Economic Issues: Motion (Resumed)

Wednesday, 7 July 2010

Dáil Éireann Debate
Vol. 715 No. 1

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The following motion was moved by Deputy Richard Bruton on Tuesday, 6 July 2010:

Debate resumed on amendment No. 1:

[120]

Deputy Willie Penrose: Information on Willie Penrose  Zoom on Willie Penrose  I am glad to have the opportunity to contribute on this important motion. I am speaking on behalf of the Labour Party. I wish to focus on employment and the need to devise an integrated employment strategy, which necessitates fresh thinking, and to avoid adherence to a policy that advocates or is a slave to traditional economic orthodoxy. By adhering to traditional economic orthodoxy, the Government believes pursuing pro-cyclical solutions such as the policies that got us into the current economic difficulty are the best way of getting us out it. The let-rip view of the McCreevy years is now to be countered by a focused austerity programme of reduction that ensures massive expenditure cuts and withdrawals of funding from infrastructural areas that could serve as significant areas of employment generation and thereby give hope to the 452,000 people who are currently on the live register. That is 13.4% unemployment, with men outnumbering women by a ratio of 2:1. Four firms go bust every day. The predicted number of business closures is from 1,800 to 2,000.

In June 2010, some 91,600 people under 25 were on the live register, approximately 38,000 of whom have been unemployed for one or more years. One in three young men is unemployed. When people experience long-term unemployment, they find it much more difficult to secure employment thereafter. The fear of long-term unemployment persisting is causing great angst.

[121]Thus far, the Government has concentrated its attention on the banking and fiscal crises while doing little to address the jobs crisis. It is the firm view of the Labour Party that these issues cannot be dealt with in isolation. Clearly, therefore, a coherent and integrated approach is necessary that encompasses all these areas. Enterprise strategy must have a dual foundation that includes attracting foreign investment.

The road map for the period to 2020, Horizon 2020, launched by IDA Ireland in March, is very instructive and illuminating. It points the way forward in terms of foreign direct investment. The agency hopes to attract 105,000 new jobs over the next five years and to promote balanced regional development whereby 50% of jobs would be located outside the major cities of Cork and Dublin. It is important to establish and achieve targets. The blueprint is important.

It is important that we develop a strong indigenous enterprise sector with a sustained focus on the development of indigenous firms in high-value-added activities. Enterprise supports provided through State agencies have a vital role in helping firms to start up and grow and in providing assistance and knowledge at critical phases in the life of a firm.

Enterprise strategy should be focused not on the withdrawal of supports but on the development of new forms of supports. These should include support for import substituting firms, for example, in addition to those with an immediate export focus.

Greater emphasis should be placed on county enterprise boards’ role in supporting small businesses starting up. Further resources should be provided. The eligibility criteria for support from county enterprise boards should be re-examined to promote activity. Given that the weakness of the economy reduces the risk of dead weight or displacement loss in the short term, this should be achievable.

In addition to developing economy-wide enterprise strategies, it is important to develop sectoral strategies, to be pursued by relevant agents. The Labour Party has proposed a €1.1 billion jobs fund with three essential components, but the media never seem to recognise this. There would be funding for sectoral jobs strategies that focus on building upon our natural and clear comparative advantages in green technology, food, tourism and the cultural and creative industries, all to be driven by relevant enterprise agencies.

I salute Bord Bia, which I would give a greater role. Under Mr. Aidan Cotter, it has been very progressive. It should be given a greater role in developing and promoting branded food products. We have only had one success, that of Kerrygold. We should try to ape that and succeed where we can generate added value and jobs in the agriculture industries.

Consider the issue of funding for shovel-ready projects. This involves a fundamental review of the national development plan. Flood relief schemes, major school building programmes and urban regeneration projects are required. Up to 1,100 school projects remain on the waiting list. In 2009, 790 schools rented prefabs. A good example in my constituency is that of Curraghmore national school outside Mullingar, where everyone agrees a new school is urgently required. The local authority has been positive and a site has been identified, so it is only bureaucracy and the usual foot-dragging that stand in the way of progress for the 200 or so students, teachers, board of management and parents, who are actively pursuing the project.

We need funding for at least 60,000 new educational training places across the system. The back to education allowance or a tax return scheme to fund one’s full-time study would make returning to third level easier. The Government should lift the cap on PLC colleges, the staff of which are ready to offer good retraining options. The initiative would also include 30,000 graduate and apprentice internships. We need to establish a strategic investment bank to invest in essential infrastructure. While the Minister disagrees in this regard, he should consider this week’s announcement on the number of projects that have been sidelined. The NRA maintains there is no money, but these projects are important. We cannot even progress the nine rest [122]areas, but they are important in terms of road safety, given the long distances that lorry drivers must travel. We pontificate on all of these projects, but we withdraw them at the first opportunity. Therefore, the work of the Minister for Transport, Deputy Dempsey, on the road traffic and transport areas has been set at naught.

The strategic investment bank could provide credit for start-ups and growing businesses. It could also have a venture capital role. An initial State investment of €2 billion from the National Pensions Reserve Fund before all of its money is gone could be used to raise €20 billion on the financial markets. This could be a vehicle for growing successful indigenous industries irrespective of anyone’s opinion. We have had our idea tested by international financiers, bankers and lawyers. During the last recession, ICC, ACC and Foir Teoranta — State banks — put assistance in place for companies and small businesses, but there is nothing similar today. This is the reason there is so great a problem.

I am asking the Minister to do something new, namely, to put in place an SME working capital guarantee scheme. This would ease credit finance issues for SMEs. Yesterday, my committee was told by the Irish Banking Federation and Mazars that 35% of SMEs now have distressed loans and capital. They need help. A credit famine is affecting small businesses. The SME working capital guarantee scheme would operate along the line of similar successful schemes found in the UK and elsewhere. It would target the sector of the market experiencing the greatest difficulty in accessing credit. It would allow the banks, which we know are under-capitalised, to extend more loans than would otherwise be possible. With a State guarantee of up to 50% of the loan amount, the banks’ capital can be stretched while ensuring an appropriate alignment of interest between lender and guarantor. A similar scheme operates successfully in the UK. Indeed, Alastair Darling extended it in his March budget. Singapore also has such a scheme.

We are all aware that job losses, wherever they arise, put a significant dent in income tax receipts. Every person on the dole costs the State €20,000 between welfare payments and lost tax revenue. With 450,000 people unemployed, we are losing €9 billion in this regard. This must be factored into our expenditure figures.

An SME loan guarantee scheme would see the Government acting as guarantor of individual SMEs to facilitate them in securing loans from participating lending institutions for acquiring business installations, equipment and working capital loans. Under this scheme, 50% of the approved loans or a maximum amount, whichever is the lesser, would be guaranteed for a period of up to five years. Associated working capital loans could be used for financing operational expenses arising from the acquisition of business installations and equipment under the scheme. The guarantee period in this respect would be a maximum of two to three years.

Another option that could be examined is that of accounts receivable loans, which could be used for meeting the working capital needs of SMEs arising from providing credit terms to their customers. Without this type of one-to-the-other credit, business cannot survive. The maximum amount of the approved accounts receivable loan guaranteed in this way could be €1 million or 50% of the loan, whichever is lesser. The guaranteed period would be for a maximum of two years or so.

The manufacturing and service industries have experienced significant employment losses. These capital guarantee schemes would provide greater flexibility to companies in managing their cash flow and make an important contribution to their survival.

Acting Chairman (Deputy Jan O’Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  The Deputy has one minute remaining.

[123]Deputy Willie Penrose: Information on Willie Penrose  Zoom on Willie Penrose  Working capital loans under these schemes would assist companies in maintaining adequate cash levels to meet their vital operational needs. This is a new proposal, although people claim we make none in the House. It works elsewhere, so now is the time to embrace something similar. Some 700,000 people are working in approximately 230,000 SMEs. These industries are dotted across the landscape with three or four jobs in every village, town and country area. They play a pivotal role in securing the lifeblood of areas by keeping people there. When those areas experience job losses, they are not headline losses and are below the radar. Nevertheless, a loss of nine or ten jobs in a small rural area is the equivalent of 500 or 600 job losses in a town. It is important that people be kept in their localities so that they can contribute to the area's vitality and maintain essential infrastructure like schools, churches and teams. If people are to have a living environment, we must encourage SMEs that provide local jobs. Development in this regard will be in the manufacturing area.

Acting Chairman (Deputy Jan O’Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  The Deputy’s time has concluded.

Deputy Willie Penrose: Information on Willie Penrose  Zoom on Willie Penrose  We must get back to basics and encourage our manufacturing base. This will take a great deal of reskilling and retraining. I hope the Minister will adopt our proposal, as it would make an important contribution to tackling the unemployment crisis, something to which we all believe we should contribute.

