The Cedar Lounge Revolution

And turning to our exalted second chamber, what of discussion of the economy in the Seanad? February 17, 2009

What indeed?

Senator Joe O’Toole:    I have regularly raised the issue of bank recapitalisation, but every time I raise this question people tell me why we need to do so. I have no problem with recapitalising the banks but can someone explain to me how that can lead to the release of credit to small shopkeepers and other small businesses?

Senator David Norris:   Hear, hear.

Senator Joe O’Toole:  It has not been explained. It has not worked in the United Kingdom or the United States. The British chancellor was almost in tears because after giving billions to the banks over there, they told him to go away. I am not trying to catch the Leader out on this, but if he does not know the answer I would like him to check it. Banks are owned by their shareholders who decide what is to be done with the money. If we put money into the banks, which is described as recapitalisation, the bank management decides what happens next. They can only do what is in the best interests of shareholders, not what is in the best interests of the Government, the economy or the country. That is the law of the land. I want to know how putting money in at one end ensures it will come out the other. I cannot simplify it any more than that. Since last September, I have asked this question of everyone who has anything to say about the economy, but nobody can indicate to me how it can happen. I had a discussion with the Leader about ways to release money when we had the issue concerning the ACC, the ICC and credit unions. As of now, however, I do not see how it can be done.
As regards the pension levy, I agree with Senator Fitzgerald’s point that we have managed to split the workforce between the public and private sectors. We should look at this on the basis of what is right, fair and honourable. If public servants need to pay more for their pensions, they should do so. On the other hand, there is absolutely no justification, understanding or equity in a situation when people earning huge amounts of money – the 35,000 millionaires that the Minister for Education and Science, Deputy Batt O’Keeffe, refers to regularly in his weekend speeches – are not asked to pay one shilling above and beyond the 1% levy that everyone else is being asked to pay. The Government should face up to the difficulty and recognise that it should introduce an extra tier of taxation. That would at least let people see that there is fairness and equity in what is happening. Until that happens, people will react against the measure.
Somebody asked if strikes are a good thing. They are never a good thing but there is a time when people must express their views on something – not to achieve an objective but simply to say “We will not accept this. It is not good enough”. That is the danger of what is happening now. The Government should look at the proposals, deal with them in the broader context and tell us where they lead. It should also tell us how it is going to deal with high earners who are not being asked to pay extra.

Senator Ned O’Sullivan:     Will the Leader arrange a debate on the future of the horse racing industry, which, like every other sector of the economy, is facing a rather uncertain future? It is a very big industry and creates many jobs at various levels, from breeding and training to racecourse management. It regularly injects a large amount of money into small towns such as Kilbeggan, Mallow and Thurles, in addition to the major festival locations such as Fairyhouse, Punchestown, Galway and Listowel. Sponsorship has been the most significant factor in making Irish racing so important and the generosity of sponsors has never been questioned. I was delighted to see that Punchestown was able to announce that it had secured its five major sponsors again for this year’s festival meeting. That is wonderful but other stories are beginning to emerge about difficulties at smaller tracks. I ask the Leader to arrange a debate on what is a crucial industry for this country.
It would be remiss of me to talk about racing today without mentioning an outstanding sporting performance by A.P. McCoy who rode his 3,000th winner yesterday in a career which has been a showpiece for Irish racing and for the world.

An Cathaoirleach:    That is not relevant to the Order of Business.

Senator Pearse Doherty:   …I refer to the discussion on the banks and the need to get our act together. We are hearing the Government is thinking about imposing cuts on high earners in the banks. We are hearing it is considering a two-year moratorium on home repossessions. We are hearing it is considering that lending is made available to small businesses. These are the proposals that my party and others on this side of the House argued for when we dealt with the issue in the autumn. These are the same proposals we made when dealing with the Finance Bill a few months ago. The Government is behaving in a reckless manner by not listening to the concrete—–

An Cathaoirleach:    We cannot have a debate now.

Senator Eugene Regan:    I refer to the Taoiseach’s speech at the Dublin Chamber of Commerce function last week, in which he—–

Senator Terry Leyden:    It was an excellent speech.

