Billy Kelleher (Cork North Central, Fianna Fail)

I am delighted to speak to the Private Members' motion. Small and medium-sized enterprises are the backbone of the economy. This has been well established by the statistics for the numbers they employ and the goods and services they provide for larger companies. This is critically important.

Senator Carty referred to the need to attract foreign direct investment. Having a small and medium-sized enterprise sector is hugely significant in attracting foreign direct investment because such businesses are capable of servicing the needs and requirements of such companies.

It is because of the important role small firms play and in recognition of the challenging environment in which they have operated in past two years that the Government has placed support for the sector at the heart of its strategy for economic recovery. The Opposition will be well aware of the Government's jobs strategy discussed in the Oireachtas recently. It is clear that the best way to support business and create jobs is to fix the banks, address the deficit in the public finances and improve our national competitiveness. These actions are not aimed at firms of a particular size, in a particular sector or in a particular ownership; rather they are aimed at improving the overall business environment in the country in order that all firms can survive and grow. Central to this strategy has been the repair of the banks which are the key facilitators of business transactions in the economy on a daily basis. Specifically, credit for the enterprise sector, especially small and medium-sized enterprises, should primarily come from a properly functioning banking system. This is critically important.

There were statements in the House earlier on the bank guarantee scheme and the Minister for Finance's statement of 30 September. Some are already beginning to rewrite history in terms of what happened two years ago. The following point is hugely significant. If the banks had not been guaranteed in 2008, there would have been a catastrophic meltdown in the financial institutions in this country. This is accepted by independent commentators. The bank guarantee scheme was hugely important in ensuring that we, at least, retained some element of integrity in the banking system. The supports offered thereafter in the context of recapitalisation of the major banks, the nationalisation of Anglo Irish Bank and other supports ensured that, at least, we had the bones of a functioning banking system. With support from the taxpayer, through the Government, we now have a system under which we can begin to get credit flowing to the small and medium-sized enterprise sector. If the bank guarantee scheme had not come into effect on that fateful night, the banks would have been incapable of borrowing on the wholesale money markets, would not have had access to credit to lend to small and medium-sized businesses, could not have cashed employees' cheques or provided short-term credit. It would have been catastrophic, in particular, for the small and medium-sized enterprise sector which depends on short-term credit on a continuous basis. It can only access credit through the banks. The most important step, therefore, in recent times was the introduction of the bank guarantee scheme to retain the integrity of the banking system. I acknowledge the role the Minister for Finance has played in trying to support the banks to prevent what would have been a huge meltdown in the Irish banking system. If we are to address the problems we face, we must accept the reality and try to move forward.

There is also the backdrop of the international recession, which most people do not want to accept. The last time I looked at the globe Ireland was on planet Earth, not anywhere else. It is an integral part of the world economy. For that reason, it is critically important our small and medium-sized enterprise sector is able to compete throughout the world and, more important, that the markets to which we export pick up. Until there is an upturn in our major trading partners, growth will be sluggish. For that reason, ensuring our competitiveness is critically important and that is within our remit. We must try to reduce the burden on small and medium-sized businesses, get credit flowing, stabilise the public finances and create an environment which can support and stimulate the small and medium-sized enterprise sector. It is critically important that the world economy picks up because we export more than 80% of everything we produce. The Government, through the State agencies, has put a lot of effort into trying to find new markets, keep current markets open for the small and medium-sized enterprise sector and encourage the internationalisation of the sector in order that we will not be solely dependent on the UK market and that we look further afield to try to find new markets. This is hugely important.

I refer to the code of conduct which has been established, the bank guarantee scheme, the recapitalisation of the banks, the nationalisation of Anglo Irish Bank and the establishment of the National Asset Management Agency. With other Senators, Senator Buttimer said he believed that once the National Asset Management Agency had been established credit would flow. The purpose of NAMA was to look at the balance sheets of the banks to see how impaired they were and address the problem by transferring the impaired assets to NAMA in order that the banks would have balance sheets which would allow them to access credit on the money markets to enable credit to start flowing again to the small and medium-sized enterprise sector. We stated at the time that this was not a quick-fix solution to the credit difficulties being experienced, bearing in mind the position in 2008 when we faced a possible meltdown of the banking system.

