Denis O'Donovan (Fianna Fail)
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I welcome the Minister of State, Deputy John Perry, to the House.

John Perry (Sligo-North Leitrim, Fine Gael)
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I welcome the opportunity today to inform the House about European small and medium-sized enterprises week and other relevant European matters.

The importance of the SME sector and its engagement with the EU is well recognised by the Government. For those companies wishing to grow, an international perspective is built upon engagement with our EU neighbours. To be competitive in the modern economy, Irish businesses must be at ease with globalisation. This means doing business in more than one country must become the norm.

We want to ensure that new companies learn to develop products with global appeal and market them internationally early on in the product development cycle. My role as Minister of State at the Department of Jobs, Enterprise and Innovation with responsibility for small business and as SME envoy for Ireland is to ensure that small businesses play a central role in our economic recovery. As SME envoy for Ireland in the European group of national SME envoys, I am focussed on ensuring that policies developed at national, regional and local level are enterprise-friendly and harness the think small first principle in order to strengthen the competitiveness of SMEs and to unleash their potential to grow and create jobs. The decision to make this appointment at ministerial rather than official level reflects the Government's commitment to SMEs.

The role of SME envoy was established as part of the review of the EU small business Act, which was launched in February 2011 and is a major landmark in tracking the implementation of the small business Act. It aims to maintain the momentum in the journey towards a more entrepreneurial Europe and integrates the small business Act with the Europe 2020 strategy. Six of the seven Europe 2020 flagship initiatives will help SMEs achieve sustainable growth, putting small businesses at the heart of EU policy.

While acknowledging that much has already been done in terms of putting the needs of SMEs to the forefront of EU policy, the small business Act review signals that more needs to be done through further significant measures to release the full potential of SMEs. The small business Act contains a number of legislative proposals, ten guiding principles and measures to be implemented at EU and member state level, with the aim of helping SMEs. These ten guiding principles are: the creation of an environment within which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded; to ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance; to design rules according to the think small first principle; to make public administrations responsive to SMEs' needs, promoting e-government and one-stop-shop solutions; to adapt public policy tools to SME needs; to facilitate SMEs' participation in public procurement and better use state aid possibilities for SMEs; to facilitate SME access to finance and develop a legal and business environment supportive to timely payment in commercial transactions; to help SMEs to benefit more from the opportunities offered by the single market; to promote the upgrading of skills in SMEs and all forms of innovation; to enable SMEs to turn the environmental challenges into opportunities; and to encourage and support SMEs to benefit from the growth of markets.

These ten guiding principles are backed up with 42 implementing measures to be undertaken by the Commission and 51 by member states. One of the key EU initiatives designed to help SMEs in the coming years is the Competitiveness and SMEs, COSME, programme 2014-20. SMEs are a major source of economic growth and job creation in the EU, accounting for more than 67 % of private sector jobs and providing more than 58% of total turnover in the EU.

Approximately 23 million SMEs exist throughout the EU, and they are an important contributor to growth and employment in the Union. If the Union is to deliver its Europe 2020 strategy priorities of smart, sustainable and inclusive growth, then competitiveness needs to be centre stage. The EU Commission finds the main challenges which SMEs continue to face include: difficulties in accessing finance; a weak entrepreneurial spirit; a business environment which is not conducive to start-ups and growth; a limited capacity to adapt to a low-carbon resource-efficient economy; and a limited capacity to expand to markets beyond their home country.

The new programme for the competitiveness of enterprises and SMEs, COSME, will run from 2014 to 2020, with a planned budget of ¤2.5 billion. The general aim of the programme is to strengthen the competitiveness and sustainability of EU enterprises, and to encourage an entrepreneurial culture promoting the creation and growth of SMEs. Ireland very much supports the proposals to establish a dedicated programme for industrial competitiveness and SMEs, which will provide targeted financial support for SMEs. In particular, we welcome the proposed equity facility for growth-phase investment, which will support the development of the EU-wide venture capital market. We also welcome the loan facility, which will provide direct or other risk sharing arrangements with financial intermediaries to cover loans for SMEs.

As part of the new COSME programme, the Irish Enterprise Europe Network will assist all Irish SMEs to access the new supports available to them, including the new SME instruments made available through the Horizon 2020 programme. The Enterprise Europe Network in Ireland is organised by Enterprise Ireland in partnership with chambers in Cork, Dublin, Galway, Sligo and Waterford. The network helps companies by raising awareness of EU legislation, customer engagement marketing, EU funding programmes, technology transfer and business partnerships for which they have a database with up to 14,000 live business and technology opportunities for Irish companies to tap into.

Since it was established in 2008, the Irish network has had 34,000 interactions with Irish SMEs looking for support under the competitiveness and innovation programme framework. The Irish network has organised 225 events for SMEs with approximately 10,000 participants. The Irish network also works with all other business support organisations in Ireland such as Enterprise Ireland, the county and city enterprise boards, Chambers Ireland, the Small Firms Association and the Irish Small and Medium Enterprises Association, ISME. The network's services are free of charge and provide real practical support for this critically important sector.

The European enterprise networks are also participants in European SME week, which was established in 2009 and is co-ordinated by the European Commission. It aims to promote enterprise throughout Europe in line with the Commission communication concerning a small business Act for Europe. It is a very important event in highlighting the critical role of SMEs throughout the EU. This year, European SME week takes place between 15 to 21 October and aims to provide the following: information on what the EU and national, regional and local authorities offer as support to micro, small and medium-sized businesses; promote entrepreneurship in order that more people, in particular younger people, seriously consider becoming an entrepreneur as a career option; and give recognition to entrepreneurs for their contribution to Europe's welfare, jobs, innovation and competitiveness. A European SME week summit will also take place in Brussels on 17 October, and the theme of the conference will be women's entrepreneurship.

European SME week will take place in 37 countries, and national, regional and local events and activities will be as close as possible to existing and potential entrepreneurs. These events, organised by business organisations, business support providers and national, regional and local authorities, will also enable existing companies to share their experiences and develop themselves further. In Ireland, 46 events will take place throughout the country during SME week. The majority of these events are being organised by the local county enterprise boards and cover a wide variety of events including project management, women in business, starting one's own business, project branding and financial management. Events are also being organised by the Irish Banking Federation, the Small Firms Association and the Crafts Council of Ireland.

SME week 2012 also coincides with the 20th anniversary of the Single Market. To mark the occasion, my Department, along with the European Commission in Dublin, have organised a joint Single Market-SME event in Croke Park on 1 November 2012 in order to highlight the importance of SMEs. This event is entitled "Europe at work for Irish SMEs: Irish SMEs and the Single Market". The Minister and I and leading officials from the Commission will be speaking at the event. Senior officials from the Commission, enterprise agencies and SMEs in Ireland have been invited to attend this event and participate in the break-out sessions. The break-out sessions will cover such topics as access to finance for SMEs, the digital Single Market, entrepreneurship and accessing the Single Market. This event will be a precursor to Ireland's hosting of the EU Presidency beginning on 1 January 2013 and will signal the importance we attach to creating the right conditions and environment in Europe in order to promote growth and jobs and help our SMEs to grow, innovate and internationalise.

Next year, the focus on SMEs will be very clearly shown by an informal Competitiveness Council which will target the SME sector. As part of the Irish Presidency of the EU, an informal Competitiveness Council will be held in Dublin on Wednesday, 1 May 2013. The focus of this Council will be on SMEs, for example, access to finance, internationalisation of SMEs, entrepreneurship, etc. This is a signal of the importance Ireland attaches to creating the right conditions and environment in Europe in order to promote growth and jobs and help our SMEs to grow and internationalise. The agenda for this informal meeting is being drafted but it is likely that the discussion will focus on topics such as access to finance for SMEs, promoting entrepreneurship in Europe and SMEs going global. The informal meeting will also deal on day 2 with research and innovation-oriented topics but linked to the overall enterprise, SME access and commercialisation agenda. The proposed agenda for this informal Council will also deal with the contribution of research and innovation to sustainable economic growth and jobs and building Europe's competitive advantage.

