Seán Sherlock (Cork East, Labour)

One question needs to be addressed regarding this banking crisis, namely whether the Government guarantee will result in the writing off of private debt and turning that into public debt for which the Irish citizen will ultimately pay. In that context, should we be contemplating the writing off of private debt to avoid a probable recourse to the taxpayer? In September of this year, the Central Bank published data showing that the M1 money supply — the physical currency circulating in the economy and the moneys held on deposit accounts — is shrinking rapidly. What does the 11% year-on-year decrease in the M1 money supply tell us? Irish businesses have less money in their accounts. They have become stifled, they cannot repay their debts and they cannot access credit. If Irish businesses are not able to repay their debts or access credit, the banks will incur further losses. Who will cover such losses? The bank guarantee scheme provides for the Irish taxpayer to cover losses to banks through shrinkage in the economy. If banking activity is shrinking, then bank losses are inevitable.

The Labour Party is proposing a set of practical measures, as outlined by Deputy Penrose, to stimulate the economy. The European Investment Bank, rather than the private equity capitalists, has to become our saviour. Private equity capitalists do not care about the future of the Irish economy. As soon as they get their pound of flesh, they move on to the next target. It should be noted that the Carlyle Group, which is currently flirting with one of this country's banks, was funded by Osama bin Laden's family at one stage of its history. I wish to make it clear that we are dealing with people of that kind. We should be very careful about who we flirt with when we are looking for people to invest in the Irish economy and the Irish banking infrastructure.

The Labour Party is in favour of sustainable and responsible investment. That has not been a mainstream feature of this country's banking culture. Having a sustainable and responsible approach to investment is not part of Irish banking culture. There is no proper risk assessment of lending and there is no proper model of corporate social responsibility. As Deputy Penrose has said, we need to change the culture of banking in this country so that we begin to lend in the real economy. Irish businesses should not continue to be stifled, as they have been stifled to date. The new type of lending we advocate will, inter alia, champion social capital. The former Taoiseach, Deputy Bertie Ahern, used to speak about Mr. Putnam's book, Bowling Alone, in the context of the need for volunteerism and investment in social capital. Why should we not use the banking guarantee scheme that the Government is sponsoring as a means of ensuring that we enforce change in this country's banking culture and thereby enhance investment in social capital? Why should preferential lending rates, below the ECB rate, not be offered to community organisations, sporting clubs and schools for any measure that involves effort that enhances our communities?

The banking crisis has given us an opportunity to set up an ecological loan book, whereby preferential lending rates can be made available to commercial and domestic projects that seek to reduce our dependence on carbon. Such loans would be offered in respect of everything from residential solar panels to biodiesel plants. Such a system would help us to offset some of the obligations we have under the Kyoto Protocol. We need to be imaginative in our approach to lending and getting out of this crisis. Nothing I have seen from the Government benches gives me confidence, as a Member of this House and as a citizen, that this country is in safe hands and that our banking infrastructure is secure for the future.

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