Professor Patrick Honohan:

A number of things arise from that. Deputy Boyd Barrett might have a different perspective about ways of organising the economy in general, so we can obviously agree to differ on that. I am subject to the treaty, so I am thinking in terms of an economy in which one has multiple service providers that operate in a competitive manner and price control is limited to cases in which there are clear reasons for market failure. There are clear reasons for market failure in banking. We do control a lot of stuff in banking. For example, on the Deputy's particular point about property prices, the way things were going and bubbles, our interventions on loan-to-value and loan-to-income ratios - unpopular though they were, in some quarters anyway - are a good example of working in an environment in which the banks did not like what we were doing. All of the banks wrote in to say they did not like it, that they hated it and that it was unnecessary, etc., etc. However, they sort of knew that this was par for the course and that they could and would be constrained in what they could lend, having shown that they had in the past loaned too much to people who could not afford to service their debts.

The control of retail interest rates in the banking system is a kind of Rubicon, though. There were times, perhaps in the 1960s, when that was very prevalent. To come out now as a country in the middle of this and say, "We're going to be the country that controls interest rates", has a signalling value far in excess of what one might think in terms of causing a retreat of service providers. That is my perception of it.