TAOISEACH BRIAN Cowen appears to have rowed back on proposals to introduce a loan-guarantee scheme for small business, first suggested by the Government in January.

He told the Dáil the issue “has to be looked at very carefully” because “we have already given credit lines from the banks to ensure, on the basis of their successful recapitalisation, that they’ll be in a position to have credit lines to business”. Mr Cowen said “the issue of the State being further guarantor in respect of loans to business in addition to what security business is already providing is something that has to be very carefully considered”.

He highlighted instead the “many supports in place from Enterprise Ireland, which are assisting small business” and had helped 1,800 client companies. The working capital needs of small business “are best provided for once the full recapitalisation of the banking system is in place and that’s at an advanced stage”.

The Taoiseach was responding to Fine Gael leader Enda Kenny, who accused the departments of Finance and Enterprise of engaging in a “great deal of messing” about a loan-guarantee scheme. The scheme “has not seen the light of day and thousands of small Irish businesses are hanging on by their fingernails”.

In January Tánaiste Mary Coughlan, then minister for enterprise, said the department was examining the feasibility of introducing a loan-guarantee scheme for small and medium-sized enterprises. In September her successor Batt O’Keeffe said detailed work was under way on a Government-backed loan scheme and he was hopeful the detail on its operation could be finalised shortly.

In the Dáil Mr O’Keeffe told Labour enterprise spokesman Willie Penrose that his officials were working with the Department of Finance and a number of agencies to “address access to credit issues for viable SMEs, including the option of a loan guarantee scheme”.

Mr Penrose said a review on the matter had been under way since June and it demonstrated a “mind-boggling level of apathy and lethargy”. But Mr O’Keeffe said it was “important that any new initiatives complement, rather than substitute, the main banks’ lending commitments and activities under the recapitalisation package and that they would represent value for money”.

During Leaders’ Questions, Mr Kenny said “one-third of county enterprise boards have no seed capital. They can’t help anybody except pay their own staff”.

A loan-guarantee scheme “operates in many countries and, where they’re well designed and well constructed, they’re commercially driven and they’re self financing”.

Mr Kenny said Irish banks “have only been used to lending where property and assets are involved and they have never been used to lending to small Irish businesses”. There were 80,000 small businesses in the country, employing almost 800,000, he said. “You cannot solve every problem but this is one you can solve,” he told the Taoiseach.