Dáil debates

Thursday, 11 October 2012

Fiscal Responsibility Bill 2012: Second Stage (Resumed)

 

Question again proposed: "That the Bill be now read a Second Time."

11:55 am

Photo of Pat BreenPat Breen (Clare, Fine Gael)
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I welcome the opportunity to contribute to this debate. It is interesting to look at the Opposition benches. Deputy Finian McGrath stands alone; there are no Fianna Fáil or Sinn Féin representatives.

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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I am all right.

Photo of Pat BreenPat Breen (Clare, Fine Gael)
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They are running for cover.

This Bill ensures that the debt rules contained in Articles 3 and 4 of the Treaty on Stability in the Economic and Monetary Union are given effect and that the Irish Fiscal Advisory Council is established on a statutory basis. As the Minister for Finance, Deputy Noonan, stated in the House on Tuesday last, when he moved Second Stage of this Bill: "This Bíll will allow us to ratify the stability treaty, in line with our fellow euro area member states, which is in the interests of this country and the euro area ". The Minister is continuing his journey all over the the European circuit, pressing the case for Ireland. Today, tomorrow and at the weekend he is at a World Bank annual general meeting in Japan. He is encouraging his euro colleagues to firm up details of the decisions which were taken last June at the EU summit to split Ireland's banking and sovereign debt. The President of the European Parliament, Martin Schulz, addressed a packed House last week. The ECB President, the EU Commission and the President of the European Council, Hermann von Rompuy, have all stood by the agreement of 29 June, which in itself is significant. Much has been said about the statement by the "gang of three" Finance Ministers that the ESM will not apply to legacy bank debts. I suspect, however, those comments are just their opening negotiating positions. We all know from our experience in Europe that unanimous agreement is very often achieved in cases where countries started out being diametrically opposed and I believe that will happen on this occasion as well. I have every confidence that the Minister for Finance and the Taoiseach will keep the EU 27 to the deal agreed in June.

The legacy of the collapse of Anglo Irish Bank and the issue of the promissory note continue to pose challenges for this country. A further payment of €3 billion is due in March. Recent comments by the Minister, Deputy Noonan, show he is anxious to have at least an indication before December's budget from the EU of its intent in dealinq with the Anglo Irish Bank promissory note so that he has all the information he needs when he sits down to frame the budget. However, even if there is a breakthrough before then there is no getting away from the fact that this budget will be the most challenging in our history. There is no easy way to plug a deficit of €3.5 billion.

I have argued in the past, as have many other Deputies on this side of the House, that we should be budgeting for a number of years in advance. That would do away with much of the kite-flying that has become a norm at this time of the year. The domino effect of the collapse of our economy and the onslaught of the global recession, which have created EU-wide uncertainty, have reinforced the need for fiscal rectitude and proper planning. At the start of the recession Europe had been struggling to get to grips with this crisis. Its response was to establish a treaty on stability and establish the European Stability Mechanism, which have steadied the ship. Ireland had already signed up to tighter fiscal rules in in the Maastricht Treaty in 1992 and the Stability and Growth Pact in 1997. It is clear these rules failed, however, because countries did not adhere to them. As a result, ordinary people are now paying a very high price.

The austerity measures forced on us because of our bailout arrangement have been painful and have had a considerable impact on our people. Notwithstanding, a glimmer of hope is emerging. The latest quarterly report from the ESRI shows that output grew last year for the first time in four years, expanding by 1.4% in GDP terms. The IMF's latest outlook paints a similar picture. I wish the Minister well in his deliberations in Japan where he will meet all the important players. He has a close political relationship with Christine Lagarde. I believe he will come home well equipped to prepare the budget and consider the outlook for the future.

The IMF report states that the Irish economy will grow by 0.4% this year and by another 1.4% next year, which is the best outlook for any EU country in a bailout. Take the Greek economy, for example, which is predicted to slump by 6%, or the Portuguese economy, predicted to slow by 3%, with similar predictions of slowdowns in ltaly and Spain by 2.3% and 1.5%, respectively. The same IMF outlook predicts there will be a modest pick-up in the global economy next year, with the emerging countries growing at four times the rate of the so called advanced economies. The saying is that a rising tide lifts all boats and this is very true of the global economy. While green shoots are beginning to emerge in this country, without a global lift in the economic tide recovery here will be held back. That is why it is extremely important for Europe to get its act together. Both the ESRI and IMF concur that Ireland's recovery will be limited if the global situation does not change. The IMF has warned European policy makers they must deepen financial and fiscal ties within the eurozone given that its debt crisis is the main threat to global financial stability. José Viñals, the director of the IMF stated: "The choice today is between making the necessary but tough policy and political decisions, or delaying them - once more - in the false hope that time is on our side."

