John Perry (Sligo-North Leitrim, Fine Gael)

I welcome the opportunity to speak on the Labour Party motion and thank the Senators who tabled it. I am conscious of all the contributions made. The small business sector is very important to the economy.

The Government is acutely aware of the importance of the small business sector and its potential for generating employment. Our challenge has been, and continues to be, where to target our best efforts and financial supports and interventions to best effect.

As stated by numerous Senators there are almost 200,000 small businesses in Ireland, employing more than 650,000 people.

The action plan for jobs and the small business sector published last November reflects many of the issues of concern to small business that I have highlighted to the Government as Minister of State with responsibility for this area. The action plan takes on board a number of recommendations from the advisory group for small business, which I established when I was appointed.

Given the importance of the small business sector and the need for the €90 billion domestic economy to grow in conjunction with the exporting economy, we must ensure the action plan includes a focus on these vitally important areas. Senator Landy and others referred to the importance of the sector and the issue of access to credit, which I will deal with shortly. Senator Gilroy referred to the pension fund and diversity and those issues will have to be addressed. Senator Mary White also referred to access to funding. The Government has ring-fenced funding by the two pillar banks.

I refer to the difficulties with late payments for those contracted to provide goods and services to the public sector. Since 2009, Departments have been improving their respective payment times to assist the cash flow of businesses and they are obliged to pay their suppliers within 15 days of receipt of a valid invoice. The 15-day prompt payment rule was introduced by the Government on an administrative basis. Departments are required to report quarterly to my Department on their performance in meeting this target. To date, ten sets of quarterly returns have been published on my Department's website. The returns for the final quarter of 2011 were published on 29 February. These show that between 97% and 98% of invoices were paid within 15 days for that quarter. The ongoing publication of these composite returns by my Department provides clarity on the performance of individual Departments in meeting the terms of the Government decision.

As part of the commitments in the EU-IMF programme for Ireland, the 15-day prompt payment rule was extended beyond central Departments and rolled out to the Health Service Executive, local authorities, State agencies and all other public sector bodies, excluding commercial semi-State bodies, in respect of valid invoices received on or after 1 July 2011. These new reporting arrangements should ensure all Ministers will be able to monitor the performance of the bodies under their aegis and will enable them to address issues with bodies that are not meeting these obligations. There has been criticism in the media in the past few days of payments by State agencies. Small businesses experiencing difficulties in securing payments should, in the first instance, approach the Department or the State body concerned. Failures to comply with the initiative can also be brought to the attention of the relevant Minister with responsibility for the ongoing concern.

A number of Members referred to opening up the rules on tendering and procurement again to enable a wider range of firms and businesses to seek public contracts. Public procurement can be an important source of business for local enterprises. In general, SMEs' flexibility and ability to respond speedily to requirements can be advantageous in competing for local contracts. Within this context, the procurement guidelines from the Department of Public Expenditure and Reform require public bodies to promote participation of small and medium-sized enterprises in the award of public contracts. The guidelines set out positive measures contracting authorities must take to promote SME involvement in a manner consistent with the principles and rules of the existing public procurement regulatory regime. They also highlight practices to be avoided because they can unjustifiably hinder small businesses in competing for public contracts.

I attended an event in Kilkenny a number of weeks ago for public contract providers and suppliers. It was an open forum and it was educational for those dealing with smaller contracts. The key provisions of the guidelines are: supplies and general services contracts with an estimated value of €25,000 or more are required to be advertised on the website, etenders.gov.ie; less use of restrictive tendering procedures and greater use of open tendering; ensuring the levels set by contracting authorities for suitability criteria are justified; and subdividing larger requirements into lots where this is practical.

The National Procurement Service, NPS, is supporting SMEs through its information and guidance strategies and works closely with the relevant stakeholders. In the past two years, there has been an increasing level of activity between the NPS and potential suppliers. The NPS collaborated with InterTradeIreland, Enterprise Ireland and Invest Northern Ireland to run a number of events titled "Upping Your Game". These events were well received by suppliers with 94% saying they were well prepared.

I refer to the provision of greater levels of social protection, including protection in the event of illness, for those who are self-employed and, in particular, for those whose business fails leading to a collapse in income. Self-employed persons are liable for PRSI at the class S rate of 4%, which entitles them to access long-term benefits such as State contributory pension and the widow's, widower's or surviving civil partner's contributory pension. Regular employees who have access to the full range of social insurance benefits, including jobseeker's benefit, pay class A PRSI at the rate of 4%. In addition, their employers make a PRSI contribution of 10.75% in respect of them, resulting in the payment of a combined 14.75% rate per employee under full rate PRSI class A.

Self-employed workers may establish eligibility to assistance-based payments such as jobseeker's allowance. They can apply for the means-tested allowance if their business ceases or if they are on low income as a result of a downturn in demand for their services. In general, their means will take account of their earnings in the previous 12 months in determining their expected income for the following year and, in the current climate, account is taken of the downward trend in the economy. As in the case of a non-self-employed unemployed claimant of allowance, the means of husband or wife, civil partner or cohabitant will be taken into account in deciding on entitlement to a payment.