The primary objective of the code of conduct for lending to small and medium-sized enterprises is to facilitate access for sustainable and productive businesses. The code promotes fairness and transparency in the treatment of the small and medium-sized enterprise sector by all regulated entities. It applies to those areas of banking of key importance to small firms such as overdraft facilities and term loans. It is specifically aimed at regulating the relationship between small firms and financial institutions and is not optional. Regulated institutions must comply as a matter of law. Not only has the code addressed how banks lend to small firms but the Government has also secured commitments on the actual levels of credit the banks must extend to the SME sector. The House will be aware that the Government secured a commitment from the main lenders, AIB and Bank of Ireland, to make available a sum of not less than €12 billion in total for new or increased credit facilities to the sector in 2010 and 2011, including for working capital. When it comes to honouring this commitment, the Government will not be prepared to simply take the banks' word. The Credit Review Office is making a major contribution in dealing with the outflow of credit not only in reviewing cases in which credit has been refused but also in reviewing bank lending policies and driving the process in providing businesses with a proper professional banking service.

The Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe, has made it a priority to regularly meet the banks to discuss the availability of credit for businesses, especially small and medium-sized enterprises. With the Minister and the Ministers of State, Deputies Conor Lenihan and Calleary, I have travelled around the country to meet businesses to hear about their experiences at first hand to ensure the Government hears both sides of the story. For my part, I attended a regional meeting in Shannon in August and I had 12 regional meetings in the year previous to that. In fact, I attended one in Athlone in July 2008 as well.

The concerns of business regarding credit availability have been conveyed to the banks. The banks are fully aware of the Government's view, not only in the context of the recapitalisation and the code of conduct, but also in the feedback from these regional seminars on how their lending practices could be improved and ensuring the considerable investment of the taxpayer in funding and supporting the banks for the purpose of lending to small and medium-sized businesses is continued.

Some Senators raised the issue of the banks' expertise in the area of assessing business plans. Enterprise Ireland has made available its expertise in this area to the banks and has put key staff into the banks to train up their personnel who for many years would have based lending policy on property values as opposed to the commercial merits of the proposition in front of them.

That we have someone of Mr. John Trehowan's calibre monitoring the banks and assessing their policies is having a positive meaningful impact on this respect of banking performance. Mr. Trethowan stated this month that the worst is over for small and medium-sized borrowers and that the situation was much more positive for bank customers than it was six to nine months ago. It is important to recognise that there is definitely an easing of credit to the small and medium-sized sector. There is a great deal more work to be done but we acknowledge that there is a start to this process. Having the Credit Review Office overseeing not only individual applications that may have been refused by the banks but also the lending policies in macro terms is critical as well. This echoes the views that have come back from small and medium-sized business representatives as well. In recent surveys they have stated that the flow of credit is beginning to filter out into the economy. As a practising politician who meets business representatives continually, however, I accept there is still much to be done in this area.

While fixing the banks has been a key element of our recovery, the Government has, in parallel, focused on maximising direct and indirect supports to enterprise with a specific emphasis on SMEs. The SMEs in Ireland benefit not only from the direct financial supports available through the county enterprise boards and Enterprise Ireland but also from foreign direct investment activity supported by IDA Ireland right up to the multi-billion multi-annual capital investment programme. The Government has targeted interventions and supports for small firms but they also benefit from our initiatives in the wider economy.

Regarding targeted support for entrepreneurs, the House will recall last week's announcement by the Taoiseach and the Minister, Deputy Batt O'Keeffe, of the provision of additional capital funding of €3.3 million for the county and city enterprise boards supporting more than 450 new jobs in small firms. This is in addition to capital funding of €15 million provided in 2010 to the enterprise boards. The Government responded quickly to the rapid economic downturn by providing financial support to almost 2,000 companies through the employment subsidy scheme and the enterprise stabilisation fund.

The public sector, as a large procurer of goods and services provided by small firms, must do what it can to improve the cash flow of the small and medium-sized sector as well. I mentioned in the House in the course of an Adjournment debate on Thursday last that all Departments are now required to pay their business suppliers within 15 days of receipt of a valid invoice. This directly impacts on the cashflow of the SMEs and there is scope to see this approach extended more widely.

Small firms in existence today are the product of the creativity and effort of entrepreneurs who believed in their ideas and worked to make them a reality. Government assists these risk takers, in particular, through the programmes provided by Enterprise Ireland. In 2010, Government increased the funding available to Enterprise Ireland by 26% on the outturn for 2009. We did this to stimulate the development of new businesses and facilitate the expansion of existing companies through a broad range of initiatives, including direct financial and non-financial supports. We are also investing in small firms in the earliest stages of development via Enterprise Ireland's €150 million seed and venture capital programme. We are committed to developing the venture capital landscape further and we are doing this through the €500 million Innovation Fund Ireland.