Given that Irish people have already endured four years of austerity, time is of the essence. If, as already stated, Ireland is to move ahead, then a strong eurozone will be required. It is not, as many of those on the Opposition benches have stated, all doom and gloom in the context of Ireland's future. Our international credibility is at an all-time high and there is international recognition for our Government's work in restoring the economy. I am Chairman of the Joint Committee on Foreign Affairs and Trade and I am obliged to travel as part of my job. I meet politicians from various countries and they indicate their respect for Ireland in the context of what has been done here in the past 12 to 18 months. They also respect the confidence the Government has engendered. One need only consider the work the Government has been doing in order to restore the economy. The Taoiseach's photograph appeared on the front cover of Timemagazine last week under the headline "The Celtic Comeback". This is a testament to the positive image Ireland is attracting globally.

12:05 pm

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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Where is Deputy Mattie McGrath when we need him?

Photo of Pat BreenPat Breen (Clare, Fine Gael)
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Deputy Finian McGrath should read the recent article in Fortune magazine in which are listed "4 reasons why Ireland's roar will return". The commentary provided in this article is extremely positive with regard to Ireland's future and its author pointed out that we are better positioned than most other European countries to recover from the crisis. The article also cites the fact that we have one of the most competitive labour markets in Europe. We have a young and educated workforce which, for example, is the main reason why Ireland attracts so much foreign direct investment. Hewlett-Packard chose Ireland because it needed highly skilled workers who also possess good language skills. This week, a number of announcements have been made in respect of the creation of jobs. Deputy Clare Daly indicated that the position with regard to jobs in this country has gone from bad to worse. I am of the opinion - the experts back me up on this - that the unemployment rate has stabilised. The news in recent days that Kerry Group and Paddy Power will be creating 900 and 600 jobs, respectively, is a testament to the work the Government is doing. The article in Fortune magazine to which I refer points out that, unlike Greece, Ireland's economy is overwhelmingly made up of exports. In that context, exports account for 80% of this country's GDP. This compares to a figure of 7.2% for Greece. The article also cites our competitive corporation tax rate as the main driver in respect of foreign direct investment.


I am firmly of the view that Ireland's roar will return. When it does, we must ensure that a more robust financial regulatory system capable of coping with future recessions will be in place across the eurozone. I support the provisions in the Bill and I welcome the placement of the Irish Fiscal Advisory Council on a statutory basis. Having a good fiscal advisory council which provides an independent assessment of the Government's budgetary plans can play a pivotal role in achieving disciplined fiscal performance. Tightening our fiscal rules and ensuring that eurozone countries maintain budgetary discipline is the next step in enhancing confidence in the eurozone. This Bill is extremely important. The strong vote by the Irish people in favour of the stability treaty was a clear signal that they want stability. Strengthening the fiscal stability framework within the eurozone is essential if we are to return to growth. The Bill is a key part of that framework.

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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I welcome the opportunity to contribute to the hugely important debate relating to the Fiscal Responsibility Bill 2012. The duty of an Independent Deputy is at all times to challenge, question and put forward alternatives in the context of dealing with the current major economic crisis. Independent Members have done this on many occasions in the Chamber. Sadly, however, we have often been ignored by the Government, which is not prepared to listen to different options in order to resolve the economic mess in which we find ourselves.

This debate is about fiscal responsibility and, above all, the future of this country, which is currently experiencing mass unemployment and immigration. It also relates to the cuts with which citizens, those with disabilities and the elderly are being obliged to deal. I accept that we must manage our finances in a sensible and practical manner. We must get our act together before it is too late. In the lead up to the budget, there will be a need for a fair and common-sense approach to be taken. That is why we must focus on fiscal responsibility during this debate.

The Minister for Finance and the Government must wise up to the fact that real progress will not be made without a deal on our debt. There is massive support on the Opposition benches for such a deal. It will not be possible to foster economic growth - the Government will be obliged to slash services further - if we do not obtain a deal on our debt from Europe. I accept that the Government is pushing an agenda in this regard. It must, however, be more robust in its efforts because otherwise we will go nowhere fast. I am not trying to score political points here, I am merely reflecting the economic reality about which ordinary people are informing me. Independent commentators nationally and internationally have indicated that we must deal with the elephant in the room, namely, our debt. If we do achieve a deal on our debt, we will then be in a position to extricate ourselves from the current mess by instigating development and growth strategies.

It is not fair for those on the Government benches to have a lash at Opposition Deputies in respect of this issue, particularly in light of the latter's support for the efforts being made to achieve a deal on debt. Of course people welcome the announcements in the past couple of days by Kerry Group and Paddy Power in respect of job creation. It is fantastic that these jobs are going to be created and I welcome the fact that some of them are quite different from the norm. This reflects the fact that people are thinking outside the box in the context of the creation of employment. Projects such as those announced by Kerry Group and Paddy Power should be warmly welcomed, particularly in the context of the impact they will have with regard to economic development. We must face up to the reality these jobs, and many like them, will be taken up by highly-skilled individuals. A large number of those who comprise the workforce are highly educated but we must ensure the needs of those in other sections of the population are taken into account.

The Fiscal Responsibility Bill 2012 provides a statutory basis for a range of fiscal policy and expenditure management reforms. It makes specific provision to the effect that the budgetary and debt rules contained in Article 3 and Article 4 of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union take effect in national law. The Bill will also establish the Irish Fiscal Advisory Council, IFAC, on a statutory basis and sets out its functions. The debate in which we are engaging is, therefore, also about these matters and does not merely relate to balancing the books.

