Paul Gavan (Sinn Fein) | Oireachtas source

It is nice to see the Leas-Chathaoirleach in the Chair and I congratulate him again. I welcome the Minister of State and I congratulate him on his reappointment. This pandemic poses an existential threat to thousands of small businesses and microenterprises throughout Ireland. Microenterprises and small businesses represent the inner core of Ireland's indigenous economy. They are the beating heart of our communities and the building blocks of our local economy. They are the hairdressers, mechanics, tradespeople and entrepreneurs that have served our communities and make Ireland a vibrant and colourful place to be. Therefore, it is essential for the economic and societal well-being of our country that these enterprises are given the support and solidarity they need to survive and thrive in this challenging time.

The losses incurred as a result of Covid-19, coupled with the sharp downturn in consumer spending domestically and internationally, present an overwhelming obstacle to many, if not most, of these microenterprises. Financial losses incurred during lockdown and the continued slump in consumer spending have resulted in a substantial cash flow problem for many of our businesses. From speaking to businesses in my village of Castleconnell, I know many of them are genuinely concerned about whether they can reopen and, if so, for how long. Overcoming this cash flow problem is key to giving these businesses the best chance to survive this pandemic. Strong State intervention is needed as a matter of urgency to provide the support these businesses need to overcome the Covid-19 challenge. This means the Government must step in to provide the liquidity supports and access to credit lines needed to rescue these enterprises.

Something that strikes me, and it has been referenced by a number of speakers already, is that while we welcome the Bill and Sinn Féin will support it, we need to do more to address the liquidity challenge. To be frank, we need to be looking at grants to businesses to get them over this very difficult time. The previous caretaker Government made an attempt to provide these urgently-needed liquidity supports and credit lines. The difference from our point of view is that supports in their present form have generally been inaccessible and ineffective for many microenterprises and small businesses and I will explain why I believe this is the case. This means that at this crucial time many enterprises are going without the supports they need to weather the storm.

I welcome the Bill as it is important to make these much-needed loans more accessible to those most in need of support. Unfortunately, the application of commercial level interest rates to Government loans has made many of the loan schemes unattractive to microenterprises and small and medium enterprises. My colleague, Deputy Louise O'Reilly, spoke to the Minister of State about this. Yesterday, we tabled an amendment in the Dáil to ensure moneys loaned to microenterprises are loaned interest-free with zero repayments for the first 12 months of the loan and that interest rates on such loans are capped at 2%, with interest only being applied to cover the overheads of administering the scheme. I believe the Minister of State gave a very positive indication, and I hope so, that secondary legislation can be applied. This approach is already in place in Britain with the bounce back loan scheme for which there are no repayments for the first 12 months and not six months as is the case here. The British Government also covers interest payable to the lender for the first 12 months and not six months. The interest rates in Britain are set at 2.5% per annum rather than the 4.5% to 5.5% being charged here. We have to recognise that interest rates of 4.5% to 5.5% are not a runner in terms of the challenges that small businesses face at present.This approach can and should be emulated on this side of the Irish Sea. The Government has the ability to borrow money at very low rates, as confirmed by Mr. Frank O'Connor, director of funding and debt management at the National Treasury Management Agency. Mr. O'Connor stated his and the NTMA's belief that the eurozone area has had interest rates of 1% or lower since 2010, moving towards 0% and then negative rates since around June 2014. This highlights the fact that the banks are doing us a huge disservice in the interest rates they are charging. As such, the Government can afford to pass on the low interest rates at which it can borrow to microenterprises and SMEs. There is no economic basis for the existing policy of charging commercial rates on these loans.

Another issue with the existing scheme for microenterprises is that banks are risk-assessing loans as if the Government was not guaranteeing the loans, which creates another barrier for SMEs seeking to access loans or credit. These stories have tallied with work carried out by Sean Pollock in the Sunday Independent. The paper spoke to several businesses and advisers who share concerns about the State's Strategic Banking Corporation of Ireland scheme. Microenterprises have reported a range of problems with the scheme, including: long processing times for applications; the process being complicated, echoing some of the points Senator D'Arcy made; banks changing repayment terms; and companies being rejected, some being told the scheme was fully allocated. These issues are a result of the Department playing no role in the application or decision-making process for the scheme, which is fully delegated to the participating lenders.

As the Unite union outlined in its paper, Hope or Austerity, the banks that administer the scheme also make the decisions as to whether or not to issue loans based on their own criteria for loan issuance, not those of a Government Department trying to keep microenterprises and SMEs afloat during a global pandemic. There is clearly something very wrong here. There is a mismatch. The policies of the banks do not align with the intended purpose of the scheme, which is to provide emergency support to struggling businesses. There has been consternation among microbusinesses and SMEs about the State response to the difficulties they face as a result of the pandemic. The research from representative bodies of microbusinesses and SMEs indicates that if the State response does not change, it will have significant implications for businesses across Ireland and, consequently, also for employment levels. This is worrying, given the enormous challenges that lie ahead as the country emerges from the shutdown. These issues surrounding the implementation of the various Government schemes have been pointed out by SMEs and their representative groups. The longer they go unaddressed, the more it looks as if the Government policy is to provide funding for microenterprises and SMEs in theory but to make sure that funding is almost impossible to access in practice.

In summary, we welcome this Bill to expand the Microfinance Ireland Covid-19 loan scheme and the future growth loan scheme and will work towards its passing. I must stress again, however, the importance of rectifying the outstanding issues with the Government schemes. They must be corrected in order to streamline access to working capital for microenterprises and deliver a fair and sustainable economic recovery.

One last point I will make concerns the broader issue of the July stimulus. The Minister of State said he would welcome suggestions. We need to make sure, first, that we provide sufficient supports but, second, that those supports reach the front-line workers involved. I will give the Minister of State one example: the hospitality industry. Clearly, it faces a major crisis right now and needs supports. We know, however, that there has been a problem in that industry for years - decades, frankly, but particularly in recent years - of low pay and insecure contracts. We need to ensure that, hand in hand with supports for the hospitality industry, there are real supports and recognition for workers' rights in that industry. We know, for example, that the employer groups have refused for years to engage in the joint labour committee process. Now is the time to ensure that, as we build in supports for key sectors such as hospitality, we build in key supports for the front-line workers who supply those services and who are very much at the cutting end of the current crisis.