay for goods or services by the relevant payment date, the supplier shall be entitled to interest, namely, late payment interest, on the amount outstanding. Interest shall apply until such time as payment is made by the purchaser. The current interest rate applicable since 1 January 2009 is 9.50% per annum or 0.026% per day. This rate is set as of 1 January and 1 July each year at a rate of 7 percentage points above the European Central Bank interest rate on its most recent main re-financing operation. In the absence of any agreed payment date between the parties, late payment interest falls due after 30 days. Departments automatically include late payment interest where late payments are being made after the 30 day period. The European Commission has launched a review of the Late Payments Directive 2000/35/35/EC. This proposal was launched by the Commission on 8 April 2009, and will be discussed in detail in the Competitiveness and Growth Council Working Group in the coming months.
Public procurement represents a key opportunity for our SMEs. Within the past few weeks, the Tánaiste and my colleagues in the Department commenced work on a project aimed at improving access for small and medium enterprises to public procurement opportunities. I wish to acknowledge the work done by Deputies Varadkar, Penrose and Morgan, my former colleagues on the Joint Committee on Enterprise, Trade and Employment. We had an eye-opening meeting at this time last year with the print forum with regard to the difficulties its members were experiencing. However, the project now underway will implement a number of actions aimed at breaking down barriers to access by SMEs to public contracts. These will include measures to ensure minimisation of the transaction costs of preparing and submitting tenders, including for example, maximising the application of the national public procurement website and electronic procurement opportunities. They will include breaking down contracts into lots, encouraging partnering among SMEs and encouraging larger companies to sub-contract. Small enterprises are in a position to provide more innovative and flexible solutions in response to Government needs than many of their larger corporate competitors. As a result of the initiative now underway, small enterprises should not find the requirements to enter that competitive process too high or too complicated.
At EU level, the annual SME performance review was launched by the Commission in 2008. This review represents a comprehensive source of information on the performance of SMEs across Europe. It also serves as a useful tool in the context of the Lisbon agenda process and the follow-up implementation of the Commission's Small Business Act for Europe, published in June 2008. The SME performance review is complemented by the Small Business Act fact sheets, with more precise information on each member state and a set of studies providing more in-depth information on specific issues particularly important for SMEs in Europe.
The Commission's so-called SBA policy radar for Ireland yields a remarkably positive picture in comparison with other countries, according to the 2008 report. Particular strengths in 2008 were the Irish public's attitude towards entrepreneurs. Some 85% of our citizens agree that persons growing a successful and new business receive high status, while the EU average is only 69%. In the areas of skills and innovation, Ireland, once again, out-performed the EU average by a considerable margin.
It is clear from the range of issues outlined that the Government has been proactive and positive, and continues to be so, in addressing the concerns of business, in dealing with access to bank credit and assisting SMEs at this very difficult time. We will continue to consult with the SME representative bodies to include them in the relevant groups and to respond to their concerns. My colleague, the Minister of State, Deputy Moloney, has proposed formally that the Second Reading of the Bill be postponed for six months in order to consider the issues in detail and to ensure it does not have any adverse effect on the operation of the current small claims procedure. We and the Department will work actively with members of the Joint Oireachtas Committee on Enterprise, Trade and Employment and with Deputy Varadkar and his colleagues in our endeavours to pursue this issue. We will also involve the SME representative bodies.
We in the Labour Party are delighted to be in a position to support this Bill which has been brought forward by Deputy Leo Varadkar on behalf of Fine Gael. We compliment him and his colleagues on the Bill.
The aim of the small claims court procedure is to provide an inexpensive, fast and easy method for consumers to resolve disputes, without the need to go into significant legal complexities. The small claims court also avoids the jargon-laden atmosphere involved in having legal people as part of the process. It is a lawyer-free zone and is a mediation service that avoids the adversarial aspects of matters and enables parties to reach a compromise without resort to litigation. It also avoids the significant costs associated with that. Therefore, the small claims court system is very important, particularly for small businesses that wish to recover small amounts. The extension of jurisdiction of the court to cover amounts up to €3,000 is sensible. The previous limit was set some time ago.
I agree the amount should be examined. We do not want to throw out the baby with the bathwater. When something works well, we should try to ensure it is refined and does not expand into something that will overrun the current system that works so efficiently and effectively. If this Bill is enacted, the system will need additional resources, because it is difficult to see how a District Court clerk would be in a position to facilitate all of the likely or potential claims that might be encompassed by the legislation.
Small businesses are very important in the context of our economy. Therefore, we must pay them particular attention and focus on their needs in order to ensure their survival. The Labour Party has put forward a number of proposals in this regard, particularly on the issue of prompt payments. I am glad the Minister of State, Deputy Calleary, has focused on that and has suggested reducing the time period for payments to within 15 days.
Another area of importance is access to public contracts for SMEs. They have lost out in this area. Deputy Calleary was right to refer to the Irish Print & Packaging Forum. It was a scandal the people in the situation in question were deprived of participation. A significant number of jobs were lost as a result.
Many small businesses that employ between six and eight people find the going very difficult. Some of their difficulties may be caused not just as a result of the current situation but because they may have got into arrears with the Revenue Commissioners. Contact should be made with the chairperson of the Revenue Commissioners in this regard. I know the Revenue Commissioners have always extended the hand of friendship and empathy, as long as people do not deny they owe moneys such as PAYE, PRSI and VAT. However, where a sum such as €25,000 is owed, the Revenue Commissioners should set in place an arrangement or scheme for the discharge of that payment. The heavy hand should not come down and force businesses to close.
I know of a business that owes such a sum and believes it should be given the opportunity to pay a certain sum a month rather than close it down. If such a business is closed down, we will have a further six people out of work, draining €20,000 a year, the equivalent of €120,000 net from the Exchequer. It would be better to allow such businesses continue in operation. The man who owns that business told me that at one time he was receiving between 16 and 18 inquiries a week, but now he is lucky if he gets ten a month and he is competing with a far bigger pool. However, he is trying to keep the business operating.
The Revenue is lenient when people come forward and I am aware it is independent in its function. However, it is important the Minister ensures that small businesses are given the opportunity to survive and are not closed down. Closing them down just passes the problem further down the line with the result that the Exchequer and, ultimately, the people must pay more. It is important that this is considered. As they say in my part of the country, a bit of a loaf is better than no bread. It is better for Revenue to keep getting small payments to discharge the bill and to keep a business up and running. This is very important.
The Minister of State is well aware that we did a tour of the commuter belts where we found that small businesses are very important. There are approximately 250,000 small businesses throughout the State creating 750,000 jobs. However, people seem to have forgotten that we are losing 4,000 retail jobs a month. One of the reasons for this is the increase in VAT. I, along with Deputies Morgan and Varadkar did a tour to the North where we saw the impact of this. The extent of the differential is 6.5%, which makes it virtually impossible for our businesses to compete. I acknowledge VAT here increased by only 0.5%, but this had a psychological impact, particularly when Britain reduced its VAT rate by 2%. Therefore, there is a difference of 2.5% in net terms on 6.5%.
The VAT increase was a foolish move. I know money was needed. I am not a fool and am aware the Government is trying to improve the situation and get money into the Exchequer. However, the impact of the change is that we have had an outflow of money from the Exchequer. Jobs are being lost as a result. Between 4,000 to 4,500 retail jobs are being lost every month. These are not the highest paying jobs in the country, but they are jobs that sustain rural communities and enable people to live in these areas. It is important that whatever the Government does, it considers the situation in a business-friendly way. It must business-proof the impact of every decision it makes from now on.
Many businesses that are members of the Small Firms Association or ISME have had varied experiences in their dealings with the banks. I want to lay the situation on the line for the banks. They have been bailed out with billions of euro of taxpayers' money that has gone to recapitalise them. Ordinary people wonder where this money has gone. They wonder whether the banks are looking after the interests of their shareholders first or trying to make up for their irresponsible lending. At a time when they should be lending support to existing and new businesses, they are not willing to do so. All the signs are, notwithstanding their assurances to the contrary, that they are unwilling to lend to businesses. It seems they are hoarding the capital in order to deal with the crisis caused by their irresponsible lending.
The money given to the banks is not filtering down to small businesses that are crucial to the economic well-being of the country, particularly businesses in rural Ireland. Many entrepreneurs and innovators throughout the country have been stymied and cannot get businesses up an running. The Labour Party suggests that the Anglo Irish Bank should be used for this purpose. It is a national bank and we own it. Let it invest some of the money in small businesses and let it start to do something. We must ensure the money filters down to the people in need. There was a €30 billion fund, but the Minister of State mentioned that approximately €300 million was available. We need more than that to get small businesses off the ground. Appropriate and worthwhile start-up grants should be made available to unemployed people who wish to start up new businesses. The county enterprise boards do not meet this need. I acknowledge the Minister of State's expertise in the area of grants.