Acting Chairman (Deputy Jan O’Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  I understand the Minister for Enterprise, Trade and Innovation, Deputy Batt O’Keeffe, is sharing his time with the Minister of State, Deputy Kelleher, Deputies O’Brien and Kennedy and the Minister for Communications, Energy and Natural Resources, Deputy Ryan.

Minister for Enterprise, Trade and Innovation (Deputy Batt O’Keeffe): Information on Batt O'Keeffe  Zoom on Batt O'Keeffe  Yes. The Acting Chairman might tell me when my time is up.

Acting Chairman (Deputy Jan O’Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  Is that agreed? Agreed. The Minister, Deputy Batt O’Keeffe, has ten minutes.

Deputy Batt O’Keeffe: Information on Batt O'Keeffe  Zoom on Batt O'Keeffe  I am delighted to be able to contribute to this debate and to outline the Government’s strategy for maintaining and creating jobs. I assure Deputies that jobs and industry growth are at the centre of the Government’s economic strategy. Members of the Opposition must be aware that one cannot decouple economic recovery and job creation from public financial stability and the need for a properly functioning banking system. If one cannot understand this, perhaps it is a good job the Opposition is not in Government.

I am acutely aware of the distress that the economic downturn is having on individuals, families and businesses. The negative consequences of that downturn, particularly where jobs are lost, cannot be overstated and our priority has been and will continue to be to respond to all of these problems. I am committed to supporting enterprise to drive job creation.

In what has probably been the most challenging year for the global economy since the 1930s, the Government’s policies and investments enabled IDA companies to create 4,500 new jobs and increase exports to €110 billion. The Government’s policies and investments enabled Enterprise Ireland companies to create more than 7,000 new jobs and win new export sales worth €693 million. Let me put this in perspective. Internationally, foreign directive investment, FDI, was down 30% last year. In Ireland, it fell by just 4%. Internationally, exports fell by more than 20%. In Ireland, they fell by less than 3%. Services exports actually grew by 2%. All of this was achieved in the depths of the recession. Now the CSO has given positive indications on the future. The quarterly accounts show Ireland moving out of recession, led by a surge in exports, which grew by 6.9% on the last quarter of 2009. The first quarter of 2010 was [124]the second strongest quarter for exports on record. Taken together, these results provide concrete evidence that the co-ordinated measures taken by the Government to address competitiveness, the public finances and the banking system are paying off with improved confidence and clear evidence of a return to economic growth.

The Government is facing up to the serious challenges head on and we are taking decisive action to ensure that we return Ireland to economic growth. The measures we have implemented to date are having a positive impact. We need to build further on these to consolidate the economic position and to create new jobs for those who have been made unemployed. Our future economic growth will be driven by exports of goods and services. Increased exports will generate jobs directly in the provision of those goods and services. Importantly, they will also generate indirect jobs throughout the economy in domestic services, retail, construction and other sectors.

Sustainable job creation must be driven by the enterprise sector. This is why the Government is focusing on a “whole of enterprise” strategy as the best route for Ireland to deliver the sustainable economic growth we need over the coming years, support our enterprises to return Ireland to export-led growth and, in turn, drive employment generation for the longer term. IDA Ireland has already made 48 job creation announcements in 2010, spread around the country, which will create almost 3,500 jobs across a range of sectors.

Enterprise Ireland has also made a number of job creation announcements in 2010, which will lead to the creation of more than 700 jobs around the country. There are far too many people unemployed, but this does not mean that our economy is completely stagnant in terms of jobs. Demand remains weak but there are signs of increases in recruitment activity. In fact there are difficulties filling vacancies in some areas of our economy such as ICT, science, engineering, sales and finance. Although one might not think it from the Opposition motion, it has been estimated that there will be a requirement to recruit up to 96,000 people on average every year up to 2014. This is on foot of the economic recovery and growth strategy being pursued by this Government.

Contrary to the rhetoric from the Opposition benches, we are not sitting around waiting for the international upturn simply to deliver jobs some time in the future. The Opposition motion fails to recognise the fact that the Government is actively implementing the policies and taking the decisions that will allow us to achieve even more ambitious jobs targets for the future. We are putting in place the resources to enable Ireland to win at least 640 international investment projects over the next five years, which are expected to create 105,000 new jobs. We are putting equal effort into developing Irish enterprise with the specific intention of creating 68,000 new jobs over the next five years. Beyond direct enterprise support, the wider public capital investment programme for 2010 is expected to support almost 70,000 jobs in the economy. The latest significant job creation initiative introduced by the Government is the PRSI incentive scheme. This will be a direct stimulus for the real economy by saving employers money and shifting the balance in favour of job creation. It will support the creation of up to 10,000 jobs. We have already received over 500 inquiries and 100 applications related to this scheme and this is a further indication that we are getting these policies right.

All of this proves that the charge levelled by the Opposition that we have no job creation strategy is utterly untrue and misleading. It is also misleading to say that we are doing nothing to protect jobs. In addition to our ambitious job creation strategies, we have implemented effective policies to protect existing jobs. Schemes such as the enterprise stabilisation fund and employment subsidy scheme were introduced to assist companies address the difficulties arising from the difficult trading conditions as a result of the recent recession. These two schemes are enabling companies to sustain 100,000 jobs. They were devised and implemented by the [125]Government, another fact that is ignored by the Opposition. We will continue to devise and implement effective policies to adapt to changing needs and global market demands, to prove that we have the foresight to identify the opportunities coming down the track, plan for them and, of course, seize them.

I want to deal now with one specific issue raised in the Opposition’s motion this evening. This is the charge that we have failed to address issues of credit availability for business. The Minister for Finance has set out on many occasions the steps we have been taking to ensure that the banks are in a position to lend to viable businesses. Since I took over the enterprise portfolio, I have focused on ensuring that the banks follow through on their obligations to lend. In my recent meetings with the banks, I made it crystal clear to them what the Government expects from them in return for the support shown to them by the taxpayer. They were left in no doubt that failure to deliver on their obligations will not be accepted by me or the Government. In response, they confirmed that they are fully committed to meeting the targets set for them and are ambitious to expand their lending to viable SMEs. I will be monitoring the situation over the coming months and I will bring the banks in again if I am not satisfied with the evidence that those commitments are being met.

It is clear to me that there has been a knowledge deficit within the banks when it comes to lending to innovative enterprises, particularly in new and emerging sectors. That is why we have insisted that they work with the agencies of my Department to develop the skills they need. I am also looking at how we can address this and other market failures through mechanisms such as a loan guarantee scheme. We are dealing with credit availability and implementing policies to both sustain and create jobs. I believe that the Government’s whole economic strategy will enable us to go forward as a more competitive economy with a sustainable and innovative enterprise base. I reject utterly the claim that we are not putting jobs and growth at the centre of our economic strategy. That claim is simply not borne out by the facts. In this context, I wholeheartedly reject the Opposition’s contentions.

Minister of State at the Department of Enterprise, Trade and Innovation (Deputy Billy Kelleher): Information on Billy Kelleher  Zoom on Billy Kelleher  In the few minutes I have to speak on this motion I welcome the opportunity to contribute. We have had many debates in the House on the issue of the economy, the banking crisis, job creation and unemployment and the challenges that face the broader economy. At the outset, while the Fine Gael motion highlights many of the challenges facing us, it is somewhat short on proposed actions. Listening to the debates and the commentary from across the House, this would indicate that there are few solid policies coming from the Opposition which might address the difficulties Ireland faces.

The Minister, Deputy Batt O’Keeffe referred to a few policy issues that the Government has introduced in recent times in the context of trying to ensure that there is stability in the banking system, that we have access to credit for small and medium-sized business and can continually ensure that the banks have the capability to lend to such companies. It is also Government policy to ensure that the banks are obligated, because of the new arrangement between them and the Irish taxpayer, as well as on foot of the guarantees, the recapitalisation and supports they have received due to their recklessness and bad lending practices in the past, to support SMEs in these challenging times.

It is no comfort to the thousands who have lost their jobs and are finding it very difficult at this time, but in December last year the Minister for Finance told the House that Ireland had turned the corner. He spoke with confidence and authority and the fact is that the figures shown in the first quarter analysis of the economy indicate that we are now technically out of recession and that there was growth in the first quarter of 2.7%. That, in itself, is something very significant and critically important not only in the context of what we are trying to do [126]here in Ireland — ensuring there are job creation opportunities as well as the potential to stimulate the economy — but equally across the eurozone. When one looks at the performance of our European competitors, one sees they only expanded by 2.2% on average, and this shows that Ireland is on track to economic recovery.

