John Gilroy (Labour)

I welcome the Minister to the Chamber. It is good to see that we are at last beginning to turn the corner, as indicated by the good news outlined in the Minister's speech. I propose to focus on an issue which is somewhat under the radar but nevertheless important. Before doing so, I take the opportunity to register my bemusement at Senator O'Brien claiming credit for recapitalising the banks.

What is the Minister's view on the future of social investment and whether it can play a significant part in extricating ourselves from current difficulties? There is a strong desire among people to help themselves at this difficult time. Social investment offers a mechanism to tap into and release that potential. Financial investment intended to achieve social objectives means we score on the double, simultaneously making our communities better places to live and producing financial returns for investors. In recent years the voluntary and community sector has not been taken seriously by the economic players who ruled and ruined this country. In the social partnership process, for example, mere lip-service was paid to the sector. I have seen the same dynamic at play in local government where, in the strategic policy committees, for example, the voluntary and community pillars were virtually ignored or, perhaps worse, patronised. Now that we have seen that the economic emperors have no clothes, it is time to move the social and voluntary sector to centre stage where it can and will play a role in our economic recovery.

It is important not to confuse the social and voluntary sector with the social economy. While many of the actors in the social economy are involved in the community and voluntary sector, the two are distinct entities. Our social economy remains relatively underdeveloped when compared with that of other countries and there is significant room for growth. In Europe as a whole, for instance, the sector accounts for more than 5% of GDP, whereas in Ireland it represents a mere 3%. A report launched last July by the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, indicated that it is possible to create up to 5,000 jobs annually in the sector, which would equate to a potential social welfare saving of up to €100 million. Significant investment is already happening in the area, with the Irish League of Credit Unions estimating that some 10% of its loan book is dedicated to various types of social finance provision.

When discussing social finance it is important to remind ourselves that we are not talking about ill-defined community projects with poor delivery outcomes. Rather, it is a system of finance based on a robust business model where there is direct investment and repayable loan finance. Normal loan criteria in regard to ability to pay and security apply, but because of the social nature of the loan, a special low rate of interest is applicable, perhaps in conjunction with a longer repayment period. In 2006 the Government established the Social Finance Foundation to act as a wholesale supplier of funding for social finance, with €25 million provided by the banking industry as seed capital. By February 2010 loans to the value of more than €20 million had been approved.

With a potential saving of up to €100 million in social welfare alone, not to mention potential tax receipts, this area provides genuine opportunities. Given the difficult conditions now prevailing, it is time to take a closer look at this model and to consider expanding the role of social finance into our economy. For instance, micro-finance social lending organisations facilitate those with viable business propositions and support micro-businesses which require working capital or experience temporary cashflow shortages. Agencies such as Clann Credo and First Step are doing valuable work in this area, but we must find a way to expand this activity. The initiative in this regard could be taken by any Department, but it is important that the Department of Finance should take the lead. We must find ways to encourage people to invest in these funds, perhaps by way a tax relief on investment, encouragement of philanthropic donations or the establishment of a State guarantee social bond. We must examine ways of encouraging people to invest funds where money raised locally is spent locally. The social bond system is operating with considerable success in the United Kingdom and is included in the programme for Government.

The obstacles we face in mobilising social economic activity include the fear or risk surrounding a failure to recover debt, fear of excessive demand, lack of promotion of social finance facilities and excessive bureaucracy. We must incentivise people on two fronts. First, we must encourage investment in social investment funds and, second, we must facilitate social entrepreneurs to utilise these funds to maximum effect. I look forward to hearing the Minister's views on this issue.

On an unrelated matter, I am aware that some organisations in receipt of public funds are slow to pay their bills and are escaping the provisions which oblige State agencies to make repayment within a specific timeframe. Is there any mechanism for extending this facility? Any organisation that is in receipt of public funding should pay its bills in a timely fashion.