When people come forward with constructive proposals, we must take them seriously. We must also listen to those who challenge the prevailing view. I am amazed that there was no reaction from the Government or society in general to the comments made recently by Professor Joseph Stiglitz, the Nobel economics laureate. Professor Stiglitz is quoted as stating that the European solution to the euro crisis is wrong. He challenged both the Government and Irish economists in respect of this matter and indicated that, in historical terms, the austerity cure has almost never worked. I do not get why this cure is still being administered, particularly if it has almost never been successful in the past. Professor Stiglitz informed the International Bar Association, at the opening of its conference in Dublin recently, governments have misdiagnosed what went wrong in the eurozone and are also advocating the wrong solution to the crisis. He further stated that austerity was "tried in 1929, the IMF tried it in Asia and Latin America. Each time it succeeded in turning downturns into recessions, recessions into depressions."

I am not a whizz kid when it comes to economic forecasts etc. When, however, a Nobel economics laureate such as Professor Stiglitz makes a statement, we need to examine the points he is making. The gurus in the Departments of Finance and the Taoiseach must consider the import of what Professor Stiglitz has had to say in respect of Ireland. Professor Stiglitz has also pointed out that Europe’s debt-to-GDP ratio is less than that of the US and he noted that the US can borrow at almost negative interest rates. He highlights the point that the fundamental problem in Europe is that the euro was a flawed currency arrangement that did not meet the conditions needed to establish a common currency and that a structural change of the euro arrangement is needed. Is that a common-sense proposal? I do not know. However, I do know that we must respond in respect of what Professor Stiglitz has said.

In his address to the International Bar Association, Professor Stiglitz also indicated that the reform of banking systems will be necessary. He pointed out that, at present, these systems are as strong as the governments of the countries that guaranteed them. This means that where a government is weak, confidence ebbs and money flows out of the banks, thereby reducing their capacity to lend to businesses. Professor Stiglitz stated that the latter, in turn, leads to the further weakening of economies.

I refer to the classic example which is well known to the Minister of State, Deputy McEntee, and Deputy Buttimer and that is the issue of small business. We have reduced the banks' capacity to lend to businesses.


I refer to Joseph Stiglitz who said that Europe was likely to face turmoil for some time to come. He said that another issue of concern was the growth of inequality in the major economies which has been exacerbated by the crisis. He further stated that in 2010 in the United States, for example, 93% of growth went to the top 1% of the population and that economic inequality leads to political inequality, including inequality in access to justice. He links the economic debate with the broader societal debate about justice and the economy.


Many people associate justice with citizens' rights but we need to think of economic rights. There is no point in the Government having a nice, happy-clappy debate about the children's referendum when it is slashing services to children. I note an element of hypocrisy and this policy needs to be challenged.


We all accept the need for fiscal responsibility and that there needs to be good governance of budgets. In my view, anyone who does not agree should not be in public life or politics. People have to pay their taxes. None of us likes voting for taxes or paying them. That includes all Members of the Oireachtas. There is no point in whingeing to the media. Some members of the Independent group are talking about loyalty. I will not be loyal to anyone who does not pay his taxes and is going around the country. That is my political position; it is not a personal position. It is business, it is politics. I challenge anyone on that issue.


To return to the subject of small businesses, the retail sector supports 250,000 jobs. The Government needs to realise that these small businesses are a very important part of the economy. I remind the Government of what it promised in the programme for Government:

We will reduce the cost of Government imposed red-tape on business, in part by streamlining regulatory enforcement activities out of a merger and rationalisation of existing structures.
For example, an employer who employs fewer than ten workers in a local community is often overlooked. However, such employers must be taken seriously when it is noted that together they employ 250,000 workers. We all welcome the big announcements such as from Kerry Group and Paddy Power but as an Independent Deputy I want to support the small businesses employing three to five or six people because it is a very important sector.


I refer to the costs associated with running a local shop. The annual cost of permits and licences is €5,436 a year; the time involved in ensuring compliance and completing surveys averages 50 hours; management time in the retail sector averages €24 an hour; the cost of this compliance is estimated at €1,200 per retailer; the cost of compliance for the average retailer is €6,636 a year; an ordinary small retailer can be subject to up to 18 separate licences over 17 separate inspections every year. We need to listen to the people on the ground, particularly those retailers who support 250,000 jobs.


I suggest some ideas for raising a few bob for the State. I refer to the situation in the cigarette trade. The highest individual cost to the State from blackmarket trading comes from tobacco smuggling. The illicit tobacco trade accounts for €526 million of lost Exchequer revenue annually and €500 million in lost retail sales to an industry where difficult trading conditions are putting upwards of 6,000 jobs at risk. We are losing taxes to the value of €526 million and the small business sector is losing revenue. As of 9 July 2012, the total number of cigarettes seized by Revenue this year stood at 66 million with a retail value of €28 million. That is a lot of money and these statistics are about the guys who got caught. Most of them get through the system and onto the streets.


