When I heard the Minister’s offering earlier I was reminded of a song that was often sung when I was a child, God save Ireland!, said the Heroes. God needs to look kindly on Ireland because what the Minister for Finance offered today and what the Taoiseach offered yesterday is so incomplete and lacking in vision.
It is so unsure and uncertain because we have been down this road of adjustment, saving the banks, early budgets, rescue plans and recovery proposals so many times since that night in late September 2008 when the two Brians rushed to save Anglo Irish Bank, Irish Nationwide and the others. With so many rescue bids I have, unfortunately, concluded the lack of a strategy or a clearly thought out programme by the Government will bring this country into a lost zombie decade, reflected in the unemployment figures announced by the Taoiseach this morning.
I remind the Minister that last September I proposed the banking rescue should follow the Swedish model.I warned against the Japanese model. In the early 1990s after the Cold War, Japan’s economy was devastated by a burst property bubble with house and land prices tumbling and undermining the property-related assets and loanbooks of many Japanese banks.
Rather than encouraging their banks to come clean on their balance sheets and write off their bad debts, the Japanese Government facilitated an asset quality cover-up whereby the bad debts were not written off. The result was that the problems were stored up for the future and multiplied to the point where the banking system all but collapsed under the weight of this unacknowledged toxic debt. The result was Japan’s lost decade.
The Labour Party will not commend Fianna Fáil, or the two Brians, as it leads our young people into another lost decade, based on a Japanese model rescue plan. What the Government delivered today and yesterday is a disgrace. It does not give people hope and confidence for the future. Before lunchtime today, the Taoiseach suggested with the bank recapitalisation programme of €8 billion next week, he would get tough with the banks’ top guys who will see a 25% reduction in their salaries.
The top guys in the banks do not earn salaries like public servants. They get compensated in a variety of ways. Their compensation packages have fallen from between €4 million and €6 million to between a mere €1 million and €2 million. We do not know the full details because they are confidential even though we are bailing them out. Is the Minister claiming that the big plan is to reduce these guys’ salaries by 25% to between €750,000 to €1.5 million? Public servants, the nurses, the gardaí, the teachers, after ten years’ service, earn a basic of €45,000 plus various allowances.
Does the Minister expect them to cheer him when they are subject to a 7.5% levy while the bankers’ earnings tumble from €4 million to €1.5 million? On what planet is the Minister living? In America they say, “God bless America”. We need God to bless Ireland to get out of this mess.
After the 1929 great crash and the tsunami of 4,000 bank failures across the United States, the then US President, Herbert Hoover, came up with a cunning plan to restore the economic fortunes of the US. He slashed Government spending to balance the books. The result was the Great Depression. After immense human suffering and the enlightened intervention of his successor, Franklin Delano Roosevelt, with some false starts, a path out of the Great Depression was charted for the US.
Ireland needs a new deal, not a bum deal like those we have had to listen to yesterday and today with short-sighted spending cuts. We bail out our banks while not providing any hope for credit resuming to small and medium-sized businesses. While the Minister allows the banks to hide the levels of their property loans by one device or another, the size of those loans on their balance sheets will freeze the banks’ genuine capacity to lend or expand the economy.
One developer, Mick Wallace, said on “Prime Time” last week that he is not paying interest on his loans. The implication is that his bank is rolling up the interest and capitalising it into the loan. If the Minister is contemplating allowing our banks to do this, does he realise it will take all the resources of the banks and completely kill their capacity for new and fresh lending to small, medium and large businesses employing people?
The US President, Barack Obama, has been in office 16 days while the Taoiseach and the Minister for Finance have been in office for 273 days. We have had 273 days of indecision, prevarication and steady economic decline. Many of their early days in office were wasted by their baseline desire to help the friends they had made in the build-up of the Celtic tiger property bubble.
As Minister for Finance, Deputy Brian Lenihan knew from the minute he stepped into office that there had been extraordinary dealings in the shares of Anglo Irish Bank by one of the largest industrial companies in the States.
The Minister also had a weak Financial Regulator. I do not believe he could have eyeballed the office cat in the banks. Yet, the Financial Regulator was asked to eyeball some of the most powerful and richest people in the country to tell them what they were doing did not seem quite right. Deputy Sherlock listened to one bank auditor yesterday at a committee declare that although he was aware of large loans to his bank’s former chief executive, he was not aware what they were.
The Minister will some time soon introduce a further rescue package for the banks. At the same time, in the Dublin West constituency, which we both share, I have a case of a former civil servant married to a garda with a family of four children. They bought a larger house for the family and she gave up her job when she had a fourth child because she could not afford the cost of child care.
The current cost of her mortgage is €1,450 per month. From yesterday she is losing money from the child care allowance and her husband and she will have a levy costing them 6.5% to 7% gross, or approximately 4.5% after tax. That is in addition to the extra €2,000 the emergency budget cost them.
This is a middle income family living in Blanchardstown in the heart of my constituency and that of the Minister. She is part of the coping classes, those who work all their lives and who do not really blow it on debt. They like a nice holiday and want their kids to go to college. They have the same aspirations as many in this House. She stated: “The very poor have a voice, the very rich do not need a voice, but the middle incomes have no voice because nobody is out to help or assist [her].”
This Government is scapegoating the public sector. Public sector reform, pay and pensions are certainly part of the solution but the public sector did not create the property crash. It did not create the tax breaks that the then Minister for Finance, Deputy Brian Cowen, continued and expanded to keep the bubble growing. The public sector did not create the crash; Fianna Fáil and Fianna Fáil-led Governments first blew the bubble to ridiculous proportions, which caused the crash.
When the Government wants to scapegoat the public sector, it should think again. In my own constituency, approximately a quarter of the population are immigrants. If it were not for our teachers, operating under quite difficult circumstances in my constituency and that of the Minister of State, Deputy Trevor Sargent, we would not have been able to deal with the integration of a significant number of immigrants who were attracted to Ireland by roadshows by the former Taoiseach and former Tánaiste, Deputy Harney, in places like South Africa. They encouraged people to come to Ireland.