We have two choices in this House and in public commentary across Ireland. We can either talk ourselves down consistently and continually or we can highlight the positives and the changes in the economy that are bringing about the stabilisation of the public finances, reducing job losses and returning the economy to growth. Confidence is critically important. People should be aware, when they are speaking publicly, debating in this House or elsewhere, that by consistently talking down the economy they are contributing to the difficulties of individuals, and rising unemployment, by undermining confidence and sapping belief in the broader economy. I ask Members on all sides of the House and public commentators across the country to report on the economy in a factual manner. They should acknowledge the fact that we are now out of recession and have an opportunity to stimulate the economy and try to create job opportunities for our people.

The Government’s initiatives in trying to stabilise the economy have been well received internationally and confidence is very strong in Ireland too in relation to what is being done regarding stabilisation of the public finances and support for the banks. The motion before the House tonight is simply incorrect in many of its aspects, such as that there is no confidence. There is a great deal of confidence internationally that Ireland is doing the right thing, that the Government has introduced measures to try to stabilise the public finances and that job creation measures are bringing about stabilisation on the unemployment front. For all those reasons this motion adds no value to the debate that is required in this country, which should be about how to put confidence back into the economy, to stimulate job creation and ensure that there is a lift in consumer confidence. It is about putting confidence back into the economy, stimulating job creation and lifting consumer confidence. For all these reasons, I reject this Private Members’ motion. It is of no value in the debate required to deal with the changes in the economy. What we need is for people to acknowledge that the difficult decisions made by the Government are bearing fruit and that we have turned the corner.

With economic confidence growing, job creation will be at the core of the Government’s policy over the next several years. Companies are already beginning to recruit and expand their labour force. Positive proposals are needed from the Opposition as opposed to its continuing nay-saying.

Deputy Darragh O’Brien: Information on Darragh O'Brien  Zoom on Darragh O'Brien  I am pleased to speak to the Government’s amendment on this Private Members’ motion. Both Ministers, Deputies Batt O’Keeffe and Kelleher, have covered many areas of the amendment. However, I want to point to some of the incorrect facts cited in the motion such as the loss of international financial market confidence in Ireland. If our commentators had the same confidence outside observers have in our economy, we would find ourselves in a better position.

Deputy Penrose raised the loan guarantee scheme operated in other European jurisdictions, a scheme which has much merit. I have also called for its introduction in the past. It is good to see at least one small snippet from the Labour Party of what it might do when usually it never commits to anything.

For example, it agreed with the €4 billion in cuts in the last budget but did not say where or how it achieve them. It backed every interest group that lobbied it and said it would not touch them. The Croke Park deal is an important step forward for the country. The past two years have been incredibly difficult for both public and private sector workers. The Croke Park deal [127]gives certainty to the thousands of civil and public service workers and provides a way forward for the country. Again, Deputy Gilmore would not say whether he agreed with the deal or recommend it to the unions, even when some of them sit on his party’s national executive. When the deal was passed, however, Deputy Gilmore said he welcomed it.

While the next budget will be challenging for the Government and the country, both Opposition parties will not be able to do what they did with the past couple of budgets by opposing everything and producing nothing. The Labour Party in particular will certainly not get away with this.

Unemployment is a major issue. I, like many other Members, have friends and family who lost their jobs over the past two years. Tackling unemployment is the Government’s major focus. In the past three weeks, north Dublin has had announcements of more than 1,300 jobs from the Dublin Airport Authority, DAA, and Stream Global Services. The way in which the national broadcaster, RTE, dealt with the DAA’s announcement on “Drive Time” was nothing short of disgraceful. These are real jobs with 500 in the authority and 400 in retail units at Terminal 2.

Some asked where the Government spent the money from the boom. One can see where the moneys went when one sees Terminal 2 and the other critical infrastructure projects across the country that will soon be finished. These projects will have created jobs before November and the budget.

I accept there are problems with the banks’ provision of cash flow and working capital for the small and medium-sized enterprise sector. That is why I welcomed Deputy Penrose’s views on a loan guarantee scheme. It is also important that John Trethowan is overseeing the banks’ credit provision. I must say, however, that having had dealings with AIB in my constituency, I have found it had not played ball.

With 1.9 million people working, the Government’s focus is on getting the 450,000 out of work back to work. While I am confident we will be able to do that, it will only happen if we have stable public finances, coherent polices, job creation and, most important, belief in ourselves.

I reject this Fine Gael motion. It offers nothing as usual. While castigating the Government might be politics, it offers no solutions. The Government will face challenges later in the year with the budget, challenges similar to those it faced over the past three and a half years. What Fianna Fáil is about is medium and long-term economic growth and getting people back to work, not short-term, political and populist decisions.

Deputy Michael Kennedy: Information on Michael Kennedy  Zoom on Michael Kennedy  I welcome the opportunity to speak on and support the Government’s amendment to this motion. I also wish Deputy Noonan well in his new portfolio. However, I was a little disappointed with his Private Members’ motion. It was the same recycled and repackaged stuff Fine Gael has been putting down for the past three years. I would have thought a new broom like Deputy Noonan would have come up with a more inventive and incisive motion. That is Fine Gael anyway; a little bit stale.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  Deputy Kennedy should not spoil the compliment.

Deputy Michael Kennedy: Information on Michael Kennedy  Zoom on Michael Kennedy  This motion is like its New Era policy, launched four times with claims it will create 100,000 new jobs every time. The motion reeks of doom and gloom. Every Member has family and friends who suffer unemployment. The businesspeople who support Fine Gael expect it to put out a bit of confidence instead of this doom and gloom. People have suffered for the past three years. They do not want it thrown at them that we will never recover economically again.

[128]The truth is we are making strides, albeit slowly. It must be realised it is a worldwide recession in which Ireland is a small and open economy. We are, however, beginning to pick up again. I find it extraordinary the Opposition, both Labour and Fine Gael, can castigate the Government’s efforts in getting the economy back on track, particularly when international bodies, such as the IMF, the EU and OECD, have said it has made the right but hard decisions. Other countries are now following our lead. Deputy Noonan, as Fine Gael’s new finance spokesperson, should come forward with new and positive policies rather than recycling doom and gloom.

Job creation is the single largest issue. The Minister for Enterprise, Trade and Innovation, Deputy Batt O’Keeffe, earlier referred to the 4,500 new jobs already created this year. In north Dublin, already this year Hertz announced another extra 200 jobs pushing its workforce to 1,000. The DAA has created 500 new jobs at Terminal 2 and 400 retail jobs in the airport, part of which is in Deputy Varadkar’s constituency. This week, Stream Global Services announced 425 new jobs for Swords. Applegreen, which will operate the two service stations on the M1, has announced it will create 400 jobs. The Pavilion Shopping Centre in Swords, which Deputy Varadkar will be familiar with as well, will create up to 100 extra jobs. Putting down gloom-and-doom motions does nothing to give confidence to our constituents, families and friends.

In the first quarter of 2010, GDP rose by 2.7%. If the Deputies were being fair they would recognise that fact and not be living in cloud cuckoo land. On the subject of jobs, the proposed loan guarantee scheme, under which loans to SMEs would be backed up 50-50 by the State, is an important step, as recognised by everyone in this Chamber, including those on the Opposition benches.

I heard Deputy Varadkar on the radio this morning. He might want to check his own party’s policy, because half its members are saying NAMA is wrong and is going in the wrong direction, while the other half are saying that we need NAMA. He might consider what his colleague Deputy Terence Flanagan has said about home equity — in effect, that we need NAMA for this reason. Every one of us recognises that this issue is a difficult one for many of our close friends, but let us be fair and consistent. If Fine Gael is against NAMA it should abolish it from all its proposals——

Acting Chairman (Deputy Jan O’Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  There are less than five minutes remaining for the Minister to speak.

Deputy Michael Kennedy: Information on Michael Kennedy  Zoom on Michael Kennedy  ——but if it supports it, it should admit that what the Government is doing is correct.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  It is a bit late now.

Acting Chairman (Deputy Jan O'Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  The Minister, Deputy Ryan, has just four and a half minutes.

Minister for Communications, Energy and Natural Resources (Deputy Eamon Ryan): Information on Eamon Ryan  Zoom on Eamon Ryan  I wanted five, but I will try in that time to set out the plan as I see it.

The plan is to sell more to the rest of the world. We will sell food to the world. The food industry is worth €8 billion in exports and employs 167,000 people. Our comparative advantage is that our food comes from the field, not from the factory. Tourism is worth €5 billion. Our advantage in that area is that the industry is flexible; it has been fast to restore value and bring back a welcome. People will come back to our country because we are, ultimately, a welcoming people. Energy is currently a €6 billion import business, but we want our energy to be home-[129]produced. We will do this through growth in renewable energy and advances in energy efficiency, and we in the Government are delivering on that. These are our home industries. Although they are not as big as our other three main industries, they are important because their value is increased in Ireland.

