Andrew Doyle (Wicklow, Fine Gael)

From 2001 to 2007, loans to farmers increased from €3.5 billion to €5 billion. During the same period, property developments increased from approximately €5 billion to in the region of €80 billion. That is the key point in respect of this matter. In addition, there was no regulation or oversight during the period to which I refer. The proposal to rectify the position involves the establishment of a State-run monopoly property management agency, NAMA, which will give €54 million to the banks to shore up their balance sheets. That is a huge amount of money to pay to five banks and building societies in respect of non-paying loans. The bill in respect of NAMA's running costs and interest repayments remains unknown.

There are four fundamental issues which should be of concern to every citizen. First, the best experts available have not been engaged to carry out an in-depth analysis of NAMA's impact on the financial and social sectors. The Government has not considered any alternative, including the Fine Gael proposal in respect of a national recovery bank. Until now, the only discussion regarding proposals relating to NAMA took place in the media and at the last week's negotiations on the programme to rescue the Government.

The second issue relates to the €7 billion difference between the €54 billion the Government will pay the banks and the €47 billion - and dropping - estimated value of the properties involved. This is a direct and indefensible premium payment to the banks at a time when basic services and special needs supports have been cut. In addition, there is no protection for taxpayers regarding further hidden losses. If a fire sale were to take place in respect of the Zoe Group's €3 billion in bad debts, what then would be the position of the €47 billion valuation on the properties to which I refer? We already know that the two main banks will require further capitalisation to the tune of €9 billion.

The third issue is that the NAMA loan book will be comprised of two thirds land and property and one third investment property. The Government will, through NAMA, maximise the yields of all properties by debt collection, selling and buying land, developing property and managing rental properties. This poses a serious question whether there will be a conflict of interest involving the Department of Finance and county councils and other agencies which source and manage land for community. Will NAMA have a vested interest in stoking a new and equally unsustainable upward valuation of property? In essence, the long-term prospects for NAMA depend on an uplift in property prices. For this to happen in the way the Government envisages, namely, 1% per year or 10% over the ten years in order that NAMA will break even, which has been rubbished by most experts, it will be necessary to fuel inflation and directly compromise our ability to restore our competitiveness.

The Government has stated that NAMA will not cost the taxpayer billions. However, I am of the view that its activities will lead to an increase in property prices. Fine Gael proposes the establishment of a national recovery bank. Such an institution would have made all the money allocated to it available to businesses to restart the economy. Under this model property price increases would have followed the economy and reflected people's ability to buy, not the other way around. The NAMA model is dependent on property prices being dragged back up and people following them. To put matters simply, this will place the Government in a compromising position.

The fourth issue of concern is that the main job of a bank is to deposit people's savings and lend money to individuals and companies to create jobs. As a number of previous speakers indicated and regardless of what the Minister for Finance stated, NAMA bonds will be used to shore up the balance sheets of the banks. The objective is not primarily to encourage them to lend money but rather to place them in a healthier position. Regardless of what is stated in respect of green shoots of recovery, there is a view abroad that we could be in a W-shaped recession. In other words, the global economy dropped and is rising but will fall again before eventually rising.

The Fine Gael option of a national recovery bank would provide an immediate, uncomplicated transfusion of funds to those who need it, namely, businesses and individuals. More importantly, it would avoid the establishment of a State-run monopoly in the property market. Such a monopoly has complex implications for society which have not even been addressed.

The Government's attitude is one of casual tyranny. It seems tyrannical and casual that we will stump up 40% of our gross domestic product to pay the debts of the bankers and developers. Sweden only paid 7% of its GDP on clearing bank debts. A huge amount of the money to which I refer will be invested in two institutions - Anglo Irish Bank and Irish Nationwide - which will never lend again. It is incomprehensible that we would tie up so much of our national equity in two institutions that will play no further part in stimulating the economy.