Embracing international trade and harnessing the extensive opportunities in the European Single Market for Irish SMEs is essential to Ireland's continued expansionary economic performance. The EU must become almost like an extended home marketplace for our SMEs if they are to grow and succeed. The Government is acutely aware of the importance of the small business sector, its potential for generating employment and the problems encountered by entrepreneurs in accessing finance. Our programme for Government and the Action Plan for Jobs fully recognises this fact. The action plan is being delivered and is in the process of helping Ireland to become the best small country in which to do business by 2016. Our actions in respect of the EU agenda in the coming year will contribute to the achievement of this goal.

Mary White (Fianna Fail)
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I thank the Minister of State for his wide-ranging presentation and wish him continued success with his portfolio on small and medium business. As we have said here many times, SMEs are major contributors to the economy in Ireland and employment. The importance of these firms cannot be underestimated. Of the 195,000 SMEs in Ireland that involve just over 850,000 people, 90% employ fewer than ten people. While many SMEs focus exclusively on the domestic market, a large proportion trade on international markets. There is potential for so many more firms to internationalise and this could be made a reality if they were to receive better financial banking from the banks. Over 70% of SMEs are involved across a broad spectrum of products, such as software, medical technologies, food production, digital content, retail and wholesale, and tourism.

As we have said previously in the House, SMEs are present in all regions and contribute to building a community while enhancing a location's attractiveness as a place to live and do business.

European SME week is to take place from Monday, 15 October to Friday, 19 October. The campaign is co-ordinated by the European Commission, which focuses correctly on promoting SMEs in 37 countries across Europe. Events have been organised throughout the country by Enterprise Ireland, the city and county enterprise boards and business organisations to enable existing businesspeople to share their experience with potential entrepreneurs and develop further their own businesses.

On Friday last, I had the pleasure of attending an event associated with the first ever National 50+ Enterprise Day, which was launched by the Minister of State and organised by the city and county enterprise boards. Over 55 potential entrepreneurs were in attendance. The driver of this fascinating initiative is Mr. John Byrne, who has made the idea of senior enterprise acceptable and attractive. I never heard of the concept of senior enterprise until last Friday. Senior enterprise has been approved recently for support by the European Union through INTERREG IVB, an EU initiative that aims to stimulate inter-regional co-operation. Senior enterprise is specifically designed to encourage greater involvement with enterprise by people over the age of 50. This may be achieved through starting a business alone or with others, acquiring or investing in a business and advising an entrepreneur or supporting innovation within a business owned by another person.

National Women's Enterprise Day is to take place on 17 October, with an event in Portlaoise. I have been honoured to have been invited by Ms Sarah Reilly of Fine Gael, a town council chairman, to speak at a very influential conference on women leading the way. In particular, I have been asked to speak about my business and political experience in order to empower other women to do as I did.

In spite of the recession, it is most heartening that so many Irish men and women are taking the risk of starting their own businesses. I commend Enterprise Ireland and the various relevant organisations that do such sterling work on prompting support for small businesses starting out and larger, more established businesses. The good news is that so many Irish men and women are willing, in the middle of a recession, to start up businesses. It takes courage and one must be able to take risks. One must be a gambler because the chance of a business surviving is very low.

It was with much amazement that I read in the Irish Examineryesterday morning a one-to-one interview with the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton. Bearing in mind all the occasions on which I referred in the House to banks not lending money and his reply that they are doing so, he is quoted in the article as saying banks have recoiled completely from lending to small businesses. I will be fascinated to hear what Senator Clune will have to say about that. The Minister stated that we must "retool the whole finance system". Furthermore, he stated: "You've seen the credit figures yourself - banking has completely recoiled from lending to small business. That has to be rebuilt." The good news outlined by the Minister is that we can ?with absolute confidence point to more high-potential start-ups this year?. He has moved from referring to job numbers under the action plan for jobs to talking about the number of potential start-ups. This is a good yardstick.

As the Minister of State will know, the ninth report of the Credit Review Office, CRO, was released yesterday. It shed more light on the reality of bank lending to SMEs and farms. Mr. John Trethowan, the credit reviewer, outlined the activities of his office since his last report, in June, and highlighted his observations on the market conditions in the SME sector.

Until Mr. John Trethowan's ninth report, the CRO believed the banks' assertions that they were lending money. The banks got a shock when he disagreed with them after approximately 18 months.

Mr. Trethowan criticised the banks for not lending, something that the Central Bank has stated in three reports. In his report, he urged business people seeking loans to make formal written applications and stated: "Much work has been done to standardise the information required for a loan application". In many banks, a business person who asks for a loan to expand a business is told by someone in the branch not to bother because he or she would not get the money. Mr. Trethowan has learned of such incidences. According to him, people should make formal written applications and not be put off by their local branches. It is important that small and medium-sized enterprises, SMEs, and farm owners not be dissuaded from applying for credit by the comments or actions of a few front line bank staff or the media.

I raised the crunch issue on the Order of Business. The banks claim that they loaned ¤3 billion last year and will loan ¤3.5 billion this year, as they were asked to do. How much of that amount is for risk taking in business rather than, for example, increasing overdrafts or safe customers? Is it just a rolling over of credit, which is useless? This matter must be addressed urgently.

What is the Minister of State's opinion on the comments of the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, in the article referred to? I imagine that the Minister regrets what he has been saying for eight or nine months. Senator Mullins has discussed the issue. How does he view the Minister's statement that the banks are not lending money?

Deirdre Clune (Fine Gael)
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I thank the Minister of State for discussing SMEs and his work in that regard. We are facing into European SME week, which is another important milestone in the development of a strong SME culture in Ireland. I congratulate the Minister of State on the advisory group that he established. It has fed into the Action Plan for Jobs 2012 and will do likewise in respect of the upcoming 2013 programme.

Kerry Group made a significant announcement today concerning new jobs in Kildare. That campus will not be an SME, but for every job established at that level, there will be an estimated spin-off of 2 jobs in the community. It is important that we recognise this aspect of the development.

Last week or the week before, the Minister, Deputy Bruton, launched the Global Entrepreneurship Monitor, GEM, 2011 report for Ireland. There were some positive elements, but the low number of people perceiving opportunities for new businesses was a concern. That number saw no signs of increasing in 2011. The microfinance scheme was opened for business on Monday, 1 October.

I hope that scheme, which will provide ¤90 million in microfinance, will be successful in encouraging entrepreneurial activity. Many people have the skills and drive to start up a business but they feel it might be risky to do so in the current climate. The microfinance scheme will give them the necessary encouragement.

The Minister for Social Protection, Deputy Joan Burton, is conscious of the importance of social insurance for self-employed people and is looking at the issue. Issues such as this must be resolved to give people the confidence to set up their own business.

The global entrepreneurship report also found that men are 2.5 times more likely than women to be early stage entrepreneurs. It is crucial that this issue be addressed. Senator White referred to a conference at which she is speaking next week, and I wish her well with that. Earlier this year, Enterprise Ireland established a ¤250,000 competitive feasibility fund targeted at female entrepreneurs. The fund closed in September. Has the Minister an update on the progress of the fund?

The report also noted a higher rate of business closures in 2011 than in the previous ten years. We had a difficult year in 2011. With this in mind, the credit guarantee scheme will provide support for job-creating SMEs. Initiatives such as SME week and the conference to be held on 1 November will be very important in this regard.

On Saturday last, I attended a conference in Cork organised by Network Cork, a network for women in business. At the conference, Mr. Seán Kelly, MEP noted that it is 20 years since the European Single Market came into effect. The Minister of State also referred to this in his speech today. A range of opportunities have arisen since then. We have cheaper international telephone calls, cheaper flights, services trading across borders, better procurement rules and a more level playing field for consumers. All of these developments help SMEs trade across borders. Nevertheless, the figures show that Irish SMEs do not engage sufficiently with their European counterparts. The idea of the Single Market and the expansion of the EU was that we would have a single market of 500 million people. Only 40% of Irish SMEs trade within Europe and only 13% trade outside the EU.