The other three industries are equally important. In financial services, 25,000 people are employed in the IFSC. It is an export business worth over €15 billion. Our comparative advantage is that we have good legal and tax systems and a new, improved regulatory system. On the service side, we export creative services worth about €47 billion. Within that, ICT is worth about €24 billion and supports 60,000 jobs. We are delivering a digital economy that works — a knowledge society. We are investing in broadband in our schools that will help us to deliver this. We are investing in the Exemplar network, which will provide high-speed Internet and for which we budgeted in difficult times. We have creative, flexible people, which means we are well placed to become a centre for cloud computing. This is the next big business opportunity and we need to grab it.

We also need to remain good at manufacturing. We are making about €80 million worth of products, much of which represents foreign direct investment. What is our strategy? It is to invest and increase the budget, even in difficult times — which we have done — for Science Foundation Ireland, because those companies are still coming here. Half of them came here in the last year to invest in research and development, which will turn into the manufacturing opportunities of the future.

Deputy Varadkar is nodding his head, but this is the reality. He does not see it because he spends all his time on that bench rather than going out and actually meeting those companies. They are doing it for this country. We continue to be a centre for foreign direct investment and high-tech manufacturing. It is working. The Deputy may not like it, but I am glad it is happening because it will help us get out of the economic difficulties we are in.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  Could the Government do more of it?

Deputy Eamon Ryan: Information on Eamon Ryan  Zoom on Eamon Ryan  Those are our six big trading areas. We also need to get various things right to make ourselves quicker, cheaper and better and help these industries. We need to develop the digital infrastructure, not just by investing in broadband but also by making information freely available. We made our census information freely available and this has been a major boost to tourism. We released the environmental data about Galway Bay and this has been of major benefit in bringing in investment. People have used that data to develop business opportunities. We need labour flexibility, a productive public service and a funding mechanism to help our businesses.

Acting Chairman (Deputy Jan O'Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  The Minister has a minute left.

Deputy Eamon Ryan: Information on Eamon Ryan  Zoom on Eamon Ryan  In that minute I will say that this morning I heard the Minister — that is——

Deputy Joe McHugh: Information on Joe McHugh  Zoom on Joe McHugh  The new Minister.

Deputy Eamon Ryan: Information on Eamon Ryan  Zoom on Eamon Ryan  ——the Opposition spokesperson on the Labour side explain what she would do differently in the banking sector. She proudly said that she would try to restore AIB and Bank of Ireland to a sound footing. That is something we can all agree on, but a plan for achieving this is something I would be interested to hear from both the Labour Party and Fine Gael.

Fine Gael now has an opportunity, with its new spokesperson, to move beyond what it is against and explain what it would actually do. Does it really want to default? Is that what it [130]will do when it goes into government? Do its members really believe we should not have NAMA? How would they change it? They need to be specific because neither main Opposition party has been in any way honest over recent years about the difficulties facing us. We have managed these and it is now time for us to proceed with the real plan, which is to become a successful trading country which delivers the wealth our people need. We can do it and we are doing it. We will get over our difficulties with the help of our political system. That is better than standing on the sidelines criticising policies without providing any real alternative.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  On a wing and a prayer.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  I must say the Minister is very grumpy today. I hope he has a nice summer break.

Deputy Eamon Ryan: Information on Eamon Ryan  Zoom on Eamon Ryan  The Deputy should get used to it. He will be facing it a lot over the next few months.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  I wish to share my time with Deputies O’Donnell, Breen, McHugh, Crawford, Hayes, Timmins and Connaughton.

I rise to speak in favour of the Fine Gael motion. I thank Deputy Noonan for giving us an opportunity to debate economic issues and the state of the economy before the summer recess. There have been many debates about different things over the past week or two, but it is appropriate that we debate the most important issue facing us before we rise for the summer.

As Members are aware, last week Ireland officially came out of recession. We now have GDP growth once again. Our domestic economy is still shrinking, but good news is good news. What we have now is the end of the statistical recession; we do not have the end of the real recession. The real recession, in people’s lives, will only end when unemployment starts to fall and incomes start to rise — when people have jobs to go to and a little more money in their pockets. There is no guarantee that this will be the case.

I heard what Deputy Kennedy said about doom and gloom. I am not interested either in doom and gloom——

Deputy Michael Kennedy: Information on Michael Kennedy  Zoom on Michael Kennedy  Why did Fine Gael table its motion then? That is what is in the motion.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  ——or false or bogus optimism. What I am interested in is realism. Let us not forget that the last recession ended in 1983, but it was at least four years before the public finances were stabilised and we did not see significant jobs growth until 1989, or arguably even later.

Deputy Eamon Ryan: Information on Eamon Ryan  Zoom on Eamon Ryan  Because the Labour Party and Fine Gael could not agree on anything.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  I seek the protection of the Chair.

Acting Chairman (Deputy Jan O'Sullivan): Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  I must protect Deputy Varadkar because there are many speakers in this time slot.

Deputy Eamon Ryan: Information on Eamon Ryan  Zoom on Eamon Ryan  They could not make hard decisions. They could not make a single call. I remember it.

Acting Chairman: Information on Jan O'Sullivan  Zoom on Jan O'Sullivan  The Minister was not interrupted while making his contribution.

[131]Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  The Green Party found it hard to make a decision on the dog breeding Bill, anyway.

Deputy Leo Varadkar: Information on Leo Varadkar  Zoom on Leo Varadkar  I appreciate the Minister is a bit upset and highly strung — he is obviously very concerned about facing me over the next few weeks — but perhaps he would allow me to finish my contribution uninterrupted.

As I was saying, for a combination of reasons, some under our control and some not, I fear we may enter a sustained period of anaemic, jobless growth. We could have statistical growth but no job creation and no improvement in income, resulting in a period of stagnation — effectively a lost decade. In order to counter that we must have a serious jobs strategy.

As other speakers have acknowledged, we have a three-part economic crisis. We have a budget crisis, which we all know about, a banking crisis, and an economic crisis, in which our concerns are jobs and competitiveness. What we have had from the Government is a response to the fiscal crisis, although it came bit late, and the fiscal crisis was largely of the Government’s creation, as the structural deficit was created by Fianna Fáil. At least in the last year or so some measures have been taken to deal with this, by reducing spending, which we largely supported, and by increasing taxation. So far, the major part of this has been tax increases rather than spending cuts. In the coming years there should be more of a focus on reducing spending, provided it is done fairly and the vulnerable are protected, and less on increasing taxation, because increasing taxes on income and on business could actually end the recovery and put us back into recession.

When it comes to the banking crisis, the Government has made a real mess. Almost €30 billion has been expended or promised already in its efforts to save the banking system, but we have little to show for it. Businesses cannot get credit — nor can consumers in many cases — and we do not have a functioning banking system. That is the worst thing about it. It is not so much what the Government has done as the fact that it has not worked.

To a certain extent we are stuck with NAMA, but there is still an opportunity to make sure it does not cost the taxpayer as much as it seems it will. One thing we can do is to dispense with the concept of long-term economic value.

  8 o’clock

Most of the loans have not yet been transferred to NAMA and only €16 billion of the €81 billion has been transferred. It is still not too late to abandon the concept of long-term economic value and to buy the loans from the banks for what they are worth. We could also increase the risk sharing element of NAMA. I recall the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, in one of his many incarnations, suggesting that up to 50% of the NAMA loans should be based on risk sharing and that they should be subordinated bonds. Only 5% of them are. Professor Patrick Honohan has already suggested that it would be reasonable for 10% of them to be risk weighted. There is still an opportunity to do that.

To move on to the more positive points, the key thing this country needs to do is to become competitive again. The Government has produced many strategies and documents in this regard, but there is still no real plan to increase competitiveness. There are three necessary elements to becoming competitive again. First, we need to reduce costs. Labour costs have reduced, but other costs have not. We also need to invest in infrastructure in a way we have not done to date. While there has been some investment, most of it has been cut back. Third, we need to improve our public service. In terms of investment in infrastructure, our main focus is our New ERA model, which essentially tries to retool the semi-State companies and to transform those which are currently a drag on growth and turn them into generators of growth and jobs. That can be done by increasing the capital spend of those semi-State companies [132]through investing pension fund money in Ireland through the semi-State companies and other bodies, instead of in overseas investments. It can be done by privatising some State assets and by getting investment from pension funds and solvent wealth funds. That is the kind of policy measure we have come across. Having listened to Members on the Government side, I note that on receipt of even the tiniest bit of positive economic news, they are back to the hubris, pride and nonsense about not talking down the economy.

