Catherine Murphy (Kildare North, Independent)
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Question 63: To ask the Minister for Jobs; Enterprise and Innovation if he will provide information on the proposed partial loan guarantee scheme; if he will elaborate on whether the scheme will have any facility for struggling businesses, in particular small and medium enterprises, which wish to consolidate existing debt and invest in recovery plans; if not, if he has any proposals for providing assistance to businesses with existing debt who wish to fund recovery plans; and if he will make a statement on the matter. [36015/11]

John Perry (Sligo-North Leitrim, Fine Gael)
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The design phase of a temporary partial credit guarantee scheme has been completed and formal proposals will be brought to Cabinet shortly. Once the design of the scheme is approved by the Government, there will then be a further request for tender published to select an operator to allow for the roll out of the scheme over the coming months. In parallel with the work taking place on the design of the scheme, the Department is preparing primary legislation to make the necessary statutory provision for such a scheme.

The scheme will provide a level of guarantee to banks against losses on qualifying loans to job-creating firms to get banks lending again to industry and entrepreneurs. The purpose of the scheme is to encourage additional lending to SMEs. It will be closely targeted at commercially viable, well performing companies that have a solid business plan and a defined market for their products or services, and can demonstrate repayment capacity for the additional credit facilities but which cannot secure credit facilities due to the following two market failures: insufficient collateral for the additional facilities; or expansionary SMEs which due to their sectors, markets or business model are perceived as higher risks under current credit risk evaluation practices.

The Government's commitment will be for an initial period of one year. Specific performance criteria will be set down to allow for review and revision of the scheme at the end of that initial period before any commitment to a roll-over of the scheme for subsequent years.

Refinancing of existing debts will not be eligible for guarantee and such arrangements will continue to be dealt with by banks under their current lending arrangements. However, in cases where new lending is sought along with refinancing, the availability of a guarantee in respect of the new lending element should be of assistance in providing an overall package of support to the business, including consolidation of existing debts.

The temporary partial credit guarantee scheme will complement the Government plans on the restructuring and recapitalisation of the banking system which seek to secure an adequate flow of credit into the economy to support economic recovery.

Catherine Murphy (Kildare North, Independent)
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When will the legislation be published and passed? When will the scheme come into place? Is there a possibility that the banks are waiting for this scheme rather than operating their normal lending schemes at the moment? The Credit Reviewer recently said he was sceptical about this being a cure-all and that the guarantee would need to proceed on an individual basis, requiring each application to be considered on its own merits, which is exactly what is supposed to happen when a businessperson seeks a business loan. Does the Minister of State have confidence in the banks lending? We packed them full of money in order for them to lend to productive businesses. All the evidence suggests that is not happening. We own half of these - we certainly own the bulk of AIB and a significant amount of Bank of Ireland which would be the primary banks.

Michael Kitt (Galway East, Fianna Fail)
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The Deputy should conclude.

Catherine Murphy (Kildare North, Independent)
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If they are not lending to business that will be productive, what has been the purpose of this? Does the Minister of State have confidence in them doing that?

John Perry (Sligo-North Leitrim, Fine Gael)
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The scheme will be rolled out in the first quarter of next year. We have to have confidence in the banks because how can they make profit without viable SMEs, which represent the backbone of their business? This partial loan guarantee will not be a substitute for bank lending. It will only guarantee loans for businesses with, for example, a new market or product range where there is a certain element of doubt. Some 650,000 people are working in 200,000 small companies. It is important to have confidence among employers and employees. Much of the money is not being spent in the economy when one considers the level of savings being made. To support small companies in the real economy we need to spend locally and buy for Ireland to get the confidence rolling. Unfortunately many of the businesses that were viable two years ago are no longer viable because domestic spending is low. Clearly no bank will give money to an operation that is losing money. It is equally about the mentoring of a business and we are very confident that the banks will start working with the accountants and others on matters such as due diligence or the company business plan as this requires a partnership approach.

Michael Kitt (Galway East, Fianna Fail)
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The Minister of State should conclude.