There is a health dimension to this trade. The illicit cigarette trade also undermines the State policy of reducing smoking prevalence by means of high pricing. Whereas legitimate retailers sell cigarettes at €9 a pack, criminals can afford to sell them for as little as €3. Some of the criminal gangs in the Dublin area are directly involved in that trade because they see there is more money to be made from cigarette smuggling and it gives them less grief than dealing in drugs. One study found that the lead content in fake Marlboro Red cigarettes was 17 times higher than is found in the genuine product. This means that smoking 20 counterfeit cigarettes is the equivalent of smoking 340 genuine cigarettes. This has been described as a potential health time bomb by medical experts. I suggest revenue could be raised for the State by dealing with this illicit trade. Some of my colleagues opposite were having a go at the Opposition and saying we never bring forward proposals. Here is one proposal that would raise €526 million and another that would raise €500 million.


Deputy Noel Harrington had a go at some of the Opposition parties and members of the Independent group about the household charge. The bottom line is that people do not want a tax on family homes. I am one of those people. I do not agree with a tax on a home. I have no problem about taxing property and wealth but I disagree fundamentally with a tax on the family home. That is my position made clear. I voted against the legislation. When the Government takes a lash at members of the Technical Group and Independent Members, I remind the Members opposite of what the Taoiseach, Deputy Enda Kenny, said in the Dáil on 2 February 1994:

It is morally unjust and unfair to tax a person's home, and by so doing grind him into the ground. Indeed in cases it could probably be unconstitutional. It reminds me of a vampire tax in that it drives a stake through the heart of home ownership, through enthusiasm and initiative, and sucks the life blood of people who want to own their own home and better their position. If the Government fails to appreciate the passion with which people will defend their rights to own their home and have it looking as well as it should, it is making a serious mistake.
I will not take lectures from anyone on that side of the House about that issue. I have no problem with the introduction of taxes but let the hypocrisy and the lectures stop. I recently asked a parliamentary question of the Minister for Finance about the amount of extra revenue that could be raised by increasing income tax on couples earning €120,000 if there were a 5% tax increase. The reply stated that the figure would be €214 million with €176 million of that yield derived solely from applying the change to all married couples.


I take the point about the issue of corporation tax that people do not wish to damage foreign direct investment. However, I wonder whether it has been independently assessed to see if this is the reality. I asked a parliamentary question of the Minister for Finance about the amount of extra revenue that would be generated if the corporation tax was increased from 12% to 15%. I asked the question to find out how many extra bucks could be collected to beef up the economy and to stop the cutting of home help hours or slashing services to the disabled.

There was a large public meeting this week in Ballymun, where representatives of St. Michael's House, which delivers services for people with intellectual disabilities throughout the city, expressed their concerns regarding proposed cuts. According to the Minister's own figures, an increase in the corporation tax rate from 12.5% to 15% would raise in the region of €675 million per annum. Government Members often complain that we on this side of the House never offer constructive revenue-raising proposals. I have offered several suggestions today in regard to tobacco duty, corporation tax and other taxation measures, including a proposal regarding couples earning €120,000 per year. We all accept the need for fiscal responsibility. As such, there is an obligation on those of us who object to Government policy to offer imaginative solutions. That is what I have sought to do today. I do not claim to have all the solutions, but in the context of a required saving of €3.5 billion in the forthcoming budget, some of the options I have outlined today are deserving of consideration by the Minister.

Following the endorsement of the fiscal compact in the referendum on 13 May 2012, the Fiscal Responsibility Bill 2012 was published on 18 July 2012. Formal ratification of the stability treaty will only take place once the Bill has been enacted. The Government considers it critical in a European context that the State is in a position to meet its treaty obligations well before the deadline of the end of 2012. The purpose of the Bill is to provide for the implementation of Articles 3 and 4 of the fiscal compact in domestic law. Article 3 requires provision in national law for the budgetary rules contained therein, while Article 4 sets out the debt rules to which member states must adhere. As a consequence of the acceptance by the electorate of the referendum proposal last May, the legislative provisions required by the treaty are consistent with the Constitution. Section 2 of the Bill requires the Government to comply with the budgetary and debt rules contained in the treaty. That is the core issue in this debate.

In considering its obligations in the area of fiscal responsibility, I urge the Government to listen to ordinary people who are functioning in the real economy. Our problems require real-world solutions and commonsensical proposals if we are to bring this great country of ours out of its economic nightmare.

12:25 pm

Photo of Jerry ButtimerJerry Buttimer (Cork South Central, Fine Gael)
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I propose to share time with Deputy Damien English.

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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That is agreed.

Photo of Jerry ButtimerJerry Buttimer (Cork South Central, Fine Gael)
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As I listened to Deputy Finian McGrath's contribution, it seemed to me that he was talking about a different world from the one in which we live. The Government is charged not only with governing this State but with ensuring we have a country to hand on to the younger generation, including the young students in the Visitors Gallery today. This Bill is about fiscal responsibility, about the obligation to manage the public purse in a prudent manner on behalf of the people.


