Finian McGrath (Dublin North Central, Independent) | Oireachtas source

Thank you, Cheann Comhairle, for the opportunity to speak on this new piece of legislation, the Central Bank Bill 2014. Before I go into the details of the legislation I wish to say that there is no point discussing the Bill unless we face up to and deal with other core issues as well such as unemployment, low pay, financial services, housing, banking and the SME sector. There is a strong link between the Bill and the broader issues. We must focus on those urgent matters and come up with sensible and workable solutions as people are suffering following difficult years. We must be radical and creative in dealing with the financial and banking crisis. People have taken enough. They need a break and they need it now.

The Bill has two main purposes, the first of which is to extend Part 3 of the Central Bank Act 1971 so that it will apply to building societies as well as to banks. Specifically, the Bill will make provision for the effective transfer of the business and other assets and liabilities of building societies and for those and other purposes to amend the Central Bank Act 1971. The second purpose of the Bill is to make provision for certain payments out of the Central Fund to the account established by the ESM as agent on behalf of the euro area member states to receive payments for the purpose of providing financial assistance to the Hellenic Republic and for related matters. They are the two main reasons for the legislation and are at the heart of it.

We must consider ideas and work relating to the banking sector. I urge the Minister to have an open mind on public banking, as it could be very important. I commend Gerry Duddy and the Public Banking Forum of Ireland for putting forward ideas that would help the economy. I would welcome the introduction of public savings banks in this country – public banks that are mandated to support SMEs. Such banks would lend only their customer savings and their aim would be sustainable lending rather than maximising profits. They would return all interests and profits to the public banking community and they would be banned from financial speculation. A total of 64% of banks in Germany are public banks. They increased their lending to the SME sector by 17% between 2008 and 2011. Public banks are important and they were a strong factor in Germany’s survival of the recession. They are also a success story.

Greece is getting EU assistance to set up 40 public banks, two of which are to be set up immediately to support SMEs, while Ireland is borrowing from a German public bank for our SMEs. The Minister for Finance, Deputy Noonan, has already invited private European banks to compete in the Irish market – more banks that will not lend to our SMEs. Small and medium enterprise provides two thirds of all jobs in this country. We should never forget the massive contribution of the SME sector to the creation of jobs in this country. The logic of such actions beggars belief.

We must ask such questions so as to make a contribution to the broader debate on the Central Bank but also on the financial problems facing this country. I wish to ask the Minister for Finance a number of questions. The first is why we are borrowing for SMEs from the German public bank, KfW, when we should set up our own bank as Greece is doing with EU assistance.

We are basically funding SMEs by using €6.4 billion of our National Pensions Reserve Fund with €2 billion from KfW but the profits will go to the foreign bank. What logic is there in inviting into the Irish market more private banks that will not lend to our SMEs when we consider that Germany's success is mainly due to its public saving banks supporting its SMEs? That is a fundamental question for the Minister. I would like to see a proposal from the Dáil - from an all-party committee - to investigate the potential benefits to the Irish economy of a comprehensive public banking system in Ireland similar to what they have in Germany. The Opposition is criticised regularly for not coming up with ideas but that is an idea. I am not saying I have all the solutions but that is an idea that should be seriously examined.

The public savings banks operate on commercial principles with the aim of maximising sustainable lending, not of maximising profits. They operate on the principle of local deposits and local loans, keeping capital in their own area. They only lend money they have, that is, there is no fractional reserve lending. Surpluses remain with the bank and within the region. Profits are used to increase equity and for non-profit purposes - the public benefit principle. They are banned from engaging in financial speculation and only allowed to lend to local people and businesses in their county or city area. They are controlled by stakeholders from the local community and are independent of political influence and control. These are all the positives of the public savings banks.

