Tuesday, 18 January 2011
In an interview on yesterday's RTE news, the Minister for Finance, Deputy Brian Lenihan, raised the possibility of renegotiating downwards the 5.8% interest rate at which money is borrowed under the IMF/EU deal, that is, the bailout scheme for Ireland. Again this morning, he is quoted in the Irish Independent as saying, from Brussels, that he is committed to getting Ireland better terms under the EU/IMF deal. This is very curious. It is difficult to know whether to believe the Minister or not. In the past, he has told us things that have not stood up. On Wednesday of last week, in response to questions from the Fine Gael spokesman on Finance, Deputy Michael Noonan, the Minister said the exact opposite. Deputy Noonan put it to the Minister that an incoming Government would seek to renegotiate a more pro-employment and fairer deficit reduction measure and a more favourable interest rate. In response to that question, the Minister indicated that this was not possible. He said, "The rate of interest and the total amount that must be secured over the programme period of three years are fixed by the agreement." He said the stability mechanism was "locked in".
Arising from the response given by the Minister for Finance in the DÃ¡il, in Brussels yesterday and as quoted in today's Irish Independent, why has the Minister performed such a U-turn in respect of this critical matter? Does the Taoiseach consider him to have further undermined the last shreds of the Government's credibility by first denouncing those who called for a better bailout deal and then by stating that this now was his personal mission? Does the Taoiseach accept that it is possible to negotiate a better deal, including a reduced interest rate, in respect of the agreement on which he signed off a month ago?
It is important to recognise the developments that are taking place at a European level in this matter regarding a discussion on the context and content of the current policy. The Minister for Finance met his eurozone counterparts yesterday to discuss the size and scope of the European assistance mechanisms. This matter still is being considered by the euro group, which is at an early stage of its considerations. A number of options have been canvassed and one must ensure the European measures have credibility and stand behind all countries. The euro group is accelerating its work on a comprehensive package and has discussed different elements of this response at its meeting. I emphasise that the euro group is at the beginning of a broad discussion on the size, scope and details of the assistance measures. The interest rate charged to any country seeking assistance is only one element of the discussion. The interest rates charged to Ireland was determined some time ago by a common approach for any borrower. Accordingly, any changes to such rates cannot be negotiated for Ireland in isolation and must be seen in the wider context. Arrangements can only be changed by agreement by all member states.
However, in respect of one aspect of recent media comment, I reject any implication that the rates which were agreed under the European Union-International Monetary Fund programme are not manageable because as was stated when the programme was launched, the indicative rates are manageable. At the same time, I of course would welcome any developments that had the effect of lowering the rates for Ireland. The Minister for Finance yesterday outlined that important legislation is to go before the DÃ¡il that will effect a small reduction in the interest rate charged on the IMF element of the loan. This is a separate matter from the political discussions that took place yesterday.
The Bretton Woods Agreements (Amendment) Bill will enable Ireland to convey to the IMF its acceptance of an amendment to the articles of agreement of the IMF that was approved by the latter's board of governors in April 2008. When Ireland's quota is changed on foot of the IMF agreements of 2008, it will have the impact of reducing the interest rate by approximately 15 basis points, that is, from approximately 5.7% to approximately 5.55%. The amendments in this Bill are known as the proposed voice and participation and proposed investment authority amendments. Once ratified by the required voting thresholds, this will have the effect of marginally reducing the cost of Ireland's assistance from the IMF. The required voting thresholds are 85% of the voting power and three fifths of the members.
Two issues exist, in that specific legislation is being brought forward independent of ongoing discussions in Europe. On the IMF side of the equation, legislation will be introduced to the House this term that will have the effect of reducing by 15 basis points the interest on the loans from the IMF. Second, a broad-ranging discussion is taking place at euro group level under the presidency of Mr. Juncker, who is president of the euro group area's finance council. It now is considering whether to enlarge the scope or increase the size of the mechanism. As Members are aware, Ireland was the first entrant into this mechanism. When Greece came in, the mechanism was not in place and it received bilateral loans from all the countries that participated in helping that country with its problem. This is the context and content of the position as matters stand.
Were this not so serious, that response would be laughable because the Minister for Finance told the House, the nation, Europe and everyone else that we were locked into the system for three years, that it could not be changed and that it was impossible. However, he stated yesterday that his personal mission now is to get a better deal. It is difficult to believe what he says in this regard. The Taoiseach should understand that the truth is dawning on each worker in the country about the ineptitude of the deal that was negotiated between the Government and the IMF-EU. While the Minister for Transport, Deputy Dempsey, may nod his head if he wishes-----
-----each worker who now pays more income tax, more levies and more charges is paying for the consequences of the Government's ineptitude and the disastrous deal that was struck.
