Link to view Joan’s speech
Deputy Burton last night outlined to the Dáil the Labour Party’s proposal to establish a Strategic Investment Bank to address two critical market failures: the shortage of SME financing and the critical shortfall of investment in infrastructure.
We propose an initial up-front investment of €2bn from the National Pension Fund, into a new vehicle which will raise funds to channel into Ireland’s SME sector and into financing vital infrastructure. Rather than pumping this money into a failed banking system, we propose that it be ring-fenced for productive, job-creating investment.
The SIB will be both a commercially driven business bank and a public project financing powerhouse. It can be a key driver of green energy, micro-finance and next generation broadband.
Has this been tried before? Yes, in the recent UK budget the British Chancellor for the Exchequer, Alistair Darling, proposed the establishment of a green investment bank to support investment in the eco-innovation and environmental sector.
France last year launched its own Strategic Investment Fund tasked with taking long-term, minority stakes in French companies with a view to catalysing further private sector co-financing.
Labour’s Strategic Investment Bank has been modelled on the hugely successful KfW bank, based in Germany. Established as part of the Marshall Plan, KfW has played a leading role in supporting investment and development in Germany. KfW is the sixth largest bank in Germany, one fifth the size of Deutsche Bank, and one of the largest capital issuers in Europe.
Over the past two years, the Labour Party has consistently called for investment in job creation to be put at the top of the agenda, but our government can’t see past bailing out Anglo Irish Bank and Irish Nationwide.
Fianna Fáil’s ad-hoc response to the crisis in Irish banking has been characterised by a string of broken promises. We were told that the bank guarantee would be the cheapest bank rescue in the world. This has turned out to be a disastrously bad call, and has led to a seemingly endless series of bailouts and creeping nationalisation.
So far, we have seen no upside in the real economy. The credit famine continues. People continue to lose their jobs in record numbers. They have seen their hard-earned pension pots go up in smoke. Businesses are going to the wall because of lack of credit and a lack of demand from hard-pressed consumers.
Most of all, we are blighted by soaring youth unemployment, particularly young men losing their jobs in the construction sector.
In just two short years, unemployment among under 25s has more than doubled, from 28,700 to 66,800, two thirds of these being young men. This cohort makes up 1 in 5 people on the dole.
When the world renowned economist, Danny Blanchflower, spoke at the Dublin Economic Workshop, he talked about the devastating long-term effects that persistent youth unemployment can cause in society and for the economy.
All the research shows that the scars of unemployment at a young age can last decades, with people losing confidence and the will to work and improve their lot. Labour’s SIB will help put these people back to work before it is too late.
Cowenomics is all about dishing out pain to individuals and families. Fianna Fáil has destroyed the economy. Everyone knows that tough medicine is needed to close Fianna Fáil’s fiscal deficit, but we also need to give people hope by investing in our future – that’s what Labour’s Strategic Investment Bank is all about.