Thomas Byrne (Meath East, Fianna Fail)

The authors of the Regling and Watson report suggested that the collapse in tax revenue was the main reason for the sharp increase in the fiscal deficit during the 2008-09 period. They argued that there were a number of reasons for that collapse, most particularly the massive change in the taxation structure. They pointed out that the Government, which has put its hands up in this regard, offered income tax cuts in order to achieve wage restraint. They mentioned that the Irish taxation system favoured home ownership, and depended on it, without having a corresponding property tax. They also claimed that the Government's changes in the structure of the system of taxation and expenditure inevitably contributed to the deficit we find ourselves experiencing. One would think from the arguments made by the Labour Party in recent months - indeed, the last couple of years - that it opposed such policies when they arose, but nothing could be further from the truth.

The 2007 Labour Party manifesto proposed a 2% cut in the standard rate of tax, from 20% to 18%. That directly chimes with the reference in the Regling and Watson report to the offering of income tax cuts by the Government as one of the reasons the change in the structure of taxation resulted in a bigger deficit. The Labour Party also proposed increases in personal tax credits and the home carer's allowance. In addition to the indexation of the standard rate band, it wanted to provide for an additional increase of €5,000 in the transferable band for one-income and two-income families. The Labour Party was offering all things to all men, in relation to tax cuts, at the time. The Government has put its hands up with regard to the policies we pursued. The suggestion that the Opposition was constantly telling us we were wrong is absolute nonsense.

The Labour Party, in particular, acted as a cheerleader for tax reductions and thereby set off the auction politics of the 2007 general election. It proposed a reduction in the standard rate band from 20% to 18%. It produced a leaflet that claimed "taxes are low and will stay low". Such an approach - the Government has admitted its part in it - contributed to the surge in the deficit, which is our most fundamental problem. I believe it is a bigger problem than the banking crisis. The Government will not take sole responsibility for it. The parties that are now opposing everything on the way down were egging everything up on the way up. This issue needs to be dealt with by the opponents of the Government. Those who oppose everything should reflect on what they were saying at the time. Were they saying "no, do not do this"? In fairness, some people advised the Government not to do these things. Such people, however, were certainly not the consistent naysayers on the Opposition benches.

On this morning's "Morning Ireland", the Labour Party's spokesperson on finance said she would do things differently now. She promised that the Labour Party would introduce bank resolution legislation if it were in government. She claims such legislation would change things, for example by reducing costs substantially. She ignored the fact that a bank resolution Bill is being introduced by the Government, but cannot be retrospective. Existing contract law protects senior bond holders on the same basis as deposit holders. That cannot be undone. Any other interpretation of the situation is a pretence. The Labour Party claims that its so-called solution, which it has not outlined, would result in substantial savings to the taxpayer. Not alone has it failed to outline the details of the solution it claims to have, but it has also neglected to set out the savings that would result from it. It cannot do so because it does not have an alternative to what the Government is doing, other than giving out. I have given out about what is happening because I do not like to have to do it. Other parties can protest. I would certainly love to protest about some of the sums that are being expended in the cause of the banking system. We have to be realistic. We have to appreciate that no alternative has been proposed to the Minister for Finance. He is on record as saying on a number of occasions that no alternative has been suggested to him in this regard. The Labour Party has said that if its bank resolution legislation were introduced, substantial savings could be made. The alternative it has offered is not good enough. The people will see through it and are beginning to see through it.

It is important to recognise there was a huge argument about subordinated debt, which the public may have latched onto. It was not a very strong argument. The point about subordinated debt is that it was always a small part of the guarantee. None of it was paid out during the guarantee period. In fact, it is no longer guaranteed. I know the Minister intends to apply a steep discount to the subordinated debt that is outstanding from Anglo Irish Bank and Irish Nationwide. It is not very significant, unfortunately, because it is a very small amount of money. The bigger picture is the deposits and the senior debt which, in effect, is in the same position as the deposits. The Government will protect deposit holders and deposits. I refer both to the little old lady who is saving a very small part of her pension and to the international investor who is investing in this country, with substantial amounts on deposit in Irish banks. Both kinds of people need to be honoured. That is the job of the Government and I support it.

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