Joan Burton (Dublin West, Labour) | Oireachtas source

I wish Deputy Eoghan Murphy all the best in his very important new job.

This is in a certain sense a technical Bill to give effect to the framework and structures of the European bank recapitalisation arrangements. It has been a very slow process. In respect of what the previous speaker said about the European Union and its response to the banking crisis, it was very disappointing. I have said that before. The EU’s initial response to the financial crisis was too slow, dictated from the centre and ideologically blinkered in approach.

As a Minister, from 2011, I repeatedly argued, together with my colleagues in the Labour Party, that the EU needed to shift from austerity towards a policy based on investment growth and job creation, with full employment as the central target, and to have a significant capital investment programme. In a certain sense, the flaw in the Bill is what is not present in terms of a comprehensive response to the financial crisis by the European Union. The response is very technical and narrow and is focused on the banking sector. As the Minister of State said, the Bill is technical in nature.

I will focus on Ireland rather than other countries. I refer to Professor John FitzGerald and a recent ESRI study. It found that during the economic crisis the main features of the Irish welfare system were preserved and welfare spending was largely protected from the huge reining in of public spending. Professor FitzGerald said a limited cut in nominal rates for most payments, which took place during the term of the Fianna Fáil Government, was offset by a fall in prices, leading to a small increase in the purchasing power of benefits. As Minister, I ensured that pensioners were largely exempt from the cuts, and as a result the real value of the State pension increased when incomes were generally falling.

Ireland's market incomes, as we know, are very unevenly distributed and the tax system and welfare system, in particular, play a very important role in redirecting income. The welfare system protected us from a potential growth in inequality during the economic crisis. ESRI studies found that after tax and welfare, there was no change in income inequality between 2007 and 2014. We would have liked if income inequality could have been reduced further. I see Members in the Chamber who rushed over to be supporters of a particular Greek model which toyed with default. As the appreciation of what a default actually meant for ordinary people and businesses in a country developed, they drew back from that. The EU could have dealt with Greece and a number of other countries in a much better way.

The other remarkable feature of the Irish history of the collapse of the banking system is that there were no forced redundancies in the public service. Many people took early retirement on an agreed basis and left the service, which diminished resources in a number of areas. Some Deputies have professed long and intense admiration here and in other Chambers for other approaches but were unfortunately not able to succeed in achieving them, although I am sure that was their aim.

The problem with the structures the EU has put in place regarding banking is that while it has addressed banking structures, the ECB does not have a remit for critical areas for the well-being of European societies, such as a policy on full employment or young people obtaining employment, apprenticeships and traineeships. I refer to those countries which are still experiencing both little or no economic growth and major unemployment. In 2011 when the Labour Party went into government, unemployment was over 15%, and when it left office, it had fallen to 7.8%. Youth unemployment had more than halved, although it is still too high.

When it was in government, the Labour Party had a single-minded focus on getting people back to work. Recent figures show that the number of people in schemes has fallen substantially because young people coming out of college are getting jobs and recruiters are back in all the colleges and universities. We have also restarted apprenticeships. Much more needs to be done to get more young people the apprenticeships and training that will help them to get good, well-paid employment and careers.

I am disappointed with the Bill in terms of the EU structures involved. The Minister of State is simply presenting this element of the EU structure. I do not believe a strong enough case has been made for the structures to be accompanied by policies around investment, capital investment and full employment.

The debate on Brexit is taking place in the North and our neighbouring island. There are probably people in the Chamber who favour Brexit. However, the context of Brexit should be remembered. We need to understand why people feel alienated from European institutions which have brought an end to war on the Continent and were constructed in the context of the horrendous Second World War. As a result of the failure of the EU to focus on investment and full employment, it no longer commands the kind of political support which it was able to ten, 15 or 20 years ago across Europe. There is an intense debate in Britain about whether to leave or remain. Other countries in Europe are now engaging in that type of debate.

When we approach structural legislation, we have to do so in the context of considering how it addresses the serious problems that befell people throughout Europe as a consequence of the events of 2008 and subsequent years. As I said, I was appalled by the lack of an investment and growth programme from the EU. I still think the Juncker proposals are not of significant benefit to Ireland because we do not have the kind of large-scale private companies that could carry the type of investment they propose. What is missing is a vehicle from which to have investment in public projects.

