Ciarán Cannon (Fine Gael)

I second the motion. We had a contribution in the House this morning from Senator Ellis stressing the importance of thinking positively about our future and encouraging job creation. He went on to say that supporting job creation was an absolute necessity if we are to recover from the difficulties in which we find ourselves. All of us would wholeheartedly agree with the position Senator Ellis adopted earlier today. Consequently, it is a pity that when the Opposition proposes such a measure that would most certainly lead to job creation, Senator Ellis and his party choose to dismiss it.

In recent years, Fianna Fáil has incessantly criticised every innovative suggestion the Opposition has made in both Houses. It then comes looking for consensus to help it out of the mess it has created. However, I do not believe for a moment that it is genuine in seeking that consensus. My doubts, and those of many others, are borne out by the tabling of an amendment to our motion this evening. If Fianna Fáil Members were genuinely seeking consensus, they should instead have welcomed that motion, included it in the suite of options they are offering in their amendment and, at least, as Senator Phelan said, outlined constructively how a loan guarantee scheme might or might not operate.

What is particularly sad about this approach from the Government is that two Ministers for Enterprise, Trade and Innovation, the current one and the previous one, both supported the concept of a loan guarantee scheme when it was first mooted. In fact the Minister, Deputy Batt O'Keeffe, when he spoke at the annual conference of the Small Firms Association last month said that such a scheme was being explored and confirmed that it would be "finalised very shortly". He went on to say that Ireland was one of the few nations in the EU that does not have such a scheme.

Last week, the Taoiseach, Deputy Brian Cowen, confirmed that the Government had done another U-turn and had abandoned any plans for a loan guarantee on the basis that the banks had been sufficiently recapitalised to begin lending again. Where is the credibility in this type of haphazard, slipshod approach? How does it console the 1,132 small business owners that have ceased trading since the beginning of this year? More importantly, how does it build any confidence in those remaining members of the small business community? Bear in mind that, far from turning the by now infamous corner, that figure of 1,132 failed businesses this year is worse than the figure of 1,003 for the same period last year, which completely dwarfs the figure of only 480 for the same period during 2008.

As Senator Phelan said, small and medium-sized enterprises are the very backbone of our economy. Up to 80,000 small firms employ approximately 800,000 people in every city, town and village in this country. In the contribution they make, I hope Senators Carty and Dearey speak from their own experience of running small businesses. I have lost count of the number of small business owners who have contacted me during the summer stating that the very life is being squeezed out of their businesses by the banking system. These businesses contribute billions of euro to the national economy but remain largely absent from Government thinking and policy, and always have done. For the most part, the Government does not consider the consequences when it increases charges and imposes duplicate layers of red tape on small firms.

I spoke last week about the punitive commercial rates regime that is strangling small businesses throughout the country and noted that, despite a commitment by Government in 2001 that all 88 rating areas would have their valuations revised, only three out of 88 such revisions have taken place in almost ten years. I also spoke about the unnecessary bureaucratic burden on small businesses. Three years on from the publication of the Government's own Business Regulation Forum report, only 4% of the targeted red tape reduction on business has been achieved. The forum estimated that Government regulations are costing businesses up to €500 million each year. The sad part is that this cost could be avoided. In today's fiercely competitive business environment, that is €500 million business cannot afford to part with. To date, only €20 million of a saving has been achieved.

During the Dáil debate on the NAMA legislation last September, the Minister for Finance, Deputy Brian Lenihan, stated:

NAMA will ensure that credit flows again to viable businesses and households by cleansing the balance sheets of Irish banks. This is essential for economic recovery and the generation of employment.

That was exposed as little more than bluster just a few weeks later when Eugene Sheehy, someone with practical experience in banking, dismissed them by saying "If people think the day after NAMA that the country is going to be awash with money - that is not going to happen." How prescient his words have turned out to be.

Research published by ISME in September this year showed that 42% of companies which applied for funding in the last three months were refused credit by their banks. In addition, it reported that 83% of firms outlined that banks are making it very difficult for SMEs to access finance. Research by Mazars into SME lending reported a fall of 1.2% in SME lending by banks for the last quarter in 2009 compared with the previous three months and a 3.6% fall when compared with the same quarter in 2008. We can see a trend emerging. Rather than opening up a credit lifeline to our SMEs, the banks are actually squeezing ever tighter in an attempt to shore up their own balance sheets and protect their own futures and no one else's.

Credit and partial credit guarantee schemes are not a new idea. There are today on average over 2,250 schemes implemented in different forms in almost 100 countries. However, not all schemes work well and the success of a scheme is dependent on how well it is structured. In introducing a loan guarantee scheme in this country, we are very fortunate in that we do not have to reinvent the wheel. Instead, we can look at the positive and negative experiences of other countries and come up with the best possible scheme.

Fine Gael has spent considerable time researching the experiences of other countries and we believe a scheme we have devised will work. In particular, it will benefit the micro and small business sector, the sector which I believe should play a major role in our recovery. Micro and small businesses, by their very nature, cannot offer a level of collateral to be able to acquire their first small loans from banks. Therefore, they find it very difficult to build up a credit rating to allow them to access more credit. This is extremely acute in the Irish situation as, during the boom years, banks were only interested in collateral linked to property as it was an easy method to offset risk. Following the collapse of the property market, banks do not have the knowledge or experience to assess alternative collateral or business plans. Property will never again be at the centre of our financial system and a new lending system for SMEs needs to reflect this.

A properly thought out and well executed loan guarantee scheme will ensure the survival of many small Irish businesses and, I am sure, encourage the creation of many more. That is the opinion of ISME, the Small Firms Association, the OECD and, until last week, it was also the opinion of two Fianna Fáil Ministers for Enterprise, Trade and Innovation. If the Government is really seeking a consensus that is in the best interests of the country, it needs to walk the walk and honour the commitment it gave earlier in the year to introduce such a scheme.