Éamon Ó Cuív (Galway West, Fianna Fail)

Tá mé buíoch as an deis chun labhairt ar son an rúin seo inniu.

If not all, then certainly the vast majority of people in this House entered into public life in an effort to serve. Whatever our individual beliefs and convictions, I believe there should be a degree of parliamentary respect based on this. Stooping to the level of accusations of economic treason as was the recent case, discredit the Houses of the Oireachtas and those who make them. The Taoiseach has been unfairly accused of many things over the past week and in recent years. As a fair and honest man he has also had the courage to express regret for those things which he would, with hindsight, have done differently.

I know that the Members of the Opposition share our commitment to the country and to making it a better place, but I challenge their representation of the decisions and motives of the Taoiseach and the Government in the lead-up to the financial crisis. While we may attack policies and become impassioned in that attack, resorting to personal and populist attacks that call into question the personal integrity of the Taoiseach is never justified. The Taoiseach has given a lifetime of service to this House and to the country, and he will continue to serve until the people and not the Opposition or commentators judge otherwise.

Government policy, for as long as I have been a party to it, has been framed with a view to protecting the weak and vulnerable, allowing the young to make the best possible start in life and distributing what resources the State had available to it in line with the needs of its citizens. Economic growth was not pursued as an end in itself and was not pursued for the few, but for the many. Economic prosperity was the means by which employment might be created, the infrastructure of the country upgraded, the basic services upon which we rely - services provided by doctors, teachers, gardaí - improved and afforded, and living standards raised for all through shared prosperity.

There is no question but that living standards improved dramatically over the lifetime of the Fianna Fáil and Fine Gael-led administrations that governed since the mid 1990s. It is widely accepted that the seeds of this prosperity were sown during the more collegiate Dáil of 1987 - where the needs of the country and the common good were pursued at the expense of cheap political point scoring and a meaningless blame game. As identified in the Regling and Watson report on the banking crisis, the economic well being of the country led to an era of increased expectations and optimism for Irish society at large. One of the key challenges that the increased prosperity of the late 1990s and early part of the last decade produced was in the housing market. As many will recall, and as identified in the report on the banking crisis, there was and is a cultural predisposition in this country towards property ownership. Historically low and stable interest rates, low inflation, falling tax rates and increasing wages all contributed to higher disposable incomes and created a perfect storm that led to unprecedented demand for housing.

The Opposition contends that this and previous Governments took no action to cool the property market and that this, along with the failure to eliminate certain property-related tax incentives made a property bubble and crash inevitable. The first part of this thesis is factually incorrect and the latter part displays a wanton disregard or a lack of understanding of the role that tax incentives played in the property market.

The Opposition lays the blame for the property crash squarely at the door of the Government, largely for its failure to curb property-related tax incentives. While it is readily accepted that certain tax incentives could have been more targeted, it is important to be clear that these incentives were not introduced to enrich developers but rather to fulfil certain infrastructural needs that were identified by various Government agencies. Property breaks geared at increasing the number of hotels were introduced on the recommendation of the tourism industry as a need was identified in this area and some incentive was required in order to attract investment. Similarly crèches were required to empower working mothers and reduce child-care costs for young couples. Few would question the need to redevelop our inner cities or socially marginalised areas. Fine Gael and Labour introduced the seaside resort scheme. The late former Deputy, Jim Mitchell, said that I was the only Deputy he knew who successfully opposed the introduction of a property-based tax in his or her own constituency, which was the proposed islands property tax relief scheme. I would admit that in general without State stimulus through tax breaks the regeneration of these areas would not have occurred. Once the tax incentives that the Opposition so roundly condemn had fulfilled the purposes for which they were introduced, they were closed down by the Taoiseach as Minister for Finance.

The stark reality is that the most extravagant deals of the property boom were not fuelled by tax incentives but rather by easy credit provided through the irresponsibility of some of the people in the financial institutions. The astronomical prices paid for the site of the Berkeley Court, for the Irish Glass Bottle site in Ringsend, for the Veterinary College in Ballsbridge, for the Burlington Hotel, for the Bank of Ireland head offices and the AIB bank centre, and for numerous other speculative development sites were not fuelled or funded by the Exchequer or by tax breaks but by easy, cheap credit, provided on "mates terms" to over-extended developers by what were, in retrospect, over-extended banks.

It is useful to consider what happened in the regulatory sphere during this period. As is noted in the Governor's report, there was a shift towards a principles-based rather than a rules-based regulatory system. In essence, this meant a move away from detailed rules and administrative actions relating to how financial institutions should run their business and towards more engagement with the senior management of those institutions with a particular focus on the object to be achieved. The purpose of this system was to encourage substantial industry self-regulation with a focus on good governance rather than on detailed regulations with the regulator assuming the role of enforcer. Such an approach, it was argued, was more flexible, market-friendly and cheaper than a more formulaic regulatory framework and therefore contributed to the development of a thriving financial services sector. This in turn encouraged further inward investment in the sector and consequently further growth. The Financial Regulator was not alone in pursuing this course. On an international level this policy was pursued by many jurisdictions where it was believed that market forces would result in banks self-regulating without the need for an aggressive system of enforcement. Such light-touch regulation was regarded as international best practice.

In Ireland, the Financial Regulator pursued this agenda by seeking to ensure that banks implemented risk management procedures and put in place robust governance structures. It was reasoned that once such structures were in place, the banks would be in a position to adequately assess all risks facing their organisations and be able to act accordingly. What we know now is that lack of a credible enforcement threat led to the banks paying lip service to the regulator, a regulator that eschewed decisive action, avoided confrontation and instead comforted itself with vague assurances that everything was in hand. The trust that was so fundamental to the principles-based regulation system was betrayed by the boards of management of the credit institutions under its supervision who abandoned their own stated lending policies and engaged in excessive risk taking. Following the adoption of the single currency, an excess of liquidity in the market, low and stable interest rates, low inflation and the increased cross-border integration of the financial sector in the eurozone led to unprecedented access to cross-border funding.

To say that the Government ignored or failed to follow the advice made available to it, or that it ignored the warnings of economists and other experts, is wide of the mark. The Government, as should be expected, is guided by and relies on expert advice from the Department of Finance, the Central Bank and to a lesser extent on the view of external sources such as the ESRI, the International Monetary Fund, the OECD, the European Commission and the Council of Ministers. At no point did the Central Bank or the Financial Services Regulatory Authority believe there were underlying difficulties in the market. Even the international markets in 2008 priced Irish Government bonds at very low yields, a sure sign that the international markets - which we have seen can be so adept at spotting and capitalising on any perceived weakness to make a quick turn - did not see any fundamental or underlying weaknesses in the Irish economy.

The Government was considered by many to be fiscally too conservative. The then Minister for Finance and current Taoiseach was described as "Ebenezer Scrooge" and criticised for underspending. A common and recurring theme from the current Opposition during the last term of Government and in the run up to the last general election was that the Government was underspending and that stamp duty should be reduced or abolished.

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