We need to go back to the old system of trying to help people. What is wrong with diverting social welfare money into this area? A person with an idea for a business should have his or her grant topped up with a social welfare payment. That payment would then subsidise a job. No one wants to be unemployed. It is soul destroying. We no longer have the safety valve of emigration. People used emigrate to England or Australia and, sadly, never come back. Now we do not even have that safety valve.
Approximately €700 million is allocated to the national development plan. Some 40,000 children are languishing in prefabricated classrooms. The Department of Education and Science takes years to even approve a new school, much less build one. Why not prioritise school buildings? Thousands of workers could be employed on these projects. Contractors are vying to compete and would submit cheaper tenders. Schools could be built cheaply in the current climate. The Government can put billions of euro into banks. Why not put one billion into prioritising projects which are essential to the well-being of the country? I have no doubt the economy will recover and the sooner it does the better. It is in the national interest that it does. It is important that educational infrastructure be put in place to promote a quicker economic recovery.
I welcome the Bill and the Government's response to it. I congratulate Deputy Varadkar for progressing this issue. The proposal to increase to €3,000 the amount which can be claimed in the small claims court is eminently sensible.
The proposal to extend the court's remit to include business debts may seem a small matter but, from a business point of view, it is significant. Earlier today, I spoke about this proposal to a local man who runs a medium sized business. It is a modest proposal to provide a simple mechanism for the recovery of small debts. Like the owner of many small and medium enterprises, this man is having difficulty getting payment from customers. I was surprised by the enthusiasm of his response when I explained what I would be talking about this evening. He said this change would transform his debt collection. He said the big stuff is not a problem. It goes to his solicitor and proceeds to the courts. However, defaulting by customers or other small businesses is having a serious impact on the viability of firms and a measure like this would make a practical and real difference.
The current position of small and medium sized enterprises is perilous. When a cheque bounces, as it does these days all too frequently, it is often the result of a chain reaction as debtors default or cheques bounce further up the line and a series of businesses can be affected.
Bouncing cheques is only one of a number of negative factors which seriously impact on these companies. There is an onus to respond politically to this crisis which is affecting small businesses. When banks are in trouble the Government responds and billions of taxpayers' euro are spent to shore them up. Yet simple inexpensive measures like this one relating to the small claims court can and should be taken speedily. I hope the Minister, in seeking time, will not delay this unduly.
There are approximately 250,000 small enterprises, employing up to 800,000 people. If even half of those companies employed one extra person we would not have the current unemployment problem. Instead, we see profits shrinking, people losing confidence, businesses closing and jobs being lost in manufacturing and service industries across the board as well as in construction.
Extending the remit of the small claims court will help but the Government needs to do much more. Last week, the Labour Party launched a policy document arguing the case for getting credit flowing to business. We have already proposed that European Investment Bank funds could be drawn down through a straight vehicle for engaging lending to businesses. Similarly, consideration should be given to a working capital guarantee scheme for viable businesses.
The contrast between the experience of small and medium enterprises and Anglo Irish Bank is startling. Some €4 billion of taxpayers' money is being injected into a bank which has not given out a loan since September 2008, and more billions are sought. Meanwhile, small companies desperate for capital are being refused credit. This morning, Deputy Eamon Gilmore sought information from the Taoiseach about loans which had been taken out by senior staff in Anglo Irish Bank. His were simple questions. Who had been given the loans and how much were they for? The questions were not answered. The Taoiseach either did not know or was not telling. Anglo Irish is a State-owned bank. The public have a right to these answers. It is another indication that the Government, despite the recent elections, is not only incompetent but is in denial. Meanwhile, businesses in the private sector struggle to keep their doors open.
The long-standing issue of late payments has been mentioned many times this evening. The Irish Small and Medium Enterprises Association, ISME, did an impressive piece of research in April showing that businesses wait 69 days, on average, for payment. Only one in five companies are paid within 30 days, 33% experience delays of 90 days and 10% wait more than 120 days for payment. I appreciate that there has been a response from the Government, particularly because the State is by far the worst offender. I cite the example of the HSE as a particularly bad offender. While Government commitments are very welcome, we need hard analysis to see if the practice is living up to the promise.
This raises the issue of the State's approach to small and medium enterprises at national and local level. The crass heavy-handed approach of local authorities in relation to commercial rates and water charges cannot continue. In my own county of Wicklow, 446 businesses are under threat of disconnection of their water supply. Their supplies are threatened because they have not paid their water charges. County Wicklow Chamber of Commerce, the umbrella organisation of all chambers of commerce in the county, has advised its members not to pay, "until such time as the Council has furnished full particulars about the charges and the charge basis has been reviewed in detail". Every day, 550 million litres of water are taken for free from County Wicklow to Dublin, where Dublin City Council charges businesses €1.5 per unit. This leads to a loss of income to Wicklow of €250 million per year. This is a long-standing problem to which I do not expect the Minister to find a resolution. However, it is an issue.
There is also a lack of transparency with regard to water charges. At the very least, people are entitled to know what they are paying for. The request by businesses in Wicklow for transparency is perfectly reasonable. I am not the only one who thinks this. In response to a question about water charges in the past few days, the Minister of State at the Department of Foreign Affairs, Deputy Dick Roche, said Wicklow County Council, "...cannot say where levies are being used and cannot say how much is being collected. Specifically relating to water charges, there is no excuse for haphazard operation. There is also no excuse for attempting to ladle additional costs onto businesses for water charges. The charges should be neutral, just cover cost and not be a profit centre". The Minister of State has a point. Local authorities are levying businesses because their funding tap has been turned off by the Government. That will place an onerous burden on struggling businesses. I hope the acceptance by the Government of these issues, specifically the proposal in the Bill, indicates that it is getting the message that we cannot continue with a business as usual approach because business is not as usual.
I thank Deputies Penrose and McManus and the Labour Party for sharing time and welcome the opportunity to discuss the Bill.
While I have many policy differences with the Fine Gael Party and Deputy Varadkar, I am pleased to note we do not differ on the legislation before us. My father used to say business was a great vehicle for binding people together and so it has transpired this evening, for the purpose of this Bill in any event.
I also welcome what appears to be a change of heart on the part of the Government insofar as it appears to have accepted the general intent of the Bill. While I do not wish to pour water on that or continue with the debate of the past two days, I wonder if the Government will be in office in six months and, therefore, in a position to take the Bill. I hope whichever Government is in place at that time will allow the House an opportunity to debate the legislation and address the issues it raises.
I also hope it will not adopt the attitude the current Government takes to amendments tabled by Opposition Deputies. On many occasions, Fine Gael, the Labour Party and Sinn Féin have offered commendable amendments which the Government has refused to accept, perhaps because it believes a Deputy from this side will suddenly appear at a Cabinet meeting. Although I do not believe that is the case, I cannot explain the reason Opposition amendments are automatically rejected. This is bad practice and a fundamental flaw in Government policy. I do not have sufficient experience to know whether this mistaken policy was adopted by previous Governments. Notwithstanding these reservations, the Government position on this Bill marks a welcome change to practice.
Bad debts cause a significant chain reaction. If business A is not being paid by business B, other companies supplying the former will have their systems clogged up by the failure of the latter to pay its debt. As noted earlier, if business A is a large company, recovering the debt is a relatively task because the matter will be placed in the hands of the company's legal department or team of solicitors which will sort out the matter in the time the courts require to do so. Small businesses and entrepreneurs, however, do not have the luxury of engaging large legal teams at significant cost to deal with these matters. The Bill is, therefore, particularly welcome in that regard.
A further consequence of not having the goods or services one provides paid for on time is that one incurs expensive overdraft charges. In the current climate, many businesses would welcome access to overdraft facilities, even with high charges, because they are being strangled. I have no doubt the telephones in every Deputy's constituency office are hopping as people facing this problem seek to contact them. I hope the legislation, when finally enacted, will help to resolve this problem. The Bill offers the prospect that a cost-effective measure will be introduced providing companies with a speedy process of accessing the courts and having debts dealt with quickly and efficiently.
Many contributors acknowledged that small and medium size businesses have always been at the heart of the economy. That is not to say that foreign direct investors are not welcome. While I acknowledge the significant role played by that sector in building the economy over decades, most of these companies have either moved or are in the process of moving to the Far East or Middle East where labour and other costs are significantly lower. Ireland will never be able to match costs in those regions and for this reason must concentrate on assisting small and medium size enterprises. This legislation marks a significant step in that direction.
I am disappointed the Government did not use more of the revenue from the boom years to further assist small and medium size enterprises, specifically in helping them upskill management and enhance export capacity. Our small and medium size sector does not have a culture of research and development. This must change and we must find mechanisms of bringing entrepreneurs and managers on board to ensure they engage in research and development practices and recognise the necessity of patenting and working closely with third level institutions.
