John Perry (Sligo-North Leitrim, Fine Gael)

I thank the Acting Chairman for her best wishes and I would like to return them.

I welcome the opportunity to discuss the importance of the small business sector to the economy and to hear statements from Members on the report of the advisory group for small business, The Voice of Small Business - A Plan for Action, a copy of which all members received last December. It is a clear plan of action. I thank the Cathaoirleach for setting aside time to facilitate statements on the report and I look forward to the valuable input of Senators. I will listen carefully to their comments. I am sure members of the advisory group will be keen to hear their views and will reflect on them in the context of their future work. That is why it is important that we debate the report and take on board the recommendation of Senators and their experiences in small companies. Their comments will also be constructive in future discussions with Ministers and their officials in addressing the various recommendations contained in the report.

As Minister of State with responsibility for small business, I want to be the voice of small business to Government to reflect the sector's concerns and to bring forward proposals to assist businesses. I believe it is vitally important that, as a Government, we communicate on an ongoing basis what we are doing for small business and that we hear first hand what issues need to be addressed more urgently and what measures can be considered to further support small business. One of my first initiatives was to consider the need to have continuing dialogue structures in place whereby the concerns of small businesses could be brought to the attention of the newly appointed Government.

This led to the establishment of the advisory group for small business, which was launched by the Taoiseach on 16 June last. In my capacity as Minister of State with responsibility for small business, I chair the advisory group. The objectives of the group are to facilitate structured and regular dialogue with representatives of the small business sector on issues of concern - the purpose of the debate is to ensure we take on board the issues and concerns of Senators who deal with business people on an ongoing basis; to promote the economic development and job potential of the sector having regard to the current restraints imposed on the national finances; and to recommend action points and follow-up for onward reference to Government.

In identifying members to serve on the advisory group, I paid considerable attention to having a well-balanced representative group with an emphasis on individuals who had first-hand experience of running businesses, as well as including representatives of the key State enterprise support agencies. Thus, the group's membership includes individual business people and representatives from Chambers Ireland, the Credit Review Office, the Irish Hotels Federation, ISME, the Small Firms Association, the county and city enterprise boards, Enterprise Ireland, Forfás and officials from my Department. Forfás and my Department act as secretary to the group and Forfás provide backup research and in-depth analysis.

I would like to acknowledge the hard work and dedication of all those involved in the advisory group for small business. Their involvement is entirely on a voluntary basis and involves no cost to the taxpayer. I thank them for their work to date and look forward to their further contributions in following up on the report and in addressing new issues.

The advisory group addressed some key issues it felt were important in assisting the small business sector to cope with the current economic crisis and to prepare businesses for future growth and job creation. The group's report was finalised and submitted to the Taoiseach, and was published on 23 November 2011. Senators will note that the report addresses some big ticket items as well as more focused issues. The themes addressed include lending facilities and access to finance, labour costs and flexibility, local authority structures, costs of doing business, access to public procurement, the hidden economy, competitive practices, improving cash-flow, mentoring and advice, management development, access to information, and insolvency and debt resolution. The advisory group has categorised recommendations under immediate, short-term, medium-term and long-term actions. The Government is already working on many of the issues identified by the group and others will be fully considered and determined in the coming months.

In regard to lending facilities and access to finance, the Government, through the Minister for Finance, has taken action to reorganise, recapitalise and de-leverage the domestic financial system in order to restore the banks to health and provide credit to business. In addition, the Government is committed to introducing a temporary partial credit guarantee scheme and a separate micro-enterprise loan fund to supplement normal bank lending and to provide additional lending where specific measures are warranted. The Minister, Deputy Richard Bruton, is working to implement these two initiatives. Initiatives also taken by the Minister, Deputy Bruton, in regard to wage settling arrangements under EROs and REAs are addressing labour market costs and flexibilities. Local authority structures and reforms are being advanced by the Minister, Deputy Phil Hogan.

