Dáil debates

Wednesday, 25 June 2008

10:30 am

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
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One thing we can be sure of is that the stamp of Fianna Fáil's failure in Government over the past ten years has been an obscene waste of public money. Yesterday's ESRI report confirms in its own words that the Government has blown the boom. The Minister for Finance, Deputy Brian Lenihan, responded to this by saying we must take prudent, transparent and immediate action, as distinct from what the Taoiseach said. Many will ask where all this money has gone and what has accounted for this wastage. In many cases, it is made up of relatively small amounts over a broad range. One of the areas that accounts for this wastage is the plethora of agencies and unaccountable bodies established by the Government, for example, FÁS. When unemployment was falling, the FÁS budget increased and is now €1 billion. The recent special report of the Comptroller and Auditor General highlighted serious concerns and questions about how FÁS spends its €9 million on advertising and PR.

Following up on that report, Deputy Varadkar of Fine Gael sought, under the Freedom of Information Act, the details of some of those concerns. It shows that a senior executive in FÁS responsible for its €9 million PR and advertising budget placed most of the campaign advertisements himself, despite the fact that FÁS employs an advertising agency which secures a remit from every advertisement placed. It is like keeping a dog and barking oneself. The documents Deputy Varadkar received in recent days show one instance where €100,000 of taxpayers' money was spent on advertising in one local newspaper, which is completely contrary to the normal policy of FÁS in dealing with national advertising. When asked about this unusual arrangement, there was a straightforward conflict of evidence between the official involved and his director general. Their evidence was directly contradictory. The official said the director general told him to place this advertisement. This is an example of sloppy management of the public's money. In the context of the Minister for Finance saying we must take prudent action, is this the kind of area in which the Taoiseach will see to it that a stop is put to the mismanagement of the spending of taxpayers' money, given the challenges we face?

Deputies:

Hear, hear.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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Obviously I do not know the specifics set out by Deputy Kenny. If FÁS has a budget of €900 million and its advertising budget is 1% of that, €9 million, obviously one wants to get value for money from it. FÁS is involved in the important work of reskilling and bringing opportunities to the public's attention, particularly to those who are not in the workforce and who are socially excluded and require assistance in reskilling and finding job opportunities. FÁS has played a very good role in that effort and has been addressing itself to the new agenda that arises. Now that we have seen unemployment rise again, relatively speaking, in recent times, Deputy Kenny can be assured that FÁS and its skills will be required on a continuous basis.

I cannot comment on the specific issue that is being raised except to say that the concentration of Government activity has to be on the current side to get value for money and to bring to public attention, however one can and as economically as possible, the job FÁS does to ensure those who can avail of those services do so.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
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I accept the Taoiseach could not possibly know the individual incidences of every agency or quango around the country. My point is that following Deputy Varadkar's investigation the freedom of information material given to him clearly shows that the opinion of the FÁS executive, who is responsible for a €9 million advertising and PR budget, is that having control of that spend could influence how FÁS is portrayed in the newspapers. If one turns that around, it is using public money to buy influence in newspapers. That is not what the FÁS training agency should be about and it does down the very good work and good people who work in FÁS throughout the country.

Deputies:

Hear, hear.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
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This is not how public money should be spent. The Comptroller and Auditor General's report, accessed under freedom of information legislation, clearly indicates directly contradictory evidence. These papers are being made available to the Committee of Public Accounts and I will send them on to the Taoiseach.

I ask the Taoiseach to act on this information and consult, through the Department of Justice, Equality and Law Reform, the Garda, which is investigating this matter, to see that in this instance nothing is happening in FÁS that should not happen and that the public can expect to get value for its taxes in this area. A budget of €9 million for advertising and PR might be small money to Fianna Fáil, but it is an important budget. It is in the control of one executive who placed most of the advertisements himself. There is a Garda investigation going on. I would like to think that, beginning with the Minister, Deputy Brian Lenihan's, prudent and direct action, this kind of area, for one, would be dealt with by the Taoiseach. From that chair, he recently said sotto voce to call them in. Somebody might see to it that this activity is strictly in line with the criteria for getting best value for taxpayers' money. I would like the Taoiseach to comment.

