Peter Mathews (Dublin South, Independent) | Oireachtas source

We have arrived once again at that time of year when we take stock of the financial position and resources of the country and consider what the Government needs to collect in revenue and how it will spend it. Unfortunately, the language of this presentation is one of total confusion and complexity. Individuals and lobby interests zone in on the particular part of the jigsaw that affects them and the big picture is missed year in and year out. The experts who are professionally trained and versed in discussing the changes adjust their fees and have their business breakfasts to try to de-cloud the situation and inform people about the effects of the changes on their own much more straightforward budgets.

The Finance Bill is so named because it puts the algebra and arithmetic onto budget 2015. The Minister's Budget Statement started with a lot of heavy, labouring sentences patting the Government on the back for what had been achieved and what the Central Statistics Office told us, by way of metrics and measurements, had occurred in the various quarters last year and to date. As I said in another debate, these data are all in percentages; there is no idea of scale. The Budget Statement should set out clearly that the total amount of money to be collected will be X billion and that expenditure will be Y billion. That information should be simply laid out on a page. Instead we have paragraphs which weave the reader in and out and around, mesmerising with percentages and possibly frying his or her brain.

We were constantly reminded in debates in this House that expenditure had exceeded the revenue of the Government by some €14 billion per year, or more than €1 billion per month. That was the headline figure thrown at us for several months in the early part of this year. We need to know whether that money is being spent on things we can see - goods and services - or to pay the interest on our borrowings in the past, or a mixture of both. We are actually at an even balance between the revenue earned by the Government through taxation and the expenditure on goods and services undertaken. We are paying off the €9 billion or thereabouts in interest on borrowings that we owe.

Apart from the national debt, there is also household debt to consider. Many households took out huge loans in the period up to 2008, whereas the State did not take out a lot of loans in the same period. However, the State's revenue was coming mainly from income taxes and VAT in the construction industry and stamp duty on transactions related to property, all of which collapsed. There was still expenditure on goods and services by the State which is harder to reduce. That is the story that needs to be told clearly to the people. It is very simple to tell it, but what is contained in the Bill is not simple.

It is important to consider what led us into this horrible situation where the debt of households, the nation and businesses that are not banking and financial businesses now totals four and a half times the value of the production of goods and services in the State. That is massive. When Ashoka Mody of the IMF left here after his job was done, he said Ireland was carrying too much debt. He is now telling postgraduate students in the United States how one can address economic, fiscal and financial matters in countries in which mismanagement has led to problems. He said we should not be carrying this much debt and that a lot of the debt that had accrued - which is still with us - had come about because of losses.

The next question to consider is what losses occurred in Ireland following the collapse? Going back a little further, how did the collapse occur and what was its nature? The answer is very simple. We had six Irish-owned banking and building society institutions operating here and six others that were foreign-owned. The Irish institutions were Allied Irish Banks, Bank of Ireland, the EBS, the Irish Nationwide Building Society, Anglo Irish Bank and permanent tsb. The foreign-owned banks were Ulster Bank, Bank of Scotland (Ireland), ICICI Bank, Danske Bank, KBC Bank and Rabobank. All of these banks between them funded the domestic economy.

People might wonder if we need to consider all of these details and the answer is "Yes." There is a connectivity between the 40 homeless people who were sleeping on Grafton Street two weeks ago, the 90,000 mortgages in arrears - representing the guts of 500,000 people under stress, strain and at risk of sickness and separation; the 250,000 people who have emigrated and the 350,000 who remain unemployed. All of these people deserve to hear this narrative because it has not been told. These banks provided credit in this economy which grew, between 2001 and 2008, from three times the size of national income of some €160 billion to five and a half times that sum. It was a credit explosion and it could only have happened where there was a dereliction of duty by the boards of directors of all these banks in those seven years.

