Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Question 38: To ask the Tánaiste and Minister for Enterprise, Trade and Employment if she has encouraged the Department of Finance to make available loans to small to medium-size enterprises through a good bank or through the current banking system; and if she will make a statement on the matter. [44569/09]

Lucinda Creighton (Dublin South East, Fine Gael)
Link to this: Individually | In context

Question 66: To ask the Tánaiste and Minister for Enterprise, Trade and Employment the action she is taking to aid small businesses, in view of the drop in receipts for income tax from the self-employed; and if she will make a statement on the matter. [44583/09]

Michael Creed (Cork North West, Fine Gael)
Link to this: Individually | In context

Question 68: To ask the Tánaiste and Minister for Enterprise, Trade and Employment if she is satisfied that the banking sector is providing adequate credit and overdraft facilities to small and medium-sized enterprises; and if she will make a statement on the matter. [44526/09]

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 38, 66 and 68 together.

As I have outlined to the House in recent months, in supporting small and medium-size enterprises, SMEs, the Government's focus has been on actions to sustain a positive business environment, including the proper functioning of the banking system, allied with specific targeted supports for SMEs through my Department's enterprise development agencies.

Developments in the financial sector and wider economy during the last year have broadened the concerns for SMEs in terms of gaining access to finance and bank credit. My Department and I have held regular meetings with the representative bodies of the SME sector and other stakeholders regarding issues impacting on the sector. The Government established the round table talks on access to bank credit and subsequently the credit supply clearing group, with a dedicated e-mail contact point on my Department's website to deal with access to bank credit issues specifically.

We are all aware of SMEs' difficulties in accessing credit. We want to collate the information and present it to the banks in a scientific manner by way of explanation of those difficulties. Every Deputy who speaks in the Chamber highlights the issue, but we need detailed information. This has been forthcoming, including from Deputies.

The Government has focused on creating a fit-for-purpose banking system and has taken actions to sustain the banks and facilitate the flow of credit to the wider economy to ensure that all banks are effectively good banks and can provide the normal range of services to business clients. The bank guarantee and recapitalisation schemes, the nationalisation of Anglo Irish Bank and the passing of the NAMA Act are all aimed at this. The NAMA Act has been further strengthened by the Government amendment providing the Minister for Finance with a power to issue guidelines to the participating institutions in the NAMA process on lending practices and procedures to improve the flow of credit to small and medium-size enterprises and, if necessary, to other sectors.

There has been a major downturn in the global economy. We are in an international recession and our export markets in some areas have shrunk. The weakness of sterling vis-À-vis the euro is putting considerable pressure on particular sectors of the economy. We also had impaired banks and balance sheets. Let us be honest - accessing credit on international markets and allowing a flow of credit into the SME sector has proven difficult for banks since last year's bank guarantee. However, there has been a reduction in the demand for credit, as has been borne out by the Mazars report. Another Mazars report on a more up-to-date analysis of lending practices and the flow of credit into the SME sector will be published soon. This is a major difficulty. If credit dries up, it can cause the economy to grind to a halt. The banks have been recapitalised. Now that NAMA is in place, the impaired balance sheets can start to be addressed. Responsible lending practices are needed to ensure there is a flow of credit into small and medium-sized businesses. If businesses that are struggling, but are potentially sustainable over the short to medium term, can get to the other side of the downturn, they will be in a position to retain as much employment as possible.

Everybody accepts that the small and medium-size sector is the backbone of the economy. There is a very strong innovative and entrepreneurial instinct in Ireland. The strong yearning of the Irish people to set up businesses on a regular basis has been fostered at every level, primarily by agencies like the county enterprise boards and Enterprise Ireland. As I said in response to a previous question, such bodies are very supportive of those who are spawning enterprise, innovation and research. We are very conscious of the need to continue to do everything we can in this regard. We met representatives of the banks last week to discuss how European Investment Bank money can be pushed into the economy. The officials in question will be able to go back to the European Investment Bank, which has said it will make further moneys available at preferential lending rates.

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

The Minister of State has said he is doing everything he can. He mentioned that round-table meetings are being held to collect information, etc. He did not acknowledge the truth of the problem - the reality of why it is the way it is. The European Investment Bank money is new money. The real problem we have is with working capital. The long-standing overdraft facilities of businesses are being reduced, removed or turned into loans. Businesses are being told that the margin on their interest rates over the EURIBOR is being increased. Some charges that were refunded to businesses in the past are not being refunded anymore. Charges are being increased and cheques are being bounced.

These problems are associated with working capital, by and large, rather than with new lending. This is happening because the banks are bust. That is the truth of it. It is not necessarily badness on the part of the banks. The banks' developer loans are not working. Just 65% of their small business loans are performing. Their personal loans and their mortgages are in serious trouble. The banks are bust. No round-table meeting or other information-collecting mechanism will make a difference. Does the Minister of State not agree that the only thing the Government can do to restore credit to business is to establish a new bank from scratch and capitalise it with State money so that it can lend to business?