What is happening is also tyrannical in that the Department of Finance will become the biggest landowner in the country, if not the world. At a time when rents should be falling to allow a return to competitiveness, NAMA will be geared towards extracting maximum values. There is no upper limit on the amount of money taxpayers will be asked to provide to NAMA in respect of its loan book in the event that it experiences an increase in losses. There is no guarantee that the total amount will be €54 billion. As we understand it, this matter will remain at the discretion of the Minister who, with the exception of the submission of an annual report to the Committee of Public Accounts, will exercise the only oversight and scrutiny in respect of it.

The tyrannical aspect of what is proposed is also evidenced by the fact that there will be no Government assistance for the estimated 35,000 people who may default on their loans or mortgages. Rather, the Department of Finance will hound these individuals for every last cent. Why has provision not been made to the effect that any bank which recklessly provided 100% loans and sub-prime loans and provided current accounts therewith should be obliged to write off at least 15% of such loans? The banks were reckless and stimulated the property bubble in so far as they actively touted for business.

Unfortunately, banking became a marketing tool and ceased to be based on sound financial fundamentals. It became a matter of how large a bonus those engaged in offering loans on behalf of the banks could obtain at the end of the year. All responsible banking practices and proper oversight mechanisms seemed to disappear. If we questioned what was happening, we were accused of being killjoys and of being jealous because we were not involved in stimulating the boom.

The casual aspect of the Government's behaviour is that the Minister for Finance believes it is fine to toss a bonus of €7 billion to those who have behaved recklessly. In that context, when one considers the cuts that have been made to vital services, it is no wonder that members of the public are angry. The Minister appears to state casually that assurances have been given to the effect that credit will become available. Privately, people in the banking sector will state banks have again become cautious and conservative and will not lend money to businesses other than those which are viable. Businesses are being told they need not bother applying and then one is told 80% of those businesses which do apply are having their applications approved. New business sometimes constitutes restructuring business and it fits into a statistic.

I will turn to some of the implications of last week's discussions on the new programme for Government. It appears as though amendments will be introduced regarding a levy and a capital gains tax rate of 80% for land acquired under compulsory purchase orders for the building of roads and infrastructure for the greater good. Such arrangements first were negotiated to compensate people who were losing strategic land. Valuations are based on the impact on the existing and future landholding and the payments were deemed to be necessary to enable people to re-establish the viability of their landholding units. It seems the application of a rate of capital gains tax of 80% as a penalty on those who were unable to stand in the way of a decision would be penal. I cannot understand how any rural Deputy could stand over such an agreement. The same is true of the sale of sites whereby, perhaps reluctantly, people may be obliged to sell. One hears of farmers, in particular, who are obliged to sell some of the silverware or their breeding stock simply to pay their bills. While it is not a course of action that most people wish to take, if they could sort out their financial difficulties by selling a site, it seems criminal that such persons would then be forced to pay a rate of 80% on the sale. I do not have a problem with levying a windfall tax in respect of vast tracts of zoned land that previously were farmland. While a reasonable sum certainly should be applied, two wrongs do not make a right and going from a rate of 20% to 80% seems to be draconian.

A recent article in The Irish Times discussed seven reasons that Ireland would be left behind, one of which was uncertainty about taxes. It read:

NAMA and the process of fiscal adjustment have caused major uncertainties, especially in the minds of taxpayers. No one knows for sure how much additional taxes will be imposed as a result of bailing out banks [These are not my words]. The tax commission report also creates uncertainty.

No one seems to understand joined-up thinking is required in this regard. No member of the Government appears to think of this uncertainty. When first announced, NAMA evinced a certain amount of decisiveness. Similarly, the publication of the reports from an bord snip and the Commission on Taxation betokened a certain amount of decisiveness, albeit in hope rather than expectation. However, there has been no joined-up thinking in this regard and people have been obliged to endure a renegotiation of a programme for Government in which one third of 800 people decided the fate of the Government. Someone called it a programme for survival, which probably describes it better.

