Deirdre Clune (Cork South Central, Fine Gael)

This debate on banking is being held two weeks after the renewal of the guarantee on Thursday, 30 September. Although the debate looks back to that date, a lot has happened since. The stark problem facing the nation in the budget in December concerns how we can bridge the €20 billion gap between income and expenditure. It is a challenge for all parties. Fine Gael will not be found wanting in contributing to that debate. We welcome the letter from the Taoiseach yesterday and that from the leader of the Green Party, Deputy John Gormley.

Deputy Conlon said Fianna Fáil would welcome input from all parties across the House. I hope that is the case. The debate on the Order of Business this morning on the information that will be available to Opposition parties throws up some serious questions. We need consensus on our financial position. Fine Gael has said it does not know the figures. The IMF mentioned a figure of €10.7 billion. I do not know whether that is the figure the Government is working with. As a nation, we should commit to a deficit target of below 3% of GDP by 2014. This should be front loaded.

Full information will have to be provided to all parties. The Tánaiste said this morning that the figures would not be published until budget time. The proposed expenditure of Departments will not be available until the day of the budget. Unless the Government knows what it has to spend, how can the Opposition propose options? The questions that have been raised seriously concern me and others on this side of the House. We need full information. If it is to be a case of business as usual, and we do not have the full figures, what is Fine Gael being asked to participate in? Will it be the same kind of business as last year? I hope not.

The banking policy of the Government has failed and that is why we are here today. We are facing a scenario in which our ratio of debt to GDP will peak at 32% this year. This is unheard of and has consequences for every man, woman and child in the country.

The bank guarantee in September 2008 represented a momentous occasion, in addition to Thursday, 30 September 2010. The banking inquiry of Professor Patrick Honohan, which covered the period 2003 to the end of 2008, which period commenced with the establishment of the Financial Regulator, points to excessive weaknesses in Irish banks. These were exposed by the collapse of the global markets in May 2007. However, when compared to the imbalances that had been building up during the previous decade, we note we had a home-grown problem. It is not good enough to blame global crises, as some are so good at doing. We now know well the reason for Ireland's problems. There was over-reliance on the construction sector for employment, for providing income to the State coffers and for activity in banks.

The banks availed of cheap money from international markets and flooded the markets at home. When the money dried up, the whole edifice came crashing down like a pack of cards. It is not good enough to blame the international markets as we should have known better. We as a nation should blame ourselves and seek to determine what went wrong and how we can rectify the problem.

Income from the property sector was never going to be available forever. Warning signs were evident but they were not heeded. Warnings came from Opposition parties and from economists outside the House. It was irresponsible to expand the public sector and services on the back of funding that would eventually dry up. It was unsustainable. There were enormous increases in the education and health sectors and a growth in quangos.

When one looks back, one must ask what kind of thinking prevailed at the time in question. Prudent economic management ordains that, during a boom such as ours, we should have invested in productive infrastructure. By this, I mean infrastructure associated with electricity supply, broadband, telecommunications and transport. Such investment did not happen.

The OECD points out that Ireland continually fails abysmally in international comparisons. The quality of infrastructure is definitely linked to economic growth. It is vital to competitiveness. In the World Economic Forum's competitiveness report, Ireland is ranked 65th, near Hungary. All the figures point to Ireland's low rate of investment in productive infrastructure. It plummeted between 2001 and 2009. We will now pay the price for this because we badly need quality infrastructure to ensure employment growth.

Construction output peaked at €38 billion in 2007. However, less than 20% of this pertained to public infrastructure. Some 60% of the output between 2000 and 2007 was invested in private residential apartments and non-residential sector developments. I do not know exactly how much those assets' values have dropped; it is a question of the length of a piece of string. While we had a boom in the construction sector, only 20% of the output resulted in public infrastructure. Prudent management did not exist. The infrastructure that was needed to support enterprise and plan for our future was not put in place. Instead, we had a party and a great boom. Now we are experiencing a hangover.

During the years in question, did we have light regulation, heavy regulation or no regulation of the banking sector? Was there ever a fear of a regulator's visit to any of the banks? Was Mr. Patrick Neary's office even a mild annoyance to the banking sector? I believe not. From 2003 onwards, the Financial Regulator was just not an issue for the banks.

Mr. Honohan states in his report that it is clear that a major failure, in terms of bank regulation and the maintenance of financial stability, has occurred. The report also identified three areas to which we can point in this regard, namely, failure of supervision in individual institutions, failure in terms of approach to stability policy and failure to undertake decisive and remedial investigation. Investigations in this regard are continuing. We are awaiting another report on the ability of the Department of Finance to play its part in terms of whether it was fit for purpose, had the correct information available to it and had the professionals needed to understand what the markets were doing and the influence these markets would have on a country like Ireland, which has a small open economy whose banks were dependent on international funding.

The Central Bank Strategic Plan 2010-2012 provides some comfort in terms of its putting in place the structures that are needed. It outlines how a new model of regulation is to be implemented. This must be underpinned by a credible threat of enforcement. Issues such as the need for greater enhanced assessment of financial stability, which is a much broader and deeper level of analysis, and careful and ongoing management of the liquidity to support our domestic banks are also dealt with in this plan. The plan recognises the need for the Central Bank to promote authoritative advice to the Government, now more important than ever.

Mr. Honohan and Mr. Elderfield are providing confidence in terms of their approach to the job they are doing. Their job is a difficult one. While Mr. Honohan and Mr. Elderfield are important appointees for the country, they are also important in terms of the strong message they are sending to the international markets, namely, that we recognise where we went wrong and are putting in place structures to ensure this never happens again. This type of confidence is essential.

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