Alex White economy Archives

Time for Government to level with the people

18th November 2010

Last night, the Seanad debated renewing the Bank Guarantee Scheme. Although the Labour Party voted against it, it passed the house 26-19. I used the opportunity to raise the events of the past few days in my own speech…

I listened to the debate with some interest. Some of the points made were not without significance, especially one or two points made by Senator Boyle to which I will return. I was most struck by what Senator Quinn said. I understood him to say, essentially, that this debate, unfortunately, can be reduced to the proposition - these are not his words, I am paraphrasing what he said - that the Seanad has no choice but to support the motion.

I will not support it because there is a choice. This harks back to what happened in September 2008. On the question as to whether there was no choice on the fateful night in question, the Governor of the Central Bank, Professor Honohan, has never stated the Government was faced with only one option or that it could have taken only one course of action, namely, that of providing a blanket guarantee. Neither the Honohan report nor any of the other reports bears out the proposition that only one course of action was available. The central consequence of what took place on the night in question and subsequently when the Houses endorsed the Government’s approach was that options were closed off. The introduction to the heart of the Government’s banking policy of a guarantee of the nature and extent of the bank guarantee closed off all other options.

There has been much debate about burning bondholders and so forth. The Fine Gael Party took the perfectly legitimate view that the bondholders should have been required to share some of the pain. It was not possible, however, to achieve this outcome once the guarantee was in place. A number of the policies advocated, including the Labour Party policy of taking the banks into public ownership for a period and the policy of sharing the pain, as it were, the position taken by the Fine Gael Party, were recognised by Professor Honohan and others as legitimate options. However, it was not possible to achieve any of them once the guarantee was introduced.

Senators have argued that it is time to forget the banking crisis because it is not connected to the deficit of €19 billion and instead look to the future by focusing the debate on how we deal with the deficit. It is absurd to suggest the legacy of the banking crisis can somehow be divorced from what we need to do to address the budget deficit. The budgetary and banking crises may be different issues, but they are intimately bound up with one another.

Last night’s television and radio coverage featured a great deal of commentary. Stephanie Flanders of the BBC nailed the issue very well when she noted that bondholders who had looked at the Irish deficit of €19 billion and were advised that the Government planned to introduce a budget and four-year plan to slash the deficit only had to look a little deeper to see that the legacy of the banking crisis lay right beside the deficit problem that needed to be addressed. They do not only see that the current deficit must be reduced to below 10% next year, by a further margin in the subsequent year and to 3% by 2014, the reason being they do not see the issue in a mechanical way. While the Senator may want the House to debate the deficit and forget about the banks, the legacy of the banking crisis spooks the whole crisis, both in its economic and budgetary aspects. It forms part of the crisis and cannot be divorced from it. If anything, the events of recent days and the insistence by eurozone and ECOFIN Ministers that there cannot be a direct feed of aid to the banks, as Senator Boyle described it, indicate that the Government is on the line. The Irish sovereign has been infected by the banking crisis. The position of the sovereign and the financial position of the Government, as perceived internationally, are undershot by our banking problems. There is no point in wishing these problems away because they are at the heart of the crisis.

Getting budget over the line is primarily the job of government

9th November 2010

In seeking consensus on a particular course of action one would have to know the proposed course of action before answering the question as to whether one agreed with it. That is a first principle.

For example, if consensus is being sought on a four-year plan, we will have to see the plan before we can decide whether we agree with it. Is that not straightforward? Anyone can see that that is agreeable.

From the brief reports I have heard on the meetings which took place with the Commissioner this morning, I do not know whether matters have changed specifically. However, there appears to be less certainty about the figure of €15 billion in the four-year adjustment period. The three main parties are agreed on the need to make an adjustment in order that we can get to the figure of 3% by 2014. There should be no question about that target, but what will it actually mean? We know that up to three weeks ago the Government believed the adjustment figure would be €7.5 billion which quickly became €15 billion. Three scenarios were presented by the Government for the budget to be announced in December. On 22 October The Irish Times reported Government sources as saying the Department of Finance was seeking an adjustment of €4.5 billion. Only two and a half weeks ago the figure was €4.5 billion, it is now €6 billion. Anyone may look to the Opposition for consensus or certainty, but we must look to the Government in the first place for a sense of what is going to happen. I agree and accept that the situation is fluid. The Government must examine the growth predictions for next year and where we will be this time next year with the unemployment figures and so on. I accept that matters are in a state of flux, but Senators on the other side of the House should not demand certainty from the Opposition, a demand they do not make of the Government. This is simply not logical.