An Cathaoirleach:    We are taking questions to the Leader now.
Senator Pearse Doherty:     —–proposals being made by the Opposition that make sense. This is the economy for slow learners. The Government is in the slow lane.

An Cathaoirleach:    Does the Senator have a question for the Leader?

Senator Jim Walsh:    To follow on from the point made by Senator Regan, it is good to see the engagement between the Opposition and the Government because those of us who occasionally have the opportunity to observe what is happening in other jurisdictions will have noticed that the British Minister, Mr. Hill [erm... does he mean Miliband?] , made a comment at a party meeting that the world was facing the worst economic situation in 100 years. In a Freudian slip, the British Prime Minister last week in the House of Commons mentioned the word “depression”. Yesterday the American President gave an indication that it could take 15 to 20 years before we come out of this situation. All the signs are that this is as bad as the Great Depression. Everyone knows it took 20 years for the Great Depression to pass and it took the Second World War to change the scene.
I agree with the request for a debate on the recapitalisation of the banks and in particular with regard to the releasing of credit. I refer to the Dutch Government model in which it took on board 80% of the debts of the Dutch bank. There was a devaluation of 10% which was given as a cash contribution to the bank and no other cash contribution was given, in the hope that by parking these debts and taking them off the balance sheets of the bank, this would release credit through the banks. Some business people who deal in fairly substantial sums with the Dutch banks tell me that the situation there seems to be better than in any other country in Europe. I suggest this should be considered as a model for us. It is a case of trial and error as no government seems to have come up with the recipe for a solution.
Senator O’Toole referred to the divide between the public and private sectors. This will be so destructive that it could accelerate the difficulties we face and insolvency could be the end game for many countries, including our own. As Senator Hanafin said, it could well be others who will be telling us what needs to be done.
Public service salaries are too high. Our pensions are unsustainable. The extra contribution we are now making towards pensions do not in any way meet the cost of those pensions. There is still a need to reduce salaries by a minimum of 10% across the public service and there is a need to reduce numbers by a minimum of 15%. These will have to be the people who are not performing in the public service. If we fail to do this we will not be able to address the difficulties.
I refer to the reasonable points being made by Senator Alex White. The Taoiseach has been saying for quite a considerable time that there is a hole in the public finances amounting to €16.5 billion to €17.5 billion and this must be addressed over a period of four to five years. Other economists are saying it could well be north of €20 billion. All we have done with our €2 billion is scratch the surface—–

Senator Alex White:    It is one and a half—–

Senator Jim Walsh:    —–and everybody should recognise that. I appeal to the social partners to come and play their part as they have done in the past.

Senator Jim Walsh:    They have also been instrumental through benchmarking and otherwise in adding to the depth of the problems we face. We need solidarity from both the private and public sectors and turning on each other will be counter-productive. I hope we can move in that direction. The change in the mood in the House today has been a step in the right direction which I hope will last.