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

That is obviously the Deputy's party's view on how to get credit flowing into the broader economy. We all accept that the banks had impaired balance sheets. As I said at the outset, they were unable to access money in the wholesale money markets.

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

It will get worse and worse.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

There was difficulty in that regard.

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

People will default on their mortgages next year.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

Regardless of what else was done, if the impaired assets had not been removed from the balance sheets of the major banks-----

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

The personal loans and business loans have not been removed.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

-----they would have been unable to access-----

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

The only loans to have been removed are those of the big developers.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

-----any further moneys through the wholesale money markets and lend it into the broader economy. The Deputy is right to assert that issues with short-term working capital are creating major difficulties, such as reductions in overdraft and current account facilities. Such issues are having a huge impact on small and medium-sized businesses. As their cash flow reserves are gone at this stage, such businesses are having to work off current accounts and overdrafts. The inclination of the banks to reduce overdraft facilities over a short period of time is putting huge pressures on small and medium-sized businesses. It is essential for the members of the credit supply clearing group to meet and to the correct information. The group was established to discuss these issues, highlight the difficulties that exist and collate all the information. If people have difficulties, they can bring them to the attention of the group. I assure the Deputy that I am like a mini clearing group, in the sense that people contact my office every day to discuss the difficulties they are having.

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

Do they get answers?

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

They are referred to the credit supply clearing group.

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context

It would be great if the Minister of State were in power, as he would then be able to do something about it.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

I advise the Deputies opposite who receive such queries to refer them to the credit supply clearing group. If they want to deal with them personally, they can do that instead. We are conscious of the importance of this fundamental issue. The Deputy knows as well as I do that regardless of what else happens, we need to have functioning banks that can access money. Fine Gael believes that a nationalised bank should be established. We believe that what we have done will stimulate the supply of credit into the economy. Small and medium-sized businesses will suffer, unfortunately, if there is no demand for goods and services. Both sides of the economy have to be stimulated.

Arthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

Does the Minister of State accept that the functioning of NAMA will not have an impact on the banks for at least another year? We will have to wait until the autumn of next year, at least. Does he accept that the representatives of Enterprise Ireland who are working with the banks are not operating as they should? As Deputy Varadkar said, the banks simply do not have any money to give. Does he accept that the banks are lying when they say they are giving loans to business and meeting their responsibilities? They are not doing so. Is it not the case that we will have to wait for another year before something practical happens to create a credit stream to small and medium-size enterprises? Surely the Government can do something practical to make it happen.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

Many things are practical. We have to live in the real world as well. The difficulty is that there has been a global downturn. We have a recession in this country. There has been a contraction of the economy. There has been a drop in demand for credit. Equally, there has been a drop in demand for the goods and services offered by small and medium-size businesses. The Deputy also asked about the extent to which Enterprise Ireland is working with the banks. The Tánaiste is in discussions about the establishment of a forum, comprising representatives of the banks, Enterprise Ireland and other stakeholders, to discuss these issues again. In the meantime, Enterprise Ireland is discussing these issues with the banks on a continual basis.

Arthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

It is not working.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

Another issue of concern was identified by the Tánaiste and others at an early stage is the availability of skills levels in the banks. For many years, the banks offered loans on the assumption that they had securities in the form of rising property prices. Businesses now have to be assessed on the basis of profit and loss accounts, balance sheets and business plans. As a consequence of the different lending and banking practices that were in use until recent times, some of the banks do not have the skills sets they now need. We are continually trying to address the system. The reality if that if we had not guaranteed bank deposits this time last year, at a very precarious time, we might not be talking about the banks at all because they might have capsized. Although the banks have steadied the ship, we are not yet out of the woods. Dubai, for example, recently defaulted on a sovereign loan.

Damien English (Meath West, Fine Gael)
Link to this: Individually | In context

Dubai is the best economy in the world, according to a former Taoiseach.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

Regardless of whether we like it, the major difficulties that continue to exist internationally are having an impact on this country.

Deirdre Clune (Cork South Central, Fine Gael)
Link to this: Individually | In context

Is AIB represented on the round-table group to which the Minister of State referred? An official from AIB told the Joint Committee on Finance and the Public Service last week that little or no money would come through to small businesses on foot of NAMA. We all thought the intention behind the establishment of NAMA had been to allow money to trickle through. Is that attitude shared by the banks that sit at the round table with the Minister of State?

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

All the banks are represented on the credit supply clearing group, which has been up and running for some time. The Tánaiste is establishing a forum, on which all the major banks and stakeholders-----

Deirdre Clune (Cork South Central, Fine Gael)
Link to this: Individually | In context

Will AIB be included on that too?

