Speech by the Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, at the private members’ debate in Dáil Éireann

19 October, 2010

A Cheann Comhairle.

I move the counter-motion on behalf of the Government.

I note that the Opposition motion opens with a recognition of the importance of small firms in Ireland’s economy.

That is reflected by the fact that small firms across the country support over 700,000 jobs.

They play an important part in supporting families and in supporting all firms in all sectors as suppliers of the goods and services on which larger companies rely.

It is because of the important role small firms play and the recognition of the challenging environment in which they have operated over the past two years that the Government has placed support for this sector at the heart of its strategy for economic recovery.

I have already addressed the issue of the Government’s jobs strategy in the House recently.

I set out that the best way to support businesses and create jobs was to fix the banks, address the deficit and improve our national competitiveness.

These actions are not aimed at firms of any particular size in any particular sector or in any particular ownership.

They are aimed at improving the overall business environment in this country so that all firms can survive and grow.

Central to this has been the repair of our banks which are the key facilitators of business transactions in the economy on a daily basis.

Specifically, the provision of credit to our enterprise sector, especially small and medium-sized enterprises (SMEs), should primarily come from a properly functioning banking sector.

I want to take this opportunity to again acknowledge the extraordinary work done by the Minister for Finance to address the banking problem.

The code of conduct, bank guarantee scheme, recapitalisation scheme, nationalisation of Anglo Irish Bank and establishment of the National Assets Management Agency have all contributed to the stabilisation of the banking sector with a view to facilitating the flow of credit.

The primary objective of the code of conduct for SME lending is to facilitate access to credit for sustainable and productive businesses.

The code promotes fairness and transparency in the treatment of SMEs by all regulated entities.

It applies to areas of banking that are key to small firms such as overdrafts and term loans.

The code is specifically aimed at regulating the relationship between small firms and financial institutions.

This is not optional.

Regulated institutions must comply as a matter of law.

We have addressed how banks lend to small firms but, as I mentioned already, the Government has also secured commitments on the actual levels of credit that these banks must extend to the SME sector.

The House will be aware that the Government secured a commitment from the main lenders - AIB and Bank of Ireland - to make available not less than €3 billion each for new or increased credit facilities to SMEs in 2010 and 2011 including funds for working capital.

When it comes to honouring these commitments, the Government is not prepared to simply take the banks word for it.

Firstly, the Credit Review Office is making a major contribution to dealing with the outflow of credit, not just in reviewing cases where credit has been refused but in reviewing bank lending policies and in driving the process of providing our businesses with a proper professional banking service.

Secondly, I have made it a priority to regularly meet with the banks to discuss the availability of bank credit for businesses, especially SMEs.

I have also travelled around the country to meet businesses to hear their experiences at first hand and ensure that Government hears both sides of the story.

I have conveyed the concerns of businesses on credit availability and I have reminded the banks of their obligations to the Government and the taxpayer under the recapitalisation package.

The very fact that we have someone of John Trethowan’s calibre monitoring the banks and assessing their policies is having a positive and meaningful impact on this aspect of banking performance.

Mr Trethowan said this month that the ‘worst is over’ for small business borrowers and that the situation was much more positive for bank customers than it was six to nine months ago.

This echoes the view of some business representative groups that there has been a recent improvement in the level of bank credit to small companies.

While fixing the banks has been a key element of our recovery, Government has, in parallel, focused on maximising direct and indirect supports to enterprise with a specific emphasis on SMEs.

Remember, SMEs in Ireland benefit from the direct financial supports available through the county enterprise boards (CEBs) and Enterprise Ireland and from the foreign direct investment activity supported by IDA Ireland.

The Government has targeted interventions and supports for small firms but they also benefit from our initiatives in the wider economy.

In terms of targeted support for entrepreneurs, I was pleased to be able to provide additional capital funding of €3.3 million to the CEBs last week which will support more than 450 new jobs in small firms.

This is in addition to capital funding of €15 million already provided this year to the CEBs.

The Government responded quickly to the rapid economic downturn by providing financial support to almost 2,000 companies through the Employment Subsidy Scheme and the Enterprise Stabilisation Fund.

The public sector, as a large procurer of goods and services provided by small firms, must do what it can to improve the cash flow of SMEs.

That is why we have required all Government Departments to pay their business suppliers within 15 days of receipt of a valid invoice.

I am anxious to see this approach extended as widely as possible.

Small firms are the product of the creativity and effort of entrepreneurs who believed in their idea and worked to make it a reality.

Government helps these risk-takers in particular through the programmes provided by Enterprise Ireland.

Last year, Government increased the funding available to Enterprise Ireland by 26pc on the outturn for 2009.

We did that to stimulate the development of new businesses and facilitate the expansion of existing companies through a broad range of initiatives including direct financial and non-financial supports.

We are investing in small firms in the earliest stages of development through Enterprise Ireland’s €175 million Seed and Venture Capital Programme.

We are committed to developing the venture capital landscape through the €500 million Innovation Fund Ireland.

A Cheann Comhairle, as I said earlier, SMEs benefit from our targeted investments but also from initiatives in the wider economy.