It is the principal objective of the Government to prepare a budget, present and have it passed by the Dáil. There is a lot of talk about whether the Opposition parties will help to get the Government over the line. The Government must get the budget over the line. If it cannot do so, it will lose not just the confidence of the people, it will also lose the confidence of Parliament and have to go. That is the way our democratic system works. It does not mean, however, that we are against adopting a co-operative approach. We will do everything we can, for example, concerning the adjustment to be made in the budget. The Labour Party will come forward not just with a clear and specific set of objectives, it will also show how they can be achieved. When we talk about consensus, let us be clear about what we mean. Let it be understood that, in the first instance, this is the job of the Government.

People are entitled to lay the blame - White tells Seanad in banking debate

21st October 2010

The only way we can assess the success of the various measures the Government has taken in respect of the banking system is to apply the test it established at the outset in this regard. The Minister of State and his colleagues have outlined that test in this and the Lower House on many occasions. The is test is not designed to develop a banking system of which we can, in some symbolic way, be proud or which will satisfy international opinion. The real test the Government has set down - in my respectful opinion, it is the correct one - is that we should have a banking system which lends to the real, active and productive economy. This system must also be part, once again, of a vibrant and dynamic economy. That is the test the Government set in respect of the various measures it has introduced and it is the only one we can be realistically expected to apply.

I invite the Minister of State to outline the success achieved in the aftermath of the various measures brought forward by the Government. What have been the outcomes? We were promised that one of the outcomes would be that the banking system would be restored and begin to lend to a productive economy. On the evidence, this does not appear to have occurred. The Government owes the people an explanation in this regard.

Senator Dan Boyle always refers to honesty. It is ever so slightly irritating to hear him state that those on this side of the House are not being honest, and that all the honesty lies with those on the Government benches. He implies that on each occasion we say anything we are being dishonest. We can, as we are entitled to do, disagree with what has been and is being done, call the Government to account and take the debate in directions which the Senator or the Minister of State might not particularly wish it to go. If we do these things, however, it does not mean we are being dishonest. Perhaps the Minister of State will, in his usual honest fashion, address the matter of whether the banking system has even remotely begun to pass the test the Government set in respect of it.

The Minister of State touched on the subject of retribution and referred, rather amusingly, to the establishment of a star chamber. He has raised an important issue which deserves further ventilation. In that context, however, I am not interested in the erection of a guillotine on St. Stephen’s Green. Senator MacSharry has often stated the latter is precisely what the Opposition is seeking. That is not what we are seeking.

The Opposition is seeking the kind of scrutiny and examination necessary and, ultimately, wants those responsible for causing the difficulties that have arisen to be prosecuted. I use the term “prosecuted” in the broadest possible sense. I am not merely referring to criminal prosecution. As a society, we are entitled to apportion blame. People should not be apologetic and state we should not look backward or engage in a culture of blame but rather should look to the future. Certainly, I am principally interested in what happens in the future. But I would have thought that, of all people, the Minister of State would agree that it is not possible to do anything about the future if one does not have some understanding of what happened in the past. This applies equally to the banking system and the Government’s failure to regulate it. We are entitled to lay blame.

Six months on from Croke Park Deal, when will implementation start?

13th October 2010

There has never been a time, good or bad, when there has not been a debate about the need for reform in the public service. I cannot remember any such time. I make that point, not because I want to diminish in any way the importance of this debate and of achieving real reform in the public service. I do not doubt that for one second. However, it is interesting to note that it is a constant dynamic in public debate and discussion.

As we approach the weeks leading up the budget, people are free to say what they wish to but I hope they will not contribute unwittingly to the re-emergence of a period of paralysis such as we had last year concerning the public and private sectors. I refer not only to the Government side but across the board to commentators, Members of this House and others, to questions put about what the public sector is getting that the private sector is not, and all the other arguments that led to a toxic atmosphere, especially during the debates which took place at this time last year about what needed to be done.

I do not wish to diminish the necessity for reform in the public service because it clearly exists and has been demonstrated. The OECD report in 2008 gave us a lot to chew on regarding various steps that needed to be taken. There were a number of positive points in that report regarding the Irish public service. It pointed out the progress that had been made in areas that required reform, going back to the 1990s, if I am not mistaken. One of the report’s highlighted conclusions - I speak from memory - was that while many of the reforms were internal and process-led there was a need to look outwards and have a much more citizen or customer focused approach in the public service. I absolutely agree with that. Nobody could disagree with it. It is essential and will affect people. It may mean there will be fewer public servants; it will certainly require more flexibility and transferability across services. It may require or call for fewer agencies in order that core services can be reintegrated and provided within the public service. There are all kinds of changes that will impact on individual members of the public service. That is the case and it would be wrong for anybody in this House or anywhere else to think that public servants are not aware change is needed and is coming.