We do not need a committee of inquiry to figure all of this out. The facts are on the balance sheets of these institutions. All that needs to be done is to lay them out on trestle tables in a hall or an assembly area large enough to accommodate all the members of the boards of these banks during that period and representatives of all the auditing firms. All we need to see are the balance sheets at six month intervals from 2001 to 2008. We do not need experts or lawyers to explain it to us. We do not need people from the investment banks of the world who collectively have paid more than €150 billion in fines and penalties for their misdemeanours in this period. Ordinary people in this country and elsewhere have been thrashed by the establishment financial system and continue to be thrashed. That is wrong.

As I said, the Bill puts the arithmetic and algebra on the long and meandering thing that is the budget, moving little pieces of the jigsaw instead of looking at the big picture. The losses in the Irish banks were not the €64 billion about which everybody talks - that is simply the amount that was put into the banks via the raiding of the National Pensions Reserve Fund and includes bits of capital from the troika loans. The actual losses to the six Irish-owned banks on commercial property or NAMA-type loans were some €50 billion, with a further €35 billion lost on mortgage loans. At the same time, the foreign-owned banks lost at least €40 billion.

This has been funded by their parent companies and the citizens of other countries who supported Lloyds Bank, Royal Bank of Scotland Group and so on. Add it all up and it comes to €125 billion in losses due to the credit-pyramid bubble overseen and created by the boards of the banks between 2001 and 2008. What is the value of our gross domestic product? It comes to €160 billion or thereabouts. The losses in the domestic banking system amounted to 65% of our GDP. The United States has a GDP of €12 trillion. According to all of the books, including Timothy Geithner’s Stress Test: Reflections on Financial Crises, Too Big to Fail, All the Devils are Here, the Americans thought the whole world financial system was collapsing. Its total bank losses were contained at €1 trillion, one eight, or 12.5%, of its GDP. Ours came to 65%.

The Trichet letter to the late Brian Lenihan printed today is not really important. It was just setting out the framework for what had to happen to fund and bridge the Government’s expenditure for three years, while the revenue figures could be brought around for normal budgetary purposes. Of the €125 billion in losses, €31 billion arose because of Anglo Irish Bank which was funded by deposits and issues of senior secured and subordinated bonds. We were told by the European Central Bank and the European Union, by Mr. Joaquín Almunia, Mr. Olli Rehn and Mr. Jean-Claude Trichet, that we were not allowed to incur losses on the funders of that bank, as well as the others. That was wrong.

On 28 September 2008 the guarantee for all of the liabilities of the Irish-owned banks, an exposure of €400 billion, was entered into under duress. It was based on negligent and fraudulent information supplied by the banks. In insurance, as the Ceann Comhairle will know, if someone supplies information on a risk that is not truthful and comprehensive, it voids the contract of insurance. A guarantee is a contract of insurance or indemnity. We had every right in the world to selectively choose which liabilities would be guaranteed. Customer deposits should have been secured but not the senior secured and subordinated bondholders.

A budget is about taking a picture of revenue against expenditure which we think we should fairly maintain to provide services such as schools, hospitals, water, buses, trains, health and education. Anglo Irish Bank was a completely busted flush around the time of the guarantee. Mr. Trichet and others in Europe did not want the system to be strained beyond its survival. The Government was headlocked into writing three promissory notes, an IOU, to resuscitate the busted Anglo Irish Bank, with Irish Nationwide Building Society, to the tune of €31 billion. This coincided with the requirement of the bank to redeem bonds that had initially been issued to the original subscribers and sold into secondary markets to risk-takers. The only way the ECB could lend money to this busted bank to wrongly redeem all of these bondholders was if the Government stepped the people up to the scaffold to the tune of €31 billion. We are still on the scaffold for €25 billion of that figure in that horrible story.

These bonds are now called prom-bonds. There was no deal on the promissory notes. Instead of a vest with grenades with a ten year fuse, we have one with a 40 year fuse. The Government does not have the guts to get this story across and tell the ECB it is justified in tearing up these bonds.

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