Credit terms are a key area for small and medium size enterprises. A business supplying one of the major retail chains may experience problems because the retailer resorts to any excuse not to pay the supplier. In such circumstances, the period in which moneys are owed increases from 30 days to 60 days to 120 days and so forth. Deputies will be aware of many such cases. If the supplier complains or brings the matter to a point the retailer regards as unacceptable, the latter will simply stop taking the supplier's goods or services. The businesses of such suppliers invariably becomes dependent on large customers within a short period.
An independent office needs to be established to address this issue. The legislation addresses a slightly different problem. We should establish an independent office with a small staff of perhaps a couple of accountants and solicitors with some clerical back-up. A business facing the circumstances I have described could bring the case to the office and have it stood up in a short period of perhaps one hour. At that point, the independent office could examine the books of the large supermarket chain or other purchaser. By examining the files pertaining to the complainant and other suppliers, it could ensure the complainant is not readily identifiable and a level of anonymity is maintained. This is necessary because the more dominant the large supermarkets become, the more small businesses depend on them and the greater their vulnerability is to being abused by them. We need to be mindful of this problem. I do not advocate establishing another large agency with all sorts of bells and whistles. A small, tight and imaginative structure could be built to provide genuine protection to businesses which are being ripped off - that is not too strong a term - by large companies.
While I acknowledge the inefficiencies of the job creation agencies, I do not wish to be hard on them because circumstances have changed and they, too, will have to change. Deputy Penrose referred to the county enterprise boards, the agencies charged with dealing with businesses with fewer than ten employees. The maximum grants these bodies can provide are irrelevant in business terms and the criteria for approving such grants need to be overhauled, as the Minister will be acutely aware from debate and discussions she has had in the Joint Committee on Enterprise, Trade and Employment. Politics have never entered into the deliberation of the joint committee. While it has good and lively debates and frank and open discussions, they have always been focused on trying to achieve what is best for enterprise and business and long may that practice continue.
Reform measures are also required in FÁS, which I do not propose to attack for the failings highlighted all too often recently. The agency requires a significant overhaul. As with nurses in the health service, the recruitment ban has caught frontline FÁS staff who may not be recruited without the approval of the Department of Finance. FÁS is unable to quickly replace some of its trainers, including those who take maternity leave or retire, and this has created a backlog in some FÁS offices. That is not a criticism of the Minister of State, Deputy Calleary, because I appreciate that he is not long in the job but I raise the issue with him in the hope that it can be resolved because the knock-on effect, the bottleneck which that creates in the FÁS offices when we are trying to get people in to be trained and upskilled, is very significant. I hope that a mechanism can be found to alleviate that bottleneck and to resolve that issue as quickly as possible.
Credit is an integral part of businesses. There is a practice developing that I have noticed in some sectors. Perhaps I will explain it to the Minister of State best by using the example of the food service sector, wherein a struggling business moves from its vegetable supplier to a new vegetable supplier and leaves the old one carrying the can of €3,000 to €10,000 or whatever the sum might be. The business runs up a new debt with its new supplier and after a relatively short period of time, moves to yet another supplier. This legislation, were it in place, would eliminate such carry on because there would be a chain reaction of businesses folding, of significant bad debt, and of some businesses not being able to simply write it off and being in mortal trouble.
I accept that there are some issues with the Bill. There are certainly some amendments I would like to see appended to it. That is by the by and we can deal with them on Committee Stage as they are not significant. I hope that the court rules can be amended, as was stated earlier, to save a major piece of legislation having to be brought in to facilitate the implementation of this legislation. I welcome the opportunity to discuss the Bill here this evening and I look forward to it being discussed in six months, whether by this or another Government.
I welcome this legislation and commend the Government on agreeing to it. I would hope that it can be fine tuned by the time we get agreement and I commend Deputy Varadkar on bringing it forward.
We all are well aware that in this difficult economic climate all businesses are suffering, and the small indigenous companies in Ireland are suffering more than others. The large foreign direct investment companies which come here have large resources and facilities which smaller Irish companies do not have. In the past year, in particular, Irish companies have been caught by the twin effects of the downturn in business and the compounding shortfall of available credit from the banks.
I am well aware of companies in my constituency which are stretched to the limit to keep going and to keep their workers employed. In that regard, it is good that where the Revenue Commissioners - which I will not state have adopted a less hard line attitude on the collection of revenue - see a genuine effort being made by companies to fulfil their obligations on VAT, PAYE, PRSI, etc., they are making an effort to accommodate such companies in ensuring that their business and employment continues.
Banks and financial institutions are being more careful in assessing companies when they apply for credit and this is creating a knock-on effect where suppliers, in effect, are being used as bankers by some of their customers. Clearly, this cannot continue. Some well established Irish companies which have a track record of successful business and which have been profitable for a number of years have built up reserves. I have been speaking to a number of medium-sized businesses which find they are taking on the role of bankers and have more credit extended than ever before. An extension of the small claims court would be welcome for companies which have a large number of outstanding debts, the pursuit of which in the Circuit Courts would not be worth their while due to the costs involved and the impossibility of securing anything like what is due to them. Such companies would look to what is proposed in this piece of legislation and avail of that. It would ensure that companies about which previous speakers have spoken who strive to get the longest possible credit terms would think twice about going down that particular road and that we would have a stronger, leaner and, I suppose, meaner business sector, particularly in the small and medium enterprise sector.
The problem is not unique to Ireland. The UK and France, in particular, have experienced this problem over the years. By bringing in legislation those countries ensured the protection of their small and medium enterprises.
I wish the Minister of State, Deputy Calleary, and Deputy Varadkar every success in pushing this piece of legislation through. I would not like to see it delayed too long because there are companies which will not survive if this is extended too far into the future.
At the outset, I congratulate the new Members, Deputies O'Sullivan and Lee, on their election to Dáil Éireann and wish them all the best in the time they serve their people here.
Like the previous speakers, I welcome the publication of this Bill. Certainly, I am glad that there seems to be cross-party consensus in advancing the intent of expanding the remit of the Small Claims Court to the area of debt collection. I suppose I would have a minor concern at the outset that the existing system would not become overly complex. It is my firm view that the existing small claims procedure is user-friendly and quite simple, where any citizen can complete a simple one-page form, lodge €15 and be into the system where his or her complaint can be dealt with in a simple and efficient manner. While we are discussing small and medium business here tonight, we all are obviously aware of the many onerous regulations and much red tape that has been inflicted on small and medium business and we should at all times strive to minimise the effects of such regulation. Indeed, as long as I have been a public representative, I have actively advised people to avail of the good offices of the small claims registrar in the Limerick courts and I thank the staff who have dealt with those issues in an effective manner.
On small and medium enterprise in general, as in other areas of the country small businesses form the backbone of employment in many communities right across my constituency in County Limerick, in towns such as Newcastlewest, Kilmallock, Bruff, Rathkeale, Cappamore and Murroe. Many such enterprises derive much of their business from the agri-related sectors. Small and medium enterprise goes hand in hand with the agricultural sector and we must continue to promote, foster and protect it as much as possible.
In saying that, I am also conscious of the recently published live register figures. This is a worry to all of us in my constituency and, indeed, is a human tragedy for the many people who are losing their jobs. I look forward to the imminent publication of the interim report of the task force, which is chaired by Mr. Denis Brosnan, where we will look at the area of job promotion and job protection in the mid-west. There are many people who, in the fall-out from the recent Dell redundancies, are certainly awaiting that report with the expectation that something positive will come out of it. I ask that the State agencies in the mid-west redouble their efforts to try to attract more foreign direct investment to the area. Askeaton in County Limerick has a fine, fully serviced business park of approximately 100 acres. It is waiting for a start-up enterprise that will provide many badly needed jobs.
Regarding small and medium-sized enterprises, SMEs, we have tackled other issues. For example, we dealt with the problematic cost of insurance effectively through the Personal Injuries Assessment Board, PIAB. However, we must consider the many other issues surrounding credit. We all know that the Government is pursuing the establishment of NAMA, but I am concerned that NAMA is being kicked around like a political football. Business needs confidence, but it sees the Dáil bickering over NAMA. We must move beyond that and realise that NAMA is the only show in town. This side of the House is being accused of bailing out the bankers and developers, but I could say that the other side, which opposes NAMA, comprises the big developers, namely, the Labour and Fine Gael parties. Since bickering gets us nowhere, we need to move beyond it.
