John Paul Phelan (Fine Gael)

I move:

That Seanad Eireann:

- notes with concern that 1,132 businesses have been declared insolvent since the start of the year;

- notes that the rate of business insolvency is higher so far in 2010 than for the same period in 2009 and 2008 despite assurances that the economy was turning a corner;

- notes with concern that small business are still having difficulty accessing credit through financial institutions for a variety of reasons;

- recognises that the Government strategy of NAMA and bank recapitalisation has not produced a "wall of cash" in credit for small business;

- acknowledges broken Government promises to introduce a credit guarantee scheme for small and medium-sized businesses;

- recognises the success of such schemes in countries such as Chile and Taiwan that have delivered business growth and increased trade, while not burdening the taxpayer;

- recognises that a loan guarantee scheme is necessary to achieve the goal of establishing strong and long lasting links between SMEs and banks and to encourage entrepreneurship; and

calls on the Government to introduce a loan guarantee scheme for small and medium-sized businesses based on the following principles: shared risk with financial institutions, using the resources of the financial institutions to assess loan applications, financial institutions bidding for loan guarantee contracts, and excluding financial institutions that develop a record of approving non-performing loans.

I welcome the Minister of State at the Department of Enterprise, Trade and Innovation, Deputy Kelleher.

The motion I propose is similar to the one discussed yesterday in the other House. It concerns small and medium-sized enterprises and their importance to Ireland's economic recovery. There is not much in the Government's amendment to the motion that I would disagree with, but pious platitudes are not enough for the SME sector. The amendment rehearses many of the promises made in the past few years to help the sector, but the statistics clearly reveal the importance of SMEs to the economy, as well as the number who have lost their jobs as a result of business closures in the past two years.

There are approximately 80,000 SMEs in Ireland, each of which employs an average of ten people. Leaving aside the 350,000 who work in the public sector, over half of the remaining people employed in the private sector work in small or medium-sized enterprises. It is, therefore, a significant sector and it is important that we promote and develop it. Fine Gael recognises that we must promote job creation if we are to get out of our difficulties. The beauty of the SME sector is that it reaches into every village and parish in the country. By employing neighbours, friends and, in some cases, family members in local communities, these businesses provide employment for 800,000 people. I am sure the Minister of State will acknowledge that our recovery will be secured through maintaining jobs in the sector, as well as by developing it to ensure those with new ideas are able to set up enterprises.

We are all familiar with anecdotal evidence of the difficulties SMEs are facing in accessing credit. The 2010 Forfás report supports this evidence with its finding that access to finance is the single biggest challenge facing Irish enterprises. A recent ISME report states 42% of the companies which applied for funding in the past three months were refused credit. I acknowledge that in some cases the proposals made were not good enough, but 42% is a very high figure. The report also states that 83% of firms are finding it increasingly difficult to access finance. That is the reason I commend the motion to the House. Even if the Government is unable to support it tonight, I hope it can implement the principles outlined in it.

Every time the Minister for Finance has intervened in the banking crisis in the past two years we have been promised that credit will flow as a result. Sadly, however, credit is not reaching ground level. We are speaking about real jobs and businesses at a time when 450,000 people are out of work. We must ensure that as many as possible of the 800,000 working in the SME sector keep their jobs.

Over 1,100 small and medium-sized enterprises closed in the nine months to September 2010, compared to 1,000 in the same period in 2009 and 500 in 2008. By their nature, such businesses experience a high turnover because many new initiatives involve an element of risk. However, long established businesses which would otherwise have a viable future are facing serious difficulties in accessing credit. While the Government has spoken about the need to get credit flowing to individuals and enterprises, that is not happening.

Fine Gael was criticised in the Dail for proposing to expose the taxpayer to a further potential liability, but our proposals mirror the systems in place in more than 100 countries. Britain has in place a mechanism under which the risks are shared but which protects small businesses. Our proposals would have a real impact on every parish, town and village in the country. We do not propose to open the floodgates in order that every small enterprise with an idea for expansion would automatically be granted credit. Business proposals would still have to meet stringent requirements before credit could be accessed. At present, enterprises cannot access credit to develop viable ideas. The banks are engaged in a necessary process to improve their balance sheets, but this means they are not prepared to support viable business proposals. The Government has not done enough to ensure businesses can access the credit they need to continue. In many instances, there is a shortage of working capital. I know the system that has been established in the UK to support the joint risk between the banks and the state also supports working capital. In other instances, it refers to investment over a longer period to increase employment within those businesses.

Today, I seek a real discussion and debate on the issues, not what happened in the other House yesterday, which was just mud-slinging from one side of the House to the other. The Government has outlined proposals and suggestions as to how we might get credit flowing but the reality is that none of it has worked yet. Perhaps tomorrow it will be working properly, or perhaps it will happen sooner rather than later, but we need to ensure that we are not back here in seven or eight months with another 1,200 to 1,500 small and medium-sized enterprises closed. If 1,200 more close with an average of ten jobs in each business, that will be another 12,000 people on the live register, which we could desperately do without. Ultimately, if we are to get out of our economic difficulty, it will be by getting people back to work and retaining current jobs. I am not convinced the Government has done half enough to ensure that those valuable enterprises throughout the length and breadth of the land are supported in the difficult times they are experiencing. I urge the House to support the motion.