It is interesting to consider that some of the loudest protests to Government policy come from Members opposite whose colleagues are in government in the North. The latter must manage a block grant from the British Government, which involves making difficult choices regarding expenditure, decisions which their party colleagues in this Parliament condemn the Government for taking. I welcome Deputy Finian McGrath's proposals on taxation. I am pleased to hear that he has paid the household charge and that he is committed to supporting the Government in its endeavours to reconstruct our country. When I read in this morning's newspapers, however, that Fianna Fáil is opposed to a property tax, I could only laugh with incredulity. This is the party which signed us up to the agreement with the troika and committed to the introduction of this very tax in its revised programme for Government and in the national recovery plan. Its hypocrisy knows no bounds.


This Bill is about responsibility - responsibility in how the Government manages budgets and delivers public services for citizens, as well as its responsibility as a member of the eurozone. Deputy Peter Mathews is absolutely correct in that it is also, by definition, about financial regulation. We do not have to cast our minds back far to see that a lack of regulation in the financial services sector and the irresponsible activity it enabled played a large part in getting us to where we are today. The Minister for Finance, Deputy Michael Noonan, has described the rules set out in the legislation as sensible and prudent and as representing a reasonable and responsible approach to budgeting. That is what we must instil in young people and in all our citizens. One cannot spend money one does not have. One cannot live on tick, on the never-never, ad infinitum. The forthcoming budgetary process will be difficult. The requirement to take €3.5 billion out of our economy deserves thoughtful and constructive debate in this House. The overriding principles must be fairness in the provision of services and the obligation to instil growth and promote employment. Some of the Members opposite baffle me with their voodoo economics. Instead of constructive proposals, they simply want to throw money everywhere. We spend €13.8 billion on the health service annually. The tactic of simply throwing money at a problem has not worked in the past and is not an option now.


The electorate endorsed the provisions contained in this Bill in the referendum at the beginning of the summer. This Government was given a mandate to govern, make decisions, create employment, manage our economy, reform the institutions of the State and get people back to work. No other Government since the foundation of the State has faced a challenge of this scale. Apart from managing the economic crisis, we must restore confidence in the country and market it to the world as a super place to invest, with young, bright and educated workers who deserve the opportunity in make their living here. That requires action and leadership from the Government. The Taoiseach has repeatedly referred to his aim of making Ireland the best small country in which to do business by 2016. That is no small challenge. It will require a collaborative approach and a commitment from parties on both sides of the House. If we are to rebuild our country, we must move away from the politics of protest and condemnation which are in themselves a potentially effective political weapon.


What is required instead are manageable, deliverable and tangible solutions. Perhaps Joe Duffy will consider hosting a solution day on his radio programme which would give ordinary people an opportunity to offer constructive suggestions and solutions. Ireland is a small, open economy. We have had great news on the jobs front this week but also, regrettably, job losses. I agree with the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, that we should avoid kite-flying in the run-up to the budget. As well as seeking to instil confidence, we should also be careful not to frighten people. We must all be careful of the language we use, whether from the Opposition or Government benches. Likewise, members of the fourth estate must be conscious of the impact of their commentary. People throughout the country are under pressure - tá siad faoi bhrú.


A great deal of debate is focused on the need for a deal on our bank debt. The Bill before us is one of many pan-European measures being taken to deal with the financial difficulties facing Governments across Europe.

It provides a framework for the prudent management of the economies of the eurozone. Deputy Shane Ross who has just joined us will be aware that some European countries abandoned prudent and responsible fiscal management. We must all live up to our responsibilities in this regard. The Government, in particular the Taoiseach and the Minister for Finance, has been working closely with its European partners to secure outcomes that will benefit the people. The onus is on the European Union to ensure these outcomes are achieved. EU Finance Ministers and the President of the European Central Bank, Mr. Mario Draghi, are working to secure a deal on Irish banking debt. Mr. Draghi should note that Ireland, the poster boy for reconstructing an economy and the best student in the class, must be offered a stimulus by way of a successful renegotiation of our banking debt. The issues involved are complex, however, and negotiations are proceeding slowly. Discussions must continue until the negotiations bear dividends.

The same people who argued that the Government would not secure a deal on the interest rate applied to our debts have criticised the current efforts to secure a deal on bank debt. As the negotiations proceed, we must not lose sight of the bigger picture and the efforts being made behind the scenes to secure a deal. People have co-operated in the reconstruction of the country. For this reason, we need to create confidence and share the burden. As the budget approaches, we must debate all the issues in the House, but we must also highlight improvements in investor sentiment, the reduction in bond yields and the successful return of the National Treasury Management Agency to the debt market.