Deputy Kieran O’Donnell: Information on Kieran O'Donnell  Zoom on Kieran O'Donnell  I support this timely motion. I wish to focus on the issue of the credibility of Government policy. In its counter motion, the Government states it has stabilised the public finances and regained credibility. When the European financial stability package was introduced here, the cost of our borrowing dropped to 4.7%, but it has drifted steadily upwards since and is now 5.29% for ten year bonds. The reason for this is the lack of credibility among the international markets due to the way the Government is dealing with the economy. It is also felt that the Government moved 14 months too late to make the required fiscal corrections. The current Taoiseach, who was Minister for Finance in 2007, should have moved in the December 2007 budget, but nothing was done until early 2009. In fact, Deputy Brian Lenihan’s first budget as Minister for Finance in October 2008 did not deal with the issue either. Therefore, there is a credibility issue in the international markets.

Furthermore, the Government must borrow €45 billion over the next two years. This is necessary because the Government ran the country into the ground to such an extent that there was nothing left in the kitty for the rough day. If we have learned anything from the crisis, it is that we must provide a contingency fund. A certain amount of the budget each year should be set aside as a contingency fund — a kitty for a rainy day.

On the banks, the terms of reference for the commission of investigation have been published tonight. There are two interesting elements to note. First, the terms of reference do not take into account the actions of the Minister for Finance, the Taoiseach or the Department of Finance in terms of crisis management in the context of the banking crisis. Second, I note the coverage date has been extended to 15 January, which coincides with the nationalisation of Anglo Irish Bank, with regard to investigating the banks and investigating Anglo Irish Bank and Irish Nationwide. It is interesting that with regard to examining the statutory role and responsibilities of the Central Bank and the Financial Services Authority of Ireland, the investigation is limited to 28 September. I wonder why this is the case.

In the case of Anglo Irish Bank, a portion of the back to back loan between it and Irish Life & Permanent, €3.45 billion, came through on 26 September, but €4 billion of it came through on 30 September. Furthermore, accounts were produced by Anglo Irish Bank, under the watch of the Minister for Finance and the Department and of the Central Bank and the Financial Regulator, in December 2008 which overstated customer deposits. We had €7.45 billion of bank moneys going from Anglo Irish Bank into Irish Life & Permanent and then up to its subsidiary company, a life assurance company, and then returning to Anglo Irish Bank as customer deposits. This gave the impression there was greater liquidity. Clearly, people had concerns in terms of a run on deposits, which underlines their fears in terms of solvency.

There are questions to be answered. When we debate the commission of investigation tomorrow, two things must happen. First, the coverage date must extend to 15 January, the date Anglo Irish Bank was nationalised, for all elements of the investigation. The investigation must also include examining of the performance of the Minister for Finance, the Taoiseach and the Department of Finance in the context of crisis management of the banking issue.

The new business plan produced by NAMA is a disgrace. It has no cash flow projections for the coming years and no profit and loss account projections. This is unlike the original draft [133]plan which, to be honest, was a fabrication because it relied on the figures provided by the banks themselves. This was ludicrous. The Minister for Finance failed to clarify that issue when we debated the NAMA business plan and we now find ourselves in a situation where, clearly, NAMA will make a loss. The Government has admitted this. Some 25% of the assets that went into NAMA are already gone. I would call them corroding assets. NAMA is like a juggernaut on the edge of cliff with five or ten people holding on to it, but it is rolling over the cliff and will, eventually, fall into the sea dragging the Irish taxpayer with it. We will be left with nothing more than toxic waste. What BP did in America will pale in comparison because it is the Irish taxpayer who is footing the bill here.

On the jobs crisis, some 290,000 people have been added to the live register since the Government took office. There are now approximately 450,000 people on the register. The Government has not addressed this issue. We must ensure we introduce policies that will create jobs. The Government has taken some of the elements of our NewERA document and I am glad to see it is now endorsing that policy.

Deputy Pat Breen: Information on Pat Breen  Zoom on Pat Breen  I welcome the opportunity to speak on this motion and commend my colleague, Deputy Michael Noonan, on bringing it forward. Claims that the recession in this country is over are premature, given that some 450,000 people are now registered as unemployed, the highest level of unemployment in our history. In County Clare, some 46 people a day have lost their jobs over the past two years. GDP grew by 2.7% in the first quarter of year, mainly due to the increased export output of our multinationals. However, four businesses have gone to the wall every day for the first six months of this year in Ireland. Some 28 of those businesses are in my constituency in County Clare. Business people are very fearful of the future. This week in Ennis, pedestrianisation of the town was abandoned following the experience of local businesses in the O’Connell Street, Abbey Street and Bank Place areas of the town, which witnessed a dramatic drop in sales during the previous six-week trial period. On top of that, there has been a 17% drop experienced by all retail businesses since the beginning of the year.

Cash flow is the lifeblood of small businesses and we were promised when the Government signed a blank cheque to bail out the banks that increased cash flow would result. That has not happened, not even a trickle. In fact, the taxpayer will end up footing the bill for all the billions which have been invested in the bailouts although there will be no bailout for the ordinary man and woman on the street. The proposals made yesterday to help home owners in trouble fall well short of what is required. Encouraging home owners to hand back the keys of their homes and to sign onto the social housing lists at a time when cash strapped local authorities are dealing with an unprecedented demand for housing shows exactly how out of touch this Government has become. There are 2,500 families on the social housing list in County Clare alone, for example, and I am interested in hearing how the Government plans to fund this additional demand for housing.

The Government’s economic recovery plan is failing because it is driven by bailouts. My party in government will get the country back to work, and I hope our opportunity comes sooner rather than later.

Deputy Joe McHugh: Information on Joe McHugh  Zoom on Joe McHugh  I am pleased to have an opportunity to contribute briefly to this debate and I welcome the Minister, Deputy Brian Lenihan, to the House. I support my colleague, Deputy Varadkar’s, call for a separation of the debate on the economy from that on the banking sector. It is not all about freeing up the banks to provide credit and get liquidity moving. There are many people with business ideas, people who want a reason to get out of bed in the morning. They do not need money; they simply need to get past the regulations and bureaucracy that exist. In my own county, for example, 28 commercial fishermen who had planned to [134]go fishing this summer on Lough Foyle are not permitted to do so. That is a question of regulation and has nothing to do with banking.

We need a serious debate on the smart economy to which the Minister, Deputy Ryan, referred tonight. I accept that we need a smart economy and a well regulated IFSC centre. We have a great smart economy in Donegal where Primerica, a very successful American company employing computer graduates, is thriving. However, the reality is that a smart economy on its own will not get us out of this recession. There are people previously employed in the indigenous sector, including in manufacturing and so on, who do not have the skills necessary to participate in the smart economy.

We must have a debate that is founded in reality. It was completely disingenuous for Government Deputies to claim last week that the recession is over and everything is fine.

Deputy Brian Lenihan: Information on Brian Joseph Lenihan  Zoom on Brian Joseph Lenihan  We did not say that; that was what the CSO said.

Deputy Joe McHugh: Information on Joe McHugh  Zoom on Joe McHugh  The recession is not over. We were also in a deep hole in the 1980s but at that time people fished and farmed. Farmers could get £1,000 for a good bullock in 1981 or 1982. Those prices are no longer available and that is something we must address. People are back working on the land this summer because of the good weather. They have been back cutting turf and baling hay in recent weeks.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  It depends where the bog is.

Deputy Joe McHugh: Information on Joe McHugh  Zoom on Joe McHugh  Deputy Connaughton told me he has seen square balers in Galway for the first time in 25 years. However, such activity will not get us out of recession because it will last for only a few weeks. What will happen in September?

We must be realistic in terms of getting people back working. There are regulatory measures and interventions we can take. There is an element of educational snobbery in the notion that everything must be about the smart economy. We must get away from that fixation. There is the real economy out there and then there is the nonsense that goes on on the other side of this Chamber. We must have a meaningful debate next September in an effort to get this country back on its feet.

Deputy Seymour Crawford: Information on Seymour Crawford  Zoom on Seymour Crawford  I welcome the opportunity to contribute to this debate. It is incredible that net income has reduced by 28% in the past two years. The average drop in farm income for the same period is 40% while in wet land areas it is far higher. In my own constituency 14,500 people are out of work, 1,030 of those having joined the dole queue in the past 12 months. No other economy has experienced such a decline.

The Governor of the Central Bank and the two independent banking experts have shown clearly that the Government was seriously at fault in what happened. We now know that at least 75% of the current crisis was home-made. Some 300,000 people have lost their jobs and another 150,000 have had to emigrate. Some 90% of those who have lost their jobs are under 35 years of age and many of them have mortgages and other commitments. The Government got us into this crisis and is clearly incapable of getting us out of it.

I fully recognise the personal efforts of the Minister, Deputy Brian Lenihan, on the banking issue. He may not have been right but he has certainly tried. However, an exclusive focus on the banking sector will not get us out of this crisis. We must have a stimulus for job creation. Small businesses, farmers and others must be able to access working capital to allow them to stay in business. We learned in recent days that funding for roads and other infrastructure project will be reduced, meaning less work will be available. Schools building programmes and [135]other projects are being delayed because of red tape. It is better to pay people to do that work, enabling them to make a contribution in income tax, rather than have them on the dole.

