Credit Guarantee Bill 2012- Second Stage

I congratulate the Minister on the initiative provided for in the legislation. In contrast to the previous speaker, I believe it is more than a trifling matter and will have a considerable impact. I will elaborate on that issue presently.
The Bill forms part of a strategy and sequence of actions taken by the Government that have put jobs to the fore. The jobs budget early in the lifetime of the Government included significant initiatives such as the lowering of the VAT rate on food in the tourism and catering sectors which continues to have a significant impact. The JobBridge initiative taken by the Minister for Social Protection, Deputy Joan Burton, has also had a considerable impact. The entire strategy of putting our public finances in order has won us international confidence, resulted in the postponement of the payment of the €3.1 billion promissory note and delivered a reduced interest rate on our borrowings, accruing savings of €10 billion. In parallel with these tangible achievements, we are increasing economic competitiveness, which is a sine qua non for creating employment.
All the actions of this Government are concerted and strategic and they are part of a pattern of activity with the goal of creating jobs. This is a further important step. The businesses which do not have sufficient collateral or which have a unique idea can access funding because of the State guarantee. That is critical for them and it is very important when the assets do not stack up. That is the reality for many small and medium enterprises and it will make a huge difference.
It is interesting to note the statistic that €125 million lent to small enterprises has a net gain to the Exchequer of €25 million, due to unemployment assistance not being paid and the multiplier effect in the economy from taxes and so on. The impact of lending in this area is colossal. We all have enough anecdotal evidence from our clinics and from canvassing that the banks have not been lending as freely as is required by the small enterprises. This initiative will help that. Not only will it be valuable to those who access it, but also it will help to accelerate general lending, and that is an important consideration.
The legislation will empower the Minister to give a 75% loan guarantee. It will allow him to establish procedures for participating institutions, to establish a 2% premium charge by the participating borrowers, and to set up eligibility criteria. A review is possible at any time and a contractor will be assigned to oversee the scheme. These are the salient elements of the legislation, but the important thing is the money will come on stream for small businesses. The State will enter into an agreement with each lender and will accredit the lender to be part of the scheme for a three year period. I understand from the Minister’s speech that it will be reviewed after a year, and that is important.
In 2007, 90% of loan applications by SMEs were successful, but that was down to 50% in 2010. The level of applications was down from 37% in 2007 to 31% in 2010. Professor Honohan has said that credit conditions are tougher here than in any other eurozone member state, and that was the case up until the creation of this Bill. It is important to note, with reference to what Deputy Boyd Barrett said earlier, that there are lending targets for the banks and that they are being scrutinised. This Bill has been welcomed by Mr. Mark Fielding, the CEO of ISME, which is significant because the people in ISME are at the coalface and will be affected by it one way or another.
We all accept the basic thesis of Deputy Boyd Barrett and his colleagues that we need a stimulus. While there has been a level of it, we need increased stimulus. That is not in question, but where the Deputy and his colleagues get it wrong is that we have to create the conditions. We had to win international confidence, we had to get the national finances in order, and we had to work in a strategic tactical fashion to arrive at a point where we would have the international confidence to get the stimulus in place. This is a good Bill, it is a step in the right direction and I hope it will work in practice. We will monitor that.

Senator Joe O'Reilly representing Cavan & Monaghan 2010. | An ExSite website