Dáil debates

Thursday, 1 December 2011

Credit Institutions (Eligible Liabilities Guarantee) (Amendment) Scheme 2011: Motion

 

12:00 pm

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)

I would like to read some comments into the record:

The amendment before us this morning is the recommencement of the bank guarantee of billions in the name of Irish taxpayers...It provides for the roll-over of the bank guarantee...The Minister is asking the taxpayer to provide yet another line of defence for the banking system...[Next week when the Government will announce €3.8 billion of] cuts in welfare and elsewhere, it will be to meet the higher interest charges Ireland has to pay on an increased national debt because of the incompetent way the bank guarantee was cooked up and then handled...The critical issue to be addressed is whether the banks have changed sufficiently to warrant the taxpayers dipping into their collective pocket once again.

These are not my words; they are the words of Deputies Joan Burton and Richard Bruton taken from their speeches to the House on 3 December 2009. The Dáil was debating the Credit Institutions (Eligible Liabilities Guarantee) Scheme that day. This is the same scheme that Fine Gael and the Labour Party are seeking to extend today. Both parties, then in opposition, argued strongly about the new banking guarantee and both voted against the scheme.

Nine months later on 29 September 2010, when Fianna Fáil sought to extend the eligible liabilities guarantee, ELG, scheme for a further six months, the Fine Gael and Labour Party opposition to the scheme remained steadfast. Deputy Joan Burton described the extension as a vote of confidence in the Government's banking strategy, firmly stating that the Labour Party does not do blank cheques. Deputy Michael Noonan, while supporting the principle of the extension, voted against it on the grounds that it would continue to provide cover for Anglo Irish Bank.

How the times have changed. Fine Gael and the Labour Party voted against the ELG scheme in 2009 and against its extension in 2010. Nevertheless, today we are being asked by Fine Gael and the Labour Party to extend the bank guarantee not for a further six months but for 12 months. We are being asked to saddle the State and its taxpayers with an unknown liability on top of the existing guarantee of €100 billion. We are being asked to write a blank cheque for the banks, including Anglo Irish Bank. Given the volatility in the eurozone it is likely that the scale of this liability will increase in the coming 12 months. Given the risk to the State and the taxpayer of the bank guarantee this represents the greatest and most expensive political U-turn in the history of the Dáil.

The Minister will be aware that the move today does not mark the beginning of the U-turn. That sad event took place behind closed doors in Government Buildings in June of this year when the Cabinet, including the Minister, Deputy Noonan, Deputy Joan Burton, Deputy Richard Bruton and others agreed to extend the bank guarantee until the end of 2011. However, today, unlike in June, every member of the Government and its backbenchers must vote on whether they wish to breath a further 12 months of life into what is universally regarded as the most costly and the most damaging decision ever taken by an Irish Government.

The scale of that U-turn is breathtaking given the depth of opposition to the bank guarantee, especially from the Labour Party. If there were one decision that represents the Labour Party's capitulation to the failed policies of Fianna Fáil it would be this one. So much for not writing blank cheques for failed banks. Naturally, those in the Labour Party, stung by the exposure of this complete U-turn, will attempt to deflect attention from its bad decisions. They will allege that they alone stood against the blanket guarantee in 2008 and that they alone had the courage to stand up to Fianna Fáil at the time. Naturally, this is not true but they have repeated it so many times that it is possible they now genuinely believe it to be true. The Dáil record shows and tells a different story.

Let me set the record straight. At the end of September 2008 there was widespread fear that a run on Irish banks was imminent, that our banking system was at risk of collapse and that many small depositors would be burnt. Many credible economists and commentators argued for a time-limited guarantee of deposits and liabilities of banks of systemic importance to serve as an emergency measure. Fianna Fáil, acting under pressure from the ECB which advocated not letting any bank fail, introduced the Credit Institutions (Financial Support) Bill on 30 September 2008. The Bill empowered the Minister to produce a financial support scheme to provide a guarantee for Irish banks which would be presented for approval by the Houses of the Oireachtas.

Sinn Féin gave conditional support to the Bill. We criticised its lack of detail and called for specific protections to be provided for the taxpayer. We argued for tougher regulation of the banks. We stated that any bank in receipt of State support should assist struggling mortgage holders in distress. We called for a specific levy to be applied to covered institutions. We made it clear that we would only support the scheme if our substantive concerns were met in the secondary legislation. Many of these concerns were echoed in the contributions to the debate made by the Labour Party, including that of the then finance spokesperson, Deputy Joan Burton.