The greatest issue is competitiveness. There are a number of strategies, including the smart and green economies to reduce energy costs. Thankfully, those costs have reduced and I hope the fall will continue. I was heartened by the Fianna Fáil Party's local election manifesto in which we sought to freeze local authority rates for the next three years to assist small businesses. This aim is important, as are development levies. As we all know from our time serving on local authorities, the rate struck was the balancing figure in our budgets at the end of the year.
I acknowledge the recent statement by the Chairperson of the Revenue Commissioners to the effect that they are taking a pragmatic, reasonable and proactive approach to the collection of taxes. Doing so is right and necessary. While people and businesses must pay their fiduciary taxes, VAT, PAYE and corporation taxes, the Revenue Commissioners have responded responsibly and reasonably and have allowed businesses to adapt to their straitened cash flows.
As this is my first opportunity to speak since the recent by-elections, I join my colleague, Deputy Collins, in welcoming Deputies Maureen O'Sullivan and Lee to the House. I wish them well as they represent and serve their constituents.
I welcome the opportunity to contribute this evening and thank Deputy Varadkar for tabling the Bill. In the past year, the country has witnessed the worst economic recession since 1929 and every business has felt its effects. As this is a difficult time for all businesses, they must be supported. Small and medium-sized businesses are indigenous industries and have been the lifeblood of the economy, providing much needed employment and boosting their local economies. My constituency is renowned for its indigenous industries.
However, such businesses have suffered many difficulties in recent times, including a decrease in sales and reduced incomes. Every day, they struggle to keep employees working. I salute their attempts to keep people in work. Many are still making a contribution to the economy. It is important that we, as a Government, continue to support them as they play their important role and face challenges. It is important that we do everything to ensure that they grow and maintain employment.
The economy will only turn the corner because of growth in the national economy, but it will not happen if we do not support our SMEs. They are facing challenges. As a Border Deputy, I must mention our exporters' cross-Border problem posed by sterling. It is a considerable challenge for our small and medium-sized businesses.
Entrepreneurs face problems receiving payment for goods and services and other problems resulting from lack of credit and the availability of cash flow. Another serious problem is the loss of our competitive edge. During the good times, we became uncompetitive and will only regain international competitiveness through cost reductions. Businesses must be proactive in this regard. They must get more for less. I agree with Deputy Nolan, who stated that businesses need to be leaner, meaner and keener. Some cost reductions are already occurring. I welcome the reduction in energy costs in particular.
The Government is happy to accept the Bill in principle and I would support the proposal of the Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, that it be deferred for a six-month period so as that it could be reviewed. In my role as a public representative, I have recommended the small claims procedure when constituents have come to my clinics looking for advice on redress. The procedure is consumer friendly and easy to use and consumers are happy to know that they do not need to engage the services of a solicitor. For many, this is a distinct advantage, as they might not otherwise be able to proceed with their claims. The other great advantage is that the claims are resolved in a speedy and efficient manner. It is important that we maintain this element.
I would not like to see a situation whereby businesses would use the procedure to pursue claims against individual consumers. In the current economic climate, I share the view of the Minister that it could make consumers more vulnerable. I would urge caution regarding large businesses creating a situation whereby they could use the procedure to pursue consumers or small businesses for relatively small debts. It is imperative that any widening of the procedure be targeted in an appropriate manner. Many small businesses are limited companies and have limited liabilities. Since they may be required to engage legal representation, the Minister is right to take advice in this regard.
We know that economic recovery will not occur if we do not stabilise and revitalise the banking system. The steps introduced and the actions that we will continue to take are necessary to repair and revitalise our financial system, which will aid economic recovery. Our banks must continue to lend money to assist our SMEs, but they cannot lend if they are not in a position to attract funds and they cannot survive if they do not have access to funds. Our economy is flexible and resilient and is adjusting to the new economic circumstances. We must continue to work hard and redouble our efforts to assist the small and medium-sized businesses so that they continue to play an important role in the future. They need credit to continue trading. The events of recent months have resulted in cash flow problems. Banks must continue to provide credit and I urge businesses that have been afraid to approach them to do so now.
I accept the Bill in principle. The Government is in broad agreement with Deputy Varadkar's proposal and I thank him for tabling it before the House. I ask that he appreciate the Government's genuine concerns when it proposes that the reading be deferred for a six-month period to provide an opportunity to consider the issue in detail. The current system is working well and we need to ensure that we do not put it at risk. I am sure that the Minister will conduct the necessary analysis and review quickly to ensure a Second Reading in six months time.
I welcome the opportunity to speak on this Bill. There is no doubt that it is a tough time to be in business. I am acutely aware that the current economic difficulties are having a profound effect on businesses, particularly small businesses. The importance of these companies to the economy ought not to be underestimated. They are key to maintaining jobs and improving growth as we emerge from the global financial crisis. By supporting small and medium-sized businesses, we are supporting the country's economic recovery.
One of the most pressing issues facing small businesses is a lack of access to credit and cash flow. This has made it very difficult to engage in the most basic of trading procedures, namely, paying bills and receiving payment for goods and services. The Government is well aware of the range of difficulties being faced by SMEs. In matters relating to payment, it has led by example with the introduction of measures to ensure prompt payments. The Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Mary Coughlan, recently announced a measure that will see Departments paying business suppliers within 15 days instead of 30 days. In addition, the enterprise stabilisation fund will provide €100 million over the next two years for SMEs.
I welcome any move that highlights the value of small and medium-sized businesses to the economy.
While I accept the spirit of the Bill, I nonetheless support the proposal by the Department of Justice, Equality and Law Reform to defer the reading for six months. This will allow the Department, in consultation with the Department of Enterprise, Trade and Employment, to complete a review of the situation. It will provide a detailed impact assessment of the proposed expansion and it is envisaged that suitable proposals will be brought forward in the autumn.
Although I accept the objectives of the Bill in principle, I have a number of concerns relating to the details. First and foremost, it must be remembered that the raison d'être of the small claims procedure is to provide a pro-consumer mechanism to resolve minor claims, in a relatively speedy and efficient way, without the need for legal representation. The way in which the Bill is currently drafted could have a negative impact on individual and small businesses. Essentially, I am concerned that businesses would use this procedure to pursue small claims against individual consumers. The last thing we need in these economic circumstances is to exacerbate the vulnerable position of consumers.
While I understand the benefits of businesses taking certain small claims, for example when difficulties arise in securing payment for good and services on credit terms, the procedure ought to be restricted to small businesses. I would not like to see a situation arising whereby a large scale business such as a bank could use the small claims procedure to pursue consumers or small businesses for relatively small debts.
The legalities of expanding the small claims procedure to include small businesses remain to be clarified. The existing mechanism was introduced by amending the rules of the District Court. It is not yet clear whether the small claims mechanism can be changed simply by amending the rules of the District Court or whether primary legislation will be required.
Furthermore, the majority of small businesses are limited liability companies and it appears Irish case law may require companies such as these to engage legal representation. It would be highly undesirable to overly complicate the small claims procedure. Therefore, I welcome the fact that the Minister for Justice, Equality and Law Reform, Deputy Ahern, will seek legal advice on the matter from the Attorney General.
Regarding the threshold of claims, the current limit is €2,000. These limits are kept under review by the Department of Justice, Equality and Law Reform. It should be noted that it, in consultation with the Department of Enterprise, Trade and Employment, is currently reviewing this threshold.
Before I came into the Chamber this evening, I spoke to a constituent who runs a small business and employs four people. His business is not currently making money, but he is surviving. His biggest worries at the moment are rates. He was able to pay half his rates in 2008, but finds he is now unable to pay the other half. His rate bill is some €9,000 per year. A number of Deputies mentioned this issue and I ask the Minister to request that local authorities take a pragmatic approach to small business employing people because they are finding it difficult to make such payments. Everybody likes to pay their bills. The people to whom I refer want to pay their bills but unfortunately, they have to decide whether to keep people working or pay rates or water charges, which is another serious issue.
I am very conscious of the importance of small and medium sized businesses to the economy. I recognise the need to support them in their efforts to maintain jobs. Given the absolute necessity for businesses to access credit and cash flow, I accept the objectives of the Bill in principle, but propose the reading of it be deferred for a number of months.
The Government is very conscious that businesses in Ireland and, in particular, small businesses have been significantly affected by the very difficult economic situation the country is currently experiencing. Equally, this Government is very much aware that small and medium sized businesses are key to maintaining employment in the immediate future and to growing the national economy as we move through the current global financial crisis.
It is clear small businesses have faced difficulties in terms of the availability of credit and cash flow, and this has manifested itself in terms of problems being faced in making and receiving payment for goods and services. As a result, the Government has taken specific measures to assist small businesses and the enterprise sector to ensure access to credit. The Minister for Justice, Equality and Law Reform, Deputy Ahern, therefore accepts the objectives of the Bill in principle, but proposes the reading be deferred for a period of six months to ensure his Department, in consultation with the Department of Enterprise, Trade and Employment, can complete a review, including a detailed impact assessment of the proposed expansion, with a view to bringing forward suitable proposals in the autumn.