Culture and language are also important if SMEs are to do business with other countries. Some contributors at Saturday's conference spoke about the importance of language and culture. Doing business in Italy, for example, is different from doing business in Germany. In Germany, one is paid on time and one knows where one stands, whereas in Italy, one must take a more laid back approach. Knowing the language is very important.

The issue of language comes up time and again. A recent report from the expert group on future skills needs identified the fact that our teaching of foreign languages is not up to the required standard. We must develop a five to ten year programme for the teaching of foreign languages in our schools. That should include Mandarin, although I accept that we are concentrating on EU trade this week. We are falling down in our foreign language skills, and they are very important. It is not necessary to be fluent in a language, but we should know enough to do business, be polite and engage with business people in other countries. That goes a long way. The importance of personal contact cannot be overstated. It is more effective than e-mail or texting. The support of the Minister will be important for SMEs who want to progress to trading abroad in other EU countries.

Access to credit has been mentioned by many speakers.

I note that Mr. Trethowan's report this week was critical of the banks. It is the second report in a row, the eighth and ninth, to be so critical. He outlined how he had ensured 100 decisions were overturned, which led to ¤10 million being made available through the supply of credit and almost 850 jobs being supported. That is very encouraging. All companies that have been refused credit, even where there is a perceived verbal refusal, should be encouraged to progress the matter by dealing with it through the channels that have been set up, as outlined in Mr. Trethowan's report. He gives some very significant examples of how credit was denied to well established businesses and businesses with a credible business plan and potential.

The retail sector is one in which the Minister of State has a great interest. It is suffering at present. Consumer sentiment is at a very low level. It is understandable because people do not have confidence and are worried. They are anxious to hold onto whatever money they have and they are certainly managing their spending. The retail sector has suffered extensively as a result. In the run up to the Christmas period the Minister should use his very public platform to encourage people to buy Irish and not to buy on-line unless it is from an Irish company. He should encourage people to support their local traders, particularly those who have set up businesses in our cities and towns. They need to be supported in the spending period between now and Christmas.

Sean Barrett (Independent)
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I welcome the Minister of State. I always enjoy his visits to the House because we have good debates on this important topic.

We reoriented the economy too much towards construction and public administration. It is very difficult that correcting that orientation increases unemployment from 4% to 14.8%, as it currently stands. However, the Minister is moving in the right direction. We must try to move away from an economy where so many auctioneers and solicitors were transferring property to each other, with banks completely obsessed by property and missing the enterprises the Minister of State is here to promote.

There are still problems with finance. We own AIB and we used to own the Industrial Credit Corporation, ICC. I approved of the sale of ICC because when the economy was booming it did not matter. However, are there some ICC executives or people of that type around to form a wing within AIB dedicated to entrepreneurship and small business? Are those talents still around? Perhaps the Minister would investigate whether they are there. We need something like that, as it was a great start-up institution. I recall a report from Bloxham Stockbrokers which stated that our pillar banks were hardly interested in small and medium enterprises at all. They opted entirely for the property bug and people relied on the foreign banks to provide the finance for small and medium enterprises. However, those banks will not stay here now because the Government is supporting the pillar banks so strongly. Therefore, there is a gap and perhaps a new type of ICC, as a branch within the State-owned AIB, might be considered.

With so many premises empty in our towns and cities, embarrassingly so at this stage, upward-only rent reviews should be examined. I hear criticisms from the owners of small and medium enterprises that local authorities are increasing rents to businesses that are renting premises from those authorities. That is also worth examining.

In the transport sector, after 80 years of trying to put small bus companies out of business, those companies actually own 80% of the fleet. It is wrong to have direct award contracts instead of competitive tendering.

Such people could have very fine start-up businesses, were the State to allow them to tender for procurement. However, the literature on procurement produced by the Department of Jobs, Enterprise and Innovation does not wash in the Department of Transport, Tourism and Sport, just down the street. That Department simply does not want to know and actually boasts in its literature that, as it got a direct award contract, there was no competitive tendering. In response, I say, "Thanks a lot guys". We are trying to develop economics in the country and not promote monopoly, as the Department of Transport, Tourism and Sport is so prone to do. Moreover, there also are elements of this problem in tourism. As the Minister of State is aware, part of the cost is that the NAMA hotels undermined commercial hotels, which undermined bed and breakfast businesses, which are the small businesses that might develop. Consequently, one must look again at how capital subsidies availed of by large entrepreneurs and producers put the smaller person out of business on the basis of unfair competition.

As the Minister of State is aware, Senator Mary Ann O'Brien has made great speeches about the problems associated with sick leave and I refer to the figures I received from ISME yesterday. That organisation states that in small enterprises, the average employee is sick for three days a year. The rate is six days in larger enterprises - because the personal touch is lost - and is 12 days in the public sector. However, the Department of Social Protection picks up the tab in the public sector and, therefore, an effort to effect a reduction in people absenting themselves sick in the economy, which I would support, probably should start in the health service, which is where the main rate of absenteeism occurs. However, to push the cost onto small enterprises, the representatives of which claim the lowest number of sick leave absences, is something the Minister of State may wish to consider.

As for recessions, one never knows. Ryanair was launched during the last recession and I believe it employs 8,000 people at present. Its first flight was from Watford to Gatwick in 1985 and it now carries 85 million passengers. The Kerry Group was launched in the 1970s and one of Deputy Perry's ministerial predecessors, Mark Clinton, virtually gave away the Dairy Disposal Company because he thought Denis Brosnan would do a much better job and we are celebrating the success of that vision today. Perhaps there are activities within the public sector that could be transferred to small and medium-sized enterprises. Denis Brosnan started out with a small to medium-sized enterprise, which no longer is the case, and everyone has gained today from that.

As for enterprise boards, I am concerned about them being associated with local government because it is known from the McLoughlin report that local government in Ireland has massive inefficiencies, particularly at managerial level. Is there a danger that some of these inefficiencies could transfer themselves into the vital work enterprises do? My other misgiving concerns Forfás moving to the Department. It did have independence and carried out useful work. I can appreciate the reason it was a good idea to bring it in because the Department got all those talented people. However, will they become more like traditional civil servants or will they lose their dynamism by coming into the Department? Will some of the talented people leave because the Department does not have the reputation for being the most enterprising or innovative in the world? I support the points made by Senator Clune about the teaching of languages and Members also have stressed the teaching of mathematics, both of which are vital. In addition, one should support people like Jerry Kennelly in County Kerry, who is running entrepreneurship events in schools and is generating huge enthusiasm each year when the awards are given out.

The policies the Minister has outlined are excellent but one must make sure that each institution, law and public body is in tune with what the Department is trying to do. It is in this spirit I made these suggestions, particularly on what is to be done with AIB. Will it be possible to develop a section similar to the industrial credit corporation in AIB? While we now own it, we do not do so to enable it to go back to being a property-obsessed bank, which got itself into trouble the last time. I wish the Minister of State good luck as Members will be watching out and will be wishing him all the best in his endeavours. This is the way to reformulate the Irish economy for which I am sure he has widespread support in the House.

Jimmy Harte (Labour)
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As usual, the Minister of State is welcome. He has been highly proactive in the small business area as he comes from such a background. Small and medium-sized enterprises, together with the farming industry, are so important. I note representatives of the latter were here in force today outside Leinster House. The problem for any small business in today's economy is accessing liquidity or credit to keep afloat.

Many businesses are on the margins of survival. We have many initiatives in place which are helping. It will be a long road but it will be successful in the end.

I refer to the Credit Review Office. According to the latest figures on bank decisions, overturned applications are up 35%. I said previously that it would be a more efficient use of the Credit Review Office's time to put a stamp of approval on applications before they hit the bank because there seems to be a time delay. Sometimes banks put applicants off either at the front desk or over the telephone rather than take a formal application. On many occasions, good applications are turned down by the banks only for the decision to be overturned by the Credit Review Office.