The difficulties businesses and farmers are experiencing with red tape are intolerable. I spoke recently to a dear friend of mine who sold his farm in the Carrickmacross area some time ago, although the sale did not go through for other reasons. He is now farming in the United Kingdom — a fellow EU member state — and the difference he has described in the level of bureaucracy is incredible. These issues must be examined. The hospitality sector and others are plagued by over-zealous bureaucracy. We have gone from no regulation to over-regulation. It is easy for any individual to board an aeroplane and travel to other member states to see what is happening there. These people know what they are talking about.

Deputy Tom Hayes: Information on Tom Hayes  Zoom on Tom Hayes  I commend my party colleagues on tabling this motion, particularly the new finance spokesman, Deputy Noonan. When he said at the weekend that it was time to sack the bankers — the people who caused the problems in this country — there was an incredible public response. The Minister, Deputy Brian Lenihan, should take heed of that. The reports released this week relating to NAMA and activities in the banking sector prove it is high time these people were sacked. I commend Deputy Noonan on making that statement because it is what the Irish people want at a time when they feel frustrated, annoyed and dejected at what has happened and is happening in this country.

I heard Government Members referring to the need for confidence and the importance of not talking down the economy. The reality is that nobody has confidence in this Government. Some 450,000 people are unemployed and hundreds of young people are leaving our shores on a weekly basis to seek a living in Britain, the United States, Canada or Australia, many of them graduates. How could they have confidence in a Government that has no plan to get us out of recession?

The Minister should go back to the basics, back to the industries that produced jobs in the past. Two of those are staring us in the face, namely, agriculture and tourism. Thousands of jobs could be created in agriculture and related industries. There will be a huge shortage of timber in years to come because the Government has closed down the forestry industry. These are the sectors which could provide jobs for young people. Throughout the world food is becoming a more valuable commodity, yet the Government sits idly by as the potential of emerging markets is ignored. The Minister has a moral responsibility to the people of this country to put in place a plan to expand our agricultural industry, which has been neglected by the Government for so many years.

The potential to encourage tourism from Europe and throughout the world is enormous, but no effort is being made to encourage tourists to Ireland. If this motion achieves nothing other than to ensure the Government puts in place a plan for tourism and for agriculture — the basic industries — that will at least be a start. Only then as a country could we say that we were doing something and that the Government would put in place a plan for the 450,000 people who are unemployed.

Deputy Billy Timmins: Information on Billy Timmins  Zoom on Billy Timmins  I wish to speak on two issues, namely, property and the banking strategy. People want hope but they cannot have hope unless they have the truth first. Those formulating our banking strategy have failed to see the big picture. Irish banks have outstanding loans in the region of €150 billion. In normal times, they should have a margin of 2% on costs, leaving a profit of €1.5 billion per year. However, the cost base of our flawed banking model is €4.5 billion. In a best case scenario, one third of the €150 billion of loans are dead. The Government intends to inject €50 billion into a banking system that will simply incur more losses. The policy must change. Bondholders should receive equity as opposed to monetary [136]repayment. The IMF has operated this model for more than one decade. The future is bleak and our standard of living must become sustainable.

In August 2007, all derivative markets went pear shaped. However, it took until October 2008 for the stock market to reflect this. Since early 2010, all European Governments have been bust because the projected future tax stream is too small to service the debt. This is one realisation of which we must all become aware. Before the year end, Spain, and possibly Portugal, may go down the road travelled by Greece. We will follow suit if we continue as we have done in the first six months of this year, taking in €14 billion and spending €22 billion. This is unsustainable. We have an extreme case of living beyond our means.

In the developed world in 1976, the ratio of government and personal debt to GDP was 110%. In 2007, the percentage reached 350%. The figure must return to that 1976 figure. Investors dislike uncertainly and large deficits. Let us be honest with the public. We filled potholes while the country was going down the drain. Is it any wonder the public is so angry?

As the record shows, in the run-up to the 2007 general election I spoke against capital investment in public housing because I believed, correctly, that it was fuelling the property market and I took the view the funding used should have been invested in infrastructure. We did not experience a property bubble, rather a money supply bubble.

The average house price should be in the region of three to five and a half times one’s income. In 2007, it was 17.5 times one’s income in this country. The average house price today is approximately €240,000. The property market will not operate properly again until this has decreased to somewhere in the region of €100,000 or €150,000 and the market will ensure this takes place in the next two or three years.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  I thank Deputy Noonan for tabling this important motion on the floor of the House. One of the great problems in the financial markets is the lack of clarity. This results in a lack of confidence. Whether we are for or against NAMA, there is no point wasting time on the matter this evening. It is in place. Every time there is an assessment or an evaluation of NAMA there is a different answer. We were informed by the Minister some months ago that, over ten years, NAMA would realise and make a profit of almost €5 billion. Yesterday, Frank Daly, a man for whom I have great respect, stated this figure would be approximately €1 billion. This is code to inform the people that they are in for one of the largest losses ever witnessed. We have no idea where it will finish up but we can rest assured it will not make a profit.

If ever I heard remarkable wisdom, it was in the past 24 hours. I refer to cases of where homeowners cannot meet repayments. It had been suggested that perhaps the right thing for such people to do is close the door and throw the key away to someone and turn to the local authority to get a house. I have never heard such bunkum in my life. Where does the Minister believe the 2,500 people on the housing list in Galway will get a house? Where will the Minister get the money to build houses for them? What will happen to the houses out of which they walked? These are the very houses the bankers would have been perfectly pleased to confiscate through the courts if they believed there was some way they could sell them afterward or get money for them.

Let no-one suggest to me the home loan scheme, which was supposed to be the be all and end all, is any good. It proposed to do a great deal for the new, first-time house purchaser. However, only nine people in all of Ireland received a loan as part of the scheme in its two years of operation. The Minister of State with responsibility for housing was at it again recently. He maintained this was a good scheme. However, the way in which it has been implemented suggests the Minister wishes to ensure no one can get a loan and this has proved to be the case.

[137]Minister for Finance (Deputy Brian Lenihan): Information on Brian Joseph Lenihan  Zoom on Brian Joseph Lenihan  I congratulate Deputy Noonan on his appointment as the principal Opposition spokesperson on finance. I cannot wish him well in the political sense but I congratulate him on his appointment and I look forward to engaging with him because I am conscious he has always been a champion of the tradition of robust debate in the House, which is, I believe, a good tradition.

The Members may wish to note some interesting figures released today by EUROSTAT. In its league table of EU growth rates for the first quarter of this year, Ireland has jumped to the top. Naturally, it is important to keep this in perspective given the severity of the downturn the country has experienced during the past two years. It is too early for the “Hallelujah” chorus. However, I suggest equally, that the dirge that comprises this Fine Gael motion is distinctly out of tune with the reality of what is happening in our economy.

Last December, I outlined in my Budget Statement that the worst of the recession was over. Last week, the Central Statistics Office confirmed this is the case. GDP increased by 2.7% in the first quarter. As I have already stated, that is the fastest pace of increase in the EU. As a result, this evening my Department has revised its budget day forecast for GDP growth this year from -1.3% to positive growth of 1%, tangible evidence that the economic plan which the party opposite calls for us to abandon, is bearing fruit. The driving force of this growth is exports. It is the case that GNP is still expected to contract by 0.75%. However, this is also an improvement of almost 1% on the budget day forecast. Our plan is working, we must stick to it.

Naturally, unemployment is unacceptably high but I reject the suggestion that the Government does not have an employment strategy. Everyone on this side of the House recognises the difficulties in the labour market and the hardship these are causing. However, the best jobs strategy is to continue on the path of sustainable growth. We must continue to improve our competitiveness, we must maintain the stability we have brought to our public finances and we need a functioning banking system.

Jobs are at the centre of the Government’s economic strategy. We have been proactive in protecting employment and in creating new jobs as the Minister, Deputy Batt O’Keeffe, outlined in his contribution earlier. There are almost 1.9 million persons at work today in Ireland, approximately half a million more than in 1997.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  There are 450,000 people unemployed.

Deputy Brian Lenihan: Information on Brian Joseph Lenihan  Zoom on Brian Joseph Lenihan  Discussion on the creation of jobs without addressing the more difficult and less popular issues of competitiveness and fiscal stability is simply vacuous. Businesses will not prosper unless we win market share for our goods and services. However, every measure we have taken to regain our competitiveness during the past two years has been opposed tooth and nail on the floor of the House. There is no rigour or serious intent in the economic policies of the Opposition parties. Their approach is simply a part of the political game.