As an immediate response to some of the other recommendations in the report, the Government has immediately committed to five recommendations for action. These are pragmatic ideas which are capable of early implementation to help troubled small businesses obtain supports, address some of the challenges of the hidden economy, assist their cash flow by promoting prompt payments and seek ways to reduce administrative burdens. The initial actions to be delivered are as follows. First, to develop a simple one-page guide setting out warning signs to encourage small businesses to ask for help and outline services available. This is aimed at supporting business that are in crisis and are unsure where to turn for help and advice. Second, to audit and review the multiplicity of licences required by businesses to assess the potential for discontinuing some licences and for amalgamating licences. This will cut down the regulatory burden on companies and the level of inspections as well as the cost of regulation, which can be critical for companies which are currently over-regulated. Third, to introduce additional scanning at ports to combat the illicit tobacco trade, which has such a detrimental impact on small retailers, as highlighted in a television programme earlier in the week. This would be very cost-effective given there is currently a huge illicit trade. All forms of smoking are detrimental to one's health but what is being imported is even more detrimental. Fourth, to make available an official notice regarding the Government's current 15-day prompt payment practice to support full compliance for all public sector bodies and agencies. Fifth, to develop a voluntary code of conduct on payments within the private sector, with the aim of reducing payment terms from the current average of 70 days.

The remaining recommendations will be considered and discussed with relevant stakeholders to determine which ones may be advanced. The report will also feed into the development of the action plan for jobs being finalised by the Minister, Deputy Bruton.

In parallel with the establishment of the advisory group for small business, I have also established an interdepartmental SME liaison group. This is to ensure that each Department of State clearly identifies the importance and concerns of the SME sector and ensures that actions taken have full regard for their impact on SMEs - the small business test. This group will also focus on those recommendations of the advisory group which require cross-Government implementation. In every Department, there is a small business element. It is important to have joined-up thinking.

The Government is fully committed to small and medium-sized enterprises, as evidenced by the programme for Government, the jobs initiative, budget 2012 and the Government's action plan for jobs which we will announce shortly. The Government is acutely aware of the importance of the small business sector and its potential for generating employment. Our challenge continues to be where to target our efforts and financial supports and interventions to best effect over the coming months. When one considers the 200,000 companies employing 650,000 people in a €90 billion economy, the backbone of this economy is small business.

In these constrained economic circumstances, this requires difficult choices to be made in the face of enormous challenges - choices to ensure that we achieve change and make a real difference, not only to the business community but also to balance the human, social, and economic effects so as to protect and enrich the living and working conditions of all the people we represent.

On the importance of small businesses to the Irish economy, my aim, as Minister of State, is to ensure that small businesses will continue to play a central role in our economic recovery. Their ability to succeed and grow underpins our future potential for jobs, growth and prosperity.

As I stated, there are almost 200,000 small businesses in Ireland, involving a remarkable 650,000 employed throughout the country. That is why we want to get the views of every Senator here on how best we can strengthen that role. Encouraging even 25% of those companies to create one job each would create 50,000 jobs. Currently, small companies are the most effective way of getting people back to work. Small businesses are currently operating in a particularly difficult environment, and I believe it is vital that we continue to focus on actions that achieve positive improvements in the operating environment for small businesses.

In the context of budgetary allocations for 2012, even at a time of declining resources, my Department's budget is being broadly maintained, with current spending at €366 million slightly lower than the 2011 allocation but capital spending at a record high of €514 million. This will directly support the enterprise sector.

Over the next two years, the Government will commit approximately €1 billion in enterprise capital supports. It is a considerable amount of money for the area of investment in jobs and in the future of Ireland. The Government recently committed to a multi-annual action plan on jobs, with quarterly targets and a strict implementation process. This will be key to delivering a rolling set of reforms across the economy and Government to support the Government's number first priority, which is job retention and creation.

Access to finance is the key issue for the small business sector. We need a financial system that is better suited to the needs of our smaller company sectors. Financing the productive capacity of the economy is critical to long-term economic success. While large businesses have various options open to them, including the capital markets, small businesses are heavily dependent on the banking system. The initiatives taken by my colleague, Deputy Noonan, Minister for Finance, to restructure and re-capitalise the banking system were the principal responses to making credit available.

The recent restructuring of the domestic banking sector creates capacity for the pillar banks to lend in excess of €30 billion over three years to the SME and other important sectors.

The Government has imposed lending targets on the two domestic pillar banks for the three calendar years from 2011 to 2013, inclusive. Both banks are required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities to SMEs. The banks have informed the Department of Finance that they expect to meet their lending targets for 2011. This will be independently benchmarked.

A number of targeted initiatives are being developed by my colleague, the Minister for Jobs, Enterprise and Innovation, to build on the recapitalisation platform and ensure a flow of credit to businesses in order to sustain jobs and generate new employment opportunities. These initiatives include the temporary partial credit guarantee scheme. The introduction of a targeted temporary partial credit guarantee scheme was one of the commitments announced in the jobs initiative launched in May 2011. On 22 November 2011 the Government approved the design of a temporary partial credit guarantee scheme and tenders have now been invited for an operating body for the scheme. The invitation to tender was published on Monday, 5 December 2011 and we intend to roll out the scheme at the earliest opportunity. In parallel with the procurement process the Minister is proceeding to draft the necessary legislation to underpin the scheme, which is designed to assist viable SMEs on the margins of commercial lending decisions to gain access to credit.