John Trethowan said that in the past three months, the Credit Review Office received 36 eligible applications from SMEs refused credit by AIB and Bank of Ireland - the two pillar banks - that work is ongoing on 12 cases and that three have been withdrawn. He also said that of the 21 cases completed in this quarter, 14 bank refusals were overturned resulting in the two banks subsequently supplying ¤1.18 million of credit, supporting a further 106 part-time and full-time jobs in the SME sector. The banks must be dragged into this equation because without the existence of the Credit Review Office, those 106 jobs would have been at risk and people may have ended up on the dole.

I give credit to John Trethowan but he must get support from the banks. In his ninth quarterly review, which was issued yesterday, he said that only three banks are actively lending in the SME sector, namely, Bank of Ireland, AIB and Ulster Bank. He pointed out that there is a lack of competition in lending which, over the years, was a driver of credit, although maybe overdriving it. However, the banks are now probably sitting back and hoping people do not come in looking for loans because they do not want to take the risk. With pressure from the Government, the banks have to lend. They have been looked after by the taxpayer and we effectively own them. At times, the banks do not give credit when first asked.

I said previously that there is a negative perception among small businesses and farmers that they are wasting their time applying for loans because there seems to be a perception - it is fostered by a few front line staff in banks - that people should not bother applying for loans because they will probably not get them. There is perhaps negative media coverage of banks and people are afraid to go in. If one has a small businesses, is trying to get one's feet on the ground and is struggling to meet wage bills, tax returns and suppliers, the last thing one wants is a session with a bank, which can be intimidating.

I said previously the Credit Review Office could play a role in giving an indication to the client that he or she should go for the loan based on a very good application. There is a role for the accountant to put the loan package application together very well rather than shabbily. The banks would get an indication that the Credit Review Office has looked at the application and is favourable towards it. That might speed up the process and keep a business going because currently, for small businesses waiting one month or two months for a decision, it can be the difference between surviving and not surviving. Survival means the preservation of five, ten, 50 or 100 jobs, as John Trethowan outlined.

I welcome the Minister of State's efforts, which are being successful. I come from a small business background and it is difficult to survive in a recession. Senator Barrett said some of the bigger companies come out of recessions but there are many stories of small businesses which have been wiped out. They are just statistics. Ryanair is probably the exception as is the Kerry Group and they come out of recessions stronger.

Businesses employing two, three or four employees are the backbone of the economy along with small farmers and shopkeepers. I would encourage the Credit Review Office, CRO, to continue its good work and ask the banks to meet their obligations because if businesses are not making money, the banks are not making money and until the banks start making money again and repay the taxpayer, we will be in a downward spiral.

Tom Shehan (Fine Gael)
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I call Senator Michael Mullins who has eight minutes.

Michael Mullins (Fine Gael)
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I welcome the Minister of State, Deputy Perry, to the House.

Thomas Byrne (Fianna Fail)
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On a point of order, should the next speaker not be from the Opposition?

Tom Shehan (Fine Gael)
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According to the rota, the next speaker will be an Independent Senator from the universities panel but there is no one offering and therefore we went on to the second rota.

Thomas Byrne (Fianna Fail)
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In that case would it not be the practice for another member of the Opposition who is offering, such as myself, to be called?

Tom Shehan (Fine Gael)
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If you wish but I am trying to do my best and go by the rota.

Thomas Byrne (Fianna Fail)
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My point is that if there is no Member from one Opposition group present a speaker from another Opposition group should be called.

Tom Shehan (Fine Gael)
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Senator Reilly has been present for the entire debate and perhaps we should allow ladies go first.

Thomas Byrne (Fianna Fail)
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I do not mind but it is worth making the point that the Opposition speakers would follow the Government speakers if the Government-----

Tom Shehan (Fine Gael)
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I call Senator Reilly who has eight minutes.

Kathryn Reilly (Sinn Fein)
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I hope not to take up that much time. I welcome the Minister of State to the House. He is a regular visitor here and we are discussing an important topic. As many other Senators have said, small and medium businesses, SMEs, are the lifeblood of the economy and upon them hinge jobs and the fate of the local economy. That is an interlinked cycle in that when one suffers, everyone suffers and it is important, therefore, that we facilitate and foster their growth as much as possible.

We frequently hear reports that paint a clear picture of banks not lending to SMEs. That must change because the SME sector will be allowed play its part fully in restarting economic growth here, especially when we consider that the State owns most of the banks in the State. As the major shareholder in those banks we must try to do more to compel them to start engaging in greater lending to SMEs not just in theory but on paper because that is not trickling down to the people affected. The soft approach to date has not worked. We must take a harder approach and make sure that for SMEs the Government is seen to be fighting their corner because local economies and job creation hinge upon their success.

Another critical issue that has been raised with me is the vacuum and the uncertainty around county enterprise boards. SMEs, and smaller businesses in particular, do not know where to go for advice and assistance. We need more clarity on local enterprise offices, LEOs, their budget and the scope of their field of activity.

At the joint committee on jobs recently, Bernard Coyle of the Irish Exporters Association raised the issue that plans to close the county enterprise boards without having a replacement in place was causing considerable inertia in the system and companies were paying for that. That legislation must be prioritised and put in place as soon as possible, particularly when we consider the fourth guiding principle of the EU Act noted by the Minister in his contribution.

We have heard the mantra that the Government does not create jobs. Over 33,000 jobs have been lost in the economy. The vast majority of work found is in the SME sector, and Central Statistics Office figures demonstrate that 80% of all employment is within the SME sector. A Government sponsored report found that 2,200 new businesses start up every month, and we know that at the same time there are approximately 1,400 business closures every month based on current trends. The start-up phase is when companies need the greatest levels of support, and that is the reason the county enterprise boards and bank lending are important.

I commend entrepreneurs and start-up companies who take the plunge and set up their own business, especially in this economic climate. I was fortunate to meet a start-up entrepreneur on Monday who set up the Blackbird café in Derrylin, County Fermanagh, which is doing very well so far. I hope that trend continues. I commend people who take that plunge in this climate because it is a very brave move.

A host of specific issues arise upon which the Government must act if it is to play its role in facilitating SMEs in helping to get Ireland back to work.

On Friday I was fortunate enough, as a Border county representative, to attend a conference that was jointly hosted by the Oireachtas Joint Committee on the Environment, Culture and the Gaeltacht and its corresponding committee in the Assembly. The debate was on difficulties with planning issues in Border towns and town centres. The main issue was the displacement by multinational corporations of town centre businesses which are largely SMEs. The question asked was how they can be sanctioned when there is no demonstrable need for developments of such scale, especially when there are large vacancy rates in towns because SMEs are going out of business. In a large number of cases planning is granted for commercial reasons and for the immediate bounty that they bring to cash-strapped local authorities. The point was raised that every ¤100 spent locally injects ¤250 into the local economy whereas the same amount spent in a multiple only injects ¤140 into the local economy. Can the Minister of State tell me if he or his Department plan to enhance and support the town centre experience where many SMEs are based? For example, if footfall is diverted from a town centre it removes a lot of business from SMEs, and that is across the spectrum whether that is retail or any kind of sector. How can we collectively enhance the retail and social experience of towns? Will the Government develop a plan similar to the Northern Ireland Independent Retail Trade Association, NIIRTA, which produced a 50-point plan for redeveloping or regenerating town centres?

We need to have a greater conversation with the Minister and his Department on SMEs and town centres and how to support SMEs in a dwindling town centre environment. Such a debate would naturally follow the work done by the Oireachtas Joint Committee on the Environment, Culture and the Gaeltacht.

I cannot talk about the local domestic economy and SMEs without mentioning shrinking domestic demand and the effects of austerity policies. A reduction in incomes, flat taxes such as household taxes and VAT hikes have led to a decreased domestic demand among consumers because people are afraid to spend their money. That correlates with SMEs struggling to survive because some of the Government's policies have mitigated against them. To return to what I said at the beginning, job creation hinges on SMEs, the domestic economy and a consumer's willingness to spend. In a previous Private Members' motion, the Sinn Féin Party tabled changes that should be implemented and that we think could help SMEs in the current economic climate. One example is ending an upwards-only rent regime for existing contracts. The Government gave such a commitment in the programme for Government and there were problems with existing contracts. We need to ensure that such contracts do not hinder SMEs.