The central question I asked the Taoiseach was whether he now accepts it is possible to renegotiate this agreement and get a better deal for Ireland. I recognise the point made by the Minister for Finance that everyone must agree but my question is whether the Taoiseach accepts it is possible to get a better deal. I am sure that each Deputy's office is being contacted by hundreds of people stating they are between â¬20 and â¬100 per week worse off than was the case last year. The reason for this is that the truth now is dawning on people that the impact of this deal is affecting their pockets each week. I again ask the Taoiseach this question in the light of this U-turn by the Minister for Finance, who has followed those Members of the Opposition who have called for a better deal. Does the Taoiseach accept that given the political negotiations that can take place, it is possible to get a better deal on this interest rate, "Yes" or "No"?
The reason that taxes are being raised is because there is a gap between what the Government spends and what the Exchequer receives. Quite separate from there ever having been a banking crisis, Ireland has a serious public finance position it must address.
The continuing attempt to suggest that revenue raising is about paying for the banks or the IMF is a separate question altogether. The reason the Government is raising taxes is because Ireland's taxes were at 2002 levels before the last budget, while expenditure was at 2010 levels. This gap must be closed by reducing expenditure and increasing taxes and this is the reason for the increase in the latter.
As for this specific matter, Ireland had been funding its deficits on the financial markets until interest rates became too high in markets. This was as a result of the Greek crisis in April and the Deauville declaration, whereby speculation on the burning of senior bondholders meant that premium rates on financial markets increased to such an extent that Ireland came out of the market. The Government now has negotiated with the IMF and the European Union an agreement for the funding of this State over the next few years at the rates that are available to everyone else. The IMF rate available to us is what is available to everyone else. Moreover, the European Union rate was struck by the euro group council on the day when the Minister for Finance, Deputy Brian Lenihan, on behalf of the Government, confirmed its acceptance of the deal because Ireland was the first country to come in under the aforementioned new regime. These are the facts.
Since then, the euro group, which is the group of finance ministers for countries in which the euro currency operates, has been considering other wider and deeper measures. The group is deciding on what is the best way because what has been done to date has not brought to the currency the stability the European Central Bank and others would like to see clearly. Further work is to be done in this regard, as we are part of a global issue that has not yet been resolved. In the meantime, however, Ireland has secured for itself a sheltering from this turbulence to some extent because of the provision of a funding mechanism, through this financial package, from the European Union and the IMF. It has enabled us to draw up a four year plan that, as Members are aware, was agreed with the European Commission and that contains continuing policies that will be necessary to close the gap in Ireland's public finances between what is spent and what is earned as a country in respect of taxes. Moreover, we are receiving such funding at a rate that is far less than the rate we would be obliged to pay, were we seeking to fund our deficits in capital markets in the normal way.
This is the position and the simple point I make to the Deputy is that a change in the interest rates on the European Union's side of the equation or package can only happen if everyone agrees to such a development. This is only part of a wider discussion on bringing stability to the currency area generally. Second, in respect of the IMF part of the equation, legislation is to be introduced that will have the effect of reducing the rate of interest from that part of the loan by 15 basis points. These are the facts and this is the position.
There are now 437,079 people on the live register. The number of people on it in December was the highest end of year figure since records began and was the 19th successive month that the number of people on it was over 400,000. People who are fortunate enough to have a job are finding that their pay has been cut through the taxes that were introduced in the budget and the universal social charge. People who are paid weekly or fortnightly have already had that experience and those who are paid monthly will see the changes later in the month.
People who are out of work and on the lowest levels of social welfare are being asked to survive on even less. Families are being told that their VHI premia will increase, in some cases by as much as 43%. Many other families are struggling to pay mortgages and in some cases are facing repossession. While all of that is taking place the Government is preoccupied with its own survival. The Green Party announced it was withdrawing from Government and that we would have an election by the end of January but the situation seems to have changed.
A number of Ministers said they are not contesting the next election. A leadership issue is to be decided in Fianna FÃ¡il. We have a dysfunctional Government. Its dysfunctionality has been demonstrated clearly in the fact that when President Sarkozy last week publicly launched an assault on this country's rate of corporation tax, I saw no Minister or anybody in Government publicly responding. Nobody is minding the shop while Fianna FÃ¡il is trying to sort out its internal difficulties.