Photo of Pádraic McCormackPádraic McCormack (Galway West, Fine Gael)
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What about the voting machines?

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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First, if there is a Garda inquiry, there should not be any political involvement whatever on the matter.

Photo of Bernard AllenBernard Allen (Cork North Central, Fine Gael)
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There is political responsibility.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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Second, the chief executive of that organisation is a person whom I personally hold in the highest regard and whose integrity I would defend at all times, Mr. Rody Molloy. The Tánaiste, as the line Minister, can make inquiries into the matter to get the details of what is being referred to this morning, of which I have no notice.

Photo of Enda KennyEnda Kenny (Leader of the Opposition; Opposition Spokesperson on Northern Ireland; Mayo, Fine Gael)
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The internal report is here.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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If there is any issue of Garda involvement, it should be left with the gardaí.

Photo of Bernard AllenBernard Allen (Cork North Central, Fine Gael)
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That is another washing of the hands.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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I want to return to the serious state of the economy and to focus in particular on the role of the banks in the economy at present. When the Irish economy was booming, the banks were in the driving seat. One could get a loan for anything and they were pushing money at people. However, now that the economic circumstances have changed somewhat, the tune of the banks has also changed and it appears they are now behaving in a way that may add to our economic difficulties.

I am hearing from businesses, big and small, that when loan review dates come up, the banks are in to reduce the facility, change the terms, add on extra charges and increase interest rates without waiting for the changes made by the European Central Bank. Businesses starting up anew or which are expanding find that, in effect, the banks are now closed to new businesses. In the new economic circumstances in which we find ourselves, it appears the banks are squeezing the life out of many businesses in this country and putting jobs at risk.

I do not expect the banks to act in a way that is not commercial or not responsible to their shareholders. However, they could apply their credit policies in a more measured and sensitive way in the new circumstances in which we find ourselves. I would have thought it must be in the banks' own long-term interest to ensure the Irish economy gets through the more difficult times it is now in. The banks need to look at the wider picture rather than just their own quarterly returns.

Has the Taoiseach had discussions with the major banking organisations in this country with a view to getting them to look at the bigger economic picture and behave in a more measured, responsible and sensitive way at this time? The Taoiseach has been good to the banks. I recall that in the 2005 budget, for example, he abolished the bank levy, which at the time was worth approximately €103 million per year of a benefit to the banks. The banks did very well when the Irish economy was doing well. They made huge profits, and the four larger banking groups made most of their profits here in the Irish economy.

Will the Taoiseach exercise leadership with regard to the banks? Will he call in the major banking organisations, have a discussion with them and persuade them to act in a more measured, reasonable and sensitive way with Irish business at this very difficult time? In this way, the banks and their lending and credit policies could be made to become part of the solution to our economic difficulties rather than adding to the problem, as, frankly, they are doing at present.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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In my previous capacity as Minister for Finance, I was obviously in constant contact with the sector through the Central Bank mechanism and other mechanisms. This was to ensure that, in dealing with the situation that has arisen with regard to international financial market turbulence, our banking system was able to operate appropriately and properly despite the fact that an international credit squeeze was taking place, for which I was to take some responsibility, according to the Deputy yesterday. With regard to the question of the banks providing finance, while there is this international situation of which we are all aware, I agree it is important that banks continue to provide prudent risk to business and that the performance of Irish business during the good times should stand as a strong criterion for continued support for those businesses which continue to invest and to require access to finance.

It is true there has been difficulty with regard to inter-bank lending. The provision of money supply has been an issue in international banking circles for over nine months and the provision of money beyond 30, 60 and 90 days has not been as plentiful as would have been the case in the past. This is as a result of the lack of trust that has emerged due to the outcome in the United States of the developments in the sub-prime market there and the ripple effect this has had on wider banking circles.

