Colm Keaveney (Galway East, Labour) | Oireachtas source

In February 2011 the Government inherited a country that had been placed in the pawn shop after a decade and a half of reckless economic and fiscal mismanagement. In the light of the presence of my colleagues in the Chamber, I do not want my speech to become an attack on Fianna Fáil or on any of its coalition partners. I simply want to state some facts. The weakness and incompetence of the last Government, under the pressure of the European institutions, brought the liabilities of failed private banks onto the shoulders of the ordinary people of this country. A previous Government had narrowed the tax base to the extent that the fiscal consequences of an economic downturn would be catastrophic. The massive increase in Government spending was not based on sustainable economic or fiscal propriety, but on the once-off proceeds of the property boom, which has left thousands of people burdened with debt and in crisis. Difficult issues were not resolved by reform, but by throwing money at them. Radical reform in welfare, education and health should have been done when we were in a time of plenty. That was simply not done. The Government is responsible for implementing such reforms at a time when resources are scarce. We have to get on with the job.

While I agree to some extent with what Deputy Stanley has said, it must be accepted that a disaster which took 15 years to create will not be resolved in 20 months. It will probably take the lifetime of the Government to resolve 15 years of economic mismanagement and the vandalism of our country. There is a deceit in the simple assertion we often hear from the Opposition benches about burning the bondholders and taxing the wealthy. It simply will not happen that way. It is misleading people to suggest that is a genuine message. In its own right, the bank debt is not our greatest problem in some ways. As I mentioned earlier, under a previous Administration the tax base was narrowed and spending was recklessly increased. When the crash came, we were left with a large gap between taxes collected and moneys spent. If the bank debt issue could be removed entirely, we would continue to face a crisis in this country, namely, the fiscal gap between what we take in and what we spend. Every day, we borrow more than €40 million to fund essential services and to keep our schools, hospitals, welfare, policing and general public services running.

Perhaps we should consider the example of a European country that has burned its bondholders - Greece, which applied a 50% haircut to its bonds. I invite Deputies to reflect on a report on this matter in the Financial Times of 18 October last, which states:

Greece’s top security official said he was determined to crack down on an alarming rise in rightwing violence .... (He) admitted that some individual officers may be sympathetic to the neo-fascist Golden Dawn party, which has been blamed for much of the violence and won a surprising 7 per cent of the vote in June elections .... (His) comments came amid concern about a string of assaults by rightwing thugs on immigrants and leftwing opponents, and accusations that Greek police were either sympathetic or [with the fascists]. .... As in the rest of the Greek public sector, police numbers are being reduced. Fewer than half of country’s 52,000 officers earn more than €1,000 per month and they are facing further pay cuts [as a consequence of the burning of the bondholders].

There have been reports in the Italian media in recent weeks suggesting Greek women are engaging in prostitution in Italian cities to feed their children in Greece.

The Government inherited a situation where private bank debt was effectively turned into sovereign debt in order that any default would be seen as a default on sovereign debt and treated as such. Any idea that we could have defaulted without consequences is wishful thinking or worse and those who express this view are deliberately misleading the public. We would have moved from being reliant on a moneylender who would have imposed conditions through dialogue to the situation similar to that in Greece where conditions would have been imposed on us by threat of the denial of critical funding. We could, of course, have freed ourselves from any need to borrow by closing the deficit immediately though making radical cuts and providing for massive increases in tax. The consequences of this would have been horrific for low income households and those in receipt of welfare payments. There is no doubt that middle class incomes would have been demolished and a mortgage crisis would have infested our society.

The Government found the ship sinking and had to make choices about which aspects of the ship it should save. We chose to reverse the cuts to the minimum rates of pay, thus raising the incomes of the vulnerable in society by €40 a week, which is significant when one is struggling to put money into a purse to bring a child to a doctor. We removed the very low paid from the universal social charge net and have protected, where possible, core social welfare payments. While there are some issues with the JobBridge scheme and, like all schemes, should be subject to critical analysis, it has to be acknowledged that 60% of the participants have managed to secure full-time employment.

We are working hard to encourage inward investment and secure employment for the people. Central to this is the restoration of Ireland's reputation and credibility as a place in which to do business and where we honour our debts. Investment and the creation of employment will do most to get us through this difficult time. Central to restoring our reputation and giving confidence to those who might want to invest here is the issue of trust. The Government has sought to address the issue of the bank debt by engaging in careful diplomacy and has made significant progress, however maddeningly slow it has been. I appreciate that we have been waiting a long time for a resolution, but this country will be given a deal.

While others may not be in a position to say it, the debt is unsustainable. I understand why the Taoiseach and the Tánaiste do not say this. They are sending a signal about the critically important foreign direct investment and the way we would like to conduct business. We need to enhance our reputation by encouraging trust and confidence in a way that will secure that investment. There is no easy way of doing it. We have to proceed by way of patient diplomacy, not knee-jerk reactions. This, with the progress we have made in addressing the fiscal position, has been evidenced by the fall in our bond yields in excess of the fall in the yield for other EU member states.

There are issues we need to address with regard to the burden imposed in the fiscal adjustment. The only consequence for me, as a well paid civil servant - I must be honest - is that I am €100 worse off as a result of the household charge and €5 worse off as a result of the septic tank charge. The CSO survey clearly indicates the gap between those who have and those who do not. The Government and all of us who sit on this and the other side of the House should show caution on the growing gap and the potential consequences in terms of social unrest in the country. There are many in the middle classes who are being squeezed by increased charges, wage stagnation, debt payments and increased costs. They represent the core of our society and economy and, when the fiscal position improves, we must focus reliefs on those who have carried the burden of recovery. It is the spending power of the middle classes that will help the economy to recover. The budget must address the proportion of the burden of fiscal correction on those who have high earnings and a capacity to pay. The budget will not be accepted by the citizens if social justice does not feature. The issue of tax exiles must be addressed. How can people who avoid paying tax in this country, in a just society, allow their families to benefit from publicly funded services such as schools, roads, hospitals and so on? How can we find that the financial consequences of a budget for those on higher earnings have sheltered them in many ways from the effects of the cuts in services? We have to address this issue in the budget. We see powerful groups such as consultants refusing point blank to engage with the State on playing their role in addressing the crisis. The Government needs to address this challenge and take whatever legislative action is necessary in order to force these changes.

There is light at the end of the tunnel and I am confident we will emerge from the crisis. However, we must ensure those most in need have the protection of the State. We must ensure recovery, when it comes, will keep the economy and society intact. Most of all, we must ensure the concept of social justice will not be sacrificed for expediency or the lack of participation of powerful vested interest groups in society.

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