There are a number of concerns about the details of the Bill, as drafted. It could have a number of negative consequences for individual consumers and small businesses alike. The intent of the small claims procedure has always been one of a pro-consumer mechanism to resolve minor claims in a relatively speedy and efficient way, without the need for legal representation. This is very important and we must maintain it at all times.
The Government is anxious to maintain the pro-consumer aspects of the procedure and would not wish to see it being used by businesses to pursue small claims against individual consumers. Such a development could make consumers even more vulnerable in the current economic circumstances.
There is merit in allowing for certain small claims by one business against another business. This is particularly the case when many small businesses have encountered difficulty in securing payment for goods and services provided on credit terms. However, it might be appropriate to restrict the measure to small businesses. It would, for example, be totally inappropriate to create a situation whereby large-scale businesses, such as utility companies or banks, could use the small claims procedure to pursue consumers or small businesses for relatively small debts.
The Minister for Justice, Equality and Law Reform, Deputy Ahern, will consult the Tánaiste and Attorney General in regard to the appropriate mechanisms to ensure that widening the scope of the small claims procedure can be targeted appropriately. I compliment the staff of the small claims section in south Tipperary for the work they have done in resolving many disputes.
Subject to legal advices, primary legislation may not be necessary. The existing small claims procedure was introduced by amending the rules of the District Court. It remains to be clarified whether an amendment to the rules will be sufficient to allow for the inclusion of small businesses within the small claims procedure. The majority of small businesses are limited liability companies. It appears Irish case law may require limited liability companies to engage legal representation in domestic proceedings. Detailed legal advice is required on this matter.
Failure to attend to this consideration could overly complicate the small claims procedure and we must avoid that at all costs, and could result in negligible savings to the small companies concerned. The Minister for Justice, Equality and Law Reform, Deputy Ahern, will seek the advice of the Attorney General to ensure legal representation will not be required for small firms using any extended small claims procedures.
As we all know, small businesses in Ireland are the backbone of our business community. In these very challenging times, we have seen many large companies pull out of Ireland, blaming a lack of competitiveness. We know small businesses are providing jobs and need our support. I hope the Minister and his officials do not delay the difficult examination of the proposed Bill which they must do, so it can come before the House in early autumn.
Many small business will disappear if we do not give them the support they need and ensure our banking system provides them with the lifeblood of their business and livelihoods, which is credit. I condemn the banks, because they are not doing that and are not meeting the needs of small businesses in rural Ireland. By not doing so, they are not allowing businesses to expand or continue at their current level. In many cases, businesses are being forced to shed staff, which is bad for all areas, be they rural towns, villages or wherever. The sooner the Minister can comply with the different measures and introduce the Bill the House, the better. I commend it.
I welcome this Bill. It is very simple, but could be very useful. I am disappointed the Government does not seem to get it. The issue is that businesses, especially small businesses, are under pressure this year. We have spoken about this issue numerous times and I am happy the Minister of State, Deputy Kelleher, gets it, but I am not convinced those around him do so.
Deputy after Deputy on the other side of the House has come in here tonight and congratulated us on the Bill, said it is great and that it is needed, but six months are needed to fix it. It will not take six months to re-write the Bill or make changes to the parts the Government is not happy with. It should be agreed on tonight. The changes could be made, a telephone call could be made to one of my colleagues - as often happens - and we could fix and adjust it. We have seen legislation written in a day. The Minister of State should let small businesses know he wants to help them. They have serious cash problems. For some companies, €2,000 or €3,000 could pay this week's wage bill. That is the way it is. From week to week businesses are trying to scrape together a few euro to pay bills and their employees and to keep the show on the road. That is how tight things are, but there does not seem to be any acknowledgement of that from the Government side. The enactment of the Bill is one small development that could make a difference to a few businesses.
On the night the budget was introduced I spoke at length about the National Asset Management Agency, NAMA. I said that night, irrespective of whether one agrees with NAMA, it would take too long to be of benefit to businesses this year. The banks are not giving out money. Overdrafts, credit facilities and short-term loans are all tools of business, without which they will fail. There will be many more failed businesses. I am afraid that in six months' time we will have 500,000, not 400,000, unemployed. If the Government does not take serious action it will not take until next year to reach that figure, as some have predicted. We will reach 500,000 unemployed this year. The situation cannot continue. Money must be freed up. Businesses that have been 20 or 30 years in operation are being told by their banks that they cannot have an overdraft, that it is not worth them having an overdraft or they are charged a significant amount for a short-term loan. That cannot continue. It is not on. We are bailing out the banks and giving them what they need. We have accepted that something has to be done but we should demand that they look after small businesses. It is as simple as that.
The Bill is a small attempt by this side of the House to do something constructive, to send a message to businesses that we appreciate what they do for us and the number of people they employ and that we are willing to help them. The Bill is being put to one side just because it came from Fine Gael. The Bill must be examined and tweaked and turned and it might not come back to the House for a year, like all the other Bills that we have been promised in six months time.
The Government is guilty of not paying its debts. I tabled parliamentary questions last year and the previous year to find out the number of days it takes each Department to pay its bills. I was impressed with the replies, if they can be believed. I found out that in theory each Department tries to pay its bills in ten days, 12 days or 18 days but that does not happen in reality because State agencies and other bodies in particular consistently find reasons for not paying. They introduce bits of red tape and find reasons to ask for more information and delay making payments, even when it comes to paying sports grants. Payments are delayed as much as possible rather than simply handing over the cash.
People have come to my office in the past year who are owed money by Iarnród Éireann for work carried out more than two and a half years ago, some of them even longer. When I tried to raise the matter in the House the Minister would not take the question. The Ceann Comhairle or somebody else blocked it. I got no response when I wrote to Iarnród Éireann. It is not good enough for the State to owe people hundreds of thousands of euro for work they have done, just because one or two people got mixed up or moved to a different Department, or because a question mark was put over something. That cannot continue. Those businesses employ people and they have bills to pay. It is not good enough for Ministers to reply to the effect that Departments pay everything in ten or 11 days when they know that is not the case. It is also not good enough for Ministers not to answer questions. If I were a Minister and I thought anybody under my watch was not paying his or her bills I would have serious questions to ask and I would not stand for it. It should not be allowed. It is not fair to delay payment, especially given the current situation.
That is bad enough but then there are the significant delays incurred by the Department of Enterprise, Trade and Employment in refunding redundancies. That should not be tolerated. It is not fair. That approach is crippling businesses. It will lead to more businesses closing and more job losses, yet we have inaction. We heard Members speak about how brilliant the Government was to introduce a plan last July and then to have the budget. Those problems started in January and February 2008, a year and a half ago, yet we still have not taken action.
The Minister of State, Deputy Kelleher, was present when I spoke in debates about the need for labour activation schemes and to help businesses with cashflow. We need to change the way we do our business when it comes to funding enterprise. The problems emerged as early as last February yet nothing has changed. We still have problem after problem. Businesses have told me they cannot pay their wages for one of three reasons. The first is because they are owed money by a State body. The second is because they have not received back the redundancy money they have paid out already to their staff. The third is because they cannot get credit.
There are many areas in Fine Gael's plan for business on which we could work together with the Government to bring about change. People who have money do not have confidence in the system. We have one of the highest level of personal savings in Europe, yet people are afraid to spend their money because they do not have confidence in where we are going. They do not believe the Government has a two-year or three-year plan because it has nothing to show them. We must restore confidence and get that money moving. If we do not, we will have more businesses failing and more unemployment. That is preventable but we must devise a plan and take action, not just talk about doing things in six months' time. That is not good enough any more.
I congratulate Deputy Varadkar on bringing the Bill to the House. It is a pity we do not have more time to discuss it, because any one of the 18 points Fine Gael has outlined to ensure the small business fraternity gets a fair crack of the whip is worthwhile and together they make a great package. It will be clear to people that Fine Gael is the only pro-enterprise party from whom they will get any help.
The Minister of State, Deputy Kelleher, knows better than most that the business environment, especially for small businesses, is a jungle. There was never anything like it for the past 50 years. One employer who has 15 people working for him told me that Fridays come very often in his case. He was referring to the fact that he has to pay his staff every week. He said one of the things he noticed is that, while heretofore the strategy of the company was to sell product and get salesmen out into the field, the most important employee in his company now is the person who collects the debts. No other person on the payroll is more important than that individual.
I am disappointed with the Government that it has postponed further discussion of the Bill. That is a stalling exercise. Why would it take the Attorney General and whoever else is involved six months to sort out legal anomalies for something that is so important to both employers and employees of small businesses at a time when we have 400,000 people out of work? Why would one want to postpone a measure for six months that might have a positive effect on keeping even five people in a job? I cannot understand why the Government is doing that.