Nevertheless, the country could take other measures. As I noted, the goal is to try to swing back down to a competitive position. In this context, we can try to have addressed some of the areas somewhat outside our control. For example, we are powerless with regard to what happens with the valuation of the United States dollar or sterling. The value of sterling is having a serious impact on our exporters. We must consider keeping those affected active, alive and afloat. One development that could take place pertains to China which has so much money invested in dollars. Were the Chinese authorities able to invest in euro without risking instability, it certainly could help to shore up the euro's position. Ireland should ask the International Monetary Fund to revisit the substitution account and create a new international currency in which countries such as China could invest without causing exchange rate volatility.

Ireland exports 43% of its agricultural produce to the United Kingdom. Yesterday I met farmers as they drove their tractors through Wicklow town. For the first time ever I encountered a mood of despair rather than of anger. They are unable to be angry anymore. This island has a food producing economy and agrifood sector that employs, depending on what figures one takes, between 230,000 and 300,000 people, yet we appear to be doing nothing to address this issue. My colleague, Deputy Creed, and I produced a draft fair trade Bill to deal with the retail and grocery sectors. The day after we published it the Tánaiste and Minister for Enterprise, Trade and Employment announced a consultation process on the development of a code of practice. While some of the soundings taken from the big three retailers have been that this will add to costs, I believe that to be nonsense. There is nothing to fear in our Bill for anyone who is not partaking in the practices we propose to outlaw. If the Bill allows for people to prove this, it will not constitute an additional cost and an audit would cost an organisation more.

In this context, it appears no effort is being made to try to restart the economy. The former Taoiseach, Dr. Garret FitzGerald, noted that the €16 billion loss in income constituted a part of the problem that no one in government appeared to be trying to address. The State has lost income in the form of lost tax revenue from a bloated property sector. While the property sector was shoring up the coffers of the State, sight was lost of the fact that all other areas were disappearing in terms of competitiveness. Unless these issues are addressed and action is taken to stimulate the economy, we will not succeed, regardless of what is done to shore up the banks. Even the 1% rate the Government has identified as being necessary will not be achieved. Certainly, it will not get credit rolling because we do not know where we are going.

Fundamentally, to allow the economy to recover we must concentrate on those sectors in which we are strongest. If we regain competitiveness, we have a tourism sector that can compete with most places in the world. Moreover, we are in the euro zone, speak English and have a natural resource in respect of agriculture, food and energy production. I am a member of the Joint Committee on Climate Change and Energy Security which presented a draft Bill to the Government on foreshore licensing. However, it has been buried between the Departments of the Environment, Heritage and Local Government, Agriculture, Fisheries and Food and Communications, Energy and Natural Resources and there is no sign of it emerging, for whatever reason. I am led to believe there is a Cabinet sub-committee on climate change which has acknowledged receipt of the Bill. However, it probably has been in its possession for six months by now.

To revert to NAMA, it is hard to comprehend how such an important act or direction for the State to take can be treated with such a casual attitude. It is a fundamental mistake to overvalue and overestimate. The spin the Government has placed on this matter evinces no sense of erring on the side of caution. I have listened to the contributions of various Members on the Government side and this issue is being spun in a positive fashion. While Members on the Opposition side do not wish to spin negatively, if one considers the Bill pragmatically, the risks are huge. This is a huge gamble and no effort is being made to take on board proposals from any other side of the House. Mr. Dermot Desmond of NCB alluded to the need for a national recovery bank, to which the Fine Gael proposal comes closest. The incentive varies slightly under our suggestion. The institutions are charged 4% per year to guarantee the bad loans. To pay that and have access to new credit, they have to lend money to service that loan and pay their ongoing bills. Fine Gael is not alone in saying that a recovery bank is the best way to address this.

I disagree with the notion of nationalisation, which is a last resort. Everyone, including small shareholders, must take risks but the risk seems to be on the public. For the small shareholders there is some hope that some day they or their descendants will get the value back on their investment.

See this speech in context