Following a briefing from the Deputy Leader and Spokesperson on Finance, Deputy Joan Burton, the Parliamentary Labour Party has decided to vote against the government motion this evening seeking to renew the blanket bank guarantee.

Speaking after the meeting Deputy Burton said:

Today’s vote is, in effect, a vote of confidence in the government’s banking strategy. Two years after the first guarantee, which we were promised would cost nothing, we are faced with enormous bills, credit is still scarce, and the cost of Government borrowing is soaring. The Labour Party has no confidence in the government’s banking strategy. We stood alone in opposing the original guarantee in September 2008 and we have been more than vindicated by developments since.

Labour doesn’t do blank cheques. We were told that the original guarantee would be the cheapest bank rescue in the world, but it has already cost Irish taxpayers more than €30bn, and the bill keeps rising. Every time that Brian Lenihan or Brian Cowen has tried to put a line under the bank losses, they have been found some months later to have completely underestimated the scale of the problem. They scoffed when the IMF suggested last year that the total bill could hit €25bn, but this has already been surpassed.

We are being asked to extend the guarantee today, but we are not being told yet what the cost of the last blank cheque will be – the Government are insisting on voting this through, but they wont tell the taxpayer the cost of the Anglo bailout.

Two years on from the bank guarantee, the government has still made no progress with the introduction of a Special Resolution Regime for the banks. – once the guarantee was granted, the introduction of such a resolution mechanism was the only realistic way in which the financial burden could be shared appropriately between taxpayers and the banks’ investors.

As of midnight tonight, there will be €40bn of bank liabilities which will fall outside the guarantee, but without a bank resolution act, it will be difficult to ensure that those bondholders make a fair contribution to cost of the banking failure.

In the weeks before the original blanket guarantee was put in place the Labour Party called for enhanced protections for ordinary depositors, but these protections should not have been extended to the professional investors who took a punt on bank bonds. The Central Bank Governor, Professor Patrick Honohan, has since vindicated this position in his report on the banking crisis.

‘Omerta’ has been official government policy on the banks from day one. Labour was briefed on this motion today at 10am, and the Department were unable to answer basic questions put to them by the Labour Party, such as:

– Will Irish banks be facing a further funding cliff in December, when the guarantee extension is set to expire?
– How much debt has each institution guaranteed under the ELG scheme to date?
– How much debt is expected to be issued under the ELG scheme between now and the end of December?
– Will the government urgently introduce a ‘Special Resolution Regime’ for banks?
– Is a further guarantee extension, beyond December, envisaged?

The government has also choreographed events in such a way as to give the Dail the least possible time to consider the motion on the renewal of the bank guarantee. The Dail has been in recess for twelve weeks. When the government decided that the Dail would return on September 29th they knew that a decision would have to be made by midnight that night on the renewal of the scheme. Why was the Dail not brought back earlier so that it would have adequate time to consider the renewal proposal.

We are also being asked to make this decision on the guarantee a day before the Regulator is to disclose the full extent to the likely cost of bailing out Anglo-Irish Bank. We are told that this figure will not be announced until after the markets close tomorrow. At this stage the Regulator must know the amount, the government must know the full amount. It is simply not acceptable that the Dail should be asked to make a decision on the guarantee while the information on Anglo is being withheld from TDs.