We should also address the difficulties caused by late payment for those contracted to provide goods and services to the public sector, including NAMA. We should also open up the rules on tendering and procurement and develop clauses in public procurement contracts to promote the sourcing of local goods and services and provide training.

Another important measure would be the provision of greater levels of social protection, including protection in the case of illness for those who are self-employed. Entrepreneurs have taken the plunge but they are afraid of what will happen if their business fails and worry whether they will be adequately protected by the social protection system. We do not want them to suffer a collapse in income because they tried to create jobs in their local economy. We need to ensure that there is a safety net for them.

With regard to local authority rates, we should introduce of a more progressive rates system whereby a larger and more profitable - typically a multinational business - pay a fairer portion of rates to alleviate the burden placed on mainly indigenous SMEs. We should also enable company directors to invest money from their private pension funds in their businesses.

I have a brief question on the Minister of State's speech when he mentioned the second guiding principle which states: "Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance." What is the definition of "honest entrepreneurs"? How is the measure governed and monitored? How will the measure be applied in reality? I ask him to make sure that people do get a second chance.

Tom Shehan (Fine Gael)
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I call Senator Michael Mullins who has eight minutes.

Michael Mullins (Fine Gael)
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I welcome the Minister of State and thank him for his comprehensive speech which comes during European SME week. It is a great opportunity to provide information to businesses and potential start-up organisations on what supports are on offer to small and medium-sized businesses. It is an opportunity to promote entrepreneurship and particularly to encourage young people to consider starting small businesses that will give employment to themselves and possibly one or two others. It is also an opportunity to give recognition to the many fine entrepreneurs who have kept small businesses afloat in very difficult times. The Minister of State has great experience in the small business sector and is doing a fine job in helping to promote small businesses in his job as Minister of State.

The Action Plan for Jobs 2012, which identified 270 actions across 15 Departments and 36 agencies, is making some contribution to make it easier for companies to start up or expand thereby encouraging exports and job creation. Small business is pleased that the Government is in the process of overhauling five employment rights quangos which should be complete in 2013. I welcome the reform of the city and county enterprise boards, involving the local authorities in job creation. The comprehensive legislative programme, with the enactment of the Companies (Amendment) Act and the Competition (Amendment) Act, the Protection of Employees (Temporary Agency Work) Act, the Microenterprise Loan Fund Act and the Credit Guarantee Act, has been a significant contribution in helping small businesses.

The major question of finance has come up again today. We all come across that issue in our constituencies on a daily basis. The recent report of the Credit Review Office, which was mentioned on the Order of Business, certainly tells the full story. Small and in many cases successful businesses are not in a position to get money from banks. I will give one example from my county, Galway. Bill Madden Nursery has been in business since 1833 and is very successful in landscaping, and retail and wholesale nursery. It had reached the end of the road when it sent its application to the Credit Review Office. It could have gone under with a significant loss of jobs. It stated that it found that the people at the Credit Review Office were very helpful, professional and understanding, and gave valuable advice. The outcome of the review gave a new lease of life to the nursery allowed it to keep the jobs in place and continue in business. The review made the company's bank sit up and take its business seriously. The nursery would strongly recommend the process to other businesses that have not done so already. We need to send the message that if people are not happy with what they are hearing from their banks they should approach the Credit Review Office. It is very significant that 100 businesses are still in place employing 8,500 people.

Two small shopkeepers in my town, Ballinasloe, who are under pressure but are keeping legitimate businesses going, told me in the past week that the banks are treating them like criminals, which is not right. In one case a company employing 16 people needed ¤200,000 to keep afloat. It had ¤1 million worth of orders up to Christmas, yet the bank pulled the plug. That is not right and the banking system is not helping the lifeblood of the country - small and medium-sized businesses.

When we sort out our financial situation, other issues will need to be addressed, including the complexity of regulation and licensing in this country. The Minister, Deputy Bruton, gave an undertaking to reduce the level of bureaucracy and red tape by 25% by the end of this year. There is a great deal more to do in this area. We need to put in place a system that makes it easier for people to start up or continue in business.

The sick pay proposals were mentioned. There is great concern among the small and medium-sized enterprise sector in regard to the proposal that they bear the cost of sick pay. I urge the Minister of State to remain in close contact with his Cabinet colleagues on this issue. Another issue of concern for small businesses is that of commercial rates. An overhaul of the rates system is required. I believe that rates should be linked to turnover, ability to pay or profitability. There needs to be some sort of flexibility in this area. A one-size-fits-all situation does not work in the current economic climate. Small businesses expect and need better value for money from local authorities in terms of water and service charges. There is much work to do in this area.

Another issue for small businesses is the difficulties they are experiencing in obtaining payment for services rendered or goods delivered. Many companies are experiencing great difficulties in this regard, despite the legislation in place. Another bone of contention is, as mentioned by Senator Barrett, the issue of unfair competition. The hotel and hospitality industry is finding competing with NAMA properties an issue. This matter also needs to be addressed.

On the black economy, small businesses are under pressure from cash operated businesses, including people drawing social welfare benefits and operating small businesses. Many of these businesses are operating in competition with legitimate businesses that are paying their taxes and charges, which is unfair. There are many illegal activities in this area which also need to be addressed, including the sale of smuggled goods and diesel laundering, with which small shops cannot compete.

Senator Reilly referred to self-employed people whose businesses run into financial difficulty, leaving them unemployed. It is grossly unfair that people who have given stable employment in good times and have helped the State are not helped through difficult periods. The social welfare system needs to be adjusted to take account of this situation. I would ask that the Minister of State take this on board.

Thomas Byrne (Fianna Fail)
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On the speaking order, I am reminded of a call I made previously for the abolition of the second group of Independents in this House. It is an issue which I intend to raise on the Order of Business. It makes a laughing stock of the Seanad that we have two separate groups of Independents and when one of them does not turn up the speaking arrangements for the day are upset.

I wish to raise a number of issues, the first of which is that of card and merchant acquiring services for small and medium sized enterprises. I had lunch yesterday in Navan. When I tried to pay for it with my Visa debit card, which is a convenient mechanism, the shopkeeper was unable to accept it but happily agreed to waiting for payment until after I had eaten my lunch and obtained money from the ATM. The man concerned told me he cannot afford to have the required machine in his premises. The same applies to other small businesses such as dry cleaners, barber shops and so on that do not have high turnover in terms of sales. Pharmacies often have them because there is a high cash value on purchases therein. This issue is causing huge problems for small businesses. It will become an even greater problem with the introduction of swipe cards - my wife has one and has used it already - which do not require people when paying in certain outlets for goods costing less than ¤15 to enter a pin number. While the availability of this service as a matter of practice in, say, Tesco or some of the multiples will be extremely convenient, the increasing move to a cashless society will be inconvenient for small businesses.

If the Government cannot force the banks to lend to small businesses it will have to put in place some arrangement at little or no cost to enable small shops to carry out commerce. Small shops cannot do business if people do not use cash. People are using cards more and will soon be using their iPhones to make purchases. If we do not come up with a system which addresses this issue, people will avoid small shops and go to the multiples where they can use their cards, which is much more convenient for them. I suspect this is already happening. One can purchase a coffee in Navan, Slane or Kells with cash or one can go to Supermacs and purchase one using one's Visa card, which is more convenient. Supermacs has the power in the marketplace to offer this service, in respect of which I believe the charges, in terms of commission, are exorbitant. The delay in payment from banks or merchant acquirers to the shops would also be an issue for small shops, as they could not afford to wait for the money to come through. There is a need for serious action in this regard. People will of necessity avoid the shops which do not provide this service, resulting in their closure. Whomever tackles this issue will be the hero of the many small businesses on whom we depend, including dry cleaners, barber shops, coffee shops, sandwich bars, hairdressers and pubs in rural Ireland. It is increasingly the case, when one tries to pay for drinks in a pub where one may be attending a meeting and has no cash to do so, that they do not accept payment by debit card. This is particularly true in respect of pubs located outside towns. They, too, will be at a disadvantage because this new service is too expensive for them to offer. Addressing this issue will be a plus for small businesses.

