Alex White finance Archives

Recovery Plan is bill for economic failure

25th November 2010

The Four Year Plan released yesterday afternoon will affect every man, woman and child in this country. It is devastating - the price we must pay for political incompetence. Within a matter of hours, I gave a speech to the Seanad. You can read the whole debate by clicking here.

I welcome the opportunity to participate in this debate on the plan published by the Government this afternoon. This plan is in many ways the bill for economic failure. Regrettably, it is a bill that must be paid over a period of some years.

Having listened to Senator Boyle, I have a real sense that he is finding his voice on some issues and that he may be, in terms of some of the things he said, feeling a sense of political liberation. I agree with much of what he had to say. There is a sense that people have been codding politicians, and not perhaps only Government politicians, and that they may have been unwitting participants in the illusion that we can fund and have the type of public services to which we aspire and should have for our citizens and children, and that these can be sustained and managed at a particular level of taxation. A stark statement on page 91 of the plan, with which no one could disagree, states : “We have eroded the income tax base to an unsustainable level”. This is manifestly true. However, I do not believe income tax is the only element we need to examine in the context of from where we raise taxes. I agree with Senator MacSharry and others who said that it is necessary that we not confine ourselves to only looking at income tax. We do not wish to raise taxes for the hell of it but so that we can look towards having a sustainable economy and public service in respect of which there is certainty in terms of funding into the future. We must never again think we can pin everything on the type of transitional taxation we had during the so-called boom.

I recall sitting beside a politician on a radio programme prior to the last general election. She was a supporter of the then Government and is not now a Member of the Houses. I recall her seeking to sustain the argument over many minutes on that radio programme that it was possible to reduce taxes and improve public services. I do not understand how it would have been possible then or since to do this.

The extent to which any of us was party to such an illusion was a mistake but the principal responsibility must lie with the Government regarding these matters. Opposition politicians can from time to time be criticised for calling for this and that. It is sometimes legitimate to engage in such criticism but it is greatly dwarfed by the legitimate criticism that one can level at a government that has failed to carry out the policies it ought to have implemented.

The document, regrettably and sadly, is a bill and it is not particularly detailed. It has detailed aspects and although it purports to contain a growth strategy and a jobs strategy, it does not. There is nothing new in the narrative on these areas. There is a great deal of generalised, aspirational material, with which it would be impossible to disagree, but there is little relating to a jobs strategy. The IMF is constantly being invoked but its officials are in the House and, in an interim report published earlier this week, they rightly identified the urgent necessity for a growth strategy and to put in place serious measures to get people back to work. That is what we need.

How can consulting the electorate be a ‘distraction’?

23rd November 2010

From today’s Order of Business in the Seanad…

We have a caretaker Government, a significant portion of which has essentially handed in its notice and is operating on the basis that the Dáil and Seanad will be dissolved early in the new year, although how early is not clear. We know the Finance Bill was enacted on 3 April this year. Does the Leader or the Deputy Leader have any view on what was meant by the reference to financial measures? It could take us until April to deal with all of the financial measures.

I reiterate that it is a matter for the Government to introduce and pass the budget. The Constitution is clear on the issue. In circumstances in which we have only a caretaker Government it is not reasonable or appropriate to suggest the Opposition parties should act as some kind of surrogate Government when it comes to the single most important job of a Government, which is to introduce a budget.

There is much talk about whether an election would constitute a distraction. I take offence at the notion that consulting the people would be inappropriate. How could consulting them at this grave time be a distraction?

I believe in parliamentary democracy in which people are given a mandate to make decisions. They do not consult because the system does not allow them to consult at every hand’s turn for everything done in Parliament; it is necessary to repose trust in parliamentarians. However, at a time as grave as this, was it ever more necessary, appropriate and desirable that the people be consulted on what should be done?

I constantly say the Government does not have a mandate to do what it is doing, but the Opposition does not have a mandate anymore than the Government does to introduce proposed budgetary measures. Senator O’Toole says the budget should be put through, but it is not an undifferentiated thing as if we just had a quick vote on it. It will include measures that will affect ordinary citizens, including cuts in welfare and other changes. It is not just a question of getting over the line; it will include a host of measures that will need to be considered and which will affect ordinary citizens. In a sense, they are the ones who should be in the driving seat, not on every individual measure, but at a time as grave as this, what is the problem?

I know people are concerned about delay and I do not underestimate the gravity of the international situation and the implications of a delay, as others mentioned. I do not believe a delay would be particularly desirable, but when everything is balanced and knowing that there will be difficulties for whatever Government is in place in coming weeks and, by extension, the country, it is vital that the people who elect Members to the other House which needs to make a decision on the budget, be consulted at this time.

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.

Can we trust the government anymore?

17th November 2010

From today’s Order of Business…

I respectfully disagree with the suggestion that criticism of what the Government has done in the past is an entirely separate matter from what we have to deal with now. The two are intimately bound up for two reasons. First, the Minister for Finance and others on the Government side have spent a number of weeks trying to persuade us that the budgetary crisis and the banking crisis are entirely separate. This effort has been made repeatedly in this debate in the past two to three weeks. We have been asked to stop talking about the banks and just talk about the budget when we know that the banking crisis and the central policy failures in regard to banking, and at the top of which failures I would put the blanket guarantee given more than two years ago, are inextricably and intimately bound up with where we are at the moment in regard to the crisis the country is in. We cannot see our way to analysing and debating this issue in any kind of credible way without having regard to these central policy failures, the legacy of which we are facing day in, day out.

The second reason we cannot separate the two things is the issue of trust. Can we trust the Government? We can disagree with those in government and that is fine. We all know that we disagree with them but can we trust them or believe what they say? The problem is that trust and legitimacy immediately flow out of any government, leaving aside whether one agrees or disagrees with those in government, if one cannot believe what that government says. One cannot possibly have any trust in that government. The people cannot have trust in a government, some of whose members at the weekend described as fiction that there were ongoing discussions on bailouts or related matters.

Another Minister, Deputy Dempsey, who was standing beside the Minister in question shook his head and indicated he did not know anything. Either the Ministers knew what the position was and misrepresented it or they did not know what it was, in which case what are they doing in the Government? What is going on in the Government in relation to policy?

My brothers who live in the United States are as well informed about what appears to be taking place as are the people here who are being informed by the Government. This morning’s interview by the Minister for Finance hit rock bottom in that respect. There is no frankness or honesty, without which one cannot have trust and-or legitimacy.

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.

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.

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Category: finance