Last week I asked the Taoiseach a number of times to set out a clear timetable for the taking of the finance Bill and the dissolution of the DÃ¡il to give the people of the country an opportunity to decide who should be governing the country and get the fresh start and change the country needs. Can the Taoiseach tell us today what the timetable is or will he provide time in the House to debate the motion of no confidence in the Government tabled by the Labour Party?
I have no interest in playing politics as usual with Deputy Gilmore in regard to taking his confidence motion. He can take it in his own time. Everybody knows it will be defeated. We have work to do and are going to get on with it.
On the corporation tax rate, President Sarkozy's statement was responded to last Friday by the Minister of State with responsibility for European affairs, Deputy Dick Roche. In the consolidated common tax proposals, which are at the usual stage of preparation in the Commission, there is no suggestion of a reduction in the rates of corporation tax, rather, it is about consolidating the base. In the treaty protection negotiated by this and previous Governments where unanimity is required for changes in taxation we stated that would be the case. It is open for the Commission, which has the right of initiative, to introduce any proposal it wishes but President Barroso and Commissioner Rehn have confirmed that the proposals do not refer to corporation tax rates.
It is the first time in four months that Deputy Gilmore has raised the question of unemployment because for the four months he did not raise it unemployment reduced. There are 30,000 to fewer people out of work this month-----
-----than there were last August. The rate of increase, month on month and year on year, has been decreasing considerably and that is reflecting the stabilisation in the economy we are seeing as a result of the successful implementation of the budgetary policies being pursued.
The amount of revenue we forecast for 2010 came in not only on budget but was â¬700 million more than expected and spending was controlled as planned. No one is suggesting that we are through the woods yet but as a result of the Government's preparedness we have demonstrated the required political capacity to make adjustments of â¬15 billion, all of which were rejected and opposed by Deputy Gilmore and his party.
On when the finance Bill will be enacted or the DÃ¡il dissolved, the Deputy will of course be aware of and observe the constitutional proprieties. It is a matter which is the prerogative of the Taoiseach unless he or she loses a majority in the House. On the timetable involved, in our parliamentary schedule we set out an indicative timetable for the passing of the finance Bill, which will be passed one month sooner than it was last year. From that, the Deputy can take an indicative period beyond that when the dissolution of the DÃ¡il will take place and an election held. I hope that covers the questions.
The Taoiseach is living in a wonderland. First, the statement by President Sarkozy, with the greatest of respect to the Minister of State, Deputy Roche, required a more forceful response from the Government than it received.
At a minimum, it required that the Taoiseach pick up the telephone and contact him but he was too busy making other telephone calls to do the country's business.
As regards the Taoiseach's take on unemployment, I do not know whether he is aware that a lot of people are leaving the country because they cannot get work here. When the Taoiseach plays around with the figures and says the rate is lower than it was another month or whatever, he is not factoring in the number of young people, many with very good qualifications, who are giving up in despair at what the Taoiseach is doing to this country and are emigrating.
The reality is that people are out of work and are not able to get work and those who are in work are suffering a loss in their income. The Taoiseach needs to answer a question very soon. People all over the country want to know when he and his Government will get out of office. They keep asking me and I am sure they keep asking other members of the House when we will get rid of the Government.
The Taoiseach has given his party a secret ballot on his future as leader of the party and I wish him the best of luck. When will he give the people of the country a secret ballot to decide his and his Government's future as leaders of the country? From what I can see, the ploy since we returned after Christmas has been that the election which was supposed to have been called by the end of January has now become an election that will take place or be called before the end of March. The Minister, Deputy Dempsey, said today the election will take place in two or three months.
The date for the election is going from one month to the next and it is clear that the Taoiseach's strategy is to cling on to office for as long as possible in the hope that something turns up because his agenda is more about his party's survival and fortunes than the good of the country.
I did not hear the question but I will answer it anyway. The reason why the DÃ¡il is sitting is because there is serious business to be done in this parliamentary term. The finance Bill and pension legislation related to the budget needs to be passed. The Bretton Woods Agreements (Amendment) Bill will be taken tomorrow and will reduce the interest rate in the IMF agreement by 15 bases points. Other budget related legislation will be completed. We will do all of that one month sooner than last year.