As a politician going about one’s daily work around the constituency and going to meetings, one meets many people from both sectors. The most discerning - I hesitate to say intelligent because that implies looking down on others - and thoughtful people in the public and private sectors can see the value of and necessity for both sectors. One talks to private sector workers who may be in business. They require services such as public transport and child care for their workers and health services as part of the make up of any modern economy. They recognise the importance of a vibrant and proper public service because they need it, as do their staff and their families. Equally, people in the public service will say, “We know we are nothing without the private sector. We can’t self-fund. If there isn’t a dynamic economy and private sector there is no money to fund the public service”.

People accept decisions must be taken, but there is more than one solution

7th October 2010

One of the legacies of the period from which we have just emerged was the complete failure of many in government to distinguish between a so-called genuine business person and one who was less than genuine. Those who have turned out to be duds and less than genuine, if not worse, were feted and celebrated by many members of the Government during the recent period. Therefore, I would not rely too heavily on the ability of certain people in government to make the distinction between so-called genuine business people and those who are less so.

I do not subscribe to the view that there is no hope. I do not for one minute wish to be lined up in anybody’s mind or book with people who believe the country is sinking or does not have a future, that there is no future here for my children or theirs. I believe very strongly that there is a positive future for us as a community, society and economy. We must restructure and rebuild a genuine and real economy based on production and the efforts of our people, the provision of goods and services based on innovation and all the qualities about which all other colleagues spoke during the course of the debate. In that sense, I am an optimist, although today it is very difficult to be one. Leaving aside political partisanship, I want to be counted among those who see a very strong future for the country in the years ahead when we will address seriously the shocking and horrendous problems we can see.

Neither do I subscribe to the psychobabble we have heard, particularly in recent days, although it has been evident for a number of months. I do not think it gets us very far. I refer to those who give out about people talking down the economy, the endless negativity and so on. Essentially, it is propaganda. Those who devote most of their speeches and spend their time preoccupied with others who, in their view, talk down the economy are not addressing the real issues. In a sense they are blaming and attacking the messenger. People do not need to read the so-called negative pieces by journalists in the newspapers or listen to the economists who appear on “Prime Time”. They do not need to be told by such individuals that things are bad. They can turn off the television and the radio and need never buy a newspaper, but they will still know that things are shocking for them and their families. People who have lost their jobs or have had wage or welfare cuts do not need to be told by anybody, negative or otherwise, that life is difficult and things are tough for them. Let us stop blaming and trying to take refuge in the notion that there is an army of people talking down the economy. There is an element of psychobabble in the notion that if only we could get people to be more cheerful and have smiling economists and cheerful journalists writing nice happy-clappy articles in newspapers, everything would be fine.

Trust is the next issue to be considered with regard to the future and confidence. I had a very interesting experience earlier, although people might think it strange for me to relate it. I listened to the Minister for Finance, Deputy Brian Lenihan, on “Morning Ireland” and said afterwards to a person that I thought he had done a good interview. That person said, “Yes, but do you believe him? I cannot believe him any more.” I asked what was meant by this. The reply was not necessarily a personal criticism of the Minister but one of the Government and its attitude. It has to do with trust. There was such a lengthy period during which the people were not told the full truth or given all the facts that now they are being given facts and the truth which we hope is the whole truth, they have lost faith in anything they are told. There should have been far more honesty much earlier in the process. We should not have had Members coming into the Dáil or the Seanad suggesting, for example, the bank guarantee would be cheap and that we would get out of the banking crisis relatively easily. I recall that at one stage a Minister came into this Chamber and more or less suggested to Members that we would make money out of the whole process, that NAMA essentially would be a money spinner. People simply did not believe it.

Extending the Guarantee

30th September 2010

Last night, the Seanad was invited to extend the guarantee covering Irish banks that was first put in place in September 2008. This was before we were told the final bill for Anglo Irish Bank, which was announced only this morning. The extension was carried by a margin of 6 in the Seanad. The following is an edited transcript of my speech…

It is not irresponsible to oppose, to test government policy or to seek to amend it. The opposition at any period of a country’s history performs a major task for the body politic precisely by being in a position to test, criticise, query and, if it judges it to be appropriate or necessary, oppose. It is for a government to ensure its policies are sufficiently well argued in public and in parliament and that it has sufficient support among the members of a parliament to get those policies through. Opposition parties must exercise a sense of responsibility and, especially at moments such as this, restraint in how they present their arguments, marshal their arguments and participate in the debate. I do not disagree with that for one minute.

