Róisín Shortall (Dublin North West, Social Democrats) | Oireachtas source

I am pleased to have an opportunity to contribute to the debate. The Social Democrats will not oppose the Bill. We are considering it in the most extraordinary of circumstances, at a time the economic shock from the crisis is being felt not only by Ireland or a small handful of other countries but by every nation around the world. Covid-19 has ushered in an unprecedented time of solidarity and that is a welcome by-product. That solidarity, which is a very welcome development, is unprecedented in European economic history. It is a very much changed environment and changed attitude since 2008 and it has resulted in the issuance of collective debt.

This is a time for new ideas and new ways forward and that is very much welcome. I hope the Government will be part of that new way of thinking and new approaches because we desperately need them to work our way back to recovery. It cannot be a case of going back to the old ways of doing things; we must take a new approach to ensuring that we have a vibrant economy but also a fair and vibrant society.

The Bill provides for the use of two instruments of the Eurogroup financial package, which were agreed on 9 April – the SURE fund of €100 billion and the EIB guarantee fund of €200 billion. The legislation does not provide for the European Stability Mechanism, ESM, the third arm of the Eurogroup package. This fund is worth €240 billion, just under half of the total Eurogroup package. It is a bailout fund, established in the aftermath of the 2008 crisis, which is now being deployed as a pandemic credit line to help finance health costs incurred in fighting Covid-19. The ESM is not mentioned in this Bill or in any of the supporting documents shared with Members. The Minister has stated that the Government has no intention at present to borrow under the ESM because we can borrow reliably from the international markets at real rates that are more favourable than the ESM. This is good and shows Ireland's favourable standing and relative economic health. If the circumstances arise whereby Ireland no longer has easy access to low-interest rate funds on the market and needs to avail of the ESM, do further provisions needs to be made in legislation to allow the country to draw down these funds? Could the Minister of State confirm, therefore, that the European Stability Mechanism Acts of 2012 and 2014 make sufficient provision for access to the ESM in this scenario and that access can be guaranteed by issuing a request for assistance from the Government, which does not require further legislation?

I wish to move on to our domestic circumstances. On Friday next, the European Council will meet to discuss the economic response to the pandemic and the €750 billion recovery package, which is in addition to the €540 billion package this legislation is dealing with.

There has been a good deal of discussion on this already and the compromise position contains several important changes to the original proposal. Of particular importance for Ireland is a Brexit reserve fund of €5 billion which will be set aside primarily for the benefit of Belgium and Ireland. This is a success on Ireland's part and very prudent given the damage a no-deal Brexit may cause to our economic recovery. However this benefit also raises an important point about the approach that the recovery plan should take. Just as our domestic circumstances surrounding Brexit have been taken into account, Ireland should by the same measure and in solidarity, push for the domestic circumstances of other member states to be taken into account in their recovery plans.

The last decade showed that a one-size-fits-all form of recovery and resilience does not make sense for a diverse collection of economies like the EU. We should not make that mistake again. The President of the European Council has proposed that the funds will be linked to stronger enforcement of the rule of law. This provision has provoked a strong reaction from some member states, including Ireland, which are considered to be acting outside the European law. I urge the Minister and the Government to support this provision. Given Ireland's commitment to the rule of law and human rights generally, we should be calling for their inclusion in the final package.

In planning for the overall EU fiscal response, there is a prudent discussion to be had about the value of balancing grant aid and debt-based lending. There has been a certain amount of discussion about this at European level and whatever happens in that regard will feed into the domestic situation also. The group SME Recovery spoke recently to the Special Committee on the Covid-19 Response, making several good points on the importance of grant-based lending for small business. The current supports in Ireland are based primarily on debt-based lending whereas other European countries have introduced more grant supports, which in turn encourages take-up.

Many SMEs in Ireland are simply not in a position to take on further debt, meaning an over-reliance on debt-based lending to business will not be appropriate. It is really important to get this balance right, and not just domestically - we need to be arguing for that at European level as well. I support and commend what the previous Government did in its rapid fiscal response to this crisis but many of the support schemes have been adapted from plans originally drawn up for a hard Brexit scenario. At this point, given the crisis we are facing at the moment, those schemes are not fit for purpose. We need to focus on ensuring the schemes are adapted for the current crisis and provide sufficient grant support to SMEs, which are so vital to our domestic economy and for job creation and retention.

It was interesting to note that the former Governor of the Central Bank, Professor Patrick Honohan, last week urged deeper spending to combat the fiscal crisis that is looming. He said that there "should be no loss of nerve in fully deploying the financial resources of the State and its borrowing capacity" and that it "would be a very big mistake to use the previous crisis as a model for how the public finances should be managed,". We ignore that advice at our peril. Professor Honohan made the point that if governments attempt to limit expenditure once the immediate danger has passed, it will simply exacerbate the economic slump. We have the ability now, from EU support as well as borrowing on the private markets, to borrow substantial amounts of money on a long-term basis at rates that are effectively close to zero. This has enormous potential. It has the potential to reposition our economy significantly.