The most important reason for securing a deal on bank debt is to deliver for families. President Obama and his challenger, Governor Mitt Romney, constantly refer to the middle class in the US election campaign. Never before has the term "middle Ireland" been so apt. This section of the population is being squeezed, targeted and asked to pay, as I observe daily when I meet people in my clinics, while canvassing, in the GAA club and restaurants and shops as I walk around my constituency and other parts of Cork city. Whereas incomes have declined, costs have not decreased in many areas. Last week Allied Irish Banks announced an increase in its variable interest rate on mortgages. The announcement followed a previous increase in the bank's mortgage rate and similar increases by Bank of Ireland. It is mind-boggling that Bank of Ireland requires current account holders who wish to avoid paying bank charges to maintain €3,000 in their accounts. Do bank chief executives know people who have €3,000 in their current account on certain days of the month? This daft requirement is morally wrong and should be changed.

The issue of energy prices must also be tackled. I listened recently to a radio interview with the Commissioner for Energy Regulation in which he provided an articulate justification for allowing Bord Gáis and Electric Ireland to impose prices increases. This year gas and electricity prices have increased by 8.5% and 4.8%, respectively, while the public service obligation charge has increased by €9.67 for all users. These increases have a major effect on the financial circumstances of households. Deputies can make a stand on this issue.

I support the action being taken on the issue of private health insurance by the Minister for Health, Deputy James Reilly. Insurance premiums have increased repeatedly in recent years, with some providers having increased prices three times in the past two years. Middle Ireland has been hit again and we see the fallout in terms of increased pressure on public health services as people opt out of private health insurance or change their insurance cover or plan. A regular health insurance plan which cost €665 in 2008 now costs €1,240, an increase of 86% in a five year period during which incomes declined. We are penalising again those who are responsible and compliant. Families face many day-to-day pressures. In terms of the impact on ordinary families, it is crucial that the efforts being made by the Taoiseach and the Minister for Finance to secure a deal on bank debt are successful.

This is an important Bill. The Government is being prudent in the measures it is adopting to rebuild the economy and look after the national interest. It must also recognise the role being played by middle Ireland and the need to provide further assistance as part of our efforts to manage the economy. It is important that the budget is fair and balanced and pro-jobs and pro-growth. This week different growth projections have been provided by the IMF, the ESRI, the Department of Finance and IBEC. Which of these projections is correct? How is it possible to plan for growth when there are so many competing figures?

12:35 pm

Photo of Shane RossShane Ross (Dublin South, Independent)
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I concur with much of the latter part of Deputy Jerry Buttimer's contribution. I am not trying to be mischievous in welcoming comments such as those made by the Deputy, especially when they come from the Government benches. When the Deputy addresses the issue of middle Ireland, he is reflecting a growing body of opinion that the so-called coping classes, those who are somehow managing to make ends meet in the current difficulties, are finding that they may no longer be able to cope. The Fiscal Responsibility Bill is aptly and cleverly named, but it is, unfortunately, a reflection of the groupthink that has come to take middle Ireland for granted. While "fiscal responsibility" is a magnificent phrase, the Bill should be renamed, depending on which way one views it. It is, however, another part of the straitjacket and lack of flexibility to which the Government agreed in running the economy.

It is part of the area which Deputy Buttimer just addressed when he spoke about last week's bank interest rate rises and recent rises in health insurance premiums. What I find difficult about this agenda is that when the Government is asked about these rises, as happened on Leaders’ Question the other day, both of which are hitting the coping classes in middle Ireland very badly, it responds it is not its baby. The VHI is a State-owned and run organisation. The Government makes great play of the fact that AIB and Bank of Ireland are the pillar banks and in which it puts great store in developing its banking policy. Not only that, the Government owns 99% of AIB. When I asked the Tánaiste last week what he would do about AIB’s interest rate rise on the standard variable rate, which is unfair and unjust to those involved, he said as AIB is a commercial organisation it is not up to the Government to do anything about it. He also added that he thought I would be the last person who would suggest the State intervene in a commercial organisation.

He is wrong. I believe the Government should be interfering on a microbasis everyday with what is happening in AIB and other State-owned banks. For anyone on the Government benches to stand back and claim it is not the Government’s business is conniving in a crucifixion. It is up to the Government to intervene when State banks are behaving in an unacceptable way, leaving middle class people without any money at the end of the week. One cannot take the view these are somehow independent commercial bodies anymore and whatever they do has nothing to do with oneself. The view must be taken that there are grounds for interference in the activities in State-owned banks, which are making people’s lives impossible, if we own them or have been given guardianship of them.

The Fiscal Responsibility Bill is part of that austerity agenda which gives the Government the chance to cop out. Whereas it has the laudable objective in balancing the books, it again gives the Government the opportunity to say this is not its responsibility because it implements Articles 3 and 4 of the fiscal treaty. That is a terribly convenient stance to take. While in some ways it is difficult for the Government to sacrifice its independence - which it has done anyway - it makes it easier to point the finger overseas and claim they made us do it. It is a bit like Deputy Buttimer making laudable noises against the Bill, as well as making some courageous reservations about Government policy, but saying because he is under the party Whip he must vote for it.

