Denis O'Donovan (Fianna Fail)

I move amendment No. 19:

In page 19, line 27, to delete "12th anniversary" and substitute "3rd

anniversary".

I raised this matter on Second Stage, have reflected on it and believe strongly in it. As the Minister will be acutely aware, we are in the most difficult financial circumstances ever envisaged by the State since its foundation. The only comparable situation, internationally, goes back to the Wall Street crash in the United States.

On Second Stage I agreed with the Minister's position. The previous Minister, former Deputy Dermot Ahern, had suggested a six year period and the Minister, Deputy Shatter, has reduced this to five years. In present circumstances we should consider my proposal that the 12 year period be reduced not to five years but to three years and, in that regard, the Law Reform Commission's consultation paper made certain suggestions. The 1998 Act is totally outdated and belongs to a different era. As the situation stands, we do not know, although perhaps the Minister has figures, how many people currently face bankruptcy. I do not refer to the 40, 50 or 60 big developers who brought this situation about and the banks that facilitated them but to the people who may own €500,000 or €1 million, business people who find the situation impossible, having been caught and being unable to survive because of the banks' perspective. The banks loaned them money within the past four or five years and they are now being crippled and crucified by the same banks. In my experience, they are also, inevitably, caught by the Revenue, which debt remains outstanding.

It is important to be aware that the bankruptcy legislation of most our EU partners applies to a period of under five years. The Bill proposes amending the Bankruptcy Act to reduce the period, from 12 to five years, wherein a person can apply to be discharged from the court ruling. I suggest it be reduced further to three years because of the chronic economic situation we face. In that regard one must take account of the fact that in the United Kingdom, including over the Border in Northern Ireland, the period in question is one year. I accept there is some rethinking, and that the one year period may be totally inappropriate and is being abused. However, the gap between one year and five years is too much. I am aware there are people in business in the Republic who are currently skipping over the Border and applying for bankruptcy under the 12 month ruling in the neighbouring jurisdiction of the Six Counties. Perhaps the Minister might comment on that. If it is the case that certain people are availing of that situation it is wrong.

I do not accept that 12 months is a sufficient period, nor perhaps is two years, but I believe strongly that three years offers a reasonable balance. In its recent report, "Growing Enterprise for Ireland", Forfás stated: "In order to encourage potential entrepreneurs unnecessary disincentives such as our current bankruptcy procedures should be modernised." It further stated that the provisions of the previous Bill, which are very similar to those of this Bill, did not go far enough in this regard. The current bankruptcy laws, specifically the Bankruptcy Act 1988, are more severe than similar laws elsewhere. For example, in the UK such a ruling may contribute to a fear of failure and thus impede potential entrepreneurs. Under existing laws any person who becomes bankrupt in Ireland currently faces a 12 year waiting period to be discharged. The Minister proposes reducing this to five years but the comparison remains to a period of only 12 months in the UK. The current provisions outlined in the Bill, however, would still not bring Irish law into line with other jurisdictions. In that regard it is most important that we take cognisance of what Forfás stated. There is absolutely no doubt that we need entrepreneurs. The Government has introduced initiatives to try to create jobs and so on, but we need entrepreneurial skills and development and need to encourage people.

Speaking from my own perspective, being in business and knowing what is going on around me in my consitutency and in neigbouring constituencies, probably 75% of business people who are currently in trouble are that way through no fault of their own. They were expanding their business, buying a new one, or whatever.

I am not talking about people who recklessly engaged in desperate borrowing. I am aware of a case in a town in my constituency where somebody bought a business, sold their house in Dublin and made some money on that. They were advised by the banks to expand the business, which they did. They invested the spare cash in bank shares on the advice of their banks but within a period of three to four years they were in a position where they had to close down the business and give the keys to the bank because of a €35,000 or €40,000 debt to the Revenue and an overdraft they could not service as they were marginally off the mark in that respect. There are hundreds and possibly thousands of such people in our society. The full scale of the problem has yet to be known because the Irish people are proud. People who are in business do not capitulate easily but that problem is rife.

We should take into account also the view of the Money Advice and Budgeting Service, MABS. Mr. Michael Culloty, the MABS national press officer, stated: "The processes are the same, the costs are still the same and the time period is still long by international comparison." He went on to state: "We still wouldn't be recommending it as an option for the people we're dealing with, 70 per cent of who are on social welfare." That may be an opt-out clause but MABS is concerned about the position as well.

The Irish Property Council also added its weight to the argument in this regard. There would not be much sympathy for people involved in the property market but many small operators, not the huge developers who were borrowing millions, may have borrowed €1 million or €2 million to take the opportunity to build some houses or to expand, primarily on the advice of banks, believing they were doing the right thing.

By international standards we are still a long way off the mark with regard to our five year requirement. I feel strongly about this matter and unless the Minister concedes and accepts my amendment, I will push it to a vote. This is important to note.

Regarding my amendment which was ruled out of order, I made the point about the costs involved for a bankrupt person applying to the court to be discharged of his or her bankruptcy. That is an aspect the Minister might have regard for also.

There are many reasons this amendment should be accepted. The Minister responded on Second Stage that he had an open mind as to whether the period should be six, five, three years or whatever. He took the view that it should be five years but stated that he was open to accepting an amendment on that. In that regard I ask the Minister to consider seriously the position in which we find ourselves. We have not reached the bottom of the barrel in this regard. I reckon it will take another two to three years before the full impact of this recession hits the business people of this country. When the Bankruptcy Act 1998 was enacted and despite the fact that we were coming through a difficult time in the 1980s, nobody then would have envisaged the type of recession we are now facing. To enable this country to have the resurgence we need and get the business people who failed, many through no fault of their own, to re-emerge, it is essential that we grasp the nettle, take a leap of faith and opt for the three year period. The Minister will understand in time that it is a fair compromise and if in ten or 15 years time it is decided that the period is too short, the legislation can be easily amended to extend it to five years. While I acknowledge the Minister's intention to reduce the period to five years, I am convinced that period is too long and that it will damage the recovery of our economy and the people who are caught in an invidious position.