I do not believe we have time at this point to rehearse all the arguments that were gone through in the days and weeks after 29 September 2008. I assure the House that at all times the position taken by my party, then and since, has been motivated by no other objective than the interest and common good of the country. The fact we took a different view and opposed a proposal brought forward by the Government does not and should not in anyone’s eyes lessen in any way or suggest to anyone, either in this House or outside, that a political party that takes an opposite view is somehow offside, cannot be relied upon or is in some way undermining the common good. The opposite is the case.

We do not have time to deal with or go back through all the arguments we had then. Some of them have been touched on because they are still live and relevant. That is the basis upon which the guarantee was presented at the time and the basis of the claims that were made for the guarantee. Senator Boyle says it has been very successful. I do not know how it is possible for anyone to say it has been successful. While it would be difficult for me to say definitively that it will historically be proven to be unsuccessful, I do not know how Senator Boyle can say it has been successful because it will not be possible to pass that judgment for many a long year from today. I can understand him defending it but to suggest it has been a success seems contingent on many different things that lie in the future such that it is not possible to make the point.

At the time of the original guarantee legislation in regard to which this proposal is an amendment, the Minister, Deputy Brian Lenihan, stated:

There is understandable concern that the Exchequer is potentially significantly exposed by this measure. This is not the case. The risk of any potential financial exposure from this decision is significantly mitigated by a very substantial buffer made up of the equity and other risk capital in the relevant institutions. It is estimated [he does not say by whom] that the total assets of the six financial institutions concerned exceed their guaranteed liabilities by approximately €80 billion, which is half of Ireland’s total GNP. By any measure there is, therefore, a very significant buffer before there is any question of the guarantee being called upon.

I note the narrative has moved in recent days and weeks in the view of Ministers and certainly former Ministers, such as Deputy O’Dea, and I saw the Minister of State, Deputy Curran, nod his head when someone made the point that the banks had lied to the Government. It may well suit the Government that the narrative now becomes “the lies the banks told the Government”. It may be that lies were told and that the Government can somehow seek to portray itself as being blameless in that regard and being the hopeless victim which has been misled.

Summer recess shows current govt is part of the problem

29th September 2010

With regard to people’s confidence in the future, unfortunately we must record the fact that whatever about the mood in this House and the mood in Leinster House, there is a really palpable mood of despondency and fear throughout the country and that has not changed since we were here last. If anything, it has got worse. We have a responsibility to address this. The principal responsibility lies with the Government but I accept that the Opposition and the people involved in public life have a great responsibility also. The difficulty for the Government - particularly during the summer when there were many examples - is that most people have now taken the view that the Government, far from being able to produce a solution or be part of the solution, is itself part of the problem.

I refer to the question of engagement with people. It is reported in the newspapers today that the Taoiseach stated the Irish Government is trying its best - I do not have the exact words to hand but he is quoted in this morning’s newspaper - to persuade people on the international front that we are doing the right thing. I can understand the Taoiseach attempting to do this but when is he going to start persuading and addressing the issue of the confidence and the belief in this country on the part of the people of this country? Again and again in the spring, Members opposite referred in the House to The Wall Street Journal and various other newspapers in America which they thought were praising Government policy. I do not see them bringing in copies of The Wall Street Journal or some other publications that have been commenting recently on the deterioration in the economic situation here.

On this question of confidence, I agree that the Irish Government should be engaging with the people. There is a serious failure on the part of the Government and in particular, on the Taoiseach’s part. I do not want to hear again another reference to turning the corners. What does the phrase, “turning the corner” mean? The Irish people are able to put up with bad news and they are able to put up with the truth. They are able to put up with honesty and they do not get that from the Government. They get this happy, clappy sort of soft-soaping where everything is fine and we are turning the corner. How many times have we turned the corner? We are going around a roundabout at the moment and that is the sort of corner we are turning. The first time this phrase was used was a year ago and the Minister for Finance is still saying it. The Government should level with the people. Let us have facts and honesty and the first place we should have it is in this House, today and tonight, about Anglo Irish Bank. I refer to the ludicrous scenario whereby tonight, the House will be asked to extend the guarantee but we will only be told the story about Anglo tomorrow.