As I stated earlier, SMEs benefit from our targeted investments but also from initiatives in the wider economy. The Government's new integrated strategy for trade, tourism and investment creates a platform for small firms to maximise their potential, either as suppliers to exporting firms or as exporters themselves. The strategy sets a number of priorities and targets to be achieved by 2015. It will increase the number of new export focused jobs by more than 150,000 in manufacturing, tourism and traded services, with a similar number of indirect jobs also being created; increase the value of exports by indigenous companies by 33%; diversify the destination of indigenous exports; increase overseas visitors to 8 million; and secure an extra 780 inward investment projects through IDA Ireland.

The UK market, which is key to many small indigenous firms, will, along with the US, continue to be a key market for Ireland. There is also considerable potential to expand business with our eurozone partners and the new and exciting potential growth markets such as Brazil, China, India, Russia, Japan and the Gulf states. Our small firms will face obvious barriers such as language and cultural attributes as well as different business practices and regulation. The co-ordinated effort of all agencies will be focused on helping our small firms overcome these barriers, win new business, succeed in new markets and reach their potential. In doing so, Government is both providing leadership and taking action in support of small firms. Of course, these facts are absent from some of the Opposition's analysis of the Government's economic strategy, and I can understand that as well.

One point that has come across strongly in my dealings with small business owners is that they thrive on confidence. This is most significant. Senators O'Malley and Carty and others referred to it. We need to be honest and open in debates in this House. I have stated time and again that the negative narrative that permeates the Houses of the Oireachtas and the media is having a damaging impact on confidence. Less confidence leads only to less investment and less spending which equals more job losses. We have an obligation, not only in this House and in the other House but across society, to try to be as positive as we can in facing the adversity in a challenging way with optimism to prevent the nay-sayers from having their day because this is having a shattering impact on individuals, families and businesses. When one looks at the amount of money going into deposits in recent times vis-À-vis the times of exponential growth in the economy, savings are up rapidly and that is because people are frightened and fearful. I do not want to downplay the significant challenges that exist but this country has developed itself into one of the wealthiest countries in the world, whether people like to admit it or not. It has one of the best social welfare systems in the world, it has a good education system, it continually turns out top quality tradespersons and graduates and it has a good health system. We would like to do more in all these areas but we have achieved a great deal. The State is only 90 years old. Getting from the pillage of colonialism to where we are today in 90 years has been a considerable achievement. It has been achieved by one means only - the resourcefulness of our people. We have very little other than the resourcefulness of the people on this island.

It is critical we send out a message that Ireland is in a challenging position but can overcome the adversity. We have done this previously. I left school in 1985-86 when there was a workforce of 850,000 and almost 20% unemployment. There is now 1.8 million in the workforce and living standards have improved dramatically in that 25-year period. It is not as if we have lapsed back to where we were. There are significant challenges. Unemployment is stubbornly high at 13.6%. We want to ensure that changes and we start to expand the economy and drive down unemployment, but it will not be achieved, or certainly will not be helped, by the continuous negative narrative that is pervasive in commentary across the airwaves. This is not about shooting the messenger. This is about explaining that confidence helps people to spend, invest and create opportunities and employment, which themselves create further confidence. We did this in 1986-87 when we started a programme of renewal in the country and people had an appetite for change and a belief in their determination and in themselves. I am definite that residual belief exists still. It is just that it must be turned on again.

I make that point because it is something I genuinely and passionately believe. As I stated in this House previously, I have more at stake as a father of three young children in ensuring the present Government proposals work and bring us through these challenging times than I will ever have as a Minister of State, and I mean that passionately. We have an obligation to be confident, to lead people and make them believe they can come through these difficult times, as the people have done on numerous occasions since the foundation of the State.

Good news is important and there have been positive signs in recent weeks. Redundancy claims have declined and recruitment agencies are indicating there has been a healthy increase in the number of jobs advertised. I was informed recently by a financial services company that it will recruit 300 people by Christmas and it hoped to recruit a further 200 people after Christmas. Opportunities are available, even in these challenging times. Three quarters of the jobs advertised are for newly created positions. More important, the number of job placements increased by 55% in the third quarter of this year compared with the third quarter of last year. These figures come on the back of Ireland's improved trading performance. The value of exports, for instance, increased by 12% in July compared with the previous July.

Notwithstanding whether people are prepared to admit it, the recession was international. If that were not the case, Irish exports would have continued to grow. They did not increase because the economies of our trading partners, including Germany, the United Kingdom, the United States and most other eurozone countries, shrank. The contraction in world markets damaged our export potential. Enterprise Ireland has indicated, however, that its firms will recover approximately 70% of the export earnings lost last year in the deepest recession the world has seen since 1929. This and other messages will encourage small business owners and consumers and engender the confidence required to get the economy growing again.