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

Yes.

Conor Lenihan (Dublin South West, Fianna Fail)
Link to this: Individually | In context

We always take care of AIB.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

All the banks that are covered by the guarantee will be included. Other stakeholders from broader industry, as well as representatives of bodies like Enterprise Ireland, will be represented too. Public interest directors have been appointed to the banks. There have been personnel changes within the top echelons of the banks. The first priority was to stabilise and capitalise the banks and remove the impaired balance sheets. Now we can deal with the real issue, which is the need to get credit flowing to the small and medium-sized business sector.

Deirdre Clune (Cork South Central, Fine Gael)
Link to this: Individually | In context

That is the only area that has not changed.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

I would like to ask the Minister of State about the second Mazars report, which is being compiled by the Department. Will he insist that the report contains a breakdown of new and existing funding? The first Mazars report dealt purely with the amount of money - €32.4 billion - that had been given as credit to small and medium-sized enterprises by a certain date. It gave the relevant figure six months after that date, but it did not break down the figures to highlight the extent to which overdraft facilities are being withdrawn. It did not state whether rolled-up interest was included in the €32 billion figure on the later date. When representatives of AIB appeared before an Oireachtas committee recently, they said they had no problem with providing such a breakdown between new and existing lending. Will she insist that the most recent Mazers report, when completed, will have a breakdown showing the level of funding being provided to existing businesses?

Today Dell announced it is selling its plant in Poland. The Tánaiste is in the House today. It is critical that she should provide an assurance. Has she sought an assurance from Dell on the implications of that sale for the Limerick plant and the 1,000 jobs still there? Furthermore, will the Minister go back to Europe and ask the EU about the matter?. It allowed €54 billion to be given by the Polish Government to allow Dell establish the plant in Poland.

Brendan Howlin (Wexford, Labour)
Link to this: Individually | In context

That is outside the scope of the current question. As the Deputy knows-----

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

If that approval had not been given we might still have the jobs in Limerick. Has the Tánaiste sought an assurance from Dell that there will be no implications for-----

Brendan Howlin (Wexford, Labour)
Link to this: Individually | In context

The Deputy should not ignore the Chair.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

-----the jobs that remain in Limerick? These are critical questions. This has just been announced. The manufacturing base is now gone, totalling almost 2,500 jobs.

Brendan Howlin (Wexford, Labour)
Link to this: Individually | In context

The Deputy is anxious.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

I would like the bolted doors and the Mazers report to be dealt with and the Tánaiste should deal with the Dell issue.

Brendan Howlin (Wexford, Labour)
Link to this: Individually | In context

No doubt the Deputy is anxious about this. It is a very serious matter and worthy of a request for the Adjournment debate or as a Special Notice question.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

This has just been announced on the public airwaves. I would like the Tánaiste to deal with it.

Brendan Howlin (Wexford, Labour)
Link to this: Individually | In context

Tomorrow is the day to do that. The Deputy should not expect to be able to juxtapose a question in the middle of Questions Time.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

This has huge implications. I want the Tánaiste to give an assurance.

Brendan Howlin (Wexford, Labour)
Link to this: Individually | In context

That is why it should be dealt with in a proper way.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

I note the Deputy's concerns on this issue. With regard to the actual question, I can only oblige Standing Orders. Forfás is working with the Central Bank as we speak, analysing the credit supply going to small and medium-sized businesses.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

They are not lending.

Mary Coughlan (Donegal South West, Fianna Fail)
Link to this: Individually | In context

The Deputy asked the question.

Billy Kelleher (Cork North Central, Fianna Fail)
Link to this: Individually | In context

We are all well aware of the difficulties. Sometimes banks reduced overdraft facilities and provided term loans but that was not an increase in credit to small and medium-sized businesses. We know what was happening. Now we want to get Forfás and the Central Bank together to analyse this.

Mazers 2 is also in there, assessing the credit demand. Let us be honest. There has been a drop in demand. The first Mazers report clearly pointed out there was a drop in demand for credit simply because there was a contraction in the economy. Companies and small and medium sized businesses that need to access credit, based on sound business projections and balance sheets, profit and loss statements and all that is done in normal everyday businesses, should be supported. We are trying to ensure the banks do that and are monitoring it in that context, through Mazers. Equally, Forfás is working with the Central Bank, analysing the type of credit that is being extended to small and medium-sized businesses.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

I call the Tánaiste to speak on Dell.

Brendan Howlin (Wexford, Labour)
Link to this: Individually | In context

I know the Deputy rightly regards this as a very serious matter but is cannot be juxtaposed in the middle of other tabled questions.

Kieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

It is hugely relevant.