Mark Dearey (Green Party)

I support the amendment, though not necessarily because a loan guarantee, of itself, is a bad idea. Clearly that is not the case. There are many countries which have loan guarantee schemes in place. However, I am of the view that a loan guarantee scheme should be an action of last resort which should only be introduced when all other efforts to try to re-establish a vibrant and viable SME sector have been exhausted. There is no doubt the SME sector is under pressure.

When speaking in recent days, Mr. John Trethowan of the Credit Review Office appeared quite sceptical, partly on the basis of the level of resources and time that would be required when so many other pressing issues are being dealt with by the Government, in respect of how a loan guarantee scheme might work. Mr. Trethowan referred to the potential need for a double assessment in respect of every application and highlighted the sheer level of manpower that would be required to facilitate this process, which would run in parallel to that already being operated by the banks.

Mr. Trethowan has his finger on the pulse when it comes to reviewing the availability of credit to the SME sector. He pointed out, in a rigorously logical way, that if a business is viable and good for a loan, then it ought to qualify and if it is not, then an artificial construct, which in some instances a loan guarantee scheme could prove to be, could form a prop for businesses which would otherwise not survive. I accept that Senator Cannon stressed that any loan scheme would have to be really well designed. In light of the issue relating to resources, there is a real prospect that the operation of such a scheme could not be guaranteed to be as optimal as we might wish.

I acknowledge the existence of schemes of this type in other countries and the potential advantages to which such a scheme, if established, might give rise in this jurisdiction. However, I re-emphasise that setting up a loan guarantee scheme is probably an action of last resort. Many of the other measures the State has implemented, which are itemised in the amendment to the motion, ought to be fully exploited before a loan guarantee scheme is put in place.

The motion tabled by the Opposition is quite carefully crafted. I fully acknowledge that the scheme envisaged would not constitute a blank cheque for small businesses. Should such a scheme emerge, the principles contained in the Opposition's proposal would probably be the correct ones. They include 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 which develop a record of approving non-performing loans. That might exclude all financial institutions operating in the country at this stage. It is worth noting nonetheless that Fine Gael's motion proposes a set of guiding principles which, by and large, are correct.

Given the tightness of resources, our exposure to debt, the fact that guarantee schemes also increase the levels of default - although they also ensure businesses which would not otherwise be able to access it receive credit - and the very onerous demands on human and financial resources, the motion is premature. Therefore, the amendment, with the menu of proposed options, ought to be given a full chance to take effect before we revisit the issue, if necessary.

Another pressing issue is that overdraft facilities have been withdrawn from small businesses. I am aware of cases in which this has happened and the issue must be examined. I understand most of the work of the Credit Review Office is focused on this area, rather than the provision of a loan guarantee scheme. Having access to working capital, as opposed to a loan to fund investment in equipment or productivity measures is important. The UK scheme is focused on proving productivity is improved rather than a loan just being for the building of an extension or shop front. One looks to improve output in terms of each unit of labour.

I look forward to the measures proposed in the amendment being introduced and hope they will provide appreciable and measurable support to ensure the survival of small businesses. It is critical that people start spending again and show confidence; in a sense, they should stop saving. There must be a return to positive sentiment among consumers to help the 83,000 small to medium-sized enterprises we are discussing. Some 98% of businesses in the retail sector are small and medium-sized enterprises. People must stop hoarding because they lack confidence and begin spending again. Liquidity in the real economy, rather than an artificial construct, will be of much benefit to the SME sector. From my reading of the amendment, that is where it is hoped the targeted measures will have an effect. Many of the businesses which are suffering owing to a lack of demand and reduced spending and which are operating on the basis of sub-optimal services in shops, outlets and hospitality units might see a change to positivity when sentiment turns, with people starting to spend again and employment growing. Senator Phelan outlined a scenario in which there would be increased unemployment among SME employees, but this can be turned around in order that businesses will begin hiring again.

There are measures we could take. I outlined an example yesterday in which employers and potential employees would be given freedom to negotiate for one year a rate below the national minimum wage. The national minimum wage may be desirable, but for some it is a blockage in entering the labour market. Such a measure, as confidence returns and spending increases, could be a real boon in employment creation.