Michael Moynihan (Cork North West, Fianna Fail)

I welcome the Bill and I wish to discuss some aspects of it. I refer to the banking and financial crisis which has arisen both here and in the global economy. The Government issued a guarantee to the banks. It is widely reported in the media and elsewhere that further consultations are ongoing. In the late 1970s and early 1980s, a significant amount of money was given out by the banks in rural communities to pay for agricultural land. This resulted in inflated prices for agricultural land. People were given money to buy land at auction and this put farmer against farmer. It took a long time to repay the money because interest rates rose in the early 1980s to 22% and 23% and this crippled many farming communities. The current crisis has been caused by the amount of money that was loaned out. One could say that the entire capitalist system worldwide nearly came to a halt. It was said to be the biggest financial crisis since the 1929 Wall Street crash but this time governments across the world intervened to prop up the banks and the financial services. It may be time for governments everywhere to consider a fundamental change in the regulation of financial services and the banking sector.

In the Finance Bill, the Government has increased the limits on mortgages which local authorities can give out. There once was a time when ordinary people were only able to get mortgages from their local authority to build or buy a house. The threshold has been increased for low to medium income families to allow them to get local authority mortgages up to €285,000.

After the foundation of the State, the Agricultural Credit Corporation, ACC, and the Industrial Credit Corporation, ICC, were established as semi-State banking bodies. It may be time for governments around the world to provide banking services again, which would assist in ensuring proper banking regulation is in place. In 20 years time the economic cycle will have moved on again with further economic development. Is it time for nationalisation of banks with State-run institutions ensuring checks and balances are in place? It is also important that those on bank boards and elsewhere who got their fingers severely burned in this financial crisis learn lessons from this experience. Whatever guarantees come out of the ongoing negotiations with the banks from the banking guarantee scheme, the economy will develop as the economic cycles change with a boom time returning again at some point. This has happened throughout history but we must learn lessons from the current crisis to ensure it does not happen again.

Small and medium sized businesses find themselves under pressure from the banks, many of which have withdrawn overdraft facilities. They also have to make end-of-year returns for tax, PRSI, PAYE and VAT. Every week, many firms are looking at the fundamentals of their business and letting people go in ones and twos which is not as headline grabbing as large job losses. It is, however, affecting significant numbers of people in rural and urban areas. Many banks made loan deals with farmers for the building of sheds under the farm waste management grant scheme. However, many have reneged on these deals because of the tightening of available credit, which must be condemned.

It is said the measure of a person is if he or she can learn from their past mistakes and move on from them. Fundamental issues have to be examined with regard to the financial services sector. Strict regulatory powers will have to be put in legislation regarding the Financial Regulator and the Central Bank. It might be time to establish a new banking system which will not allow what happened in the past year to recur. As public representatives, we must ensure it will never happen again.

Without wanting to re-fight the Lisbon treaty campaign, if there were ever a case for stronger integration with Europe it must be what has happened in the financial services sector. One need only look at Iceland, outside of the EU, and the collapse of its economy. Several weeks ago figures were given to us from the various financial authorities that €70 billion of EU money was being used to keep Irish financial services afloat. It is all very well for successful and super-wealthy individuals to lead campaigns against the EU and the Lisbon treaty. However, the ordinary people are benefiting in no small way from the amount of money the European Central Bank has been able to inject into the Irish economy and keep the banking system afloat. This is a fact that needs to be made known to the people.

I welcome the increase in the income levy for better-off earners. It was also welcome that the minimum wage sector and social welfare recipients were excluded from the 1% income levy. It is important to look after the less well-off in times such as these. For many years, we have talked about the success of our knowledge-based economy. The emphasis in the Finance Bill on supporting research and development enterprises is, therefore, welcome. The tax credit for research and development has been significantly enhanced to improve its attractiveness to large and small companies alike and to support the development of a knowledge-based economy. While we are going through a very difficult financial period, it is important we continue to fund research and development.

The reduction in commercial stamp duty from 9% to 6% is a welcome step to rejuvenate and kick-start the economy. Claims for tax relief in the business expansion scheme and the seed capital scheme have been extended by three months. The purpose of this measure is to make the system more user-friendly for those availing of the reliefs.

Many have commented on the tying up of the loophole which saw the super-rich blatantly exploiting the non-residency conditions for tax purposes. Those on low to medium incomes watch whether the Government asks the wealthy to contribute in times of difficulty. There are many tax schemes which were introduced for good reasons over the years to stimulate the economy, employment and particular industries. Many of them have reached their sell-by dates and need to be re-examined.

Some argue that if the US had proper regulation of its financial services industry, it might not have the precipitated the current crisis.

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