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Meanwhile back at the Seanad – the cutting edge of economic debate… October 7, 2010

Posted by WorldbyStorm in Economy, Irish Politics.
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They’re back. They really are…

Three or four contributions will suffice from last week. There’s stuff about the top and bottom in the last quote below. It’s hardly worth a read (I’m being serious). There’s boosterism from FF in the second last quote. Likewise as regards its utility. But the first and the subsequent quotes… ah, now that’s a different story…

This was referenced in Garibaldy’s regular piece on Sunday… but here’s the full text from the debate.

Senator Eoghan Harris:    Last night, the President pointed out that the Seanad was a place where we could be fearless in speaking, but I am afraid that we are always flunking. We have had months and months of worked up public anger about the banks, which has all been very well, but two groups benefited from the Celtic tiger, namely, the property groups allied with the banks and the public sector. While Anglo Irish Bank is a bad situation, it is a manageable one. What are not manageable are our public sector finances. The State’s liability in terms of public sector pay and pensions increased by €6 billion in the past five years. The elephant is in the room but no one will touch it. The media cannot touch it because the public sector is articulate and buys newspapers. RTE is a part of the public sector, The Irish Times is a trust and you are locked in and institutionalised. I say “you” because I feel distinct from Senators in this matter. There is a conspiracy of silence in the Oireachtas about the public sector. No one will tackle or speak about the issue or point out that, even had we managed Anglo Irish Bank and had there been no banking crisis, we would have a crisis in our public finances.

Nothing will be done unless we tackle the pay and pensions side of the public sector. Its members are the only group in the country who are permanently insulated against the horrors of the economic recession. They seem to feel they are entitled to it. There is no such entitlement. A member of a political party in the House told me last night that, when she was canvassing recently, she came to a house where a single woman had lost her job, had no one to turn to, was caught in a mortgage she did not know how to service and was told by her bank when she asked for interest finance that it was turning her back towards a mortgage. She asked what she could do and to where she could turn. At the next house, a public sector worker in receipt of more than €80,000 per year whinged about the levy. What kind of world does that person live in? Let us get a grip, starting in this House.
Before we have the budget and ask the productive middle class of the private sector, the productive blue collar workers or the welfare mothers to carry the can, we should turn to the fat cats of the public service to carry some of it. We should start with ourselves by taking a 20% cut before turning to any other part of the economy.

That’s some public sector worker on 80k [the figures from 2007 – from a Dáil Question from Joan Burton, are of a total of 414,000 PS workers, 10k of which were on €80- 90k plus, 7k on €90-100k plus, 15k on €100k plus. That’s gross income including O/T where applicable]. The good senator would be well advised to look at median incomes. Median incomes. Remarkable how a man who could have an input into the Irish Industrial Revolution could turn so completely, but then, if one looks at it in – ahem – psychological terms, one can trace a line where there has always been a scapegoat in the rhetoric, ‘Trots’, ‘Provo’s’, ‘hush-puppies’ and now ‘Public sector workers’. Always someone else to blame, or to point the finger at…

And then to argue that those in the PS whether on contract or permanent have been ‘permanently insulated against the recession’ when all the workers there have taken significant wage cuts whereas less than a third of private sector workers have suffered the same is at the least stacking the arguments in a most unlovely way. As for the underlying ‘permanent jobs’ argument, well, in an age where we have the bill for NAMA truth is that there are very few PS workers I can think about who believe that their jobs are entirely free from the danger of some form of redundancy in the future.

But irritating as all those are, most irritating is the nonsense about the ‘productive’ private sector. The NRA oversees the construction of roads. Educators educate. Nurses and doctors provide health care. Various agencies provide various services. None of these is, or can be (if we take the example of other countries), provided by the private sector on a mass societal level. It simply doesn’t happen. Private health care tends to fill certain niches and gaps, useful no doubt and very useful in certain places, but not appropriate for the levels of demand found in a state and as can be seen from the US context the push is in quite the opposite direction in order that universal coverage can be attained. In other words these are areas that the private sector cannot slot into, and that’s just grand. There are things, whisper it, that the private sector does much better, at least under the current model, than trying to provide social services. But that same private sector is utterly dependent upon workers whose health is reasonably good, who are educated free, gratis and for nothing by the state up to and including third level. Who can be given at least a modicum of an income when that same private sector fails, as we have seen it fail spectacularly. Who can travel to and from workplaces. And so and so forth.