Tom Shehan (Fine Gael)
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I will also confine my contribution to the disorder of the banking sector. I recently wrote to the CEO of Permanent TSB following representations to me by constituents who have banked with TSB all their lives and wished to branch into business. The people concerned were informed two days after visiting the bank to open a business account that they could not do so and were encouraged to take their business to the two pillar banks, AIB and Bank of Ireland.

The following is the reply I received from the CEO, Mr. Jeremy Masding:

While we continue to serve existing business customers I can confirm that since May of this year Permanent TSB no longer offers the service of opening new business accounts. A decision was made by the executive board that personal financial services would be the clear focus of the bank.

What surprised me most about the response was that a CEO had told the truth, because when one listens to others from the Irish Banking Federation one assumes they mean exactly the opposite to what they say.

If the proposals on the cost of sick leave to the employer were to be introduced in the budget it would have detrimental effects. Page 4 of the Irish Examineryesterday contained a story about an employer who had received a sick note from an employee to cover a nine-day period, but when the employer was at the airport on the eighth day covered by the sick note he met the employee returning from eastern Europe where she had been on holiday to attend a wedding. The practice of giving such sick notes must be investigated the Medical Council or GPs in general. Such availability of sick notes is a big question.

A very important debate on rateable valuations will be held in the House on Thursday and I hope as many Members as possible will contribute. Rateable valuations are based on the square footage of a premises and the best achievable rent. People have an idea that if one has a massive building one will pay massive rates, but the best achievable rent on the property is also taken into account. I know of a man who recently started a business who is paying less than half of the rent paid on the same premises four years ago. However, the rates have remained the same. A supermarket could be 3,500 sq. ft. or 4,500 sq. ft. but any professional such as a solicitor, accountant, dentist or undertaker could have a much higher turnover. If an undertaker has three burials a week this would mean 150 in the year and we know how much a funeral costs. However, the rates on the undertaker's property will be lower than that on the supermarket which employs 20 or 25 people. There is a mismatch and the entire issue should be thrown on the table and a more efficient, accessible and user-friendly approach should be found.

We must get a grip on this as it is blocking many people. Many people have told me they have a great idea for a business and would love to start but will not even contemplate it because of the red tape and the costs involved. These are the people we must try to harness and get involved in business and give them a leg up. I believe that in Northern Ireland a rates rebate is available for the first 12 months for start-up businesses. Let us use a small amount of imagination. Perhaps such a measure would push the boat out, but I suggest providing it to a new business which would not affect another similar business in the community because such people must be enticed.

Lorraine Higgins (Labour)
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I welcome the Minister of State to the House to hear our views on the SME sector in Ireland and what we think should be done to ensure the sector becomes the engine room of Ireland's recovery. It is a suitable portfolio for the Minister of State given his background and I commend him on all the work he has done in the area thus far. This issue has been widely discussed in the past by my Labour Party colleagues and I, and we feel strongly about addressing some of the situations already mentioned in the debate. Earlier this year we tabled a motion in the House to seek business supports for the sector. In this regard I commend my party colleagues and all Senators who contributed to that debate. We need foresight and unanimity to make any real progression in the sector.

I want to make clear I have a special affiliation with the SME sector as my parents own small enterprises in Athenry, County Galway. They are no different to any other business owners in the country who operate in small towns and do their best, employing people and helping to generate economic activity. They helped Ireland during the recession in the 1980s and the sector is trying to do the same thing in these times in very difficult circumstances. However, there is a fundamental difference between the 1980s in small-town Ireland and now. While people did not have huge turnovers in their businesses in the 1980s it is also true to say they did not have significant borrowings either. However, in the recent past business people fell victim to the aggressive marketing of banks, the lax application of banking regulations and no governmental intervention at the time. As a consequence they are now playing roulette with their livelihoods.

In my home town of Athenry more than 30 commercial units in the middle of the town are vacant. As a result there is no significant economic activity, no jobs are being created and there is no buzz in the place. Instead it is a satellite town and it is harrowing when I compare it to the time of my childhood. Athenry is by no means unique and this is indicative of what is happening throughout the country.

We must identify the crux of the problem and I wish to highlight the utterly negative situation in the country. Now more than ever we need those with an entrepreneurial spark and verve to feel encouraged to follow their business dream. The current situation in the banking industry is counter-productive in that some are effectively not operational as banks. Individuals with good credit histories have contacted me because when they sought loans to buy properties they were offered between 50% to 70% of the loan to value and in one instance the person was told the bank was not really lending and asked to return the following year when it would be in the market for loans. This is incredible. These are the same banks which were bailed out by taxpayers, the very people who cannot now get access to finance to help restart the economy. Irish banks must realise they must play their part in the recovery and adopt some patriotic initiative in this regard.

Perhaps I will not convince anyone with what I have said about my experience in the constituency, but the statistics tell their own story. Irish SMEs have a loan rejection rate second only to Greece in the eurozone at 24% of loan applications. Correspondingly, it is important to point out that the average rejection rate in the 17 member countries of the single currency area is 12%. This makes it twice as difficult for the sector to get finance in Ireland as it is elsewhere in the European Union. Not only this, Ireland can also perversely boast of having the second highest level of discouraged borrowers, which means firms do not apply for loans even though they may need credit and, in any case, if they are lucky enough to secure a loan, the terms and conditions applied to new credit in Ireland are among some of the worst in the EU.

What is more perturbing is that recently the Credit Review Office received a number of eligible applications from SMEs which had been refused credit by AIB and Bank of Ireland, the two pillar banks. Of the 21 cases completed in the quarter, 14 bank refusals were overturned resulting in the two banks subsequently supplying ¤1.18 million of credit supporting a further 106 full and part-time jobs in the SME sector. Lending to non-financial non-property related SMEs by Irish resident credit institutions reduced by ¤390 million over the second quarter of this year and by ¤1.2 billion over the year to the end of June. This follows an annual decline of 6.3% in the year to the end of March 2012.

If the banks are reluctant to reverse their current rule of thumb and associated trends then I respectfully ask that the Minister of State establish a special working group in conjunction with the Department of Finance to explore the possibility and feasibility of providing similar loan to value arrangements for the SME sector as that available to residential mortgage customers. Acquiring 92% finance for commercial properties would make a huge difference to those seeking loans in that they would not be left with a cliff to climb to make their business dreams a reality. Mortgages of 92% for commercial properties would give a timely boost to the SME sector which, in turn, would allow new businesses open and thus generate economic activity in small rural towns.

It makes sense to buy property now given the massive correction in the market, and all that is stopping us from kick-starting this are the banks. If they are reluctant and dismissive of such approaches then it may very well be time for the Government to examine the establishment of banks similar to the former ICC and ACC which targeted the important sectors in Irish business as a way of generating economic growth. Ireland needs answers and solutions and we do not need excuses. Let us also look at the huge stock in NAMA's possession. NAMA should be required to publish a full and detailed list of all property currently on its books and indicate the market prices of these properties. Having property in its custody on behalf of the taxpayer and incurring security and maintenance costs associated with them is a fruitless exercise and does not make financial sense.

As a way of countenancing the lack of lending to those who want to start up a business, NAMA needs to explore the possibility of providing rent-to-buy deals. I fail to see how it can lose. It would be a win-win scenario for all concerned. It would solve a huge headache for NAMA in terms of associated property costs and a huge problem for individuals seeking to set up their own businesses as it would give them the opportunity to prove to the mainstream banks that they are capable of financing any such loan as they will be paying rent.

Michael Mullins (Fine Gael)
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There are a few speakers I must accommodate.

Lorraine Higgins (Labour)
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I will conclude shortly. The Government will win as it would bring some much-needed funds into the Exchequer while stimulating the SME sector. I commend the Government on the steps taken with regard to the action plan for jobs, the school building programme, the capital spending on infrastructure announced in the July stimulus plan and the micro-finance fund which was recently announced. However, let us look further than this. The current market perception of the Irish economy means that it is unlikely that any significant new banking players will enter in the near future. The resulting competition among the few can only result in continuous paralysis. Without a working banking system, we will not be able to rebuild Ireland. We must recognise how critical the role of SMEs is for economic development and do everything to address the conditions inflicted upon them. For that reason, I urge the Minister of State to earnestly consider all the proposals made here today. I thank the Minister of State and the Acting Chairman for his indulgence.

