Éamon Ó Cuív (Galway West, Fianna Fail)

I welcome the publication of the Bill but, as Deputy Stanton said, it requires major amendment. It represents a very complex and bureaucratic approach to everyday lives. We must first recognise the impact of omitting the bankruptcy option, which pertains to the big and the few. Most ordinary people in debt want simple solutions that are not overly bureaucratic. They want to get on with their lives.

The Government has not been very proactive on the debt issue. This response seems very much controlled by the banks. The reality is that debt worries are affecting many people. Debt is probably the main issue holding back recovery. More important, it is causing untold misery and hardship. We must ask ourselves how many people who have committed suicide in the past four years did so because of debt worries.

The second point we should consider when examining people's response to debt is that if individuals, particularly those at whom this Bill is aimed, really understood all the rules well, they would not really worry as much as those who did not seek any advice. One would realise that in existing law, there are a large number of remedies, particularly in respect of small debt. Therefore, we need to reach out to these people and remove the shame associated with their debt. We need to tell people that indebtedness can be experienced by anybody.

At a time in which we have done great work on reducing the number of road deaths, we must ask how many suicides have been caused in recent years because of debt worries. How many relationships and marriages have broken up because of debt? For human, social and economic reasons, we need to address this.

Time and again we rightly say that people with addiction and illness problems should move on from guilt complexes. I agree with that very strongly. I am worried that we are adding to the guilt complexes over debt with all the talk of moral hazard. When I hear banks talk about moral hazard and express worry about moral hazard associated with a write-off, I think of two phenomena, the first of which is that all of us can make mistakes and the second of which is that most people who make mistakes learn from them and do not repeat them. To hear banks talking of moral hazard is a joke given that they were the biggest serial gamblers of all time. They gambled the equivalent of trillions of euro worldwide. The problem was not confined to Ireland alone. Across the world, the banks have ruined the lives of many people and have caused much misery. Therefore, I do not buy into the moral hazard argument. It is totally spurious and it makes it harder for people with debts to seek advice and relief.

Begrudgery and arguments associated with moral superiority are causing considerable damage. One hears people asking why they should bail out certain individuals. They should do so because they are fortunate enough to be able to pay their taxes. If somebody in one's community is down, is it not right to give him a helping hand on the basis that if one ever needed a helping hand, that individual would give it?

If we were to take the argument of moral hazard to its logical extreme, no smoker, alcoholic, individual involved in a car accident, motorist who was not wearing a seat belt or motorist who was driving a little too fast would be admitted to hospital at the public expense. The argument would be that the individuals should not have done what they did, and that we are only encouraging them to smoke, drive too fast, not wear a seat belt or drink too much by admitting them to hospital. Therefore, when one considers the moral hazard argument in everyday terms, one realises it is crazy.

Let us identify the reasons people are in debt and address the problem in the interest of the common good and in a spirit of community and sharing. My experience of people in debt points to those who, through no fault of their own, are utterly foolish with money and can never seem to keep it in their pockets. They borrow ill-advisedly. I have met people with gambling and alcohol addictions who never have money and who are always in debt. Such people will always be in society. We must help them not to hurt themselves and those around them. I will always help them because the trademark of a decent society is helping those in trouble. I realise, however, that giving more money in any form to people in this group is like putting water into a bucket with a hole in it; on doing so, one is no better off. There are other ways to deal with them. They were with us in the good times and will be with us forever. They need our help and we need to find ways to provide it.

The majority of people in financial difficulties either borrowed beyond their means when they could get easy credit from banks - the banks were giving it out over the telephone but are unlikely to repeat the exercise, having been badly scorched - or did not borrow overly much and based it on the expectation of future income. This latter group could include people in the building trade who had partners in the public service, both of whom had good incomes and borrowed reasonably. One could not claim that, had their incomes been maintained, they had borrowed beyond their means. Other people are a mixture of these two groups.

The moral hazard argument does not stand up. If people tried to repeat the exercise, the banks would be unlikely to lend to them again. We need not worry about the moral hazard of fixing people's problems.

I wish to raise a general money issue as opposed to an issue relating to the Bill. We must consider the macro level construction of money and the banking collapse in Spain and Germany, from where most of the money was loaned, as well as the rest of the world. When we put our money into banks, do we want them to gamble with it, our pension funds, our life assurance policies, our insurance funds and so on? Just as there were ethical investments, have we reached the point at which people making investments or buying into pension funds should take smaller returns if they can be assured their money will not be gambled on the market? The world economy would not be at the whim of the so-called markets, which have got matters wrong before and will do so again. Given the chaos caused by the markets' movement of money from here to there and their multi-trillion euro bets on what would happen, people would not want to be complicit. The world must consider these fundamental issues. Contrary to popular opinion, the bulk of the money in question does not belong to the rich. Instead, it is ordinary wealth that is aggregated and played on the super gambling markets, which have brought us so much misery.

