Jimmy Harte (Labour)

I welcome the Minister of State to the House. I realise he has a passion for small business. His portfolio will give him great satisfaction if we can produce the necessary jobs in the country. Small and medium-sized enterprises have been the lifeblood of the economy and they will be the saviour of the economy in future. As Senator Keane noted, up to 900,000 people operate in the SME sector. Almost every family in the country has someone involved in SMEs at some level. They are adding value to their products and providing employment and credit for people who are finding the going tough at times. They are acting in the place of the banks in some cases and they are taking a greater risk than the banks because those involved are keen to hold on to their businesses. The last people to give up on their businesses in this country will be those with small family-run businesses. These people will be prepared to fight tooth and nail to hold on to what they have built up over generations and we cannot afford to lose that ethos.

I congratulate the Minister of State and the Government on bringing forward the Credit Guarantee Bill. Recently, I met a young couple who sought to change their mortgage and move to a smaller property. Their current mortgage is almost up and they have a faultless credit history. The fact that one was working full-time but the other was working only part-time meant the bank refused the loan. The young couple who bought the property were planning to put in a new kitchen, new furniture and to improve the house they were planning to leave and the people who would have bought it would have done the same. There is a knock-on effect; it is not simply the case that the bank would not lend one mortgage. The decision stopped one couple spending because they had savings that they wanted to spend on the next property. Only when the credit sector starts moving and the banks begin to give credit to young couples, who want to move house, buy furniture, improve the garden or put in an extension, will we be able to help SMEs and then SMEs, in turn, will pass on their profits somewhere else.

It is like the engine of a car and we are starving it of oil. A credit guarantee is important to get businesses that are viable off the ground and to keep them going. The Minister of State indicated that it was no guarantee for people who are not making money; it is really only for those who can. Earlier, the banks moved from risk lending. They followed the United Kingdom model and went into house purchases and fees. There is little risk involved in that model. The clients of the bank are charged every month for using an account and they can be charged up to 20% for using an overdraft. Then, when they are behind the counter they can be sold house, life and motor insurance. The banks were travelling down the road of low risk until they were caught in the property bubble. Then, they got greedy because they thought it was easy and they did not believe they had to take any risk. It was easier to lend €1 million for a residential property rather than lend €1 million to a small business that would create jobs. The banks have been found out as a result.

We are in a position where we need the banks to buy into this and the efforts of the Government should be commended in this regard. I have spoken to people at various levels in various bank branches. They have indicated that they are constrained by their head offices. They fill in forms from when they come in at 9 a.m. and they are obliged to tick boxes all day until they leave in the evening. In the meantime, if a loan query comes through they must ring someone in London, Edinburgh or outside the country to get approval. The banks are reluctant to lend money because they want to get back into the fee business. They want to get clients back in the door to sell them insurance and charge them for using the accounts. No one hears of free banking any more because the banks are determined to get the money off their clients one way or another.

The Credit Review Office is doing a great job. According to Mr. Trethowan, up to 50% of refusals are overturned on his advice. I have stated previously in the House that perhaps someone should go to the Credit Review Office before they are refused by the bank to get some advice initially from the office. It appears to be more switched on to the needs of small businesses than the banks. If the banks had their way, they would lend no money to small businesses because they believe there is risk involved. Mr. Trethowan appears to have debunked that theory and his analysis is correct. The banks are prepared to knock young businesses off their perch and suggest that those involved are incapable of repaying borrowed money. It is possible that such people will simply give up. Other small businesses trying to survive might be encouraged to try again but it takes a great deal of effort and guts to go back to the bank through the Credit Review Office and make the case that the bank simply did not believe the analysis of the business owners. Many small businesses are giving up because they are afraid.

I am unsure whether there is a facility whereby an SME can speak to John Trethowan before going to the bank. They may not need a full scale analysis but perhaps a basic analysis. The office may be able to indicate that those in the business are wasting their time and that they should not go to the bank without giving a total commitment. At the moment businesses are approaching their local banks and are being refused money. Subsequently, the Credit Review Office may return with a different opinion. I believe people are afraid to go to the Credit Review Office because they have gone through so much with their banks and accountants and they may be struggling to survive.