John Perry (Sligo-North Leitrim, Fine Gael)
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The day of the bank just giving money and standing back and hoping it will work are gone.

Michael Kitt (Galway East, Fianna Fail)
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I call Deputy Catherine Murphy.

John Perry (Sligo-North Leitrim, Fine Gael)
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It is important that the bank take responsibility also.

Michael Kitt (Galway East, Fianna Fail)
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I call Deputy Catherine Murphy briefly as we are running out of time.

Catherine Murphy (Kildare North, Independent)
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I am not arguing that money should be advanced to companies that are not viable. The Minister of State and I know there are plenty of viable companies that are being squeezed to the point that they may not be viable. It almost becomes a self-fulfilling prophecy in that the domestic economy will suffer if we do not reinforce viable companies. Plenty of them are being impacted negatively by the banks. I would not argue for a guarantee although where a company is marginal I can see the benefit of a guarantee. In the first instance the money was put into the banks to allow solid companies to continue in business and continue to employ people. I know people in viable small and medium-sized businesses who are concerned about their viability because of the dysfunctional relationship they have with their banks.

John Perry (Sligo-North Leitrim, Fine Gael)
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The Taoiseach, the Minister for Finance, Deputy Noonan, and the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, met representatives of the banks in the past ten days to discuss their obligation to invest in companies. If we consider the principles of any business, the taxpayer has put money into the banks and therefore the banks are obliged to put money into companies which in turn will create jobs. I entirely agree with the Deputy that the €30 billion will have to be clearly benchmarked on a regional basis. As Deputy O'Dea said, it is not about repackaging a loan that was offered two years earlier.

Michael Kitt (Galway East, Fianna Fail)
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I thank the Minister of State.

John Perry (Sligo-North Leitrim, Fine Gael)
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This is about the potential for new business. I assure the Deputy that the Government is determined that the banks will play a critical role in kick-starting the domestic economy. It is very important to get confidence and credit. Unfortunately they are both linked. There is a great lack of confidence. There are 650,000 people working in small companies. We need to give confidence to those employees and their employers.

Michael Kitt (Galway East, Fianna Fail)
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I thank the Minister of State.

John Perry (Sligo-North Leitrim, Fine Gael)
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That is why we need certainty. The banks will need to play a role and will be very much benchmarked by the Government as to what they are doing. I will come back to the Deputy again on this.

Michael Kitt (Galway East, Fianna Fail)
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I will take two brief questions from Deputies O'Dea and Tóibín.

Willie O'Dea (Limerick City, Fianna Fail)
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When a decision needs to be taken as to whether a loan will be guaranteed, what sort of person will take the decision? Will it be taken by a bureaucrat in the Department or by somebody in the private sector?

Peadar Tóibín (Meath West, Sinn Fein)
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In the North of Ireland, Sinn Féin along with its partners through the programme for government made £50 million available in loans to small and medium-sized businesses. Would the Government not consider putting something like that in place straight away to deal with the problem?

John Perry (Sligo-North Leitrim, Fine Gael)
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In response to Deputy O'Dea's question as to who will take the decision, there will need to be due diligence of the business plan. It will be in collaboration with the Department, which will have a critical recommendation on this along with the bank and the business's accountant. That will be very much a win-win situation. That level of mentoring will assist with the viability and will reassure banks which in the past have refused money. There will be decisiveness. The code of banking will be looked at to give a timeframe.

In response to Deputy Tóibín's point, we have put a huge amount of money into the pillar banks. They are sufficiently capitalised and have the money to lend. With Mr. John Trethowan's report, there has been independent assessment of that. Bank of Ireland and AIB are each committed to lending €3 billion, which may be insufficient to meet the demand. The tragedy at the moment is that it is not just about giving money to a business, which is one element. It is about the level of support in the economy, the spend in the economy and the stacked-up costs of doing business. Keeping a company viable is not just about giving it a big cheque and hoping everything else will be rosy.

Peadar Tóibín (Meath West, Sinn Fein)
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Nobody is making that point.

John Perry (Sligo-North Leitrim, Fine Gael)
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That is not the answer to all the problems.