A number of very large public projects are now required in Ireland, and there have been many discussions in the Chamber on the subject. The programme for Government refers to investment in broadband as a way of developing more small and medium businesses in Ireland. The area which requires rapid investment and the scaling-up of investment is housing and the construction of homes and apartments.

The Minister of State said the banks in Ireland are doing very well. I understand the phrase he used in his speech was that the banks are "well capitalised". A well-capitalised bank may not be a bank that is functioning well if it is not lending in an accessible way for the construction of homes, as is required by our society.

We have a significant expansion in the population. We have a flow of returning emigrants and inward migration, which is being utilised in our expanding economy, but because the banks are not functioning, particularly for medium-sized developers and builders, we are not getting anything like the housing construction we require.

I do not agree with the Minister of State's comment in the context of housing, "It is important to point out that our banks are currently well capitalised [that is true] and in general good health." However, a bank that is not able to lend to developers for a vital economic and social need such as housing on a small and medium scale is not contributing what it should to a functioning economy. I say to the Department of Finance that the statement to which I referred is not adequate because if a developer intends to build a block of apartments in the city centre, he must have all the capital lined up and in place to build all of the apartments. One cannot, for example, get funding for the first five of a total of 40 apartments and then go back and look for the funding for the next five. All the funding must be in place at the start.

It is easier to get funding for individual house building, for which there is considerable demand, in particular in suburban Dublin and in the suburbs of other cities. People want a family home in which they can raise their children. However, there is again a problem with banks in terms of financing builders and developers, in particular medium-sized and larger developers. NAMA has been funding some developers but the banks in general are not doing so as yet. We still do not have the kind of flow of development from the strategic investment fund that ought to be in place by now. I understand a review of the fund is under way but it is not producing the strategic flow of capital to build the houses and apartments we need in this country.

Let us be clear that the purpose of banks is to mind people’s deposits and to lend that money. We know that banks are very shy of lending. According to the most recent statistics, development and building, which should account for approximately 10% of economic activity in this country, is down to approximately 6% net. That is grossly inadequate. One cannot really commend the banks when they are not doing what they are meant to do in a normal economy, which is to aid the flow of money around the economy.

The Single Resolution Fund is a technical mechanism to ensure bank collapses do not happen again, but bank collapse is not just a function of technical regulation. It is a function of a functioning economy where people have jobs and they are not afraid to spend. If there is large unemployment, as applies in a number of European Union countries – thankfully Ireland is moving away from that – people then become afraid to spend and, accordingly, one builds up a problem whereby activity in the economy is way below what the levels need to be. There have been right-wing ideological views in Europe to the effect that this is the way the structures ought to be, but to some extent that is standing economics on its head. One needs activity and people at work and then one is a position to provide the social goods and capital investments such as houses that people need. The banks are a key element in facilitating that. The banks are not in rude health if that is not happening. When the Minister of State responds at the end of the debate, I ask him to comment on that point. The issue does not feature directly in the Bill before the House but it is crucial to the future of Europe and the economic future of this State in order that we can reduce unemployment further and get a job with good pay and conditions for everybody in this country who wants a job. Given that as a country we have been investing a great deal in education, we have tremendous potential for sustainable economic growth with improvements in capital investment if we use the banking system properly.

The regulation of the European banking structures has taken a very long time. Much of the process was decided in 2012 and 2013 and the long gestation period of the Bill is one measure of how slow Europe has been, over a period when we experienced some of the worst crises seen in post-war Europe. There was no feeling of urgency in dealing with the consequences of the banking crisis, which has been experienced in many countries, including high levels of unemployment in Spain, Italy, France, Greece and Portugal to a lesser extent. There are high levels of unemployment among young graduates, young people and workers in general. That is not a sign of a functioning European Union. While the Bill is part of the mechanism of resolving and ameliorating future crises, it does not sufficiently address the after-effects. I do not know whether the Minister has any counterpart proposals to accompany the legislation that would ensure the kind of investment and policy orientated to full employment and major infrastructural development, including the kind of development we need as a country in terms of climate change.

In the context of the discussion in the United Kingdom on Brexit, does the Government have a view on an investment and employment programme? The UK has very significant employment creation figures at the moment, but the terms and conditions of work in many areas of employment have worsened. Notwithstanding the difficulties we have been through, thanks to the Labour Party being in government, we are the only country that has improved collective bargaining for workers during the recent incredibly difficult period in our financial history. I look forward to hearing the Minister’s reply in due course.

See this speech in context