The Minister for Social Protection established the advisory group on tax and social welfare last year to meet the commitment in the programme for Government. The group will, inter alia, examine and report on issues involved in providing social insurance cover for self-employed persons to establish whether such cover is technically feasible and financially sustainable. In addition, the actuarial review of the Social Insurance Fund, which is due to be completed in mid-2012, will examine this matter.

Addressing high local authority rates is an important issue and this was raised by numerous Senators, including Senator Kelly. The Minister for the Environment, Community and Local Government is carrying out a comprehensive review of the rates. The Commissioner of Valuation, who has sole responsibility for all valuation matters, is conducting a programme of revaluation of all commercial and industrial properties throughout the State on a county-by-county basis. The purpose of the revaluation process is to provide for more consistent and up-to-date valuations for rating purposes and to assist in providing a more equitable distribution of valuations across those liable to pay rates.

The commissioner, in consultation with the Minister for Public Expenditure and Reform, has been reviewing various options for streamlining the valuation process and speeding up the national revaluation programme. In this regard, the Government recently approved the drafting of a valuation Bill to amend the Valuation Act 2001. There will be an ongoing debate with the Minister on this issue. Having compared the figures for 2011 with those for 2010, the annual rate on valuation, ARV, decreased on average between 2011 to 2012 by 0.27%. Of the 88 local authorities, 49 have applied the same ARV as in 2010 and 36 have reduced it. Two local authorities introduced an increase and the 2010-11 figures for Dún Laoghaire-Rathdown County Council are not comparable due to a revaluation of all commercial properties by the Valuation Office. Local authorities have been requested to exercise restraint in setting their 2012 ARVs.

It is recognised that the existing revenue base of local authorities is narrow by international standards. This was a consideration in the introduction of the €200 charge on non-principal private residences in 2009. While these are difficult economic times for many businesses, Senators will appreciate that local authorities play, and must continue to play, a central role in delivering local services at local level. Local authority capital and current budgets, economic planning and development, and the provision of goods and services, as well as community infrastructure, feed into the communities that they serve. Local authorities have an important role in providing support both for the retention of existing jobs and the creation of new employment in their areas. Local authorities are being proactive in many ways in this regard. For example, business support units in each county and city council are providing a focal point for business and enterprise to engage with the local government system and smooth their path in setting up and managing businesses.

The Government will continue to impress on local authorities the need to continue measures to enhance efficiency with a view to minimising rates and charges for business. The Minister recognises many businesses are facing difficult economic times and will continue to keep all matters relating to rates under regular consideration in his Department.

The motion calls for, among other things, measures to allow company directors to invest money from private pension funds in businesses. The regulatory and tax regime governing the activities of supplementary pension provisions are designed to protect and encourage individuals' savings and benefits in order that they will have an adequate income on retirement. This point is fundamental to the understanding of the Government's position on the recommendation made. It might be expected that the trust deed to establish a pension scheme would normally set out the details of the power of trustees in the investment of the scheme's funds. General pension legislation does not specifically prohibit it. For this reason, the Minister for Finance has indicated he does not foresee changes being made to tax legislation which would facilitate proprietary directors to invest their pension scheme assets in sponsoring employer companies.

Ensuring increased access to credit and finance facilities for small businesses was mentioned by a number of Senators and is by far the most talked about issue in recent times. Irish small businesses are faced with the unavailability of adequate credit facilities. The initiatives taken by the Government to restructure and recapitalise the banking system are the principal response in seeking to make credit available. The aim is to restore the lifeblood of the market economy, that is, funding for lending and borrowing to help fuel business investments, run factories, buy machinery and equipment and pay wages. Generally, large firms in good financial conditions can obtain credit more easily and on favourable terms. In contrast, bank-dependent smaller firms have faced significantly greater problems in obtaining credit.

The Government has engaged in significant efforts to improve the credit environment for small businesses. It has imposed lending targets on the two domestic banks for three calendar years. They were required to sanction the lending of €3 billion in 2011, €3.5 billion this year and €4 billion next year. The Minister for Finance recently confirmed both banks had achieved their 2011 targets. The information is being independently assessed by the Credit Review Office. The Secretary General of the Department of Finance, Mr. John Moran, has embarked on a series of meetings. I met businesspeople in Limerick on Monday at a public meeting. There was a series of meetings and Mr. Moran will compile a full report. The Mazars report was also debated at public meetings.