In the context of balanced regional development, small industry is the only way in which industry will get a hold in the regions. We must get vibrant companies back up and running again. That will be difficult to achieve because the IDA's approach is to focus on large firms. We know there is a critical mass and that certain companies must be located in large cities. Whatever hope places like Ballinasloe, Tuam, Loughrea, Gort and Mountbellew have, it will not be based on a reliance on large firms. We must ensure we allow small businesses every chance to thrive and beat all the bureaucratic traps that are put in their way.
I beg the Minister of State to ask the Revenue Commissioners, sheriffs and everybody else that is involved to show compassion. I accept they are not doing too badly. I am aware of a firm in the west that employs 26 people. It ran into trouble only because of the recession. It is possible to retain those 26 jobs this year and next year. It is important that some of the moneys due to the Revenue Commissioners could be paid in instalments to allow the company to work its way out of trouble. If the company is wound up the 26 workers will be finished and the Revenue Commissioners will get next to nothing. Why should the two parties not work out a detailed plan of action to allow the company to work its way out of its difficulties? I urge the Minister of State to bring back that suggestion to the Revenue Commissioners.
The situation is in crisis and the Government is not doing enough to resolve it. I commend Deputy Varadkar on bringing this important Bill to the House.
I come from a business background. My business is 100 years old this year. My mother ran that business for 65 years and I ran it before getting involved in politics. It is a successful business, a newsagents with lottery facilities, employing at one stage approximately 15 people. It now employs three full-time and four or five part-time staff. Two of the full-time employees have worked for me, one for 37 years and the other for 27 years. They have been loyal and have worked extremely hard. I am trying my best to repay that loyalty by keeping the shop open. I keep it open not just to make money, but because if it folds three people will have to join the dole queues. The business, which has been in operation for 100 years and, to which I have a loyalty, will not survive.
I do not believe the Government knows what is happening. It is proposing to stall this major initiative for six months. This is a crisis that requires immediate action. I have had to pay off newspaper companies and to plead with cigarette companies to maintain the flow of cigarettes into the shop. I had to do a deal with the Revenue Commissioners to ensure the shop remained open. I am fortunate in that I am well paid as a Member of this House. Not too many businesses are in that position. This crisis must be addressed immediately or small and medium-sized enterprises will go to the wall.
Businesses have been good for this country. They have paid their taxes and kept small towns open. The Government is showing scant regard for the loyalty they have given. This proposal must be accepted immediately if we are not to lose more businesses, resulting in 100,000 more people joining the dole queues. The Government has bailed out the banks and the banks have put the boot into businesses. I am trying to obtain credit for a business that has been open for 100 years. I am in a better position than most.
The banks are not open for business with existing businesses. They are using the mantra that they will lend to new businesses. New businesses will not come on stream at this time. We need to protect existing businesses. There are many entrepreneurs out there eagerly awaiting what will happen here tonight. The Government, in not accepting this Bill, is giving the two fingers to businesses, the staff of those businesses and to small towns in our community. I am asking the Minister of State to ensure that action is taken to address this issue before the summer. I know the Minister of State is working extremely hard. He must ensure something is done immediately if businesses are not to go to the wall.
I thank my colleague, Deputy Leo Varadkar, for bringing forward this important legislation, which is short and to the point. There has been much talk from Government about national strategies and grand plans for the smart economy as a way of restoring competitiveness and creating jobs. These grand ideas should not blind us to the importance of also finding urgent micro-steps that can have a significant and immediate impact on job protection.
In my opinion, this Bill is one such urgent micro-step. The life blood of any business is cash flow. The Bill fits into the bigger picture of improving competitiveness and of bringing about real reform in the way business is conducted. There is an old business saying that cash is king. This is never truer than when cash is in short supply. I agree with Deputy Feighan that businesses, including small service companies and the retail sector, are in turmoil. This Bill is about the survival of small companies, small family businesses. It is about trying to support the business person seeking to protect his or her business and the staff employed therein.
There has been much discussion about the banks not providing credit to small and medium-sized companies to ensure that they can remain open as they struggle in the worst economic downturn in decades. I agree that the banks can and should do more to help the small business sector. They have received billions of euro from the State for which they are doing nothing in return. They are micro-managing their accounts and providing no new credit whatsoever. This week, the Government injected €4 billion into a bankrupt bank, which raises many questions. Billions of euro of taxpayers money has been put into the banks' coffers and they must use that money to help small businesses. What small businesses really need is a restoration of consumer confidence to ensure consumers generate the cash flow that small businesses need to keep them going. There is a saying that "turnover is vanity and profit is sanity". Sanity and vanity are currently in turmoil. For the small business, the most difficult task is ensuring that payment is received for goods and services supplied on credit. This problem can be difficult enough in good times. In this crushing economic downturn, payment of money owed to small and medium-sized enterprises, SMEs, is absolutely critical.
The Bill is designed to support small businesses through the provision of a quick and simple low cost legal remedy when an SME encounters serious difficulty in obtaining payment from a creditor. Fundamentally, this Bill is about the preservation of jobs. We must remember that the retail sector, which is the biggest employer in the State, often employs less than ten people. The backbone of this economy is retail trade and services, a sector which has not to date received a State grant. In the current climate, our top priority must be the preservation of jobs and the restoration and maintenance of small companies. We must take all possible steps to protect existing jobs. In addition, we must reduce the cost on the SME sector when it must look to legal remedy to obtain money owed to it. Legal costs can be a significant element of business costs when a small business is forced to take legal action. Reducing such costs is another key step in assisting local businesses to protect jobs.
This Bill strikes the right balance in facilitating a small business to quickly recover what is owed at a low cost. I thank Deputy Varadkar for bringing forward this Bill. I appeal to the Minister of State to take action to address what is going on. It is appalling. The people have no confidence in the Government, as evidenced in the recent elections. Billions of euro has been given, through the State guarantee scheme, to Allied Irish Banks and Bank of Ireland, and to Anglo Irish Bank to allow it to remain open. Little or none of the money received from Europe has filtered through to small companies. This Government has lost the plot entirely when it comes to the restoration and maintenance of small companies. It has missed out on an opportunity to create confidence and, as Deputy Paul Connaughton said, to encourage people to retain jobs. Instead, all we have heard about is job losses and redundancies, the payments for which are costing the State a fortune.
I, too, thank Deputy Leo Varadkar for bringing forward this important Bill at this time. I appeal to the Government - the benches opposite are unfortunately bare at the moment - not to stall this Bill for six months. The next six months could be vital. Many small businesses will go to the wall if this measure is not introduced quickly. Stalling this legislation for six months at this particular point does not make any sense.
Many small businesses are currently put to the pin of their collar to survive the economic crisis for which this Government is responsible in terms of its over-reliance on the building sector. Earlier, the Government, supported by members of the former Progress Democrats Party, Independents and the Green Party, won the vote of confidence. It will now claim it has a mandate for all it is doing, including stalling this important legislation for six months. As pointed out earlier, whatever mandate the Government has, the Green Party has no mandate. While they were elected on the basis of their opposition to Government and everything it did previously they later, for convenience of numbers, joined up with Fianna Fáil following the election. Calling that a mandate does not impress me or the many small businesses that are being forced to close.
The banks are refusing to make cash available to small businesses. The Government is not helping businesses to survive, many of whom are awaiting payment for services to, perhaps, State agencies, government or local authorities.
This money is sometimes expected as payment for services provided to State agencies and local authorities. Many small businesses are owed thousands of euro and this money is vital for their survival. The grants for adaptations for disabled persons and essential repairs for the elderly have not yet been paid for work done in County Galway since September 2008. The small builders who completed these projects are still waiting for the householders to pay them from the grants. Similar issues arise in respect of the farmyard pollution grants. The Government decided that projects under this scheme had to be completed before the end of September 2008 and that only 40% will be paid in 2009 and 2010, respectively, and 20% in 2011. How can any small business wait that long for payment?
We have encountered these kinds of problems on our canvass. Small business people took out their anger with all politicians even though the blame lies with the Government, which is now stalling this Bill for six months instead of accepting it and getting on with the job of releasing money to small businesses.
I thank Deputy Varadkar for acknowledging in this Bill the plight of farmers. It is high time that the farming and food processing industry were treated the same as other sectors. Agribusiness employs 200,000 people but over the past 12 months, farmers have gone to the wall on a daily basis. In the parish of my wife's family, the number of dairy farmers have decreased from 40 to three over the past 20 years. I was shocked to learn over the past three weeks how bad circumstances have become for farmers. I visited a farmer with whom I am acquainted through our mutual involvement in an organisation and who paid six employees out of a milk cheque that was one third less this April than last year. We have developed the American way of farming due to high energy costs and poor cashflow. Farmers are culling the lower ends of their herds to generate the cash they need to continue.