In November 2011 the Government also sanctioned the establishment of a microfinance loan fund to generate up to €100 million in additional micro-enterprise lending, which will benefit more than 5,000 businesses over a ten year period. Loans of up to €25,000 will be available in all industry sectors for micro-enterprises with up to ten employees. It is the intention to establish this facility in the first quarter of this year. Both schemes have been very effective in other jurisdictions.

The temporary partial credit guarantee scheme and the microfinance loan fund will not solve all the issues that arise in respect of access to credit but they will form key components in a suite of initiatives aimed and ensuring the flow of credit to SMEs to sustain and expand employment. Both confidence and credit are needed to sustain our domestic economy, which is worth €90 billion. If people have confidence to spend in the economy, businesses will be more viable for lending.

In conjunction with the Department of Finance I will be holding a series of regional meetings to discuss the issue of access to bank credit with local stakeholders. These meetings will explore the findings of the recent Mazars survey of credit demand, which was published by the Department of Finance late last year, and consider options for Government action to improve access to credit for SMEs. Mr. John Moran, the head of banking in the Department of Finance, will also attend the meetings. We hope to engage with all SMEs, chambers of commerce and business people. If difficulties arise on foot of the Government's recapitalisation of the banks, I want to hear about them first hand. The dates for the meetings will be announced next week. They will allow me to hear the views and experiences of local businesses and their representative groups. Local bank representatives will be invited to attend and State agencies will also discuss access to bank lending.

I ask Senators for their opinions on the issues that arise for small businesses. Their recommendations will inform the Government's ongoing work on job creation and supporting small businesses. This feedback will complement the information supplied in the Mazars survey and ensure future Government policies on credit to SMEs are based on as much information as possible and are implemented at the earliest opportunity. We hear about people who are not getting credit. We want to hear from businesses and representative bodies in a public forum.

To assist the cashflow and working capital of small businesses, the 15 day prompt payment arrangements have been extended across the wider public sector for invoices received on or after 1 July 2011. Central Government Departments have been paying their invoices within 15 days since June 2009. The first set of returns from public sector bodies covering the period 1 July to 30 September 2011 has been collated by most Departments. In respect of my Department, the first set of returns was published on the Department's website on 4 November 2011.

As much as €15 billion per annum is spent in the economy through public procurement. Greater emphasis is being placed on making public procurement more accessible to small businesses, especially in seeking to foster greater small and medium enterprise, SME, engagement in developing innovative products and services to meet the needs of public bodies. It is important, given that public contracts are subject to EU procurement regulations, that the tender arrangements in place facilitate and support Irish companies, especially in the SME sector which is a critical part of the economy.

PRSI changes were made as part of the jobs initiative to encourage employers to recruit new employees. Reviews of the sectoral wage agreements pertaining to hotels, restaurants, catering and construction are being carried out to improve competitiveness.

Small businesses are not only a vital part of our economy, they also play a vital role in our society and local communities as well as economic regeneration. It is important that State agencies work with communities to create employment. The Government will work with Enterprise Ireland to support more than 100 community based economic development companies which are doing a successful job. I intend to continue to ensure the business environment is supportive of small business. Our future economic prospects depend on sustaining our strong entrepreneurial spirit, even in the face of unprecedented economic challenges. The Government is focused on ensuring small businesses are supported in every way to develop their business, increase exports, create jobs and rebuild the economy.

Senators will have heard the good news today from Bord Bia that the value of food and drink exports increased to €9 billion last year. Enterprise Ireland companies increased the value of their exports to more than €15 billion this year. Foreign direct investment is highly effective but we need to lift the domestic economy, consisting of 200,000 companies employing 650,000 people in an economy worth €90 billion. The small business sector will create jobs and rebuild the economy. The various Government initiatives I outlined and the work of the advisory group underpin this supportive business environment.

I am pleased to come before the House with the report, which is an excellent document, albeit of a preliminary nature. Having attended meetings around the country at which I listened to people involved in business, I know people want straight talk and action. If people in small companies are supported, they will create jobs at little or no cost to the State. I will listen to the ideas and recommendations of Senators and hope we will be able to work on them in government.