We will only attract investment if we have a strong stimulus and long-term growth plan. I was very concerned when the then Taoiseach, Deputy Varadkar, spoke a number of months ago about the need to return to a balanced budget in the medium term. That is not the kind of thinking that is required at the moment. The then Taoiseach spoke about borrowing leading to nervousness on the part of investors, and that has no basis either. Given the current economic circumstances, which are very favourable and benign, it makes no sense whatsoever not to borrow in significant amounts and invest in our economy. Ensuring growth in our economy is the one sure way to attract foreign direct investment or domestic investment. The aim has to be significant growth over the coming years.

Any attempt at retrenchment or any mention of austerity will simply weaken our standing and turn off investors. We should know at this point that austerity measures stunt growth. Ireland raised €1.5 billion in debt last Thursday. That comprised three separate issuances with terms of seven, ten and 30 years.The 30-year debt, which was raised at 0.6%, was oversubscribed by nearly three times. This is a significant demand for Irish debt of long duration at low yields. We should be taking full advantage of this by borrowing extensively and spending the capital now to invest in our long-term growth and prosperity. A few weeks ago, Austria raised €2 billion in a bond auction with a maturity of 100 years and that was priced below 1%. That auction was more than ten times oversubscribed. We should be learning from that and from what a number of our EU counterparts are doing. We should avail of the wonderful opportunities presented to us now to invest significantly in our economy.

The Covid-19 committee heard from the NTMA that the State is in a very strong position to meet its borrowing requirements. It said that most important fundamentals for investors in deciding whether to lend to Ireland and on what terms have not changed and are the country's growth potential and its fiscal policy over the long term. All these factors point to the same conclusion. Given the low interest rates available on Ireland’s debt, the Government should borrow extensively and spend deeply to provide support for the economy at this time. Deputy Nash referred to the book review done by the Minister for Finance, Deputy Donohoe. I would like to recommend to the Minister, and indeed to the Minister of State, Deputy Chambers, another book that would be well worth their while reading. It is quite a short book called Angrynomics and it is by two Irishmen, Mr. Eric Lonergan and Mr. Mark Blyth. It talks about establishing a national wealth fund. This idea has also been promoted by a number of very respected economic commentators, including Dr. Aidan Regan in The Sunday Business Postjust last week.The idea is to establish a national wealth fund supported by the issuance of Government debt.

The goal of the fund would be to make long-term strategic investments, which would provide a return either to the State or to the public directly. The proposal is based on the economic theory that when the rate of interest grows faster than the economic growth rate the rich get richer and wealth inequality grows. This is because people who are lucky enough to receive an inheritance will be able to invest their assets and see them grow in value over time, while those without an inheritance will work for years to save a lump sum, which will most likely be put forward as a deposit on an overpriced house. They will continue to work and wait more than 30 years to pay off the mortgage debt to own that asset.

A fair and functioning market economy should lead to a wider distribution of wealth but the reality we see is that wealth inequality and inherited wealth put the majority of our population lifetimes behind those who are born into economic privilege. Creating a national wealth fund could combat growing wealth inequalities by having the State invest assets on behalf of Irish society and then distributing the capital returns to citizens. There is no better time to create this national wealth fund than right now. The Government has the ability now to issue long-term bonds at what is effectively a rate of 0%. We saw that the debt issued last week was oversubscribed. Even if the compound interest was only 5%, the State could repay debt issued to create the fund in less than 15 years. At that point, the State would own all of the assets it had invested in and all capital returns would go back to Irish society. Every citizen would have a share of the national wealth, meaning everyone would effectively have an inheritance to provide seed capital funding for a business or a house deposit, thereby being set up for future careers and prosperity. Now is the time to take a new approach to create a fairer and more equal society. It is within reach of the Government and would dramatically improve the livelihoods of Irish people and the long-term growth of our economy.

It is also very important that in rebuilding our economy, we ensure the regrowth and recovery are jobs rich but also are worker centred. There are measures beyond strict spending and taxation that the Government must take to improve our economy and public finances. We need to focus on a worker-centred recovery in order that as people return to work and the economy reopens, people's living standards and work-life balance are also improved. A right to collective bargaining and greater employee led decision making will not only ensure that workers have better conditions but will also lead to greater productivity and greater competitiveness in the economy. We need to ensure that workers have the right to flexible working conditions, especially in the aftermath of Covid-19 when working from home has become the norm for so many. Initiatives such as flexitime, a four-day working week and options to work from home on a long-term basis could also go a long way to improving working conditions. Equally important is the right to switch off and enshrining this in legislation.

Younger people in Ireland undoubtedly have taken the brunt of this crisis and it is very important to prioritise their needs. People in their late 20s and 30s are experiencing a second deep recession. They paid a significant price at a very important stage at the start of their adulthood and the start of their careers in the last recession. They are now knocked back again. We know from the figures that it is the younger generation who have paid the highest price in this crisis. They must be the priority in our recovery.

The provision of public services must be seen as a major element of any recovery and any stimulus package. Investment in the public sector and good quality public services not only ensures that people's rights to a decent standard of living are upheld but we also must recognise that the State is a major employer and a major purchaser of services, which in turn can create a huge stimulus for the private sector. Ensuring people have access on a universal basis to public services without cost at the point of use means we take a lot of heat out of wage demands and ensure a greater level of competitiveness throughout the economy.

There are many other things we need to do in addition to the stimulus package but we must take the broader view. The recovery must be person centred and I hope the Minister of State will take on board many of the proposals made this evening.

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