Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

Bíonn deá-chomhairle ar fáil in aisce uaithi i gcónaí.

First of all, I would like to deal with some specific issues in the budget. In the second half of my contribution, I will talk about the wizardry of modern finance and how, as a simple person, I wonder at times how this magic money is always coming about. There used to be certainties. Matter could not be created or destroyed. Then it was found that if one split the atom, one could destroy matter but one could create energy out of it. Therefore, it became that energy could neither be created nor destroyed. There used be principles in relation to finance that there was no such thing as a free lunch but the world seems to be having a great free lunch at present. I wonder, if it is so simple, why it was not done before. It is something worth debating. Before we come to those issues, people have to live in the immediate and in the immediate effects of a pandemic.

The first thing we have to recognise is that a big slice of society, those whose incomes have stayed the same, because they have not had the same spending opportunities on holidays, on hospitality or whatever, will probably save more money or have more money for paying off their debts than they would have had otherwise because every time there is a lockdown or even a semi-lockdown, the opportunities for spending reduce. Then there is the other half of our society who have been impoverished by what has happened. Many of them, those in small and medium-sized enterprises who had never depended on the State and got on with their business, now find that the basis of business has disappeared.

In the main, I would have to say the Government has done a reasonable job trying to help a fair number of people with fairly accessible schemes. I do not get a significant number of complaints about accessing the schemes but we know there are significant sectors that the schemes keep seeming to miss. It is something we will have to look at again to see what sectors or types of business are still left out of the loop.

When the initial pandemic payment came in, because it was based on what one did in January, February and March, all of the seasonal industries in the west were left out. That was a considerable challenge because in the more rural parts of the country that depended on seasonal tourism, January, February and March is holiday time when they get a break from the hard work of 12 and 14 hours a day from St. Patrick's Day or Easter sometimes up to Christmas.

When one looks at the Covid restrictions support scheme, CRSS, there are two conditions. A person's business has to be closed down by the closedown. The other condition I understand that is there in practice is that one has to have an office or some place of business. There are many businesses in this country that do not have a specific place of business. Their place of business is their own homes. There is nothing wrong with that because, if one went back 150 years, cottage industries were prevalent and farming was prevalent. Work was done from people's own homes. It is only in the more modern world we have insisted on everybody having an office, etc. That actually was a function of telecommunications. It is hard to believe that when I went to Corr na Móna the first shock was that it was hard to get a telephone. When we built the co-op, it took us a year to get a telephone and unless one was in the office, one could not be contacted. Now younger people have never experienced the world without the phone in their pocket so wherever they are, that is where their office is. We have progressed to a fantastic situation where there is no need for an office. With the CRSS, businesses that provide services, such as the limousine business, got caught out. Strangely, groups such as the small fishermen are not in a good way because there was a market collapse, and not that they were stopped fishing. For example, limousine owners were told that there are all these loans available, but they are only available if they buy an extra limousine. Who will buy an extra limousine at this stage? It is hard enough for them to pay for the ones they have. What they needed was help to pay back the money they had borrowed.

On a bigger policy level in regard to welfare, tax and so on, we seem to have moved into an as-you-were situation of no policy change. There were little bits here or there. The earned relief was brought up to €1,650, but that was going there anyway. There was no significant shift in how we do our taxes or where the burden of taxes lies, and these can be done in a cost-neutral way. I hope that is not a sign of things to come because we need changes in the tax system. As I often said, for the ordinary person living his or her life and trying to make tax returns, the tax system is inordinately complex and we need to look at making life simpler. The past ten years, with the introduction of the universal social charge, USC, and its multiple rules and crinkles, have added a third payroll tax. We would be better returning to the two-tax system of tax and PRSI contributions. The present one is merely ministering to a fetish of the Department of Finance that is a backdoor way of taking people on low incomes, which I disagree with.

For the past ten years the age exemption was reduced, and has stayed reduced, and the basic tax credits have stayed the same so while welfare has gone up - I counted seven or eight increases in the past ten years of €5 per year, or an increase of €35 per week - more people who have a small private pension or in small self-employment wind up in the tax net.

That is a clear policy of the Department of Finance because it seems to me that it wants to take more tax off the low-paid.

