Fianna Fáil to push for a quicker SME debt solution

Fianna Fáil is to push for a quicker resolution of outstanding SME debt and an expanded PRSI scheme for the self-employed as part of its framework agreement to support a minority government.

Thousands of businesses continue to struggle with legacy debts accumulated during the financial crisis despite significant decreases in the past year.

Figures from the Central Bank show a near-11% reduction in outstanding SME debt during 2015.

Nonetheless, many remain heavily indebted with the total outstanding stock of SME credit standing at €43.5bn.

Having reached an agreement with Fine Gael to support a minority government, Fianna Fáil has committed to tackling businesses debts much as they’ve pledged to help struggling homeowners.

The party’s initial focus will be on encouraging the Central Bank to update and extend its existing targets for dealing with SME debt, according to Fianna Fáil finance spokesperson Michael McGrath.

“One of the reasons for the lack of new lending in the SME sector is the overhang of legacy debt. We will push for the Central Bank to publish updated targets for dealing with SME debt and ensure these are extended beyond the state-supported banks,” Mr McGrath told the Irish Examiner.

Last year, the Central Bank said it believed two-thirds of non-performing SME loans were likely to “return to viability” over time.

It suggested that in cases of significant property-related debts the viable business would have to be separated from such legacy debt, where possible, as part of restructuring agreements.

The underlying issue of SME debt has been thrust into the spotlight again recently with a growing fear of loans being offloaded to vulture funds.

Ulster Bank recently wrote to business customers warning that their debts could be bundled up and sold off if they failed to repay or refinance their loans in a matter of weeks. Only loans dealt with by its so-called problem debt management unit which were in arrears or “outside current arrangements” were contacted.

Fianna Fáil has also outlined its intention to pursue a State Enterprise Bank to extend credit to SMEs.

The framework agreement struck earlier this week also includes a commitment to examine an expanded PRSI scheme for the self-employed which could allow business owners opt-in to making additional 4% PRSI class A contributions.

“PRSI is regarded as equivalent to an income tax by self-employed people due to the tenuous link between benefits derived and the amount paid. We want to change this so there is a genuine PRSI safety net for the self-employed.

“Self-employed people have no entitlement to an invalidity pension and occupational-injuries benefits which employees can avail from contributions made at the PRSI class A rate,” Mr McGrath said.

However, analysts said not all the plans would come to fruition.

“Not all of these policies will see the light of day, and some shouldn’t, but it is clear that housing will be the key focus area for the Government over the coming months.

“Finding agreement on the specifics of these policies will be the next major challenge in the new political order of Ireland,” said Goodbody chief economist Dermot O’Leary.


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