The Deputy said President Sarkozy has a view on corporation tax. He is entitled to that view; it is one that has been expressed on many occasions. I heard it at many ECOFIN Council meetings down through the years. One of my predecessors, Deputy Quinn, would have heard it a few times. Our corporation tax regime is simple and transparent, unlike the complicated system of allowances and reliefs that apply in some other countries which dramatically reduce their effective tax rates. Our corporation tax arrangements are compliant with the EU code of conduct on harmful tax competition. Our corporation tax yield as a percentage of GDP - our total tax revenues - is higher than the EU average and higher than in France. Our corporation tax arrangements are one element of our overall strategy for winning into Ireland and Europe investment, business and jobs that could otherwise end up in competitor areas like Switzerland, Israel and Singapore and while that is good for Ireland, it is also good for Europe. Increasing the rate would likely lead to a drop in economic activity and thus a drop in revenues. It would, therefore, run counter to the whole effort of Ireland's recovery plan, endorsed by the European Union and reflecting the EU-ECB-IMF funding arrangements. The OECD studies confirm that increasing corporation taxes represent the most harmful tax adjustment in terms of impact on economic growth.
I made these points on behalf of Ireland in the presence of all Heads of State and Government at the last European Council meeting. I made our position very clear, consistent with the sentiments I have just expressed. While the initiative will be studied and examined and we will take part in the discussions, we have made our position clear with regard to the corporation tax rate issue. As I said, the European Commission has indicated that it intends to bring forward a proposal for a common consolidated corporation tax base later this year. Ireland and many other countries are opposed to such an initiative, which in any event would require unanimous approval. It is noteworthy that even in this context, the Commission stresses that adjustment or harmonisation of rates is not envisaged. The Government has consistently and resolutely defended Ireland's corporation tax rate, including most recently at the time of the EU-ECB-IMF funding negotiations, and we will continue to do so. This confirms the clarity of the policy of successive Irish Administrations on this matter. This is well understood and does not require another phone call from me.
In the context of the shadow boxing currently under way within the Fianna FÃ¡il Party, the Taoiseach said "We are in a fight and we need a fighter." Is it not a pity that the Taoiseach and his Government did not offer greater resistance and put up a fight when the IMF came knocking at our door? Today is another black day for the people of Ireland as the Government draws down â¬5.8 billion of IMF funding, this in the week following a drawdown of â¬5 billion from the European Union. The situation we are in means this money will go to zombie banks here and, in turn, help the major players in Europe avoid their responsibilities, given they were the real reckless lenders in this over several years. Frankly, the money will head straight back out of this country, leaving the taxpayers of Ireland in deeper and more serious debt.
Does the Taoiseach accept that what is unfolding today and what will continue for some time to come is as a direct result of the Government's disastrous banking policy and is indicative of a policy that has seen a manageable State deficit being merged with an unmanageable private banking debt?
Does he accept that the consequences of this are the impoverishment of the Irish people and the further collapse of our public services across the board?
In his response to me last week, the Taoiseach indicated, reluctantly in my view, -----
----- that his contacts with senior Anglo Irish Bank personnel were more intimate and more extensive than he had previously shared. I must ask him some straight and simple questions on that. First, why did it take a question from me in the course of Leaders' Questions - only the second opportunity open to us under Leaders' Questions as a Technical Group - for the Taoiseach to proffer the information that it was not only a golf outing with SeÃ¡n FitzPatrick and Fintan Drury, but that he was also meeting that evening with Gary McGann and Alan Gray, a director of the Central Bank and a member of the Irish Financial Services Regulatory Authority, whom the Taoiseach had appointed when Minister for Finance in January 2007? Why did the Taoiseach not offer that information previously? Why, up to the conclusion of the second question here -----
I wish to remain on track. Why did the Taoiseach not offer that information? He had every opportunity on questions put to him earlier and previously, yet he withheld that critical information and claimed, right up to the time I stood up, that it was an entirely social occasion. However, it transpires that there was an agenda to address in terms of budgetary measures and job creation initiatives -----
Let us cut to the chase and to the last of my questions and to a question that has not been posed. How appropriate was it in the opinion of the Taoiseach that a director of the Central Bank, appointed by the Taoiseach as a member of the regulatory authority, would be engaged in debate on matters fiscal and economic, job creations and budgetary issues etc. with three, either then or previous, senior directors of Anglo Irish Bank? In fairness to the former regulator, he has indicated that in his opinion such contact, socially or otherwise, would be wholly inappropriate. What is the Taoiseach's view?
I will answer the questions directly, because I reject with contempt the usual effort to make something out of nothing. On banking policy, the Deputy suggests we should not take the â¬5.8 billion that has been obtained. Can the Deputy suggest an alternative source for the â¬5.8 billion?