Michael Mullins (Fine Gael)
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Only for the fact that the Senator is my constituency colleague, I would have cut her off.

Paschal Mooney (Fianna Fail)
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I welcome my constituency colleague, the Minister of State, Deputy Perry and, as I have done in the past, wish him continued success in his very challenging position. It is not one that can always deliver on aspirations in these difficult times. I know the Minister of State's business background has prepared and equipped him very well for the job in hand.

Two reports published in the past week are of some significance. One was the Central Bank report which indicated that we are still, despite our best efforts, not competitive with our trading partners. In light of the fact that there is a difference of some 10% between Irish labour costs and those of our trading partners, the Central Bank in its report did not quantify and specify the areas in which this 10% differential existed. I am not sure if the Minister has any information but it seemed that one boot was thrown out and one is now waiting for the second one to fall. The report was somewhat flawed in that it did not specify the areas. That would have been helpful. There has been no follow-up or response from the Central Bank since last week about what areas of the economy contain this 10% differential. It is clear there are some areas where the competitive differential is much lower. It would be helpful to the Minister of the State and the Government if there was an awareness of the sectors that need to be addressed. The Minister of State may have some comments to make in that respect.

The other report was the IMF report, which was published this morning and received some airing in both Houses. It said the IMF had underestimated the impact of austerity policies in Ireland. This is significant coming from a group of people who, when it was first mooted would be coming to Ireland as part of the troika, were greeted as if it was Dracula descending on the country. This was because, traditionally, the IMF had nearly bankrupted Third World countries because of the very stringent fiscal policies it imposed on those unfortunate countries. However, it turned out to be much more benign and if one looks at the three entities in the troika - the European Central Bank, the European Commission and the IMF - the IMF have come out as the angels in all of this. It is the entity that has pulled the other two back from imposing further austerity on the people.

I would be interested in hearing the Minister of State's comments on this in the context of his brief. The inference from the IMF report is that not only this Administration but the previous one got it wrong. We must remember that the recession started in 2008 and the first of the fiscal austerity budgets was introduced following 2008. The amount of money pulled out of the Irish economy over those four years is of the order of ¤25 billion, which is an extraordinary sum of money. It would be interesting if the Minister of State had some comment to make in the context of that report. I do not expect that it will mean a change of direction in Irish fiscal policy but I am sure there will be some discussion around the Cabinet table.

I wish to bring two areas to the attention of the Minister of State. There are reports circulating in the UK that legislation is being prepared that would impose a £100 levy on all commercial traffic going into and out of the UK. If that was to be implemented in law, it would be the death knell for many transport companies that are already put to the pin of their collar because of rising costs. I am not sure if the Minister of State is aware of this because I had it checked out as a member of the Oireachtas Joint Committee on Transport and Communications last year. The information I received was that it is only at proposal stage and is not yet drafted in legislation. Again, it is something the Minister of State should watch out for because it impacts on small and medium-sized enterprises.

Linked to this would the Minister of State support the view that our fuel costs have risen to such an unacceptable level that they are now directly affecting jobs in the transport and haulage market and the wider economy? I know we have no money and are a bust flush but sometimes in a budget, the Minister for Finance comes up with one or two innovative schemes that stimulate a particular area of the economy. It all about targeting resources but I make the plea that serious consideration be given to reducing the burden of fuel costs on the Irish economy and specifically on the transport and SME sectors. Even if it was only to be a few cent, the psychological impact of that would be a stimulus rather than impacting adversely on the overall budgetary situation.

Terry Brennan (Fine Gael)
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Ar dtús, ba mhaith liom fáilte a chur roimh an Aire Stáit ar ais go dtí an Seanad. As the Minister of State stated, small businesses are a central part of our economy and play a vital role in society and our local communities. The Government is clear that it is critical to put SMEs at the centre of our thinking in driving the economic recovery. They have played and will play a significant part in this economic recovery. The ability of SMEs to succeed and grow underpins our future potential for jobs, growth and prosperity.

The Government is focused on ensuring that Irish companies are supported in every way to develop their business, increase exports, create jobs and rebuild the economy. SMEs do not get the recognition they deserve. There are approximately 200,000 SMEs throughout the country. These are local people by and large, working and sustaining their own communities. The Action Plan for Jobs 2012 published earlier this year clearly shows the Government's commitment in this area. Many of the actions which the Government is pursuing through the action plan are aimed at improving Ireland's overall competitiveness by reducing costs and ensuring the enterprise environment is supportive of those companies which can sustain and create jobs. The action plan shows the Government's commitment to implement change and reform in a step-by-step approach to re-energise the economy and meet the challenges of recovery. The plan can and must succeed.

In addition to work under the Action Plan for Jobs 2012, the Government is also delivering on the findings of the advisory group on small business. The advisory group, which is chaired by the Minister of State, published a report entitled The Voice of Small Business in November 2011. We are committed to redoubling our efforts in the coming year and in the Action Plan for Jobs 2013 to ensure that we deliver all possible support to businesses and relieve as much pressure as possible from businesses at this difficult time.

I am also encouraged by a number of recent significant job announcements which show an increased level of confidence from investors in the economy and Government policies. Many Senators today have welcomed the announcement by the Kerry Group, which must be welcomed by us all.

By far the most talked about problem facing SMEs recently is the unavailability of adequate credit facilities. Many Senators have mentioned this. We all know access to finance is a key issue for small businesses and that it is critical to their long-term economic success. There are still problems receiving finance, as stated by many Senators. The action plan for jobs identifies the temporary partial loan guarantee scheme and the microfinance fund as two further actions to address the issue. Both of these schemes are designed to assist companies that have been refused credit by the banks because they are deemed to be a high risk. Perhaps the Minister of State will comment on how successful these schemes have been to date.

Microfinance Ireland was launched to assist SMEs and ensure supports are in place to encourage people to start out on their own and shape their own futures. The microfinance loan fund is designed to stimulate lending to sustainable micro-enterprises and it is targeted at start-ups, newly established companies or growing micro-enterprises employing not more than ten people and it applies across all industrial sectors. It will provide loans of up to ¤25,000 for commercially viable proposals that do not meet the conventional risk criteria applied by commercial banks. Perhaps the Minister of State will comment on how successful the microfinance scheme has been.

Many small businesses, having played an important role, have gone to the wall, unfortunately through no fault of their own. The owners, as with the employees, have fallen on hard times. They have made an impassioned plea to many of us in this House and the Lower House for welfare supports equal to those received by PAYE employees. They have families and mortgages and children going to school and college. Theirs is a valid argument. Why should the self-employed who fall on hard times not be entitled to the same supports as others? That they are not makes no sense to me. Why should one lose out simply because one was self-employed?

Many business owners will argue they are the backbone of the economy, and that a successful recovery goes hand in hand with a buoyant SME sector. I agree totally with them. The low rate of absenteeism in the SME sector in Ireland has been commended across the Continent. At approximately five days per worker per annum, it is close to the very best performance in Europe. The sector must be commended on this.

A significant issue for start-up businesses is their having to pay outstanding rates left unpaid by the previous occupier of their premises. As Senator Sheahan said, there should be a rates remission for the first year and the outstanding rates should be parked. The rates should be paid on a deferred-payment basis, or otherwise, and everything ought to be done to encourage the start-up company. In the past ten days, two major concerns have been drawn to my attention. These are bank lending and outstanding rates in premises. Something must be done in this regard, through the county managers, for example.

Caít Keane (Fine Gael)
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I welcome the Minister of State. This is probably one of our most important debates because small businesses are the lifeblood of the country. European SME week begins on 17 October, and we are discussing the SME sector with this in view. The theme of the conference on SMEs in Brussels will be "Women's Entrepreneurship". This is very appropriate given that there has been discourse nationally and internationally this year on women's representation on company boards. In this regard, we should consider the new EU legislation to which Ireland will be party. In the coming months, the European Commission is expected to publish a draft proposal aimed at addressing gender imbalance on company boards in EU countries.

