Thomas Byrne (Meath East, Fianna Fail)

The Labour Party motion states that the strategic investment bank will be "broadly modelled" on the German KfW bank and ICC and ACC banks. Those are the key words in the motion. As usual, it has brought a motion to the House written on the back of an envelope, so to speak, having looked up a few references.

KfW bank does good work in Germany but it is, generally speaking, a second tier bank as it does not operate in the retail markets. It operates with the benefit of a government guarantee, the same guarantee the Labour Party so adamantly and vehemently opposed. This guarantee is the means by which KfW finances other banks which operate on a commercial footing by providing them with competitive financing for investment in the market and in business. This is how the KfW bank operates. The one subsidiary of the KfW bank operating at the retail level had to be removed from the state guarantee. It operates independently because it is a commercial operation. This was a decision forced upon it by the European Union. I do not mean to denigrate the KfW bank which is a good bank and a safe bank but it is a second tier bank as it generally operates at a wholesale level. The Labour Party would probably need to do more research. At one point it was called Germany's dumbest bank, because it transferred a large sum of money to Lehman Brothers on the day it collapsed. This is not to take away from its overall good reputation.

The Labour Party refers to the strategic investment bank as having full operational independence from the Government. Does this mean that pay rates and pay scales in the bank will be a matter for that bank and not for the Government or the Labour Party? The Labour Party in all of its dealings with regard to the banks has not advocated the principle of full operational independence. In fact, far from it, it wants to interfere in every decision made by the banks. Every time a bank makes a decision, the Labour Party will criticise the Minister for Finance as if the Minister is responsible for those decisions made by bank boards and executives. The Labour Party motion advocates a new principle of full operational independence for banks. This is an interesting principle which is new for the Labour Party but it is welcome because the banks should be given full operational independence in so far as we are allowing them to have it. This Government has not given the banks full operational independence. The pay scales of the chief executives are subject to review and there are memoranda of understanding as to how the banks operate, including Anglo Irish Bank which is now a State bank. The Minister for Finance has a strong role in the operation of those banks. We are giving new powers to the strategic infrastructure bank which go way beyond what is given to the private banks and to some of the State banks.

The Labour Party proposes capitalisation such as equity investment from the National Pensions Reserve Fund to be given to the private banks such as Bank of Ireland and AIB. When the Government proposed capitalising those banks, as was advised by all reputable commentary, the Labour Party adamantly opposed that capitalisation. The capitalisation we have provided has generally not been by means of equity investment although there have been some conversions, rather it has been by preference shares with a fixed rate of return. The Labour Party is now supporting capitalisation on a riskier basis than what has been allowed by the Government for AIB and Bank of Ireland and which the Labour Party opposed.

The Labour Party proposes the strategic infrastructure Act would originate funding for infrastructure projects it deems to be appropriate. This would mean telling a bank it - rather than the Dáil - could decide which infrastructure projects would go ahead. The Labour Party is promising voters infrastructure projects - when they are not objecting to them - but it will say that a semi-State body, a bank, will decide whether this project gets the go-ahead.

The Labour Party proposal is half-baked, written on the back of an envelope. Deputy Burton usually reacts when I speak but she has not reacted tonight. I rest my case.

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