The mid-year Exchequer figures published by my Department last week show that the public finances are stabilising. Challenges lie ahead. Next year, we must identify €3 billion in savings. Further savings will be required in later years. The Government has already embarked on its examination of how this can be done. I look forward to the hearing the views of any of the other parties on this matter.

Decisive action and determination has brought this economy out of recession. The same characteristics have been brought to bear on our banking crisis and this has received international recognition as well. Governments throughout Europe are only now beginning to force their banks to face up to reality and recognise the losses on their loan books. As Klaus Regling remarked on his recent visit, we are ahead of the game in resolving our banking crisis. We set [138]up the National Asset Management Agency to clean up the banks’ balance sheets. NAMA went into the banks and discovered the real picture. We realised progress could not be made unless there was a separate, independent, statutory valuation of banking assets.

Where would be today had we followed the proposals of the parties opposite? When the NAMA Bill was introduced in Dáil Éireann, all Deputy Kenny could do was parrot a proposal from the financier, Dermot Desmond, published in a newspaper article that morning. His plan was to leave the banks to value and work out their own impaired assets while benefiting from a State guarantee. The idea was to split the banks in two, default on those providing badly needed funds to the banks and then leave the banks to their own devices. Where would the banks be now had we followed that policy? Our first bank to emerge from this crisis with new private sector investment was Bank of Ireland. Had we followed Fine Gael’s recommendation last September, it would still be mired in crisis, critically under-capitalised and short of funds. What would have happened had we taken it over and nationalised it as the Labour Party wanted to do? Would it now resemble Anglo Irish Bank? What has happened to Fine Gael’s proposal for a national recovery bank? This seems to have gone by the wayside, although I accept there was never a credible plan for the bank to raise funds. Likewise, there was no such credible plan for the Labour Party’s strategic investment bank because funding for these institutions would reduce the amount and increase the cost of funding for the existing banks and the State.

The actions of the Government have won the confidence of the international community. They have allowed us to pre-fund for this year on more favourable terms than would otherwise have been the case. If anything, this reinforces the need for the policies we have pursued. They are an essential part of the strategy on which other parties remain silent. If this recession has taught us anything, it is that we must be honest with the citizens. We must tell it as it is and not as we think they would like to hear it.

Deputy Ulick Burke: Information on Ulick Burke  Zoom on Ulick Burke  That would make a change.

I wish to share time with Deputy Noonan.

I support the motion. The Government’s planned infrastructure programme, Transport 21, has been decimated with most road projects abandoned indefinitely and, despite the recent confirmation by the Minster for Transport and Government guarantees that phase 2 of the western rail corridor between Athenry and Tuam in County Galway would proceed, it will also not be completed. Phase 1 of this project was constructed on time and under cost. It has proved to be a resounding success with the numbers using this facility way above projections. We have been informed the NRA’s money has run out for road projects. The Government has even directed that the rest areas on the motorway network should not be built. So much for the Minister for Transport’s commitment to road safety. The expansion of the provision of infrastructure was to have been the catalyst for job creation by the Government but it has again shown it has no job strategy in this time of crisis. Regional airport investment will also not go ahead. This will be devastating for the projected improvement of facilities and services at Galway Airport, which is important in supporting local industry.

Science Foundation Ireland has indicated to the Government that 950 research jobs will be lost, mostly at PhD level. What is the Government’s response? Earlier the Minister for Enterprise, Trade and Innovation said we were returning to economic growth and this was endorsed by the Minister for Finance. What planet are they both living on?

Deputy Darragh O’Brien: Information on Darragh O'Brien  Zoom on Darragh O'Brien  Those are the facts.

[139]Deputy Ulick Burke: Information on Ulick Burke  Zoom on Ulick Burke  Unemployment is still increasing with little hope for the many people affected of returning to the workforce in the near future. In Dublin 5,000 people applied for 300 jobs at Dublin Airport.

Deputy Darragh O’Brien: Information on Darragh O'Brien  Zoom on Darragh O'Brien  There are 900 jobs.

Deputy Ulick Burke: Information on Ulick Burke  Zoom on Ulick Burke  That is the reality not only in Dublin, but throughout the country.

Small businesses are being starved of resources. The bankers are putting out the spin that they are approving loans but they are approving amounts that are much lower than applicants seek, resulting in a lack of uptake. The spin banks are putting on this issue is false. Where reviews have taken place of applications, the banks have not changed the original decision, which proves this. It is important for the Minister to realise that unless he dictates to the banks that they must make funds available for small industry, there will be further unemployment.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  I thank the Minister for his complimentary remarks and for doing us the honour of participating in the latter stages of the debate. I also thank all colleagues who participated in the debate.

We all know that both politically and in the interests of the people we represent the economy is still at the heart of the matter and economic debates are important. If we can throw some light on the difficulties, that will be helpful. There is a great deal the Government parties are doing that we, on this side of the House, supported over the years. They did the right thing in moving towards fiscal correction but they left it too late to begin. That was to do with the expectation of the Taoiseach when he was about to take over from Deputy Bertie Ahern.

I recall a debate on stamp duty following the election in 2007. The CSO had published statistics on housing starts for May 2007. I had checked the statistics from January 2007 onwards and it was as clear as crystal that many thousand fewer houses would be built that year. The rule of thumb at the time was that for every 10,000 houses built, €1 billion would be generated in taxation. I pointed out to the then Minister for Finance, Deputy Cowen, that he would be short approximately €5 billion from house building alone in his fiscal estimates. That was in mid-June 2007 before the Dáil went into recess and the record will show that I asked him to publish a White Paper on what could be done to bridge the emerging fiscal gap. He did nothing in the budget in late 2007 and while Deputy Lenihan was reading himself in on succeeding him, no action took place either. However, when the Minister began to realise the magnitude of the problem facing him, he took rigorous action and I compliment him on that.

There are also difficulties with the manner in which the cuts are being applied. The Minister needs to go back to first principles and make a commitment that cuts will be applied fairly across the community and that the most vulnerable will be protected because we will not go forward unless there is a sense of social cohesion. If people feel they are being unfairly treated or the vulnerable are being attacked, there will be a major problem. We had an example earlier with the protest outside the gates.

A protest took place two weeks ago outside the office of the Minister of State at the Department of Foreign Affairs, Deputy Peter Power, in Limerick about the closure of a respite house and I went along to meet the parents of people affected. I cannot understand how such a house run by the Brothers of Charity would be closed for the sake of €150,000 when one considers the HSE’s budget. It employs 110,000 people while the Department has 500 staff and four Ministers. Why should it tap along to the bottom affecting the most vulnerable group of people on the front line who try to get a break at the weekend? The vulnerable most be protected. On the same day I was asked by one of the parents on the protest to read an article in the Irish Independent. While they were protesting to protect an allocation of €150,000, it was [140]reported that 18 executives in Anglo Irish Bank had higher salaries than the Taoiseach. How can the Minister explain to the parents of people with special needs whose respite house will be closed that €150,000 could not be found while 18 executives in this bank, which is completely funded by the taxpayer, are in receipt of salaries in excess of that of the Taoiseach?

When the budget is introduced later this year, the Minister needs to apply the fairness test to protect the vulnerable. He also needs to protect the capital programme.

I am worried about the capital programme. First, the Minister has announced already that €1 billion is being taken out of it. I believe he should re-examine that. Regardless of anything else, we need demand in the economy, and demand from the capital programme can be quite significant. The second problem with the capital programme is that what has been allocated is not being spent. The Revenue Commissioners figures published last week showed a very big discrepancy on the capital expenditure side. There is no point having the money allocated; a number in a book does not create jobs. With shovel-ready projects the shovels should be out. There is no point saying at the end of the year: “We had all this money in the capital programme but we are great lads because we saved 20% of it.” If it is allocated, it should be spent. That is the nature of budgeting.

There is a third issue with the capital programme which the Minister should check with his Department. I have received reports from reasonably significant people in the semi-State sector that they have capital projects ready to go but the paperwork is stacked up in the Department and has not been signed off. I have been told they are waiting up to eight months for the go-ahead. These are capital projects where the money is available and jobs would be created, yet they are not being given the go-ahead. That should certainly be examined.

Many Members spoke about confidence tonight. Confidence is vital. We do not have the capacity to provide the type of stimulus package that was provided in the United States. We cannot print money because we do not have our own currency, and it probably would not be wise to do so anyway. However, this country is spending approximately €19 billion more than it collects in tax each year. It is borrowing the money abroad and is spending it domestically. That is a serious stimulus package, so there is no shortage of demand on that side. Where the demand shortage occurs is in the lack of confidence in consumers. As the Minister reminded us, there are almost 1.9 million people at work and the banks are full of their savings. Savings in Ireland are at an historic high. The Minister’s task is to inspire enough confidence in people to encourage them to spend in the domestic market again. His problems, as the Minister’s Deputy said, relate to confidence.

