Richard Bruton (Dublin North Central, Fine Gael)

The Minister's comment indicates the complete dearth of understanding on the part of the Government. One need only compare the commitments made by the Government in the last general election campaign in regard to public spending with its actions in the previous five years. Therein lies the problem. The Government increased public spending at double the rate of growth for five successive years before saying, in the run-up to the general election, that it would now take a different approach by increasing public spending only at the rate of growth, as advocated by the Opposition parties. Now, however, the Government seems to be saying that parties on this side of the House were just as foolish as it was.

The reality is that we have been advocating for years something which the Government only took on board in a type of deathbed conversion, namely, the acceptance that the economy could not be run in the same manner as it was in the years leading up to the election. The mistakes for which we are now paying are not to do with the policies tabled in the last general election campaign by Fianna Fáil, Fine Gael, Labour or any other party. The flaws that have caused our current difficulties are the policies the Government pursued from 2001 onward. They were reckless, foolish and have exposed this country to huge risk.

It is imperative that the Minister for Finance faces up to the need for change, beginning with the system under which the budget is put together. The Minister cannot disagree that the budgetary process is bizarre. It chiefly consists of fielding demands from agencies as to their expenditure requirements without any corresponding commitment to deliver services according to contract and on time. There is never any commitment in terms of what will be delivered for the allocated expenditure. We vote the Estimates through without any scrutiny as to whether they constitute the correct priorities. It is no surprise to find, at the end of the year, that the desired objectives have not been delivered. Nobody takes responsibility for these failures. Moreover, the budgetary system rewards failure rather than success. As Professor Drumm observed when he was appointed chief executive officer of the Health Service Executive, the agencies which through mismanagement create a crisis in their unit are more likely to attract funds from the budgetary system than those that are a success.

That is the level of chronic dysfunction in our public finances and it is little wonder we have the problems we do. However, the Government has persisted, year after year, in resisting changes to that system. An all-party committee chaired by Deputy Rabbitte put forward proposals some time ago that would have initiated a process of reform. Those recommendations were brushed aside. That is the problem throughout the system. We must focus on revolutionising the budgetary process and affording absolute priority to our exporting sector. We can no longer tolerate the current practices of public utility providers, with the State having the highest electricity, waste management and telecommunications charges in Europe. Any service that is regulated or managed by the Government is a source of significant difficulties in regard to competitiveness. This situation arose over the seven years of looseness in the way the economy was run. High costs have been built into a range of areas and they must be driven down. However, there is no sense that this is what the Government is about. There is no sense that the Government has a prioritisation in terms of the investments it makes and the pressure it applies to companies to deliver. For example, Deputy Coveney pointed out the inconsistences in the way in which the ESB is regulated, with the result that the opportunity for better and more competitive services is curtailed.

There is no sense of a commitment to change in any of these areas. If the Government showed a determination to abandon property and pensions as the pillars on which the tax system is based and to focus instead on enterprise and innovation, we could begin to have confidence that the necessary changes will be made. We could have hope that it would no longer be all about tax incentives the value of which is largely unknown and which are directed primarily, under the McCreevy dispensation, to pension and property investments which play no part in the resolution of the problems of a small, open economy. If that type of approach were articulated by the Government, we could be confident that it was, at long last, learning from the mistakes made in the McCreevy years. Mr. Rahm Emanuel, the enforcer appointed by the United States President, Mr. Obama, has remarked that we must be sure not to waste a good crisis. That is the challenge we face. This time of crisis must be a time for making radical change in the way we run our economy. The bank regulation system is at the heart of many of the concerns. People consider that the problems we are in stem from the regulatory failures that have occurred in the banking system and they are correct.

Adam Smith is the great father of economics and he taught a lesson that the people who regulate banks have forgotten. Two quotes from him are well worth restating: "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest" and "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices".

The trouble in our banking system is that people from the same trade have been regularly meeting for merriment and diversion and they have conspired against the public interest. Limited liability is an extraordinary benefit that a society gives business and it has brought great benefits, but it has its duties and responsibilities. In banking we have gone further than that, recognising that banks are of such systemic importance to the economy that the taxpayer will step in when they get into difficulties. Governments of all hues have recognised the need to step in to support banking when it is under pressure because it is so vital to everything we do. How did our regulators not understand and take seriously the sense of duty that they should be aware of the problems Adam Smith wrote about in 1776?

See this speech in context