A report this year from the international law firm Eversheds found that having women on a company board has a positive impact on the company's share price performance. This will be evident to one if one checks the results of the companies associated with the FTSE 100 or FTSE 300. This is outlined in the Lord Davies report and the Eversheds report this year.

Small businesses are and should be given priority, as is the case under the current Government. This is evident from the action plan announced earlier in the year. There are SMEs in every town and village and they form the majority of businesses across the State, be it in manufacturing or be they associated with foreign direct investment. Growth in the SME sector will lift the country out of its current difficulties.

I had intended to mention rates but they have been mentioned by other Senators. I will not dwell on the matter; suffice it to say that something must be done for new start-ups. I was at a meeting recently in Northern Ireland and noted what is done for start-ups in respect of rates. New businesses are not displaced because rates reliefs are offered to new businesses that are not on the street. This was raised when this matter was first mooted. In the North, there is a different regime pertaining to outstanding rates. We learn by working together. In the North, rates attach to the person and not the location. I ask the Minister of State to consider this and determine how the system works in the North. Perhaps we could do something along the same lines for small businesses here.

The main obstacle facing small businesses is access to credit, as stated by many Senators. The banks are now totally risk averse. They were too lenient during the period of the property bubble and now they have gone to the other extreme. One must question this given the amount of taxpayers' money put into them. Some 24%, or more, of all loan applications by new businesses have been rejected. Something ought to be done in this regard. As many Senators have mentioned this, I will not dwell on it.

Perhaps the Minister of State will comment on the performance of the temporary partial credit guarantee scheme in the third quarter. What is the rate of progress?

The microfinance loan fund was mentioned by many Senators. I will not dwell on this either. Is it working as intended? I acknowledge it is a new fund. Microfinance Ireland is working closely with the county and city enterprise boards, which have been amalgamated into the local authorities. Bearing in mind the link between the city and county enterprise boards and local authorities, is the Minister of State working with local authorities in other countries, such as Germany, with a view to assisting small Irish businesses with contacts in those countries? Local authorities in other countries have little micro-enterprise hubs on which we could model ours and with which we could forge links.

I welcome the new business plan guidance as it is good. Many businesses know what they want but are just not getting the funding they require. The potential export division in Enterprise Ireland should be borne in mind in light of what I have said on local authorities and links with those in other countries.

Banks actually hold onto a small business's money when a transaction is made. The client pays the money; it is left in the bank for three days and sometimes four, as has been reported to me, and then it is transferred out. Why is this happening? The Minister of State should ask the Financial Regulator whether there is a statutory period for the transfer of moneys from account A to account B? If the transaction is the other way around, the bank is not slow in taking money from one's account. It will take it and hold it. The Minister of State should inquire into what is happening. Many small businesses have brought this subject to my attention.

I must give credit where credit is due. The report published yesterday by the Credit Review Office has shown that 98 cases were reviewed and overturned. The banks should pull up their socks and ensure they take business seriously. I compliment the Credit Review Office because 60% of the cases that have been examined have been overturned. I hope this will make the banks pull up their socks.

John Perry (Sligo-North Leitrim, Fine Gael)
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There was some very good debate and it will be very hard to respond to all of the points made. I thank the Senators who contributed. I listened very actively to them and appreciate the opportunity to discuss European SME week with them.

We are all in agreement that small business is an essential part of the economy and plays a vital role in society. The Government is clear, in that putting SMEs at the centre of our thinking on how to drive economic recovery is critical. Their ability to grow underpins the potential for jobs growth and prosperity. The development of companies must be supported in every way.

Senator White referred to microfinance and the regions. That initiative is up and running and will be effective. The high level of funding available to it will stream into business. I compliment the Credit Review Office, CRO, which has been effective in its role, given the number of jobs created thanks to it.

Senator Clune referred to social insurance and the Global Entrepreneurship Monitor, GEM. This is an important week, given the high level of engagement by semi-State bodies and private companies. Next week will focus on women in business and the trade and export culture. There are many opportunities and personal contact is important. When people make formal applications, banks are obliged to reply within 15 days. A person can appeal to the bank before taking the matter to Mr. Trethowan's office.

Senator Barrett made an effective point regarding the ICC Bank model and suggested that a part of AIB be geared towards small enterprise. That there is no competitive tendering in the transport sector needs to be examined. The Senator also alluded to the role of the local enterprise offices, LEOs. Kerry Group is an extraordinary success story and its jobs announcement today is good news. The role of LEOs will be important, as will the involvement of Forfás.

Senator Harte referred to the importance of going through the formal application process as well as the lack of competition among banks.

Senator Reilly made important points about the role of enterprise offices, the EU small business Act, town centre regeneration and the domestic economy. There is an opportunity for a more detailed response on the issues of entrepreneurship, town centre business and encouraging people into business.

Senator Mullins discussed self-employment, the plan for jobs, employment rights, the CRO, licensing laws and cutting down on the amount of red tape. Local authorities have a critical role to play. The black economy needs to be addressed.

Senator Byrne referred to debit cards. I must raise the issue. Senator Sheahan made a point about rates and valuations. All of these points must be examined. Senator Higgins discussed business property and getting loans from banks, mentioning the CRO again.

I can revert to Senator Mooney with information on the differential. That the IMF has reportedly underestimated the impact of the fiscal austerity policy must be considered in terms of how it will affect future fiscal policies. Fuel costs are also a major issue.

Senator Brennan discussed microfinance and sick pay, both of which will be considered.

Senator Keane made an important point about high-potential start-ups, businesses that are bank averse, etc. People network through the EU network offices, but we can examine this issue.

The key Government actions in terms of job creation are outlined in the Action Plan for Jobs. This is being delivered and is part of a process to make Ireland the best small country for business. This is a major challenge, but the Government and our citizens are up to it. We will recover our economic independence quickly. Many of the plan's actions are aimed at improving Ireland's overall competitiveness, reducing costs and ensuring an enterprising environment. Equally, the jobs plan for 2012 is delivering on the findings of the advisory group. We are committed to redoubling our efforts. The 2013 Action Plan for Jobs will deliver all possible supports to business and relieve as much pressure on them as is possible at this difficult time.

The unavailability of adequate credit facilities has been the most discussed problem of recent times. This problem faces the small business sector and needs to be addressed. The various initiatives taken by the Minister for Finance, Deputy Noonan, to restructure and recapitalise the banking system has been the Government's principal response in this regard.

A temporary partial loan guarantee is being drafted. A plan will also be put in place to tackle the uncertainty surrounding the timeframe concerning the enterprise boards. They are open for business and are engaging. The Bill will be published in the coming weeks. Both of these schemes will be designed to assist companies.

Some weeks ago, the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, launched the micro-finance fund, which has been a successful first step. It will work in close collaboration with the LEOs.

The temporary partial loan guarantee will be closely targeted at commercially viable, well performing enterprises with solid business plans, defined markets for their products or services and sufficient collateral.

Micro and small businesses comprise a crucial part of the economy and ensuring that they expand and export is a key part of the plan for jobs. For this reason, the Government has decided to implement an ambitious reform in the delivery of services to micro and small businesses, including a new micro and small business division within Enterprise Ireland, a centre of excellence in the provision of supports for small enterprise, the dissolution of the enterprise boards and the establishment of this office.

I am sorry that we do not have more time to go through all of the issues raised, but it is difficult to cover everything. Small businesses are not just a vital part of the economy. Rather, they play a vital role in our society. Our future economic prosperity depends on a sustained, strong entrepreneurial spirit even in the face of unprecedented economic challenges. The Government working group on regulation has been examining the question of cutting down on red tape. The many initiatives under way are making a difference. Companies have opportunities. It is good to see fantastic companies are emerging daily and becoming successful. I thank the House for its time.

Michael Mullins (Fine Gael)
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I thank the Minister of State.