Michael D Higgins (Galway West, Labour)

I am sorry Deputy Michael McGrath has left the Chamber because I thought his contribution was a reasonable one from the Government's point of view. I hope he will not think I am condescending if I say it was fairly well informed in terms of its economics.

I want to set out a number of points. Deputy McGrath's speech contrasted with what one could only call hectoring, abusive speeches directed at the Labour Party. For a start I will deal with one fact, which is that the proposal before the House comes from the Labour Party's earlier document, Investing in our Future. That document was available for anyone to read. It suggests that the real economy is where the Government must take action, and quickly, and that within the real economy unemployment is the biggest problem. In the ten minutes available to me I do not have the time to go into detail on that but if one looks at the cost of unemployment as it rises past 14%, one will see immediately that the deficit of 40% to 50% is accounted for by the cost of unemployment.

I suggest that the Government's policies are turning a recession into a depression. It is basic economics, given recent economic history, that if the economy is deflated to the extent that is now happening, both in terms of Government action combined with a massive increase in savings, the net effect of shrinking the economy in that way will drive the unemployment rate even higher.

As I said, I can only make a few truncated statements about that but what the Government seems to be suggesting, even in the little handbooks it prepares for its backbenchers, is that we are repairing and recapitalising the banks and that we will increase competitiveness, achieve growth and so forth. In the Finnish economy, which went through a similar crisis to ours, there was a return to growth in single figures but the unemployment rate did not drop for a full five years.

I want to state clearly our position on this issue. I suggest the Government has not dealt with the real economy and the social disaster that are the unemployment figures within it. Those who are affected by the disaster of unemployment not just in the loss of a job, but the exclusion and the misery we have heard about from many other speakers, cannot wait five years.

The other part of it which is very important is the bland way in which the return of immigration is being accepted. A total of 100,000 people over two years have emigrated. Those people have come through an educational system, and have been described by the European Union as among the most flexible, highly talented workforce in Europe, and they are to be exported. I could point to other examples. One either engages with the employment creation problem or one does not.

I attended the conference in Farmleigh at which many presentations were made on innovation and research and development. In the Tasc document published recently, Dr. Tom O'Connor points out that we have 10,000 PhD graduates working in Ireland. We have approximately 350 incubator units working in third level institutions and of those 13 have spun out tradeable companies but they were almost immediately bought up by foreign multinationals. In other words, having subsidised the research and development, instead of getting the hundreds of thousands of jobs we allow the taxpayers' investment in research and development and innovation to be consumed by the sheer power of money.

I note our debate has been welcomed by some but people have come out with mantras such as "the response of the markets". I have stated, and written it elsewhere, that one of the findings of the last crisis, and the more general one in global economics, is that there is no such thing as market rationality. Speaker after speaker on the Government side spoke about messages from the markets. This is like the fourth secret of Fatima. It is about the same status. There is no market rationality.

References were made to Greece. What a pity no one will speak about the sheer speculative, criminal activity of Goldman Sachs not only in regard to the Greek currency, but to all of the housing bubbles in the United States which, to the credit of the United States, it has the capacity to face and examine.

I will outline what is involved here for people watching. They have heard about whatever is left in the National Pensions Reserve Fund, and someone was dismissive of the Labour Party's proposals to use such funds for infrastructural expenditure. The reality is that we must take out our €2 billion now and put into a strategic investment bank that will provide infrastructure.

There was a time when schools, clinics and roads could be built at the most competitive price in decades. We have unemployed engineers and architects who account for one in three males involved in the construction industry, yet the Government contracts its capital expenditure. In fact, capital spending will go from 5% of GNP in 2010 to 3.1% in 2016. At a time when we should be reflating the economy by getting good value in social infrastructure and creating jobs, thereby reducing the cost of unemployment, the Government is doing the opposite. It is filling the gap with phrases about making the banks fit for purpose.

I ask one question of the public watching this debate. After €22 billion going into the black hole that is Anglo Irish Bank, do they see Anglo coming out in the future and lending one red cent to anyone who will ever work in Ireland? The answer is "it will not". Everybody knows that, yet at 8.30 p.m. tonight we will vote on using €2 billion from the National Pensions Reserve Fund that would fund infrastructure and capitalise the spin-out companies coming from research and development. It would have been available for the refit in terms of related technology. People are saying we must repeat the Fianna Fáil Party line that we are repairing the banks - by putting €22 billion into a bog hole. That is the test, and people can reasonably compare our proposals in regard to addressing the unemployment core of the real economy, including liquidity and credit to small and medium-sized enterprises, which is important.

One might say, would AIB not do this or would Bank of Ireland not be able to do this when it has taken so much of the State's money? That is simply not the case because the legacy of this is that between 1998 and 2007 bank lending increased by 500%. A total of 67% of that was in property and 14% in institutional lending. What was left for the real economy? They have no record of lending to the real economy. Why should we trust them now and say there has been such a change in culture that they will give up their aul sins and start lending to the real economy. There is not a shred of evidence for that.

The Members should not just believe me on this issue. Deputy Gilmore, the leader of the Labour Party, in moving our motion last night, quoted the Governor of the Central Bank who stated:

I think it's fair to say – and what data we have seem to bear this out – that banks in Ireland reacted to their own difficulties and to the downturn by greatly reducing their risk appetite. Some of this was a necessary adjustment, but the result has been limited availability of credit for start-up firms and SMEs. Indeed, I have the impression that, during the years of property-based lending, the banks have lost their edge in small business lending.

This is the alternative to our motion. The result of what the banks did at that time was to make it impossible for people to put a roof over their heads because, for example, the ratio of the average gross salary to lending had increased to approximately eight or nine to one at a time when most European comparisons state that one has unaffordable housing when that ratio is 3:1. The choice tonight is to address in the short term the unemployment problem directly and immediately by way of the Labour Party proposal of a strategic investment bank or accept that the banks have all converted now and that if we wait long enough they will repair themselves. Such nonsense.

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