And this idea that productivity is somehow measured simply in commercial transactions is perhaps one of the most pernicious to take hold in this discourse on the economic in this state. There are no commercial transactions in a nihilistic hollowed out state. It’s as simple as that and for various people to articulating such a bankrupt argument demonstrates the essential hollowness of their own arguments.

Anyhow, the response to this?

Senator Jim Walsh:    I used to be opposite Senator O’Reilly on the communications and energy portfolio. I disagree with his call for an emergency debate on electricity prices. It would be fair to point out that there have been reductions in recent years. While the point he raised about the PSO is an interesting one, it has been debated in the House previously.
Some have called for a specialisation of the Seanad. Last night, the President paid the Seanad a nice tribute, but she set us the challenge of raising the bar. We need to focus on four areas, three of which are economic in nature and fundamental to how the country evolves in the short, medium and long terms. These areas are banking, the deficit — this is a pseudonym for public overexpenditure — and unemployment. The fourth area is that of Northern Ireland.
Regarding the deficit, I agree with all of Senator Harris’s comments, in that there is a conspiracy among left-wing pseudo-socialists in the House and political parties to avoid discussing the significant escalation in the cost of our public service. Last week, I listened as the Committee of Public Accounts queried the most senior people working in our universities and the Higher Education Authority, HEA. I do not think anybody could have listened without being shocked and appalled at the unauthorised payments or the practices on allowances. Highly paid lecturers and professors in our universities receive up to 50% more than their counterparts in the neighbouring island. They lecture for six hours per week and work a maximum of 15 to 20 hours per week. These are part-time jobs. Every day of the week, evidence of this can be seen in the news media and on our televisions, where they are all pontificating about our economic and banking situations, what we should be doing and where we should be going. We heard nothing from them previously.
We need to look at the issue of the public service. It increased by 150,000 people in the decade from 1998 to 2008.

Let me slide seamlessly into some thoughts about third level. Truth is, and I work there some of the time, lecturers are overpaid. There’s no point in putting too fine a tooth on it. That’s the way it is. And it will, I suspect change. But to pretend, for this is a pretense, that lecturers wages or working conditions are characteristic of the PS as a whole is entirely incorrect. As for the increase in the numbers, the briefest perusal of OECD Reports will demonstrate that we have historically had low numbers by EU standards in our PS, that we had an increasing population during that time period and an increasing number of services. Does that predicate against certain reforms, not at all, but hey, why bother bringing a bit of subtlety and nuance when not merely can dig be got in at the PS, but there’s the opportunity to stick it to the critics of the current policies (and if you read on you’ll see that the memo went out to FF Senators to point the finger in one specific direction). Two for the price of one.

Meanwhile the following day… well, read on and see National Economy Statements from FF and FG…

Senator Marc MacSharry:    I join others in welcoming the Minister of State and am glad to have the opportunity to make some points on the economy. At the beginning of this session it is important that in our debate we communicate a strong and clear message that the Government and all Members of these Houses are prepared to take the necessary action and dispense with the pantomime politics which have taken up so much time over the past two years.
The airwaves seem to be exclusively filled with academic economists vying for position to ensure they are the ones chosen for the “Prime Time” slot, “The Frontline” slot or the “Tonight with Vincent Browne” slot. Last night, one wondered why we needed three of them vying for the position at the same time. They were comical in the extreme as one said to the other: “Don’t you agree with that, David?” This is the kind of pantomime and comic entertainment to which serious economic issues have been reduced.

