John Gilroy (Labour) | Oireachtas source

I welcome the Minister of State to the Chamber. He said it is his first time here. Many stellar political careers have started here and there is no doubt that his will follow that trajectory. Many people have commented on how rapidly the Minister of State has read into his brief and on his deep understanding of it, which is to be commended.

SMEs are crucial to the recovery of our economy. The only way we will ensure our people’s prosperity is by creating employment. The companies best placed to create employment are not foreign direct investors but SMEs. It is said that if every SME took on one new employee, it would end the unemployment crisis overnight. Anything we can do to support that sector is vital.

SMEs, particularly start-ups, have difficulty navigating their way through the system and finding the finance. The establishment of the local enterprise offices, LEOs, will, when they are embedded and expanded, address that problem. The SME sector has been disproportionately reliant on bank finance which has been a problem. I do not have a great deal of confidence in the banking sector and do not believe that it is fully compliant with our objectives for it. It is very hard to know how to address this. The last thing we want is political interference in the running of the banks but anything we can do to encourage competition in this area must be welcomed.

The Minister of State spoke about the establishment of the SBCI which will provide a very flexible funding package on a sustainable level. Often during the boom time we noticed that while the banking sector produced plenty of financial packages, very few of them were sustainable, leaving us with a great debt overhang in the SME sector, which inevitably will be a drag on the sector’s development. In addition, legislation was passed several months ago to establish the Ireland Strategic Investment Fund, which was a very important element of the Government’s pre-election and programme for Government platforms. It has been overseen by the National Treasury Management Agency, NTMA, which, by contrast with the banks, is an agency in which we can have full confidence. It has proved its value and understanding of the financial sector and markets over the past few years. A total of €19.9 billion is available in the National Pensions Reserve Fund of which €13 billion or thereabouts is invested in the banks. That leaves €6.8 billion available for investment in the economy, much of which should go to the SME sector. Although these agencies are welcome, it will take some time for the finance to sink into the economy.

Senator White mentioned that the SBCI does not have a banking licence but when the Minister for Finance, Deputy Noonan, spoke here several months ago, he was very clear that he will keep this under review and if there is a need for a banking licence he will take the appropriate steps.

How can we ensure that the financing, which is being made available through these agencies, does not just displace existing money? It is a complex and thorny area but if it were to displace money it will not achieve our objectives. There is a theory that new money displaces old money. Does the Minister of State have any comments on that point?