People have confidence in the Minister, but they have no confidence in the Government. I facetiously suggested last week that the Minister was like the mythical first mate on the Titanic. He has no captain, no crew and is trying to do the job alone.

Deputy Brian Lenihan: Information on Brian Joseph Lenihan  Zoom on Brian Joseph Lenihan  There is no iceberg.

Deputy Paul Connaughton: Information on Paul Connaughton  Zoom on Paul Connaughton  There is no ship.

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  To extend the metaphor, the Green officers who have now departed the deck would probably have been on the side of the iceberg. They would have accused the Minister of deliberately destroying one of the great features of nature by driving the Titanic straight into it. These are the problems the Minister faces. It is known by all parties that there is no confidence on the ground in the Taoiseach. Deputies can talk him up or down, he can make great speeches and the Deputies can applaud him all night but it is hard to get confidence back when it is gone. The Minister is in a dangerous situation.

[141]There is no confidence in the banks either.

Deputy Darragh O’Brien: Information on Darragh O'Brien  Zoom on Darragh O'Brien  Where are the Deputy’s colleagues?

Deputy Michael Noonan: Information on Michael Noonan  Zoom on Michael Noonan  There is a match on television. The Deputy should get in tune with the real Ireland.

There is no confidence in the banks. After the investment of €22 billion in Anglo Irish Bank, the investment in Bank of Ireland and AIB, the establishment of the National Asset Management Agency, NAMA, and the transfer of the impaired assets, we still do not have a functioning banking system that is providing credit lines to business and householders. The Minister’s reputation is at risk because of this.

Tomorrow we will debate the terms of reference of the commission of inquiry into banking. I thank the Minister for extending the period under scrutiny to include the period from the night of the guarantee at the end of September 2008 to 15 January 2009, when Anglo Irish Bank was nationalised. I am glad he has done that. However, he should allow the commission to scrutinise the advice the Minister was given as well. I believe the Minister was in a situation where he took decisions without full information. I do not believe he knew the extent of the indebtedness of Anglo Irish Bank on 29 September, when he extended the guarantee to all its liabilities, or its full indebtedness when it was nationalised on 15 January 2009. I do not believe the Minister knew what was happening in the valuation the banks were putting on the assets that transferred to NAMA. I believe he was as surprised as anybody else by the second business plan for NAMA which we received yesterday.

What has happened is extraordinary. The banks’ advice to the Department should be subject to the examination. Otherwise, as frequently happens in this country, the political head of the Department will be left holding the can when, in my view, he is blameless on the issue. He worked on the basis of the advice before him. It is in the Minister’s and everybody’s interest to have this area illuminated as well and to have the truth of the advice brought forward.

Amendment put.

The Dáil divided: Tá, 77; Níl, 71.

Information on Bertie Ahern  Zoom on Bertie Ahern  Ahern, Bertie. Information on Michael Ahern  Zoom on Michael Ahern  Ahern, Michael.
Information on Noel Ahern  Zoom on Noel Ahern  Ahern, Noel. Information on Barry Andrews  Zoom on Barry Andrews  Andrews, Barry.
Information on Chris Andrews  Zoom on Chris Andrews  Andrews, Chris. Information on Bobby Aylward  Zoom on Bobby Aylward  Aylward, Bobby.
Information on Joe Behan  Zoom on Joe Behan  Behan, Joe. Information on Niall Blaney  Zoom on Niall Blaney  Blaney, Niall.
Information on Aine Brady  Zoom on Aine Brady  Brady, Áine. Information on Cyprian Brady  Zoom on Cyprian Brady  Brady, Cyprian.
Information on Johnny Brady  Zoom on Johnny Brady  Brady, Johnny. Information on John Browne  Zoom on John Browne  Browne, John.
Information on Thomas Byrne  Zoom on Thomas Byrne  Byrne, Thomas. Information on Dara Calleary  Zoom on Dara Calleary  Calleary, Dara.
Information on Pat Carey  Zoom on Pat Carey  Carey, Pat. Information on Niall Collins  Zoom on Niall Collins  Collins, Niall.
Information on Sean Connick  Zoom on Sean Connick  Connick, Seán. Information on Mary Coughlan  Zoom on Mary Coughlan  Coughlan, Mary.
Information on Brian Cowen  Zoom on Brian Cowen  Cowen, Brian. Information on John Cregan  Zoom on John Cregan  Cregan, John.
Information on Ciaran Cuffe  Zoom on Ciaran Cuffe  Cuffe, Ciarán. Information on John Curran  Zoom on John Curran  Curran, John.
Information on Noel Dempsey  Zoom on Noel Dempsey  Dempsey, Noel. Information on Jimmy Devins  Zoom on Jimmy Devins  Devins, Jimmy.
Information on Tim Dooley  Zoom on Tim Dooley  Dooley, Timmy. Information on Frank Fahey  Zoom on Frank Fahey  Fahey, Frank.
Information on Michael Finneran  Zoom on Michael Finneran  Finneran, Michael. Information on Michael Fitzpatrick  Zoom on Michael Fitzpatrick  Fitzpatrick, Michael.
Information on Seán Fleming  Zoom on Seán Fleming  Fleming, Seán. Information on Beverley Cooper-Flynn  Zoom on Beverley Cooper-Flynn  Flynn, Beverley.
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Information on Noel Grealish  Zoom on Noel Grealish  Grealish, Noel. Information on Mary Hanafin  Zoom on Mary Hanafin  Hanafin, Mary.
Information on Mary Harney  Zoom on Mary Harney  Harney, Mary. Information on Seán Haughey  Zoom on Seán Haughey  Haughey, Seán.
Information on Jackie Healy-Rae  Zoom on Jackie Healy-Rae  Healy-Rae, Jackie. Information on Máire Hoctor  Zoom on Máire Hoctor  Hoctor, Máire.
Information on Billy Kelleher  Zoom on Billy Kelleher  Kelleher, Billy. Information on Peter Kelly  Zoom on Peter Kelly  Kelly, Peter.
Information on Brendan Kenneally  Zoom on Brendan Kenneally  Kenneally, Brendan. Information on Michael Kennedy  Zoom on Michael Kennedy  Kennedy, Michael.
Information on Tony Killeen  Zoom on Tony Killeen  Killeen, Tony. Information on Michael Kitt  Zoom on Michael Kitt  Kitt, Michael P.
Information on Tom Kitt  Zoom on Tom Kitt  Kitt, Tom. Information on Brian Joseph Lenihan  Zoom on Brian Joseph Lenihan  Lenihan, Brian.
Information on Conor Lenihan  Zoom on Conor Lenihan  Lenihan, Conor. Information on Michael Lowry  Zoom on Michael Lowry  Lowry, Michael.
Information on Tom McEllistrim  Zoom on Tom McEllistrim  McEllistrim, Thomas. Information on Mattie McGrath  Zoom on Mattie McGrath  McGrath, Mattie.
Information on Michael McGrath  Zoom on Michael McGrath  McGrath, Michael. Information on John McGuinness  Zoom on John McGuinness  McGuinness, John.
Information on Dr Martin Mansergh  Zoom on Dr Martin Mansergh  Mansergh, Martin. Information on Micheál Martin  Zoom on Micheál Martin  Martin, Micheál.
Information on John Moloney  Zoom on John Moloney  Moloney, John. Information on Michael Moynihan  Zoom on Michael Moynihan  Moynihan, Michael.
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Information on Charlie O'Connor  Zoom on Charlie O'Connor  O’Connor, Charlie. Information on Willie O'Dea  Zoom on Willie O'Dea  O’Dea, Willie.
Information on John O'Donoghue  Zoom on John O'Donoghue  O’Donoghue, John. Information on Noel O'Flynn  Zoom on Noel O'Flynn  O’Flynn, Noel.
Information on Rory O'Hanlon  Zoom on Rory O'Hanlon  O’Hanlon, Rory. Information on Batt O'Keeffe  Zoom on Batt O'Keeffe  O’Keeffe, Batt.
Information on Ned O'Keeffe  Zoom on Ned O'Keeffe  O’Keeffe, Edward. Information on Mary O'Rourke  Zoom on Mary O'Rourke  O’Rourke, Mary.
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Níl
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Information on Noel Coonan  Zoom on Noel Coonan  Coonan, Noel J. Information on Joe Costello  Zoom on Joe Costello  Costello, Joe.
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Information on Martin Ferris  Zoom on Martin Ferris  Ferris, Martin. Information on Charles Flanagan  Zoom on Charles Flanagan  Flanagan, Charles.
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Tellers: Tá, Deputies John Cregan and John Curran; Níl, Deputies Emmet Stagg and Joe Carey.

Amendment declared carried.

Motion, as amended, agreed to.


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