Despite the Cooney and Keane reports, little has happened. How should the problems the Bill sets out to tackle be approached? The Bill's proposals are worthy, particularly given the fact that we must modernise our legislation. If I have enough time, I will address some of its details. However, other non-bureaucratic solutions could give people considerable relief. For example, we could reduce interest rates. The European Central Bank, ECB, keeps reducing rates - the 0.75% is predicted to reach 0.5% - so that the consumer, the person with the debt, is under less pressure. It also works perfectly for the person with the tracker mortgage. It is the greatest relief possible. Due to Basel III and prudential capital assessment reviews, PCARs, however, deposit interest rates have no relationship with the ECB's rate. This situation came about when the regulator decided to get the deposit to lending ratio into a good gear quickly. Since there is only a certain amount of money to deposit, we have created a bubble in deposit interest rates. It places the banks under financial pressure, which is passed on to the customer in the form of variable rates, sub-prime mortgage rates, credit card rates and so on.

It is interesting to spell out the difference made by interest rates, the simplest instruments of all. If one has a mortgage of €200,000 at 7%, interest will cost €269 per week. If one reduces the rate to 5%, interest decreases to €192. If the rate is reduced to 2.75%, similar to a tracker mortgage's 2% above the ECB's rate, interest decreases to €105. This is extraordinary. If the ECB's rate reduces to 0.5%, the person's interest will decrease to €96. For many people, the difference between €269 and €96 is the ability to pay. It is often the difference between being able to pay with a little bit of comfort and not being able to pay at all. Therefore, Europe should reduce deposit interest rates first so that banks can lend to people. Otherwise, reducing the ECB's rate will be pointless. The Government should consider applying pressure or introducing legislation to ensure maximum interest rates. We need to reduce interest rates. This is the simplest solution and is unbureaucratic. Armies of personal insolvency plans, PIPs, would not be needed.

I have always favoured a second solution. Be it through the mortgage interest supplement or an amendment to the family income supplement, FIS, to take mortgage repayments into account, a direct payment should be made to a person over a short period while he or she is, for example, unemployed. Some people were reasonably prudent but ran into problems because their incomes collapsed, for example, a blocklayer who earned €1,000 per week, is now earning nothing and whose spouse is working. The simplest solution is to lift such people over the sty. When they return to employment and the economy picks up, the supplement is withdrawn. From where would the money come? Regardless of how we approach the situation, we will pay. Under my solution, people would repay their mortgages and the banks would not need as much money to absorb their write-offs. We own the majority of the banks. If the mortgages they provided are not repaid, we will pay.

The Bill is dominated by the banks' thinking. The first two solutions, those in respect of less than €20,000 and up to €65,000, should be reduced to one. An ordinary person with a debt of less than €20,000 would need to be in awful trouble to go through this unnecessarily complicated process. If one owed €20,000, I am not sure as to whether one would be better off going to the local District Court instead, admitting to the debt, handing over an examination of means and accepting the judge's decision of a repayment of €10 per week. That might be preferable to the procedure employed here. It should be remembered that many of the people with these small debts have no experience in dealing with these very complicated procedures.

There are other issues. If a person gets €500 or his or car is worth more than €1,200, it has an effect on the process, and that is below the belt. A person may have bought a car worth €4,000 and be three quarters of the way through paying for it with a hire purchase scheme. This is a penal element. The worst part is that having done the deal and agreed the write-off of a debt of less than €20,000, if a person manages to get a job, the deal would be reviewed.

There was a big debate here about the leaked ESRI report about disincentives to work and the poverty traps. In the real world, people do not want to pay what is effectively 75% tax on work. In many cases when people get jobs, between the universal social charge, PRSI, PAYE and all the rest, it is easy to have the tax rate at 35%, 40% or 50%. People would then be told that agreed repayments would be adjusted, and when all of this comes together, what is to be left in one's pocket as a reward for hard work and getting a job? It would be much more tempting to do a little bit on the black market so as not only to avoid all the tax and PRSI but also the possibility of the loan repayments being adjusted.

When debt is written off, it should be done conclusively. We should allow people a new start like we do for people who have gone bankrupt. Those people can have millions of euro written off and when they start making millions of euro again, the bankruptcy is not adjusted, at least in my understanding of it. If it is good for the rich it is good for the poor. Those who will go bankrupt would have been wealthy and got into a deep hole. I beg the Minister to think about this again.

I know there will be logical but boring and unrealistic arguments, and it may be shocking to write debt off if the possibility remains that a person would get a job. Imagine how horrendous it would be if a person could get a job and rebuild his or life. We are speaking about debts of under €20,000, mainly to credit institutions which acted in a totally reckless manner in many cases in loaning this money. They contacted people, asking them to take more money, and they increased credit card limits without being asked.

The Minister should take that element from the Bill and make it clean and simple. A deal is done on a person's current circumstances. There are many rules concerned with how long people should have debt before this process would come into effect. I do not believe, because of its complexity, that people will charge in through the door to avail of this process to get rid of debts of under €20,000 or €65,000. I have a simple request for the Minister, that he reconsider the process of writing off debt. What is done is done and the debt should be written off conclusively. If a person is lucky enough to regain employment or receive an inheritance, he or she will pay tax on that. Otherwise, such people should be able to rebuild their lives and produce again in our economy.

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