We have had various reports placing the blame and these will continue. We had Professor Honohan’s report, the Regling and Watson report and the report of the Joint Committee on Finance and the Public Service, which had the help of experts to assess the role of macro-economic and fiscal policy in getting us into our difficulties. We are in those difficulties and must now, as the Minister of State said, reflect on some of the serious actions that have been taken over the past period of time. On the Order of Business today, which was largely taken up by commentary on this morning’s announcement and the economy, I was appalled to hear a Senator effectively call the Minister for Finance a liar, saying he had misled the Houses. At no time did the Government mislead the Houses, but it is proven to have acted on the best information that was given to it at the time. In the context of the bank guarantee, there is much talk suggesting we must have known about the solvency-capital situation. At that time, the only talk was about liquidity. As soon as it became evident, when we set up NAMA and began following the PwC and other reports to look under the bonnet of these reckless institutions which were backed up by a reckless national and international regulatory regime, we took the most aggressive action in the world to rectify the situation and to assess the haircuts, no matter how draconian. We did not package it up like the Germans did, who for example insured against them hoping that when they take a close look in ten years time the situation will be better. We faced up to our problems from the off, as painful as that has been and as the situation regarding costs has become clearer, we have faced up to that too.
Thankfully this morning, as a result of the determination and actions taken by the Minister for Finance, Deputy Brian Lenihan, and his Cabinet colleagues, we can reach finality on Anglo Irish Bank. There is no question as to the disgracefully unpalatable amount of money that must be put into it, but we have the total. We are also aware now of the additional amounts that are required for AIB and Irish Nationwide etc. We must now look at the bigger picture in their regard. If one considered the amounts stated this morning as sums going into our national debt, they would amount to 98.6% in terms of debt to GDP ratio. However, when one deducts cash the NTMA would have plus the National Pension Reserve Fund, the net GDP ratio is 70%. Obviously, as we contemplate the kind of borrowings that must be done to get the ship moving in the right direction during the next few years in order to reach 3% by 2014, that ratio will grow to approximately 105%. This is manageable. If we reflect on the 1980s, the ratio was from 100% to 120% and more. We got through that then.
Senator Norris and others reflected on the positivity in yesterday’s debate and on looking forward to what can be done. The public, rather than needing the pontification of academic economists vying for position need instead assurances from Members of these Houses that they are prepared to take the action on the public’s behalf. There is light at the end of the tunnel. The election will come soon enough. We will take our chances then, based on the actions that have been taken on behalf of the people. However, at this point debate on the economy should only be about the future and the tangible actions that can be taken and the recommendations Fine Gael, the Labour Party, Sinn Féin and the Independents have for the Government. The Minister has consistently said they are pushing an open door. If they have a view or suggestion that is better than the ones we are pursuing, give them to us in order that we can assess them, move forward and embrace them if they are to be embraced on the basis of best advice, but that has not happened. I commend Senator Bradford. Every Opposition Member would do well to read his mature contribution in the Official Report of yesterday’s and this morning’s proceedings. They were mature comments by somebody who could be in government some day. Heretofore many Opposition Members were vying for position with academic economists and wanting to make sure they would be the first on the list of callers for researchers working on “Frontline”. The debate is about the tangibles that will make everything better.
There has been a marginal narrowing of the bond spreads this morning from 6.78% to 6.7% and I am confident that when the markets have had time to assess the recapitalisation announced earlier and the process on which the Government will embark in November when setting out its four-year strategy to bring the fiscal deficit within 3% of GDP, there will be a further narrowing. On the comment that it is disgraceful that the NTMA will not hold bond auctions for the next two months because of the potential impact, it would be ridiculous in the extreme from a business perspective for Ireland to go near the bond markets until its future plans can be assessed by them. This is a basic business decision. We have enough money for the next eight to ten months. Why would we contemplate paying a premium of 6.7% or more at a time when we do not require the money, given that the markets have to analyse what the Government has put forward today as a viable way forward for the country? I checked the bond spreads on my BlackBerry before commencing my contribution and the initial indications are it has reduced to 6.7% and I am confident they will narrow even further as the Government continues to take action. The Minister for Finance has stated the budgetary framework for the next four years will be outlined in November and I am confident this will lead the country back on the road to recovery, far from the doom and gloom preached by economic academics who are determined to appear on various television and radio shows. Let us dispense with the pantomime politics in the Houses and focus on the tangibles.

With regard to the economic outlook, the Central Bank, the European Commission, the OECD, IBEC, Ernst & Young and various stockbroking firms have all forecast economic growth next year of between 2.3% and 3.5%. The Department of Finance budget forecast for GDP growth is due to be published soon. During the summer it revised its forecast from -1.3% to 1%. Export-led growth will ensure the sustainability of the economy. This has been a strong performing area in the past year. The value of exports in July increased by 12% year on year, but we have heard none of the economic academics talk about this. “Don’t you agree with that too, John?” Peter Matthews said to David McWilliams last night. He replied, “Oh, I do, of course, David, that is very good, quite right.”
An Leas-Chathaoirleach:    The Senator should refrain from naming people in the House.
Senator Marc MacSharry:    In making a point on behalf of the Irish, it is not a question of abusing privilege. In talking about a programme broadcast last night one is not abusing privilege; one is simply using it, as I am well entitled to do on behalf of the people.