Two weeks later the Government brought forward the Credit Institutions (Financial Support) Scheme to the Dáil. It met none of the tests set down by Sinn Féin during the debate on the enabling legislation. Rather it provided for a guarantee so expansive and comprehensive that anyone with an ounce of sense could see that the level of risk to the State and the taxpayer was unacceptable. Sinn Féin voted against the scheme on that basis. This is not an academic point. As the Minister is aware, the blanket guarantee only came into legal effect after the passing of the scheme by the Oireachtas on 17 October 2008.

The Dáil record clearly shows that Sinn Féin and the Labour Party were the only parties to vote against the scheme. The first banks to join the scheme did so on 24 October. The Minister of Finance confirmed as much in a reply to a parliamentary question from me on 8 November this year. This is on the Dáil record. Sinn Féin opposed the blanket guarantee then and we have done so consistently since. To suggest that Sinn Féin supported the blanket banking guarantee introduced by Fianna Fáil is a lie casually thrown about to distract attention from the facts and not supported by the Dáil record.

Perhaps some of the Labour Party Deputies and backbenchers will not accept my word for it but I suggest they would accept the word of the Minister, Deputy Noonan, in a reply to a parliamentary question on 8 November 2011 in which he stated that "The formal statutory legal basis for the guarantee was provided by the Credit Institutions (Financial Support) Act 2008 and the Credit Institutions (Financial Support) Scheme 2008", known as the CIFS, which were formally approved by both Houses of the Oireachtas on 17 October 2008. The Dáil record shows that Sinn Féin voted against the scheme but, more important, the decision on 17 October 2008 by Fianna Fáil, the Green Party and Fine Gael to saddle the State and the taxpayer with a liability running into hundreds of billions of euro had consequences more profound and long lasting than any politician or economist could have predicted at the time.

Throughout 2009, Sinn Féin and the Labour Party continued to oppose the bank guarantee. When the Government brought the Credit Institutions (Eligible Liabilities Guarantee) Scheme before the Dáil in December 2009 both parties rightly saw it as a mechanism to further extend the disastrous decisions of 2008. Deputy Joan Burton was right to suggest that supporting the ELG scheme was akin to voting confidence in Fianna Fáil's failed banking strategy. She was right to describe the ELG scheme extension as a blank cheque that would be used by the Government to increase the risk to the State and the taxpayer. Deputy Richard Bruton was right to withhold support from the ELG scheme on the grounds that the banks were not doing enough to help foster lending in the economy and to change their greed-driven culture. When Fianna Fáil came back again in June 2010 seeking to extend the ELG scheme for a further six months, Deputy Joan Burton rightly criticised the Government for having no exit-strategy from the banking guarantee while Deputy Bruton rightly questioned the inclusion of Anglo Irish Bank into any support scheme. With such a strong and vocal record of opposition to the ELG scheme by Fine Gael and the Labour Party one might believe that upon taking office they would have set about developing an exit strategy from this toxic debt.

However, at a Cabinet meeting in June this year Fine Gael and the Labour Party abandoned two years of principle and adopted wholesale the failed banking policy of their predecessors. Worse, today they seek a 12-month extension of this failed guarantee. The Minister's arguments and those of Fine Gael and the Labour Party are no different to those presented by the late Brian Lenihan in 2008 and by Deputy Éamon Ó Cuív on his behalf in 2009. There are no new justifications for saddling the State and the taxpayer with the additional risks that will arise from today's decision. This represents another blank cheque written by a Government in hock to the Irish banking system and the European Central Bank and has little or no regard for the consequences for ordinary working people. Clearly, the Labour Party writes blank cheques when Fine Gael asks it to do so. It seems an apt, if depressing, description of everything that is wrong with this coalition and the Labour Party's participation in it. Sinn Féin will oppose the proposed extension to the bank guarantee scheme today, as we have consistently done since October 2008. We will do so because it is the right and honest thing to do.

I want to make it clear to every Government backbencher that today it has asked us to write another blank cheque for the banks, including Anglo Irish Bank. It is asking us to give Government guarantees to unsecured private banking debt, a sum we will not know. We are asked to do this at a time of uncertainty and volatility in the banking system which will increase the level of risk to the taxpayer. Unlike others in this House, Sinn Féin will remain true to its principles and word and vote against this irresponsible request. We will push the issue to a vote and make others vote likewise.

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