It should be stressed, however, that the targets for the approval of credit have not been imposed for drawdowns and the Minister has no plans to introduce such targets. We are meeting and engaging with the banks on the issue of drawdowns, the ultimate test of any business. The fundamental point is that €7 billion has been ring-fenced for small businesses. A lot of companies which were viable are no longer so. There has been a shift from the management of businesses based on property to cash flow management. Many businesses have to meet different criteria in getting funding from banks. Many factors affect whether funding is drawn down such as changes in market conditions or company restructuring. In the recent Mazars survey of SME lending conducted on behalf of the Department of Finance the most frequently cited reason for not availing of approved credit was that it was not needed at the time. A lot of micro companies are not going to banks, as we have found at the meetings I have attended. Companies are not engaging with banks. Every second loan refusal appealed to the office of Mr. John Trethowan has been overturned. The code of conduct of banking has been examined and banks are obliged to give a lending report to the Credit Review Office within 15 days. It is important, therefore, that people engage with the banks.

My Department is taking action to address some specific market failures which will add value to the actions the Minister for Finance has taken. We will shortly introduce a temporary partial credit guarantee scheme which will be closely targeted at commercially viable, well performing companies which have solid business plans and defined markets for their products or services, thereby demonstrating their ability to repay loans. The scheme will support new companies, safeguard jobs and create new ones. As I have stated, Enterprise Ireland companies will have the highest level of exports ever this year.

The two pillar banks have now dedicated bank officials reassessing loans. The real crisis is in the micro-domestic economy. Banks need SMEs to make money and SMEs need the banks. It is in the interests of the two pillar banks to invest in profitable companies which will repay the money. The Taoiseach is determined to ensure the banks fulfil their obligations. They have been recapitalised and it is our job to make sure they meet their obligations. If Senators are aware of cases in which viable applications have been refused and if they bring them to my attention, they can be investigated.

Primary legislation to underpin the scheme is being progressed with the Office of the Attorney General with a view to its publishing in the coming weeks. The scheme is intended to address two distinct barriers to lending, namely, inadequacy of collateral and inadequacy of understanding the novelty of a business model. It will be targeted exclusively targeted at companies which are unable to access credit.

Another priority for my Department and one that has a significant entrepreneurial focus is the introduction of a microfinance fund. If we are to maintain the strong Irish culture of entrepreneurship, we need to ensure Government supports are in place to empower people to strike out on their own and shape their own future. We acknowledge the difficulties which can be experienced by micro-enterprises in gaining access to finance at an early stage of business development.

There are many very good commercial ideas in third level colleges. To remove the barrier, work is under way in my Department on the establishment of a microfinance fund to provide loans of up to €25,000 for micro-enterprises employing up to ten persons. It is envisaged that the microfinance fund will go live in the third quarter.

Small businesses are not just a vital part of the economy, they play a critical role. Senators Denis Landy, John Gilroy, Mary White, Thomas Byrne and Tony Mulcahy referred to credit facilities. There is a common theme in all of the issues raised. Senator Trevor Ó Clochartaigh referred to rates reductions and rent reviews. The Bill tabled by Deputy Dara Calleary will be studied. Senator John Kelly referred to the issues of rates and procurement. I am sure the Minister for the Environment, Community and Local Government will consider the issues raised.

Senator Paschal Mooney referred to a lack of credit facilities for SMEs. Running a business is not just about credit, it is also about having the management tools required within companies. While credit availability is one aspect, business survival is not based solely on a bank extending an overdraft facility. Management expertise is required, as the marketplace has changed fundamentally. However, bank lending is an issue we are determined to address.

I encourage Senators to attend the meetings on public procurement held across the country. I welcome those present in the Visitors Gallery. The Small Firms Association, ISME and Chambers Ireland have all played a critical role on behalf of their members. I take Senator Harte's point in regard to local authority policy in terms of encouraging vacant units to be occupied by business. That should certainly be examined as part of each authority's management review. Councils have a level of discretion which allows them to facilitate a certain degree of derogation.

Senator MacSharry's suggestion regarding a rates holiday is a good one, as is the proposal regarding rent reviews. Of course, the opinion offered by the Attorney General's office must be taken into account. There is plenty of evidence that rents are coming down throughout the State. The bottom line is that any landlord faced with a choice between half rent or no rent will opt for the latter. These people are intelligent enough to recognise reality. We have 13,000 sq. ft. of retail space per customer in this State compared with 1,000 sq. ft. per customer in the United Kingdom. The buoyancy in the commercial rental sector in the boom years led to a situation where every town in the country is home to massive rental units whose capacity is way beyond what was ever needed. However, common sense is generally prevailing, with landlords opting for reduced rent in lieu of no rent.

On the procurement issue, I strongly encourage Senators to meet with the management of the National Procurement Service. The impressive team has embarked on meetings throughout the State and has certainly changed the service's remit.

As Minister of State with responsibility for small business I will continue to ensure we have a supportive business environment in this country. I thank the Labour Party Senators for raising this important motion. As the saying goes, "No problem, no business". There are problems in every business and these are challenging times. I do not claim to have a panacea for all of the current difficulties. It is about safeguarding the viability of small business. Success is the new survival.