The live register is stabilising. According to yesterday’s CSO figures, the number signing on decreased by 5,400 between August and September, which is hugely significant. Total unemployment now stands at 13.7% or 442,417, of whom 62,000 are in part-time employment. We can focus on all the negatives we want and there is no question that an unemployment rate of 13.7% is disgracefully too high, but the House should remember it was 18% in the 1980s. We got through it and we will get through this one too. We will learn from the mistakes of the past, but let us not focus on the blame game, as that will happen in due course. People will have their pound of flesh in regard to bankers and will have the opportunity to assess the Government on its entire term in office rather than individual aspects of policy.
Various schemes have been put in place during the year to encourage job creation and maintain jobs. A €36 million investment has been made in a PRSI job incentive scheme to create up to 10,000 jobs. This means an employer who creates a new job for someone who has been out of work for at least six months will be exempt. The six-month requirement should be removed and the scheme should be open to anyone who is out of work. The integrated plan for trade, tourism and investment in the next five years aims to create up to 300,000 jobs and boost exports by one third, which is important. The national retrofit and water investment programmes will create 9,000 jobs. Almost €600 million has been set aside for the schools building programme this year and it is set to create more than 5,300 jobs. Summerhill College in Sligo is undertaking a significant development and I look forward to the tender and the employment that will create. This investment will reach the entire nation, not least my own constituency. The number of training and activation places has increased this year to 157,000, up almost 90,000 since 2008. That is also significant but, again, we do not hear about this on the Vincent Browne show, the Jerry Springer show or “Frontline”. The community services programme and the rural social scheme will be significantly expanded to accommodate up to 40,000 people over the next year.

This morning and yesterday on the Order of Business I highlighted the difficult process ahead in framing the budget. There is no question that it will mean pain for everybody. Implementation of the Croke Park agreement and the savings it will achieve will be paramount. We might have to make even more savings; I believe we will. We must be creative and proactive in doing that and, at all times, be united in trying to ensure that in cutting services — some will have to be cut because we cannot afford the amount of public services we are currently paying for — the most vulnerable are least or, if possible, not at all affected. However, let the message from this side of the House, in the first economic debate of the new session, be that we are fully determined to deal with the issues. In this session let there be no negativity, just positivity in assuring the public that all Members of these Houses will take the necessary actions, that there is light at the end of the tunnel and that we will ensure that this will continue.

And after that panglossian contribution what of the opposition as exemplified by Fine Gael?

Well, let’s just say you probably had to be there, but anyone who bothered watching it live will know that the text isn’t far off what we read below…

Senator Paddy Burke:    I welcome the Minister of State, Deputy Mansergh, for this important debate. The country has reached a critical stage. While the Minister of State delivered a great speech, I was disappointed he did not outline the exact position on AIB. He should have treated the House with respect by bringing us up to date on the percentage shareholding the Government will take in AIB, by indicating how much money will be put into the bank and what the future holds for it.
Much has been said by previous speakers about the need to move forward together. The Fine Gael Party and its leader brought forward plans, but the Taoiseach and the Minister for Finance and their Government colleagues have rejected every plan proposed from this side of the House. That displays arrogance. The Government has been too long in power and believes no one other than the Government parties has any ideas. This is particularly true of Fianna Fáil which has run the country for the past 15 years without interruption.
It is proposed to create 150,000 jobs, with a further 150,000 to follow. Many of these will be in manufacturing. Senator Quinn has pointed out that we must get the cost base right for that sector. We must do something about costs which are too high. Energy bills, water and sewerage costs and rates are too high. Motor, general and public liability insurance is too high. There must be an environment in which 300,000 jobs can be created, but costs too high. We must help in this regard. As Minister of State said, we must have a banking system that will lend to those willing to take a risk to create jobs. There are many risk takers, many of whom got into trouble in the past few years, but there are those who are willing to put their hard earned money on the line. However, they need assistance and a banking force. That is why I am disappointed the Minister of State did not spell out the Minister’s decision on AIB in greater detail.
We have all spoken about tourism. It offers one of the quickest ways to get the economy to grow. In the past few years the numbers coming into the country have decreased. One wonders what Fáilte Ireland has done. In the report before us the Minister of State at the Department of Finance suggests some 8 million tourists will be attracted. We have never had a better product in this country. One can go fishing and moutainteering and play golf. Salmon are leaping out of every river in the country. We have never had more hotel bedrooms or hotels of better quality. We have never enjoyed better access through regional and international airports. However, we lost the welcome for which we were renowned during the years, but this is changing. Tourism is one of our greatest assets which can be promoted immediately to secure growth. In that regard, I am disappointed the Government will not deal with Mr. Michael O’Leary, one of the biggest airline operators in the world. The Government should take the bull by the horns and talk to him to secure an attractive package to bring people into every corner of the country. He has the ways and means and marketing experience to do so.