I come to an issue that puzzles me. I wonder how it is that there is no comeback on it. Every country in the world has had a bad economic year, or to put it more precisely, their governments have had a bad economic year. There are sectors of economies which have had a great year, for example the high-tech companies that work online and sell all the programmes we all use every day, and anybody who sells Internet services. Most governments have wound up spending much more money than they are taking in and creating huge deficits. We are told, with justification, that there is no harm in borrowing €20 billion, €30 billion, or any figure one can name. We are told that we can keep writing the cheques because we can get long-term money for free, and that monopoly money is now the way the world is.

The House should remember that we are borrowing €30 billion but when one takes that across all the countries of Europe and all the countries of the world there is a massive amount of borrowing going on. In the old days of conventional banking, if one was borrowing a huge heap of money, somebody would have needed to have saved that money and to have put it in the bank before the bank could lend it. We have gone way beyond that in the sophistication of our systems, however. Consequently, this is not money that was saved, invested and made available for borrowing. I am very open to the Minister of State, who is an erudite man, explaining to me where all the money is coming from, why it is being given out for free and what effect it is going to have in the long term. Is somebody going to tell me this will have no long-term effect because free money can be created every year? It defies every rule of conventional economics that would have obtained here prior to the last two years.

Ten years ago, during the other crisis, if we had suggested to Europe that it should keep printing money all the time, it would have refused and insisted we borrow the money on the market. It would have argued that money must be real and said that we could not keep writing blank cheques. I much prefer this way of solving the problem than the last way, whereby we were paying between 8% and 10% for money at some stages. However, I still query that it is this handy, that we can keep doing this and that there is not going to be a sting in the tail somewhere. We would have been told that if we kept writing cheques and creating money out of nothing, and if central banks all over the world kept creating all this money out of nowhere, it would create rampant inflation. Now everyone is going to tell me that is not happening. It is surely not happening at the moment but maybe that is because there is a constraint on people's spending. I see very little commentary on this. I see very little questioning of how we have suddenly wound up in this utopia where we can keep writing money without it having an effect on inflation or the value of money. It seems that the answer to all of the world's finance problems was really handy all the time, but I am sure it is not that simple. Nothing ever is, if we look at all the downturns before. What happened in the 1930s in Europe was hyperinflation. Sometimes in Ireland, debate at the higher level is very much focused on today, on orthodoxy, on not rocking the boat and on not questioning the basic logic of the situations in which we find ourselves.

At the beginning of my contribution I said we have created two sections of society. The people in one section depend on subsidies from the State when they are lucky. When they are unlucky, they are told to suck it up even if they are facing dire financial and personal problems. The only thing they are being offered is new loans for new equipment; no help is bring offered with the debts they have. On the other hand, if the truth be told, there are many people in certain types of business that are much better off. My worry is that when things settle down and Covid disappears, which no doubt it will, we will get rapid inflation. When there is an overgenerous money supply, price inflation will happen. I am concerned that we will hit in a second whammy all the people who have been hit in the first whammy. The people who were not hit in the first whammy will be relatively better off because they will have much fewer or no borrowings and doubtless they will have invested in long-term savings at very low interest rates before the chickens come home to roost. If the interest rates go up, their money will go up because that is what happens. On the other hand, the people who must borrow to survive will find the interest rates on new borrowings for them will go up and they will not be immune.

Some people will speak about the assurances that the economists will give us. I am sure all the European economists and the people writing all this money are going to assure us that everything is under control. It is said that once bitten, twice shy. I sat in government in the 2008 period when report after report from the OECD and all the rest came in. There is no point in denying that although there were a few outlier economists, and a few people who questioned, the vast majority of reputable economists at the time told us that there would be a soft landing and so on. When Fannie Mae and Freddie Mac broke in America, I remember putting a phone call through to the Taoiseach's Department and asking a senior adviser if this had implications for Ireland. I was blithely assured that we did not have sub-prime lending in Ireland, that there was no issue and that everything was under control. I do not think I need to emphasise or go into any detail about what the real truth was: on that sunny day when the news broke about Fannie Mae and Freddie Mac in the United States of America, we saw the beginning of a huge international financial turmoil which scarred and hurt many people.

I hope that when the Minister of State is summing up, he will be able to explain to me in simple English how suddenly the world has changed so much because of Covid that we could start writing all of this money throughout the world and there is literally no downside to it and there will be no day of reckoning. If it is as simple as this, why did the economists not think it up a long time ago? We could have provided a lot of services that a lot of people needed and we need not have worried about the cost.

See this speech in context