Mary White (Fianna Fail)

I welcome the Minister of State and compliment him on the tremendous work he is putting into increasing the availability of finance for small and medium-sized companies. I know his heart and soul is in this job.

Any Bill or initiative that seeks to help viable businesses to survive and weather the great economic storm is to be welcomed. Specifically, the Government has targeted the SME sector as the key beneficiary of this Bill, which is also to be welcomed. We have heard a lot through the years from successive Governments about helping the SME sector, yet this help has not always materialised. This Bill, while welcome, is not a magic fix. As the Minister of State has said many times, there are 200,000 small businesses in this country, employing more than 655,000 people. When he was Minister of State with responsibility for enterprise in the 1990s, the late Séamus Brennan used to say that if every small business recruited one extra person, this would have a major impact on unemployment. This holds true today; small businesses are the backbone of the economy. Sadly, however, small businesses are being starved of credit. We know this because Mr. Trethowan of the Credit Review Office, in his eighth quarterly report, has seen the light for the first time. He pointed at the banks, saying that he was "disappointed that there is not more evidence of support for 'enterprise risk taking' on new and increased lending in the banks' current lending policies. This would suggest that their current risk appetite needs to be reassessed in order to support economic and employment recovery". It appears, therefore, that the banks are funding existing companies but are terrified to act in an entrepreneurial manner. Unless we can support new companies with finance they will not create employment.

The latest assessment from ISME is even more forthright and makes for disquieting reading. ISME claims that the banks are hindering recovery, with 54% of credit applications refused by bailed out banks in the last three months alone. Its survey found that 82% of the businesses which applied for funding believe the banks are making it more difficult for them to access finance. The survey also indicates that 96% of business owners believe the Government had either a negative or no impact on SME lending. I acknowledge this does not apply to the Minister of State, who is doing his best to address the issue, but the ISME survey confirms what many of us suspect from our dealings with the SME sector, namely, that the banks are not lending.

A Central Bank paper found that €1.6 billion was issued in new loans to the SME sector in first nine months of 2011. However, the banks also removed €2.4 billion by closing credit facilities. Overall, lending to the SME sector was down by €800 million. This is the environment in which the present Bill is being considered by the Oireachtas. The banks which lent too much in the past now lend too little.

The Fianna Fáil Party is not opposing the Bill notwithstanding certain reservations we have about it. My colleagues in the Dáil argued that the Bill was somewhat restrictive, especially in comparison with other countries. It is also coming late compared to other countries. The intention of the Bill is to provide a 75% guarantee to banks against losses on qualifying loans to job creating firms. Up to €150 million is to be guaranteed annually. The Government has indicated that the net Exchequer cost for an annual portfolio of €150 million of guaranteed lending is approximately €6.38 million and that the benefits forecast to arise from this intervention in each year of operation, assuming €150 million in additional lending, include the creation of more than 1,000 jobs, more than €25 million of Exchequer benefits in tax revenue and welfare cost savings and a 398% return on the State's investment. In other words the cost-benefit ratio will be approximately 4:1. By any standards that would be a remarkable return.

Why are we capping it at €150 million, however? The Small Firms Association, SFA, estimates that the fund will benefit a mere 1,800 businesses and has asked the Government to commit to meeting in full the demand for guarantee funding from small businesses by removing the funding cap from the Bill. I am sympathetic to this position because if the prospective return on the Government's outlay is so fantastic return we should at least set a higher cap. If, for example, the Government's outlay was increased fourfold to €27.4 million, more than €100 million of Exchequer benefits in tax revenue and welfare savings would ensue. That would be a handsome benefit at a time when budgets are tight. I understand that the cap may have been the price for getting the scheme off the ground and I presume it originates from the Department of Finance. If that is the case I hope the Minister of State will put pressure on that Department to review the cap if the demand greatly exceeds it. By this means it would truly be a demand led scheme. The SFA also drew attention to the 2% annual risk premium. This could well pose further cash flow problems for small businesses and should be modified. The SFA suggests that the premium should be paid in instalments at the same time as the full loan repayments are being made.

I understand the Minister of State sees the Bill as a means of providing additional lending rather than a substitute for existing lending. How is this to be policed and what is to stop the banks from using the scheme to guarantee lending they might have provided anyway? I am anxious to hear how this will work. The banks have broken the country and were bailed out by the taxpayer. The burden is enormous and the actions of the banks have done nothing to alleviate it. Any attempt by the banks to use this scheme to reduce lending must be strenuously resisted.

I welcome the Bill with reservations. Whatever its limitations we must give it a chance to work and I hope it can deliver the benefits predicted for it. If these benefits materialise I will be calling on the Government to expand the scheme. The major challenge facing the country is the unemployment crisis, with one in five people on the live register. We rely on the private sector, entrepreneurs and go getters to lift the gloom. It is up to us to provide the right environment for enterprise to flourish and, limited as it is, this Bill is a step in the right direction.