I have referred to the daily negative rhetoric which discourages potential investors, entrepreneurs and consumers in Ireland. One cannot take small and medium-sized businesses in isolation. Foreign direct investment is of major benefit to the small and medium-sized enterprise sector which services and feeds off the large multinationals. SMEs also create a critical mass among themselves. If we continually highlight negative factors without referring to positive factors, we will dissuade people from coming here to invest or explore potential markets for investment and discourage tourism.

While we must acknowledge and address the position we are in, we must do so in a manner that demonstrates a belief that we can emerge from the current circumstances. As the Minister of State with responsibility for trade, I travel abroad to promote Ireland as a location for foreign direct investment and a country that exports goods and services. The negative commentary reported daily around the world has a damaging effect.

The Government recently announced a trade strategy, Trading and Investing in a Smart Economy. People frequently ask what is a smart economy. The answer is not scientific. A smart economy is simply one in which one does things in a smarter fashion, whether making agricultural trailers in a more efficient and design friendly manner or using the highest end technology. It is about being smarter, thinking outside the box and using technology, innovation, creativity and imagination. Having a smart economy is a straightforward approach in which one uses all available resources in the most intelligent manner possible, breeding competitiveness and efficiencies into one's production lines right through to the end product and delivery to the customer.

The Fine Gael Party motion claims the Government has broken a promise to introduce a loan guarantee scheme. This assertion is completely at odds with information provided by the Minister for Enterprise, Trade and Innovation, Deputy Batt O'Keeffe, in the Dáil last week. The Minister indicated that his officials are working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfás to address access to credit for viable small and medium-sized enterprises, including the option of a targeted loan guarantee scheme. The most recent meeting was held on Monday of last week. A range of issues relating to SME credit was discussed and follow-up action is under way. These meetings are aimed at building on the already substantial progress that has been made in identifying the critical elements for further initiatives. It is important that any new initiatives complement rather than substitute the main banks' lending commitments and activities under the recapitalisation package and provide value for money from the perspective of taxpayers.

Taxpayers have stepped up to the plate by supporting the banks. We do not want to introduce another scheme that would impose an obligation on taxpayers to underwrite more risk. We must, therefore, strike a balance to ensure any loan guarantee scheme does not displace credit a bank would otherwise lend.

The activities I have outlined can hardly be described as equating to a broken promise on the part of the Government. On the contrary, they are evidence that the Government will take every step necessary to ensure small firms have access to the credit they require. This will be balanced with ensuring the banks meet their obligations and taxpayers are spared undue risk. I am concerned at the implication of the motion that initiatives should be progressed in haste and a blind eye turned to outcomes expected from the banks in light of the measures taken, as outlined by the Minister of State in his earlier statement to the House on the announcement of the Minister for Finance on banking.

Even more worrying is the Fine Gael Party's pursuit of a strategy that overlooked the potential exposure to the taxpayer. The main source of credit for viable businesses is through a functioning banking system, which has been well supported by the taxpayer. The Fine Gael Party motion implies that we are willing to put taxpayers' money at risk by promoting an all-pervasive loan guarantee scheme and allowing the banks to get off the hook. The motion would redirect responsibility from the banks to the taxpayer. The Government, on the other hand, is focusing on targeted measures for business that are critical to the economy and indigenous export growth.

It is obvious the Government has a multifaceted approach to supporting small firms. Our strategy ranges from one-to-one advice and grants provided through county enterprise boards to a range of supports from Enterprise Ireland delivering spin-off benefits from IDA Ireland and Science Foundation Ireland activity. In addition, we have a €40 billion capital stimulus programme and ambitious strategy for international trade and investment.

Government is a complex business and no single initiative will solve all the financial concerns of our enterprises. The Government recognises this and has provided leadership and a broad range of policies to restore our economic fortunes and support our enterprises, especially the small and medium-sized enterprise sector. It will not be distracted from its path and will not follow the lead of the Opposition in taking a populist, narrow stance, rather than demonstrating an understanding of the complexity of the broader business environment.

The motion is welcome in that it allows the Government to outline the initiatives it is taking. We have heard much about the need for inclusiveness and to support the Government's initiatives in a challenging environment. The issue is not that the environment is challenging politically but that it is challenging for Ireland inc. and Irish people. We need to ensure there is a broad political consensus for a buy-in to the four year plan.

The British Chancellor of the Exchequer today outlined his four-year plan to the House of Commons. The United Kingdom, which is also in a challenging position, has established a four-year plan. While the plan is opposed by the Labour Party, it gives citizens, investors and business as much certainty as a forecast can give that a pathway to economic recovery is in place. Under the plan, the budget deficit will be reduced, public finances stabilised and the generations to come will not be shackled with a high level of debt.