The joint liability scheme provides protection for all savings bank branches. They are mandated to finance all businesses and SMEs within their designated area. They can retain cash in Irish society - the aim is to have a cashless society by 2017 under the current system - and the public savings banks can provide cheap or free credit card services for businesses that bank with them. Those are some ideas relating to the broader issues that the Minister or the Committee on Finance and the Public Service should not be afraid to examine.

We also have to face up to the reality of the tax issue. I note it has come up lately in regard to our public service and also in regard to the urgent need for a universal health service, which I strongly support. I know some of my Opposition colleagues are jumping up and down about the costs, but if we want to have a public health service, we will have to pay for it. That is the reality. Most sensible people will accept that point and will make their contribution. Of course, they want information about the figures and the background to it but they will pay for it. They are prepared to pay a little extra in tax for a quality health service where there is equity in the system. That is the problem with the current system. We need to face up to the reality that if we want a proper health service, we will have to make some sort of a contribution towards it. It is not good enough to jump up and down and say that we want a public health service but we are not prepared to pay extra taxes. We have to examine that and take the hit if we are to be genuine and honest with people. At the time of the last election when we canvassing at the doors, most people said to us to get in there and try and do something, try to fix the economy, get on with the job and stop messing them around. That was a regular comment we heard on the doorsteps.

We seem to be running away from the tax issue. Why are we running away from adopting the financial transaction tax? The EU will discuss it on 6 May. The details of a financial transaction tax indicate it would apply to trading in bonds, shares and would raise a net of between €300 million and €500 million for public finances in Ireland. It would reduce the harmful economic activity by acting as a curb on speculation and risk taking by increasing the cost of transactions and can increase growth and reduce poverty by making resources available to invest in public services, addressing climate change and supporting development in the State. It would raise between €300 million to €500 million but we are all worried that London or some other country will get the gig. I propose that it should apply across the European Union and in that way no member state could hijack the gig. Around the world people are campaigning for this financial transaction tax, believing that the banks, the hedge funds and the rest of the financial sector should pay their fair share in respect of the global financial crisis. That is the just side of it. Those guys caused the problem and they should make a contribution. We are not trying to close down the financial services in this country. That is an argument I hear regularly in debates on this issue in this House. We are trying to bring equity into the tax system. We could raise between €300 million and €500 million from the application of this tax and I believe they are conservative figures and that there is the potential to raise more from it, but it must be done across the European Union.

In the European Union 11 countries are currently preparing to introduce a financial transaction Act under a special enhanced co-operation procedure. This is a legislative measure and can be adopted by a minimum of nine countries if a policy does not enjoy sufficient support for adoption across the European Union. Our Government, in this opportunity presented, did not opt to introduce a financial transaction tax, while countries like Germany, France, Greece, Spain are planning to announce their agreement on the tax on 6 May at the meeting of the Finance Ministers. We have run away from adopting that tax, but we must do so if we are serious about addressing our problems because there is a lack of money in the country to provide the urgently needed services. I was in Darndale on Monday morning and saw an excellent service being provided in my constituency. It employes 100 people and provides a service to 260 preschool children, many of whom come from disadvantaged families. That service is short €100,000. When we consider that such a tax could raise between €300 million and €500 million, we need to wise up, cop on and start supporting services, and these are services that will prevent young children at risk, and child who come from dysfunctional families, ending up in Mountjoy in 15 or 20 years time. Sometimes the financial people only look at the statistics, they do not take account of the broader picture. That is something they have run away from and they need to accept their responsibility.

I heard some colleagues speak about the housing crisis and the Minister of State, Deputy Jan O'Sullivan, is present and participating in this debate. We all know there is a huge housing crisis here and we are all worried about the boom and bust scenario and all the problems associated with that. We have families who cannot afford a house and people are finding it very difficult to get a home. I know that from my clinics in my area and from talking to the wider community. We need to address this issue as well, but we also need to address the issue of discrimination against poorer families and people in the rental sector who do not have any rights. A Cheann Comhairle, am I okay for time?

See this speech in context