Mr. Liam Kelleher:

Chairman, if I may proceed first, Chairman. Good morning, members of ... Chairman, members of the committee. My name is Liam Kelleher, I was director general of the federation from 1993 to 2007.

The CIF is the national and regional body for construction company, contractors, subcontractors and house builders in Ireland. It is recognised by Government and public bodies as the representative body for the Irish construction industry. This was reflected in its position as a social partner for the period. The federation is owned and run by its members via an executive body of 34 members appointed through the various branches and associations that comprise the CIF. All interests, sectoral and regional, are represented in the CIF’s decision-making processes. The organisation has 13 branches and a number of sectoral associations that pursue the policy objectives of their own subsector.

The five main industry groups are the Master Builders and Contractors Association, the Civil Engineering Contractors Association, the Mechanical and Electrical Contractors Associations, the Irish Home Builders Association and the Alliance of Specialist Contractors. That umbrella group, the details of the membership of it were given in the submission that I made. At its peak, the federation had in excess of 2,500 members, large, medium and small, whose priorities differed and where competition between groups and regions could be quite strenuous. The purpose of the federation is to provide services to its members and to represent its members.

For the period covered by this inquiry, 90% or more of the federation's resources were devoted to the provision of services to members. Some of these services were outlined in the submission and I am covering some of them briefly here. Industrial relations was a core service, including representation at various labour relations fora: the Labour Court, the Labour Relations Commission, the Employment Appeals Tribunal, as well as dealing with the trade unions and the industry at the time. Health and safety was a high priority for the federation during the period the joint committee is examining. The CIF worked with the Health and Safety Authority and the relevant trade unions to ensure compliance and competence in meeting and exceeding rising statutory safety standards. The CIF remains one of the key stakeholders and drivers of the construction safety partnership.

Briefly on each of the main groups, main contracting, building and civil engineering, the staff at the federation provide information, advice and assistance to the main contracting members of the federation in general building and civil engineering. They're the members of the federation who build the country's ports and airports, road and rail network, as well as hospitals, schools, public and private buildings. Specialist contracting, the mechanical and electrical specialists, as well as the other range of specialist contractors - that group represents a wide range of specialist subcontractors and both the main contractors and the mech. and elec. contractors have built the wide range of foreign direct investment projects which have established in Ireland over the past 25 years and have built an international reputation for expertise in implementing high-technology projects on time and on budget. In housing and planning, that department addresses a wide range of issues affecting members, including technical, planning, economic and environmental matters.

Representation and lobbying - representation and lobbying has always been a key element of CIF’s activity. As the members' representative body for the construction sector, it was our responsibility to represent members and the issues of the industry and to convey those to the media, Government and public bodies, national and local. The CIF's policy position was clearly set out, after my time in August 2012, which formalised what had always been the federation's approach in this area. We have always carried out our engagement with Government in an open manner. We believe transparency should be a requirement for political and public service ... Civil Service engagement, when it comes to public policy issues. We have always published our reports and policy papers and we have provided information about meetings and conversation ... and conversations concerning political and policy issues to our members. It's part of a two-way process that encourages a better understanding of the issues involved on both sides.

A variety of the Departments, in keeping with the subject matter of the inquiry, the variety of the Government Departments that we would have met included the Department of the Environment, which had responsibility for construction policy ... for publishing the review and outlook for the construction industry and for many of the issues with which the industry dealt. Our main contact with the Department of Finance would have been through the budgetary process where we made an annual pre-budgetary ... pre-budget submission, and usually met the Minister for Finance during that process or as part of that process. Our submission would normally focus on taxation policy, both industry-specific and general, and the public capital programme. Our interactions with the Department of the Taoiseach were generally around the macroeconomic position of the construction sector in Ireland and its place in the wider Irish economy. During the years of social partnership, CIF was involved in more extensive discussions with the Department on issues relating to the implementation of successive national development plans and on pay-related issues in specific national agreements.

Striving to increase supply to meet demand across all subsectors of the industry was a recurrent theme of discussion. Other Departments are listed in my submission: the Departments of Education, Jobs, Enterprise, Transport, Communications, Health, all of which we had communications with in relation to various aspects either of policy or the implementation of specific public expenditure programmes.

Members of the Oireachtas - the CIF engages on a broad level with Members of the Oireachtas, nationally and regionally. This is done in an open manner, includes distribution of our annual pre-budget submission and other relevant information materials. We interact with local authorities where there are programmes of local road investment, implementation of water and waste treatment programmes, social housing investment and a variety of other issues. We would meet with An Bord Pleanála to discuss policy matters - generally once a year - planning policy, including timescales for decision making.

