Fine Gael abandons small businesses to just sink or swim

Fianna Fail and Sinn Fein both recognise that SMEs are the spine of the private economy, writes

THE window is rapidly closing to rescue a large part of the private economy. Many SMEs are in the water, drowning. While this happens, Minister for Finance Paschal Donohoe found time to address first-class passengers, on May 8 for PwC and again on May 15 for EY.

Clients could put a question directly to the minister for finance in the middle of the biggest economic crisis since the 1930s. The sessions were slotted between EU Finance and Irish Cabinet meetings and stretched over two hours. This was for the who’s who of corporate Ireland. There are 1,100 large businesses representing about 0.20pc of all firms. The questions were marshmallow-soft: the minister knew he was on the nursery slopes. These firms are in the queue for lucrative public contracts, so it was a chummy workout, first-name terms, polite; just like the Bilderberg Summit, no one was losing their jobs.

But there wasn’t a single question about how to save SMEs, so I contacted the organisation representing Ireland’s largest private workforce. Had they a similar session lined up?

Apparently not, but ISME can produce a one-line email acknowledging receipt of a request for a meeting with the minister for finance. It dates from March. Ditto from the Taoiseach.

The organisation wanted to have a word in his ear about the 1.1 million workers employed by SMEs, the firms with under 250 staff. You can add to that 300,000 who work for themselves, the selfemployed.

The minister, it seems, doesn’t want to engage with SMEs about a rescue. Here is why — there is to be none. There is, instead, a deemed level of acceptable losses. That is clear, not from the wilful blindness to multiple calls for stimulus ranging up to €15bn to reboot the economy but from the minister’s only animated response.

Talking to PwC, Paschal Donohoe mentioned a small business just once, a local coffee shop. But he talked about stimulus historically; the wage subsidies, rates waiver, tax deferrals and restart funds (capped at €10k). That is to be the sum total, there is to be no other. Want cash? Go talk to the banks about adding more debt.

So why, I wondered, would an economist wilfully ignore logic? After all, targeted stimulus comes back quickly n taxes on income and spending. Don’t do it and you’ve a longterm hole in receipts.

It also means prolonging high unemployment, not just into next year but over the next three, so welfare costs go up. Finally, failed business owners will default on debt and that destabilises banks who tighten credit. It is a loselose. Whenever logic fails, look for other causes.

You’ll always find ideology lurking within the permanent government; it comes with the territory. It is precisely what guided policy after the last crisis when the SME sector was treated to steerage class terms.

In April 1912, when RMS Titanic went down, the survival rate of first-class passengers exceeded steerage by a factor of two-and-a-half times. Mindset influences outcomes, even if we like to pretend otherwise. A hundred years later, class difference is still applied.

The Department of Finance last time around, under the troika, raised the drawbridge, limited job losses to those outside the portcullis and secured a gilded early retirement scheme for the civil service elite. A sister department was set up to facilitate Labour, the Department of Public Expenditure & Reform.

Paschal Donohue’s secretary general there is Robert Watt. A Labour mindset is still firmly rooted in this part of the State sector. SMEs are not its natural heartland. Those in the payroll of the State talk about rights, SMEs are preoccupied with risks.

Checking sources last week, it would seem that Fine Gael’s focus in the Programme for Government talks is on big business and exporters, not domestic business. Why is this? Because Fine Gael has gone corporate, arbitrating between the 1pc and the State itself, captive to both, or so it seems.

It has indigenous SMEs tucked away, in its head, in steerage. Is there anyone in the inner sanctum, the politburo, to advocate for small business? Sadly no one has taken business risk with their own capital, got up early in the morning and made the wage bill by the end of the week.

So the race is on between structural failure of the SME marketplace and the formation of a new government. Even then, will the new cabinet have enough time and willingness to wrest power back from the crisis politburo in time?

There is much to be done, starkly summarised by the National Competitiveness Council last week to support small business, workers and owners alike; on childcare, housing and reform of liability insurance and the legal marketplace.

The Greens’ only interest in business is how to incentivise it towards the green economy. It is pretty much what you’d expect — no SME advocate there.

SME workers and owners need to look towards Fianna Fail, who bristle with intent for SMEs. Micheal Martin gets it, the spine of the private economy is the battleground to be fought over with their new rivals, Sinn Fein.

But be clear: Mary Lou McDonald and Pearse Doherty are sharply attentive and listening to SMEs. Both parties sense Fine Gael has deserted its post — perhaps jaded, perhaps poorly led, it matters not.

The latent political power of SMEs is being fought over by Fianna Fail and Sinn Fein. Whoever wins will dominate Irish politics for years to come.

Just ask those in the queue for jobless benefits next year.