It is important to point out, however, that, as the Central Bank has confirmed, the Irish banking system is well capitalised and is in a healthy state in terms of its own financial situation. I would agree it is important that while we recognise there has been a change in the international environment, and indeed the domestic environment, the banking system remains an important access point for capital for the development of markets and companies, and their ability to continue to trade. This is a point that will be continually made both by me and my successor in the Department of Finance.

Photo of Eamon GilmoreEamon Gilmore (Dún Laoghaire, Labour)
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I do not accept the banks operating in this country can hide behind the international credit squeeze any more than the Taoiseach can hide behind the global economic environment with respect to the domestic policies that are applied here. We know there is an international backdrop both to what the banks do and what the Taoiseach does in regard to the economy. However, the banks, particularly the four major banking groups, made most of their profits in this country in good times. I believe they have a responsibility now to help to get the economy through the more difficult times it is in.

They will clearly not do this voluntarily. Looking at what they are doing and how they dealing with individual businesses and customers, it does not appear as though they are willing to do it. This is why I put my suggestion the Taoiseach, and as he did not respond to it, I must put it again. Will he invite the banks to have a discussion with him, as Head of Government, so that he can talk with them and encourage them to take a wider, longer-term view of the Irish economy and encourage them to assist in whatever strategy he has, although he has not yet told us about it, to move the economy forward from where it is at present and on to better times?

My specific question is this. Will the Taoiseach ask the banks in to have a wider discussion with him about where the economy is going, their lending practices and to encourage them not to squeeze the life out of businesses at this time? At present, what is happening is that the banks in their engagement with individual businesses are throttling them, and in their engagement with new businesses in particular are telling them to clear off and that they will not make money available to them. Unless people who want to start new businesses can access start-up capital, they will not start up these businesses and therefore will not be able to contribute to moving the economy forward. Unless existing businesses get some kind of relief and understanding from the banking organisations, they will find themselves in continuing trouble.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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This is something I have already done as Minister for Finance. It continues to be done by the Minister and the Department of Finance. That is an option which is available to us at any time. In fact, last night I was discussing with advisers the issue of how we can ensure that we do not have a reaction to the downturn as if we were not capable of getting through it robustly, on the basis of a much better economy now than would have been the case when these sorts of challenges faced the economy a quarter of a century ago. This has already been discussed among ourselves. We will continue to encourage and ask that the application of finance to prudent risk and to the availability of risk capital continues to be available to business. That is important but at the end of the day, we all know the duty they have to their own shareholders, as private companies. However, of course, we will continue to encourage in that direction.

Regarding the idea that there is no strategy, our strategy has already been outlined. We do not deal with strategies based on the publication of any finance house, however reputable. We base them on our own official data, which will be becoming available to the Department of Finance in terms of its mid-year——

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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The data were pretty wrong at budget time.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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The budget day statement outlined the downside risks, all of which have materialised. If the Deputy knows of anybody who predicted the downturn in the international economy that we have seen in the past eight months, I ask her to give me a shout because I do not know of anyone who did.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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There were many people who did.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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It certainly was not in any of the policy positions put forward by Deputy Burton's party during the election.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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What about Mr. Joseph Stiglitz? Has the Taoiseach read his work? He could start there.

(Interruptions).

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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To stick to the point that Deputy Burton's leader raised——

(Interruptions).

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
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The Taoiseach, without interruption, please.

Photo of Brian CowenBrian Cowen (Taoiseach; Laois-Offaly, Fianna Fail)
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To stick to the point that Deputy Gilmore raised, the strategy is very clear. We will take whatever measures are necessary to have a sustainable budgetary strategy going forward. We will seek more value for money on the current side. We were already talking about moderating the rate of increase in current expenditure anyway because we want to continue to apply priority investment on the capital programme. That is the basic strategy that we have devised and will continue to work on, based on the data as it emerges. We are only half way through this year. We will take whatever assessments can be taken on the basis of up-to-date data next week and proceed from there. There will be continuing forecasts from various finance houses about how they ultimately see the performance of the economy this year which we will only find out about when the outturn emerges in December.