The Government’s new integrated strategy for Trade, Tourism and Investment creates a platform for small firms to maximise their potential either as suppliers to exporting firms or as exporters themselves.

The strategy sets a number of priorities and targets to be achieved by 2015.

It will increase the number of new export-focussed jobs by over 150,000 in manufacturing, tourism and traded services, with a similar number of indirect jobs also created.

It will increase the value of exports by indigenous companies by 33pc.

It will diversify the destination of indigenous exports.

It will increase overseas visitors to eight million.

It will secure an extra 780 inward investment projects through IDA Ireland.

The UK market, which is key to many small indigenous firms, will, along with the US, continue to be a key market for Ireland.

However, there is also considerable potential to expand business with our eurozone partners and the new and high potential growth markets such as Brazil, China, India, Russia, Japan and the Gulf States.

Our small firms will face obvious barriers like language and cultural attributes, as well as different business practices and regulation.

The coordinated effort of all agencies will be focused on helping our small firms overcome these barriers, win new business, succeed in new markets and reach their potential.

In doing so, Government is both providing leadership and taking action in support of small firms.

Of course, these facts are absent from the Opposition’s analysis of the Government’s economic strategy.

One thing that has come across strongly in my dealings with small business owners is that they thrive on confidence.

They need consumers to have confidence and they themselves must have confidence to invest in the knowledge that Government is doing what it can to provide the best possible operating environment.

There have been positive signs in recent weeks.

Redundancy claims are down and recruitment agencies tell me that there has been a healthy increase in jobs advertised.

Three-quarters of the jobs advertised are for newly created positions.

Even more importantly, there has been a 55pc increase in job placements comparing quarter three this year with quarter three last year.

This is on the back of Ireland’s improved trading performance.

The value of exports in July was up by 12pc compared with last July.

Enterprise Ireland say their firms will recover about 70pc of the export earnings lost last year.

These are the messages that will encourage small business-owners and consumers and engender the confidence we need to get the economy growing again.

Compare this to the uninspiring and negative sentiment that emanates daily from the benches opposite.

Their rhetoric does a disservice to those small businesses who are out there succeeding every day and it also discourages potential entrepreneurs and consumers.

I want to now deal with some of the more puzzling aspects of Fine Gael’s motion.

Fine Gael is known to complain about lack of information from Government on economic policy.

They also claim that this Government has broken a promise to introduce a loan guarantee scheme.

I have to say that this is quite bizarre given the information I provided on the floor of this House less than a week ago.

If I can refresh the Deputy’s memory, my officials are working with their colleagues in the Department of Finance, the Credit Review Office, Enterprise Ireland and Forfás to address access-to-credit issues for viable SMEs including the option of a targeted loan guarantee scheme.

The most recent meeting was held on Monday of last week.

A range of issues relating to SME credit were discussed and follow-up action is under way.

These meetings are aimed at building on the already substantial progress that has been made in identifying the critical elements for further initiatives.

It is important that any new initiatives complement rather than substitute the main banks’ lending commitments and activities under the recapitalisation package and that they represent value for money from the taxpayer’s perspective.

A Cheann Comhairle, this activity can hardly be described as equating to a broken promise on behalf of Government.

Quite the contrary.

This activity is evidence that this Government will take every step necessary to ensure that small firms have access to the credit they require while balancing that with ensuring that banks meet their obligations and taxpayers are spared undue risk.

I am concerned at the implication in Fine Gael’s motion that initiatives should be progressed in haste and a blind eye turned to the outcomes expected from the banks in light of measures already taken.

Even more worrying would be Fine Gael’s pursuit of a strategy that overlooked the potential exposure to the taxpayer.

Let me say it again, the main source of credit for viable businesses is through a functioning banking system which has been well supported by the taxpayer.

The Fine Gael motion implies that they are willing to put taxpayers’ money at risk by promoting an all-pervasive loan guarantee scheme and allowing the banks off the hook.

They would redirect responsibility from the banks to the taxpayer.

The Government, on the other hand, is focusing on targeted measures for businesses that are critical to our economic recovery and indigenous export growth.

It is clear, then, that the Government has a multi-faceted approach to supporting small firms.

Our strategy ranges from the one-to-one advice and grants provided through the CEBs to a range of supports from Enterprise Ireland to delivering spin-off benefits from IDA Ireland and Science Foundation Ireland activity to our ambitious strategy for international trade and investment.

Government is a complex business.

The idea of some ‘silver bullet’ that the Opposition is prone to turn to in order to mask the absence of a proper economic strategy is both disingenuous and dangerous.

This Government will not be distracted from implementing its wide-ranging strategy for economic recovery.

This motion is just one more example of the Opposition taking a populist and narrow stance on an issue rather than demonstrating an understanding of the complexity of the broader business environment.

And for that reason, a Cheann Comhairle, I recommend the Government’s counter-motion to the House.

ENDS

Bernard Mallee, Press Adviser to Minister Batt O'Keeffe, Department of Enterprise, Trade and Innovation, on Tel: +353 1 631 3944, Mobile: +353 87 9173022, Email: bernard.mallee@deti.ie