The measures referred to by Deputy Buttimer are not the only ones that will put many middle class people over the edge. Hitting child benefit will actually hit the same people, many in negative equity, which the bank interest rates rise will hit. It is part of the fiscal responsibility agenda. The worst hit, however, about which a big head of steam is growing and which is dictated to a large extent by Europe, is the idea of property tax. I cannot understand how the Government has not seen that those whose mortgages are going up as a result of last week’s rise in interest rates are exactly the same people it will ask to pay property tax in December. They will be exactly the same properties on which they will be paying increased mortgages, say, €1,000 extra a month on a €300,000 loan, along with a fair amount in property tax. They simply will not be able to pay it. Fiscal responsibility, austerity and all the laudable objectives in trying to balance the books have their limitations. One cannot take child benefit away, impose a property tax, put people in straitjackets with their mortgages while introducing the Fiscal Responsibility Bill. People will be put over the edge by this type of measure.

The legislation was born out of the fiscal treaty referendum. That was a battle the Government fought and won and it is now imperative for the Government to ensure this legislation gets through. To some extent, however, this measure defines our relationship with Europe. That relationship is far from being the satisfactory one the Government always puts forward in the House but a very unhappy one. Our relationship with Europe is a happy one for Germany, Finland, the Netherlands, Austria and the other powerful nations because our compliance with their wishes could not be more impeccable. It is not a happy one for us. We satisfactorily sit in the bad boy’s corner, happy to be there because we get a pat on the head for staying there and striving to get out of it. If we were to get a dividend out of passing this referendum for Europe, it should have been more than a pat on the head.

We did not get it. As a result of this and the vote on the treaty in May the Taoiseach came home on 29 June and, like Neville Chamberlain returning from Munich, said we had secured the deal, that it was a game changer, that we had received the dividend and that anyone who had expressed reluctance about the treaty was wrong. We were to introduce the Fiscal Responsibility Bill because we had got the deal and I was the first to congratulate him in the House. I said the fiscal treaty had been delayed, but I congratulated him on what appeared to be a great deal and agreed that if the Taoiseach had secured a special deal on the bank debt for Ireland, the delay might have been worthwhile. However, as everyone knows, it is a phantom deal - it has been vanishing. The dividend for introducing this Bill is not that deal. Only two days ago the chief of the European Stability Mechanism in answer to a question about the Irish deal, which was, I believe, coded as legacy debt, said it had not even been discussed by a single European body.


What is Ireland getting out of the European Union in return for this fiscal responsibility deal? Ireland seems to be getting a slap in the face. It is looked upon as a chronic offender; it is being patted on the back for doing minor things and introducing measures which are utterly unacceptable to the coping classes. Should we not inform those in Europe that we are not to be taken for granted? Should we not inform Angela Merkel, François Hollande, the Dutch and the Finns that we have noted what they said some weeks ago to the effect that our deal was a phantom one? It is obvious that the banking deal in which we put so much hope is disappearing before our eyes. If we are going to behave in the way the great powers in Europe want, we are entitled to get something back. What are we doing? Who are our allies in Europe? It seems we are reduced to forming alliances with countries that are errant in their ways, like ourselves. It seems that we are in the corner of Greece, Spain, Portugal and Italy, which are not the strongest allies to have in Europe. We are taking our orders from the strong powers, but we get little back.


The European Union has reason to be grateful to Ireland. The Government has done as it has asked at every turn. As a result of a deal with the troika, the European Central Bank, the European Commission and the International Monetary Fund, the Government has decided to introduce property taxes, allow the banks to put up interest rates, cut child benefit and do other things that have made life especially difficult for those on middle incomes. Without a quid pro quo, the result of such measures will be that many on middle and lower incomes will be pushed over the edge.


This type of Bill could be passed if it were conditional on something happening in the interests of Ireland. If we were not treated as second-class citizens or a second-class country by the European powers, we could accept a Bill of this sort, but we are seeing exactly the opposite. The deal on the Anglo Irish Bank bonds which had been portrayed as possibly coming to a head and to be agreed in October has been postponed. The latest expectation, as the Minister for Finance noted recently, is that perhaps we should be looking more closely at a date in March because that is when the next €3 billion is due to be handed over.


I suggest to the Government that in order that it is not taken for granted by any of the great institutions or powers of Europe it should make it clear that the €3 billion payment is no longer a certainty. We have run out of rope with the bondholders because we cravenly paid all of that money over, but we should make it clear and give notice to those expecting payment that it can no longer be taken for granted if we continue to be treated in the way we are being treated by the European powers, in particular, by Germany, Finland and the Netherlands. These powers have clearly signalled to us that we cannot take for granted a deal that we believed was in the bag on 29 June. That deal on legacy debt appears to be off the table. It has not yet been discussed by any European body.


The idea of setting up a fiscal advisory council which forms part of the Bill is probably a good one. The Government has the apparatus and the propaganda organs of the State working for it so ardently. Therefore, it is right that the Government should set up a fiscal advisory council, but only if it is to be truly independent. However, I am doubtful about the possibility in Irish political life of politicians of any party setting up a truly independent body. It is almost impossible to point to any body or institution established in the past 20 years to which politicians have appointed independent directors who have made totally impartial decisions. The body politic has been so stained by party politicians appointing their protégésto such bodies. The Irish Fiscal Advisory Council may be a worthy body. It has produced some seemingly independent reports. However, such bodies have been tainted by the behaviour of past Governments which put their protégéson the boards with the result that the bodies made reports so partisan that they were lacking in credibility.