Meanwhile, if you like that… well, you’ll love this…

Senator Donie Cassidy:    Senators Fitzgerald, O’Toole, Alex White, O’Reilly, Norris, Coghlan, Buttimer, Doherty, Hanafin, Walsh, Healy Eames and Quinn gave the House the benefit of their experience, made proposals and expressed opinions on the banking challenge facing the country, Government policy and our low tax regime. Interest rates are at an unprecedentedly low level. Anyone who read page six of the Irish Independent on Saturday will have noted that Bank of Ireland and Allied Irish Banks are offering a rate of less than 3% to first-time house buyers. As someone who had bridging finance in 1980, I have seen both sides of the coin. Those with a secure job who have confidence in the market have an opportunity to buy their home because they will not get better value for money.
Recapitalisation of the banks is necessary. Many of us will have seen President Obama make his first address to the American nation. Yesterday, he visited small towns where unemployment has increased from 4.6% to 15.3% in 12 months. Some countries may be in a better position than Ireland but many others are worse off than we are. Members of both Houses will have to channel their energies, expertise and focus into job creation. This can only be done by looking after the small and medium-sized businesses which kept the country going in the 1970s and 1980s. During those difficult periods, we looked after these enterprises through the Government bank, the ICC. The ACC, as it was then, helped the farming sector in the 1970s when agriculture experienced major difficulties.
Anglo Irish Bank is now a State bank. Let us look after the innovators and creators who are creating wealth and jobs. We must seriously consider creating competition in the marketplace if certain banks refuse to play their part, especially those which did not accept the State guarantee. Senator Hanafin cited a number of examples. The Government and Legislature are duty bound to look after Anglo Irish Bank, a State bank which can provide credit and replace the ICC.
Senators have expressed diverse views on this issue. We must take steps to give hope and confidence. Ireland has some of the most able and creative people in the world and the economy is one of the most successful in the world. For the past 12 to 18 months, credit, the lifeblood of commerce and business, has not been available. It must be made available.
A number of Senators present in the Chamber have played a leading role in society over the years by giving exemplary service to the nation. In my humble opinion we must give serious consideration to creating competition for the banks. Senator O’Toole was a leading figure in the social partnership process, of which we are still part. As he correctly noted, in his experience shareholders come first. In that case, the only institution which will look after small family businesses and medium-sized enterprises which employ people throughout the country is a State owned bank. The Government will have to take a lead in this regard. Our only obligation is to look after the bank we own. Perhaps the Minister will outline whether this proposal is a runner. We should consider this approach.
Many Senators noted that energy costs are too high. I watched the programme “One to One” on RTE last night. I am an admirer of much of the work done by the ESB which has performed an exemplary role during the years in providing a service all day, every day throughout the year. The chief executive officer of the company, Mr. Padraig McManus, gave a magnificent interview last night on his vision for the ESB in the coming years. Under Mr. McManus and his predecessors, the ESB has been a success story both here and abroad.
Be that as it may, as Senators pointed out, we are in a time of crisis and energy costs are of the essence. It is unacceptable that energy charges to industry have increased by 25% in the past three or four months. The position is unsustainable and must be addressed by the Government or Commission for Energy Regulation. All sides of the House call for action to be taken immediately to keep the economy competitive. Energy costs for some private dwellings have increased by 50%. Senior citizens who need heat and electricity have been particularly affected and must be supported during the downturn. Senators must raise the issue of energy costs when the Minister comes to the House. At the start of the term, I stated the House would prioritise the issue of energy until a satisfactory outcome is secured from Bord Gáis and the ESB.

The debate meanders…

Senator Donie Cassidy:    When one adds income tax of 41%, they [top earners] pay 45% of their income. They belong to the 6.5% of the population who pay 50% of all income tax paid in the State.

Senator Pearse Doherty:    Public sector employees who earn €40,000 pay more than 50% of their income in tax.

Senator Joe O’Toole:     On a point of order, we were warned by the Government not to call the levy a tax.

Senator Donie Cassidy:    On a point of information, whether it is a levy or tax, it comes out of one’s wages.

Senator Ivana Bacik:    That is what we say.

Yeah, and not just you guys…

Senator David Norris:    The Leader is learning.

Senator Donie Cassidy:    I am trying to bring balance to the House, given the comments made. We must not forget that 50% of all the income tax paid is paid by 6.5% of the people. Some 38% of people working pay no income tax. We must bear in mind that if there are no golden geese, there are no golden eggs.

Senator David Norris:    The goose is not golden but the eggs—–

Senator Donie Cassidy:     We must know—–

Senator David Norris:    That is a goose with magical properties.

Senator Donie Cassidy:    We must know from experience that those who take the risks must have a chance to make a profit. We must also know from experience that it is not a crime to make a profit.

Senator Joe O’Toole:    Hear, hear.

Senator Donie Cassidy:    We want to encourage the Irish-owned small and medium-sized family businesses, in particular, who employ 880,000 people. They will be here next year and in the years after that if credit is made available by the banks. As legislators, we have a duty to ensure we bring this point home. Our party leaders are meeting this afternoon. We are the representatives of the people who work for those who have provided employment for a long time.

At this point, once in slightly less than a week, I put my head in my hands…