Members on this side of the House are sometimes accused of being dramatic but everything that Deputy Bruton predicted 12 months ago has come to pass. Last November, when I met a correspondent to outline what I thought would happen in January and February he told me I was too dour. However, I was vindicated by events. If we go on holidays for two months, further problems will arise in September or October. It is unacceptable to reject a Bill such as the one before us. Two weeks' holidays this summer are enough for this House. We need to keep our eyes on the ball because when the middle of July comes we will be treated with contempt by the people, and rightly so. We cannot walk away because this is the House in which work can be done and people helped. To walk away in the first week of July and not return until the end of September is a disgrace. We will be forced to return in September because mortgage holders and business people will not survive until then. Their credit cards are full and their savings are gone. My county's club championships will be decimated because our young people are flying to Boston and all over the world in the hope of finding work. If we close in July and ignore our legislative responsibilities, we will deserve what we get in September.
We have looked after the people who control the banks while failing an industry. At the count centre in Trim, I saw milk from another country being put in our tea. That was a disgrace and an insult to the industry. Where are the boards that are supposed to sell our products?
We should sit every day this summer except for two weeks in August because we will be forced to return in September. Our small industries, and our farmers in particular, are the life and soul of the country. I ask the journalists in this House to visit the farms in counties Meath and Cork from which good cows are being sent to the factory for slaughter so that farmers can pay the ESB bills that the Minister for Communications, Energy and Natural Resources said would be reduced.
I thank my colleague, Deputy Leo Varadkar, for proposing this important Bill. I have seen too many small businesses go to the wall due to cashflow difficulties not only in the midlands but throughout the country. That is a shame and an indictment of the Government. I fully support the Bill's intention of putting in place mechanisms to assist local small businesses to survive in the interest of regional and national economic recovery.
According to a recent survey by ISME, 96% of small and medium enterprises have introduced pay cuts or pay freezes since the start of the year. Firms planning lay-offs have increased to 35% from 25% two months ago. Smaller businesses are continuing to struggle and the situation will deteriorate. The survey found that 35% of firms plan to make 20% of their workforce redundant within the next three months. As the sector employs approximately one million people, this equates to approximately 70,000 jobs.
ISME has called on the government to address the failure of the banks to lend money to small and medium enterprises and the costs imposed by government on businesses, and to introduce business incentives aimed at stimulating the economy. It has also stated that late payments are having a disastrous effect on small and medium businesses, which are now waiting an average of 69 days from invoice date. That is the highest waiting period in Europe. A massive 42% of companies are waiting in excess of three months for payment. It is imperative that the Government introduces a mandatory payment period whereby all companies regardless of size will be guaranteed payment within 30 days from the end of the month of invoice or delivery. It must also put in place a mechanism similar to the existing small claims court structure to settle payment disputes as they arise in order to protect the small businesses sector. This would be a step towards ending the dominance of large businesses at the expense of small and medium enterprises and creating a level playing pitch for all credit transactions. However, if the Government continues to sit on the fence, the ensuing closure of many small businesses will push more workers onto the dole.
ISME has claimed that State agencies are blackmailing Irish businesses over their contracts with the Government. The association states that agencies are writing to smaller suppliers demanding reductions of 8% and more on their existing contracts. These communications imply that any firm which refuses to comply will be blacklisted and not permitted to supply State agencies. The current procurement process for public work contracts favours larger firms at the expense of the survival of smaller companies. I am particularly concerned that some local authorities employ consultants who in some cases are putting contractors out of business and this is happening in the midlands. This must change because it is unfair to small and medium sized contractors and businesses.
My colleague from Meath dealt with the issue of how farmers are being penalised by the Government. I want to see fair play across the board for all sectors of the community. I will support my colleague on the issue of longer sittings of Parliament. We should sit during the entire month of July, go on holidays in August and return on 1 September and deal with the crucial issues that face the economy and the people of the country.
Billy Kelleher (Minister of State with special responsibility for Trade and Commerce, Department of Enterprise, Trade and Employment; Cork North Central, Fianna Fail)
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Many people waited with bated breath to ensure the Government won the motion of confidence today. I can assure the House that many people in the Opposition will wait with bated breath to ensure we win the vote to adjourn in early July and return in September.
Billy Kelleher (Minister of State with special responsibility for Trade and Commerce, Department of Enterprise, Trade and Employment; Cork North Central, Fianna Fail)
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I congratulate Deputy Varadkar on bringing the Private Members' Bill to the floor of the Dáil. It may be an indication of the usefulness of Private Members' time and of the Parliament in getting involved in constructive work as opposed to some of the more facile debates we have from time to time on the serious issues affecting small businesses.
As has been expressed by my colleagues, the Government is in broad agreement with the general objectives underlying this proposal. We are acutely aware of the concerns of small businesses in Ireland, in particular those businesses that are adversely impacted by the current economic and banking crisis. I have already stated, as has every Deputy, that there is an onus on the banks. There is a new relationship with the Irish banks under the recapitalisation programme and the bank guarantee programme to ensure there is a flow of credit to small and medium sized businesses.
Billy Kelleher (Minister of State with special responsibility for Trade and Commerce, Department of Enterprise, Trade and Employment; Cork North Central, Fianna Fail)
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We will continue to pursue that credit being opened up to flow to businesses to protect the economy and jobs; Deputy Feighan mentioned a 100 year old shop in County Roscommon.
The Government is conscious of the problems being encountered by businesses in terms of cash flow and credit availability and the consequential debt problem. The availability of credit to business is essential if we are to work our way through the current economic difficulties, maintain employment and ensure economic growth in the future. The Government is committed to and focused on ensuring that the necessary actions are taken to underpin the economy in general and the enterprise sector in particular. The enterprise sector, including the small business element of that sector, is vital to Ireland's economy which is why we have taken the necessary steps to address the credit facility difficulties being encountered. My colleagues have outlined what is being done on the recapitalisation of banks and how initiatives are being structured to provide a number of supports for small and medium sized businesses in particular.
This House need be in no doubt about our commitment. We will continue to make the necessary decisions and take the necessary actions to support enterprise, maintain employment and return the country to a more stable economic environment. It is for that precise reason that we do not oppose the Bill. It has considerable merit though not in its current form. We need to consider the measures to ensure there are no negative impacts, not only on the operation of the small claims procedure but also on consumers and those small businesses that we seek to help and protect. We have a number of concerns about the details, particularly on the possibility that the proposal will fundamentally alter the ethos of the procedure from a pro-consumer to an anti-consumer measure. Equally, we do not want to introduce any measure that has the potential to provide an advantage to large businesses to pursue small claims debt against individual consumers and small businesses with ease and minimum formality. This is especially the case against the background of the significant investment and modernisation that has taken place over recent years in the court services where a dedicated Commercial Court has been established to specifically determine business disputes.
While the Bill proposes increased access, it does not provide the necessary safeguards for consumers and small businesses. I do not wish to see any measure introduced which will make them even more vulnerable, especially in the current economic circumstances. That aspect needs to be thought through and carefully analysed to ensure that whatever further mechanism and procedure is put in place is targeted appropriately.
As I already stated, there is merit in the proposal, in particular in introducing a procedure to facilitate certain types of small claims by one business against another. This is particularly the case where many small businesses encounter difficulty in getting paid for goods or services they have provided on credit. I would not be in favour of allowing big businesses to avail of such a procedure. Introducing such a procedure will require appropriate and legally robust definitions to distinguish between business types and sizes and in particular definitions appropriate to the small enterprise and business sector in Ireland. This is an issue the Department can examine in more detail in conjunction with the Department of Enterprise, Trade and Employment and the Attorney General.
The Minister has indicated his willingness to consider the €2,000 limit applying to the small claims procedure and the matter is the subject of an ongoing review. The procedure is provided for under the District Court rules which are promulgated by way of statutory instrument; no primary legislation is involved. The very successful Commercial Court was also established by means of the rules of court. All increases in the maximum amount to date have been implemented by statutory instrument and establishing changes by primary legislation may have an effect of removing the type of flexibility that operates so effectively with secondary legislation.
The Government is on record as recognising that the extension of the small claims procedure similar to that operating for consumers has the potential to aid the small businesses and enterprises struggling for survival at present. However, in introducing such a measure we need to ensure that it does nothing to undermine the ethos of the existing procedure and that it is targeted only at small businesses and is not open to use by large firms. For this reason, the Government requests the postponement of the Second Reading for six months. This is not because we do not see an urgency in dealing with this but because we would like to take on board what has been said and proposed by Deputy Varadkar and take into account the views of Members.