What sort of nonsense is that and what way is that to treat the Parliament and the people of Ireland? The Government should level with the people. Let us have the facts. We can take it and the people of Ireland can take it. It would be much better for the Minister for Finance and the Government and Taoiseach to level with people and give the facts to the people of Ireland, however negative are those facts, so that people can then be part of this great confidence-building exercise which we all want them to engage with.

No more sterile debates on forthcoming budget

30th June 2010

When the House returns in the autumn after the summer recess - that is, if there is the same configuration in these Houses as there is at present and according to who is in Government - there will be a short period of three months or perhaps less, before the budget. We had many phoney debates in the House last year about the budget and about the proposals for cuts. The debate became quite sterile. I suggest to colleagues that this autumn we might take the debate to a higher level than perhaps was possible last year when there was a sense of crisis - not that there is not still a sense of crisis - to get beyond simply talking about budgetary measures and cuts and readjustments, necessary as those are, but look to the future of this country. In particular, we should look at the very important issue of investment. We should discuss investment in the economy, investment in infrastructure, investment in people and in ideas so that we can genuinely turn the economy around. This would ensure we would have an economy when we get through the more immediate pressing budgetary crisis.

My party has brought forward a very carefully considered proposal for a strategic investment bank to marshal investment, to marshal resources towards productive activity, to get away from this long hangover we are experiencing as a result of basing our entire future on the construction industry. We need to look at new ideas and ways to marshal available funds into that kind of productive activity in the future. Those of my colleagues who have suggested that my party has no policies or deals in soundbites, might look at this document. I suggest it could form the basis, along with proposals from other parties, for us to get away from this sterile, if necessary, debate about the budget and look to the future.

I noted another contribution today which is relevant to the discussion. In Britain there is a proposal for the establishment of a new green investment bank. This type of initiative will seek to marshal public and private sector funding, given that it is so difficult to get financing for projects, including green projects, to help make this kind of investment which will fund productive activity in the economy. I know the Green Party supports such measures.

I say that sincerely, but we must do more than talk about it. We need initiatives such as our proposal for a strategic investment bank or the green investment bank in the UK. Let us go beyond the immediate debate and brickbats about whether certain measures should be in the forthcoming budget, important as that should be, and have a real debate about the future of the economy.

Alex in the Media

22nd June 2010

On Saturday morning, I appeared on Newstalk’s Saturday Edition with Brendan O’Brien. You can hear the programme again by visiting the Newstalk Media Player by clicking here. Click on ‘Archives’, select ‘Saturday Edition’ and choose Part 2.

On Sunday morning, Sam Smyth invited me on to the panel on his Today FM show. Also there were Mairead McGuinness MEP and Minister of State Conor Lenihan. The show can be listened to again by clicking here.

On Sunday evening, I was on the panel for The Week in Politics on RTE1 along with Minister Mary Harney. Topics included Fine Gael and the banking crisis. Click here to view the programme again.

‘The more one reads these banking reports, the more serious and shocking they become’

16th June 2010

I welcome the publication last week of the two reports into the banking system. We will have the opportunity to debate them in the Senate later but there is so much to discuss and so much material in these reports, it will not be possible for us to deal with them in one debate and it will be an issue to which we will have to return in the coming days, weeks and months.

There is much talk in the Houses today about confidence in political leaders and so on. The most important issue of confidence in Ireland today is the confidence people have in their future in the country - the confidence citizens have that this country can genuinely turn itself, or be turned, around - and that there will be a future for their children. Yesterday we saw further reports on unemployment figures which show Ireland is now 3% above the EU average.

Notwithstanding Professor Honohan was not asked to look at Government policy, contained within his report is a devastating critique of Government policy in the period under review. I accept he dealt with banking management, the prudential system and the regulatory regime but there is a devastating critique of Government policy. The more one reads these reports, the more serious and shocking they become. They contain a devastating critique of economic policy, budgetary policy and macro-economic policy over the period in question. When historians come to write the history of the past 20 years, these reports will be central documents on which they will rely, in particular Professor Honohan’s report.

I was somewhat sceptical, as we in this House have become, in regard to whether the process proposed by the Government was the correct one. Professor Honohan should be congratulated on the clarity and depth of the analysis he gave. However, we now need clear terms of reference in order that the Houses of the Oireachtas and, through them, the people can be involved in a really rigorous, open and transparent examination and analysis of what has occurred and why this country and economy have arrived at this shocking state of affairs.

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Category: economy