In relation to the banks, banking regulators and banking representatives, we had very few ... we had very few interactions with banking authorities such as the Central Bank prior to the economic downturn and that, of course, was in the period that I was there. Banking was just not a feature of CIF's activities pre-2008. Access to finance was not an issue for CIF members with the federation in that period. And I should also point out that the CIF, as an organisation, had no knowledge of the banking arrangements of any of its individual members or of how they financed their businesses or of their cash reserves or their borrowings.

Now, construction in Ireland has always been an important part of the Irish economy. It has been a strong creator of jobs. It has enabled foreign direct investment and it has built those inward investment projects very quickly and the necessary infrastructure to go with them to enable the Irish economy and Irish society to grow. Pre-2000, during the national development plan of '94 to '99, I know that precedes this inquiry's period, but money was scarce and people were plentiful, but as the year 2000 approached, a major concern of the CIF was that as structural and cohesion funding from Europe was reduced that the public capital programme would be squeezed. That turned out to be largely an unnecessary fear and concerns developed in Government about the capacity of the industry to deliver on the new national development plan. One senior Government Minister spoke of bringing 2,000 immigrants into the State. The Taoiseach indicated his concern that the industry did not have the capacity to manage large projects and both Government and Opposition were calling on the industry to expand in order to deliver on NDP projects and to increase the supply of housing. There was a broad consensus across the political spectrum of the need ... and wider, of the need to build 500,000 plus new housing units in the following decade - that's from 2000 onwards. Every sector was striving to increase supply and obviously, the figures for the value of the construction industry ... they're contained in my submission and you can see that they grew rapidly. But in the period from 2000 onwards, I cannot overestimate the pressure I felt, and which I believe the industry was under, to expand its capacity to deliver building and civil engineering projects and to increase housing output. And right up to ... output increased incrementally each year but right up to the end of 2006, demand for housing continued very strongly and then when housing output commenced to fall rapidly in 2007, a supply adjusted rapidly to falling demand.

Previous evidence to this committee has stated the overwhelming consensus were that the over ... the essential pillars of the economy were sound. The prevailing wisdom was that if there was a property bubble, if one was to emerge, the country's still-high employment figures and positive Government finances would mitigate against a serious economic downturn. The prevailing view was that a soft landing would follow.

The figures for housing have been included in our submission and we issued our projections annually. We got them wrong on occasion, but the trend was pretty well upwards constantly through the years 2000. But they were ... our forecasts were based on feedback from members but also on reports from NESC, from the ESRI, from the Department of Finance, the Department of the Environment and wider sources.

On the way up ... up to and including 2006, housing demand exceeded supply and the industry strove to meet that. Builders secured finance to purchase residentially zoned lands - and this is my final page, Chairman - secured planning permission, secured development finance to build the units, purchased secured mortgages to purchase the homes and builders built, and build, when and where they think they can sell. Errors made in the scale of building in some parts of the country are fully acknowledged by the industry but these were lands that had been zoned for housing, the financial system had financed land purchase and development and planning permission had been given for the developments. Taking the wider property investment perspective, the red ... the very ready availability of finance for development and property investment generally over the period was a prime driver of the demand for property, for investment property, in general, and, particularly, housing, new and second hand. The extent of lending to the broader property sector, to property syndicates and to individuals in Ireland and abroad accelerated to levels which, in hindsight, were unsustainable. The full scale of such lending for national and international property purchases only emerged with the establishment of NAMA.

To conclude, the level of construction activity reached unsustainable levels in the 2006-2007 period. Specifically, too many houses were being built; too much economic activity was dependent on the sector. Our mental focus as a federation, rightly or wrongly, was on the pressures that existed to deliver needed works in the building and civil engineering sectors and to meet the demand in the housing sector from a growing population. When decline in the housing sector commenced, we believed it was a necessary correction and that the industry would settle around the 50,000 units output per annum. We believed in the soft landing expectation from all Irish sources and a wide range of economic forecasts - the IMF, the EU and the OECD. We made mistakes; I made mistakes. Not listening to contrarians was one of them, believing too readily the benign economic forecasts of the ... and the soft landing, and I am sorry for that.

There were many other entities involved also, but we are a part ... we were a part of it, I was a part of it and, to that extent, Chairman, I apologise.