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If we postpone this we could have further discussions with the Attorney General and the Department of Enterprise, Trade and Employment. That is why we request a postponement for six months. I want to express my appreciation and that of the Government to Deputy Varadkar.
I will share time with Deputies Burke, Clune and Varadkar.
I congratulate Deputy Varadkar on tabling the Bill. I welcome the thought that the Government has given it a broad welcome but I do not see the need to take six months to study the Bill to propose amendments - there are shades here of the Cluster Munitions Bill tabled by Deputy Timmins which was praised and subsequently introduced in Government clothes.
Previously, we have discussed the code of conduct for retailers and suppliers, the joint labour committees, the NERA regulations and the need to tighten up on this issue. There is no sense in having a primary producer product such as milk leaving farm gates at €0.20 per litre and turning up on the shelf for consumers at €1.40 or €1.39 per litre with no accountability or code of conduct on how that price was reached. Who gets the margins and where is the profit margin soaked up? We agree that the energy costs of production and minimum wage costs are causing us problems, particularly given the exchange rate. However, we have to have a code of conduct.
We need a fair trade agency, which would see the merger of the National Consumer Agency and the Competition Authority, with extra teeth. It is simple science. In the grocer super-multiples, which are worth approximately €14 billion to the industry, we have all types of unethical conduct taking place that we cannot see through, examine, monitor or regulate. An industry worth €14 billion that is not regulated or monitored properly is open to misuse and manipulation. If that is the case, and it appears it is because we are not challenging it, I ask that this Bill be passed by the House and adopted into law after the summer recess. The Minister of State cannot disagree with that.
I commend Deputy Leo Varadkar on bringing this Bill before the House this evening. Small and medium-sized businesses are key to maintaining employment. Businesses require credit to allow them continue to trade. Most businesses, particularly small and medium-sized businesses, are finding it difficult to collect the funds for their goods and services.
The Minister of State's colleague said earlier that he was very aware of the fact that one of the key drivers in our economic recovery is the provision of appropriate credit facilities to small businesses and enterprises. He went on to say that it is clear to most Members in the House that the Government is taking the necessary steps to address the particular problems facing small businesses and that it will continue to take whatever action is necessary to overcome the current situation.
That statement, in addition to what the Minister of State said earlier, is contrary to a recent bank watch survey by ISME, which confirms that the banks are continuing to restrict lending to small and medium-sized industries, with the majority of the companies being refused credit facilities even in the past three months. The results indicate that the position is deteriorating on an ongoing basis. It indicates also that the blame lies firmly with the banks' selfish lending policies.
The Government must stop pussyfooting around with the banks and force them into freeing up credit. That is not happening, despite the fact that the Minister of State and the Ministers of State who spoke earlier said there is a flow of credit. The reality is that the people who are contacting elected public representatives know that credit is not being made available to them.
Contrary to all public statements issued by the banks, there is clear evidence that they are making it as difficult as possible for business customers to access badly needed credit facilities, with the serious consequences of job losses as a result. If left unchallenged, that will lead to a major increase in company closures, with thousands more jobs lost. It is important that the Minister of State, or somebody else in his Department, makes a decision with regard to the banks.
On 22 January last I wrote to the Tánaiste and Minister for Enterprise, Trade and Employment regarding the many people who had approached me about this particular issue. They said they were in a position where they could tide themselves over for a number of weeks or perhaps months at a stretch, but they would not be able to continue to employ people and pay them if the banks do not provide credit facilities. The banks are not doing that and it is incumbent on the Minister of State to make them do it.
Enterprise Ireland is charged with responsibility for helping indigenous industries. It must be proactive rather than reactive to the many cases they originally helped and are not getting back to now to determine if they can be rescued.
I got information under the freedom of information legislation which indicated that Enterprise Ireland, in parallel to what was going on in FÁS, undertook trips on the following project titles: TV boot camp, which involved four or five days in New York City; a week's conference on digestive diseases in San Diego; and exploring sustainable furniture production in Las Vegas, among many others on which I have been given details. It is incumbent on the Minister of State to give Enterprise Ireland direct responsibility for indigenous industries such as those mentioned by my colleagues with regard to home industries, food production and other industries. Something must be done with regard to Enterprise Ireland and the many agencies that are duplicating the responsibilities for job creation and support.
I was glad to hear the Minister of State say he has adopted the spirit of this legislation. It is important that something is done to help small and medium-sized enterprises because they are the backbone of this economy, employing an estimated 800,000 people. Unfortunately, that number is dropping on a daily basis.
All of us are aware of the difficulties small businesses are facing. The Minister of State must have many deputations to his office in that regard. ISME circulated all Members with a survey it did of its members recently. Cork Chamber of Commerce circulated me, and I am sure the Minister, on the difficulties its members are having in surviving in these times but, most importantly, accessing credit from the banks. That credit is not forthcoming and it is resulting in job losses.
I was speaking to somebody yesterday who could not get €10,000 from the bank to facilitate him with a lease payment. This was a profitable retail business in the city centre that has been operating for at least 30 years. The alternative for businesses that cannot get relatively small sums such as that is to let someone go, which adds to the unemployment figures in the area.
Those stories are repeated up and down the country, and I am sure the Minister of State is aware of many of them. We must ensure that credit flows to small businesses. The banks are telling us one thing, the Minister will tell us another here but the reality on the ground is that it is not happening, and small businesses will go to the wall. If that does not happen we will lose the energy and commitment of those risk takers. Many of the owners of those small businesses are risk takers. It is not easy to go into a small town or a city centre and decide to set up a business, pay rent, commit oneself to local authority charges, pay water charges and take on new employees. That is a major risk people take. They want to do it and they will work hard, but they are not being facilitated in this climate. This country has recapitalised the banks. The State has invested a great deal of money with a view to ensuring that credit would flow to small business but it is not happening.
There are many areas where we could help small businesses. The issue of an upward only rent review must be addressed. Legislation must be examined to ensure that is taken out of lease clauses. Rents are falling dramatically, yet many lease takers are tied in to a position where there is only upward rent reviews. When the Minister of State is talking to the Attorney General in the next six months, he might discuss with him the possibility of introducing some form of legislation to ensure that rents can be reviewed downwards and follow the economic trends.
Small businesses must be protected. If we do not protect them now we will not have them when the country comes out of this economic crisis.
I thank my colleagues in Fine Gael for the strong support they have given to this Bill. I thank the Labour Party Members for their support also.
The purpose of the Bill is twofold: first, to raise the threshold for the Small Claims Court procedure to €3,000; and, second, to allow small businesses to use the procedure. The particular beneficiaries in that regard would be professional sole traders, tradesmen and people who are not getting paid for the services they provide and the goods they sell. The Bill is further evidence of Fine Gael's strength as a pro-enterprise party and one that recognises that jobs will not be created by some Government scheme. Jobs are created by business and by enterprise.
We have heard many statements and had many publications from the Government in recent years about the green economy, the smart economy and the knowledge economy. There is much merit in the documents put forward but we must not forget the real economy and the businesses already in existence, operating and in trouble. If we help these, make them competitive again and reduce their costs it is the best way to sustain jobs and promote future jobs growth. Not everyone can have a PhD or work on a wind farm. We must not forget the sizable economy already in existence which must be supported.
The Government proposes that we postpone the Second Reading for six months. Often the House is accused of engaging in a Punch and Judy show, but I respect that on this occasion the Government has attempted to meet us part of the way. Among the reasons given for the delay, I find one difficult to accept, that is, the matter of raising the threshold. This can be done immediately, but I accept that it can also be done by statutory instrument and I encourage the Government to do so.
Following advice from the Attorney General, the Government will find that it will require primary legislation, that it will not simply be able to change the rules of the court by statutory instrument, that if it is to give a limited company the power to use this procedure, primary legislation will be required. I trust the Government will receive the appropriate advice from the Attorney General as soon as possible.
In terms of changing the ethos of the Small Claims Court I understand the Minister of State's position, but this is not necessarily about consumers versus small business versus big business. This concerns on the one hand people, businesses and sole traders who pay their bills, and on the other, consumers, small businesses, large businesses and Government agencies which do not. That is the dichotomy which must be examined. We wish to support consumers who have been ripped off or discommoded, companies to which money is owed and professionals and sole traders to whom money is owed. The fact that it is a case of a business versus a consumer or a small business against a large business is not really relevant. This is about allowing people and companies which are owed money to receive what they are due for work done and services provided without having to go through an expensive court process.
In many ways I would have preferred to bring the matter to a vote tonight but inevitably, given the breakdown of the House, it would have been defeated. I am prepared to take the Government at its word and to accept the proposed Government amendment. I fully expect, having taken the Government at its word, that we will see the Bill on Committee Stage in six months time or, alternatively, to vote on corresponding Government legislation should it be introduced in the mean time.