I do not accept the continuing rhetoric from the Opposition feeding into the negativity industry in this country about this economy. We had a gross national product last year of â¬160 billion and we have 1.8 million people at work. We had major investment from Intel last Friday which will secure one of the most successful plants in the world for another 20 years. This plant has already contributed much to the local economy and the country over the previous 20 years. We have continuing efforts to increase exports and the budgetary policy we have implemented has stabilised the economy. Had we listened to Sinn FÃ©in's economic policy, we would be bankrupt long ago. Sinn FÃ©in talks about making the adjustment of â¬15 billion by increasing taxes. It would make 80% of the adjustment through taxes -----
-----and 20% by cuts in expenditure. I am answering the Deputy's questions. I am coming to the next question on which the Deputy wants a response. There is no relevance whatever to me having a dinner with regard to what I do in the course of my duties. If the Deputy has any suggestion or evidence to the contrary, he should not abuse the privilege of this House. Let him go outside and say it and I will see him in court. It is as simple as that. I am sick and tired of listening to the kind of rhetoric coming from the Deputy's quarter about truthfulness, honesty, straight dealing and recognising what is right and wrong. I know what is right and what is wrong. I assure the Deputy that in the course of the discharge of my public duties, I have nothing whatever about which to worry. The Deputy can paint whatever pictures he likes. He has been pretty good at it for a long time.
I again ask the Taoiseach why he did not provide the information that he then offered when the third of Leaders' Questions was put to him last Wednesday? What is his view in regard to the suitability or appropriateness of a director of the Central Bank and a member of IFSRA sitting down with three senior directors of Anglo Irish Bank to discuss all of the matters that have now been acknowledged to have been discussed? Does the Taoiseach disagree with the former regulator who said that would be inappropriate? What is the situation on the Taoiseach's dinner with the board of Anglo Irish Bank in April 2008 and Mr. David Drumm's claim that he spent at least an hour briefing him on the issues in regard to Anglo Irish Bank? I must ask the question of the Taoiseach: Is Mr. Drumm lying or is it, to use the phrase the Taoiseach trundles out when it suits the moment, that the Taoiseach cannot recall all of the details?
I have a final question. It has been reported that Mr. Drumm has secured a deal with Anglo Irish Bank which will block the Garda SÃochÃ¡na gaining access to confidential reports which are to be revealed in the context of Mr. Drumm's court case in the US?
Is there any basis to these reports? Is there any fear that Mr. Drumm will evade full scrutiny in this jurisdiction and prosecution if same be appropriate because of this? Did the Minister for Finance or anyone approve such an arrangement as inferred from the reports before us?
I will answer the question again for the Deputy. I have made it clear that there is no question of any inappropriate behaviour on my behalf in regard to my having a meal following a game of golf in the autumn. It is as simple as that.
That is what was being done. I do not have any qualms about it. I have met business people in many contexts. If it is being suggested that something untoward was afoot or that something wrong was being done, it was not. There is not a shred of evidence to suggest there was. Let us, as the Deputy would say, cut to the chase. If the Deputy is suggesting I did anything wrong, then he should say what it is and I will tell him if it is true or not. All the Deputy is doing is painting a picture and suggesting there is something wrong with it.
I do not know if Deputy Ã CaolÃ¡in came over to invite me to go into a wedding party if I would go given the way in which he is now looking at me. I took the Deputy at face value that evening. I do not know either what was on Deputy Ã CaolÃ¡in's menu.
On the other matter regarding Mr. Drumm, papers have been sent to the DPP. The DPP will independently assess that evidence to see what charges, if any, will be brought against what persons. I and the people of Ireland would like to see that process dealt with as quickly as possible so that the due process of law can take place and that those who may have issues to account for are brought before the courts as quickly as possible. I do not wish to say anything to prejudice that independent process.
I am not involved in any of what has been suggested by Mr. Drumm in terms of arranging for more funds for Anglo Irish Bank. No such direction was given by me at any time. The facts show that. Despite that the facts show that and that this is outlined in committee reports of this House, following evidence from the Secretary General of the Department of Finance and others, the Deputy continues to come into this House and throw around this snuff because-----
-----and suggests we have something to answer for. I want to make it clear that this is part of the continuing misrepresentation of the motivation of this Government in respect of everything it has been seeking to do to ensure the survival of this country and that we have a financial system fit for purpose, having dealt with everything that was going on. Everything we did was for the public good. Every decision was on that basis. The Deputy can throw around all he likes the type of stuff he is at. It will get an audience somewhere. I have nothing to worry about because I did not do anything wrong. As far as Mr. Drumm is concerned, if Deputy Ã CaolÃ¡in wants to take-----
If the word of that person is of greater worth to him than is that of the Taoiseach of Ireland, then that is the Deputy's business. As a Republican, I believe in everyone being equal before the law. I do not believe in taking the law into my own hands. I stand over everything I have done in public office and I have nothing to worry about.