Much has been said in the past few days about the Minister for Education and Skills attending a conference in America. There is no great need for her to travel to America to attract foreign students to this country. If I wanted to go to Australia or New Zealand, all I would have to do is go to the travel agent and I would receive a visa within 24 hours. A student from China, India and many other countries who wants to come here to study for two or three months must wait up to 12 months to receive a visa. That is the reality. I know a person who was bringing students to this country for three months during the summer. Students bring a lot of money to the country. Up to 19 students from India were due to travel and they had given notice of that to the Irish embassy in New Delhi to process their visa applications, but there was not enough time to do it. That is difficult to imagine. Is there any need for the Tánaiste and Minister for Education and Science to go to a conference in America when things like that are happening? If we want to attract students, which we do because it will fill hotel rooms, use facilities, bring in much needed revenue and help our balance of payments, then action must be taken to ensure foreign students can come to this country. English is our first language and a great education can be provided to students from abroad.
Issues can be dealt with immediately but the Government does not seem to be willing to take on the challenge. At any rate it is very slow to tackle issues. As the Minister of State outlined in his speech the recession has been going on for almost four years, since 2007. We are still going down. We have not yet reached the bottom. NAMA was a mistake. I said at the time that we needed a bottom. We needed a fire sale of property. If we do not get a bottom in the property market we will not start to climb. We must reach the bottom either through a fire sale or in another way because when we reach the bottom the only way we can go from there is up. We need to get to the bottom and we need to know that we are at the bottom because otherwise no one will have any confidence in buying or selling. A lot of revenue has been generated through capital gains tax and property transactions. Issues such as student visas and tourism can be dealt with immediately but other issues such as the high cost of manufacturing, the cost of electricity, insurance and rates should be dealt with by the Government.

We in the Fine Gael Party and Members on this side of the House are willing to play our fair share but the Government must accept some of the proposals put forward by my party. I cannot see why it would not do that. As Senator MacSharry said, the Minister for Finance has his door open for proposals. We made several proposals and costed several plans, including one for the creation of 105,000 jobs and the setting up of new semi-State bodies. The Minister for Finance and the Taoiseach rubbished them. While our door is open it seems the Government’s door is never open. I welcome the opportunity to speak on the matter. I hope the Government takes immediate action on tourism and education.

Comments»

1. Pope Epopt - October 7, 2010

Ah, McSharry Junior. What a gem. Unelectable as a TD even in Sligo, so he occupies space in the Seanad. How blessed are we with our talented political dynasties.

For whom ‘academic’ is a swear word.

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2. Jim Monaghan - October 7, 2010

Re Piblic sector bills. I suppose Mr Harris is in receipt of an RTE pension or redundancy.Perhaps he should hand it back. Seeing as he still got work from RTE. Nice.

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3. Ronan L - October 7, 2010

“Academic economists… even when it was the public sector workers, I knew it was the academic economists.”
I love the bit where he says that nobody heard of these guys before the recession came along. Perchance that might point to a fundamental flaw, given that most of the top academic economists in Ireland had huge reservations about the way things were going for most of the last decade.

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WorldbyStorm - October 8, 2010

This bit I agree with you on.

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4. Who is the Senator that Fionnan Sheehan would not name on Pat Kenny? - Page 3 - October 8, 2010

[…] […]

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5. msnet - November 3, 2010

Thanks for the details very well. I will come back to you again, when I want to know something.

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