12:55 pm

Photo of John Paul PhelanJohn Paul Phelan (Carlow-Kilkenny, Fine Gael)
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I agree with a large chunk of the comments of the previous speaker, Deputy Shane Ross, although I disagree with some of them also. I have previously expressed my view of the relationship between the former President of France and the German Chancellor. To some extent, their occasional meetings served to undermine the functioning of the European Union.

It seems that Chancellor Merkel, now that there is a new French President, has gone in other directions to seek support. Deputy Ross referred to a meeting which took place recently between the Finnish, Dutch and German Finance Ministers. It was a strange meeting to say the least, particularly seeing as I understand that the Dutch Finance Minister did not even stand in the recent election and will not be a member of the Dutch Government in future. They produced a document which was completely at odds with the agreement on debt, particularly from Ireland's standpoint, as reached by the Heads of Government in June last. I agree with Deputy Ross on that meeting between those three finance ministers and the outcome of it. What was achieved in the agreement between the Heads of Government in June must be delivered from an Irish perspective. We must work with all our endeavour over the next number of months to ensure that agreement comes to pass. I agree certainly with that.

However, I cannot agree with Deputy Ross's shock, horror and amazement at the issue of property tax. He spoke about how this is something that has built up a head of steam in the past few weeks and months. Irrespective of where one stands on the issue, property tax has been on the political agenda for the past two years and each political party had positions on property tax in advance of the last election. I understand the Sinn Féin position speaks about taxing 80% of the value of property. The previous Government had a position on site valuation. A decision has not yet been made as to what form of property tax will be introduced next year.

I agree with Deputy Ross that there must be clear exemptions and treatment for those who have paid exorbitant amounts of stamp duty and those who are in difficulties meeting their mortgage payments at present, but there are a number of people - perhaps Deputy Ross himself is in the category - who do not have substantial debts on their private residences and it is legitimate that a tax would be imposed upon those in that category. It is key, whatever shape the tax takes, that the rate would be affordable and that clear exemptions should be laid out.

The Fiscal Responsibility Bill is born out of the decision of the people a number of months ago and their vote on the stability treaty. The idea that governments would budget sustainably in future is something I wholeheartedly support. Anybody who has even the faintest grasp of economics must support a situation whereby governments would be in a position to sustain themselves in terms of their expenditure based on the revenues they can bring in. There were, until a few minutes ago, a number of school groups in the Gallery. It is completely unjustifiable that in the future we would continue to borrow money and heap debt on future generations because we cannot sustain the present public expenditure. It is highly desirable that balance would be brought to the economic books of the country. It is a symptom of what happened in the worst excesses of the Celtic tiger - the five or six years prior to 2008 - when public expenditure was built completely on an unsustainable taxation source. I suppose we are reaping the whirlwind from that by having to reduce public expenditure at a time when tax revenues are also under pressure. It is correct that any Government should try to reach a position whereby it is not heaping debt onto future generations and whereby it is not continuing to build up the amounts that would have to be paid in interest repayments as well as building up the debt itself. The reality is that the programme in which we are currently involved is constructed in such a way that the correction is taking place over a number of years, not all at once. No doubt it is imposing considerable pressure, particularly on public services. It will continue to do so, at least over the course of the next 12 months, but it is neither fair to the future of the children who were in the Gallery a minute ago and others in schools around the country nor sustainable that we would say that we will continue to borrow selfishly and heap debt onto their heads, debts that they would have to repay in the future. I fully endorse what is contained within the Fiscal Responsibility Bill and I will be supporting it.

1:05 pm

Photo of Alan ShatterAlan Shatter (Minister, Department of Justice, Equality and Defence; Dublin South, Fine Gael)
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I am responding on behalf of the Minister for Finance, Deputy Noonan, who is away on European Union business of importance to the State.

We have had a constructive debate on the importance of this Fiscal Responsibility Bill which will implement key provisions of the stability treaty, as voted for by the Irish people. The Fiscal Responsibility Bill will implement the fiscal rules in the stability treaty. These rules are sensible and prudent and represent a responsible approach to budgeting.

The debate over the last few days has raised a number of issues, proposals and queries that I would like to take this opportunity to respond to.

I welcome the support of Deputy Michael McGrath and his party for the Bill, and note that he may be bringing forward amendments on Committee Stage on the appointment of fiscal council members.

The views expressed by Deputy Pearse Doherty mirrored the arguments put forward by him and his party during the fiscal stability treaty referendum. However, the Irish people considered all the arguments and supported the treaty and, as the Minister, Deputy Noonan, already stated, the purpose of this Bill is to implement the stability treaty.

Deputies Pearse Doherty and McDonald also criticised what they see as the narrow mandate of the fiscal council, particularly the lack of a remit to consider the social impact of its fiscal policy recommendations. This is the function of Government. Furthermore, there are a number of bodies supported by the State, such as the ESRI and the National Economic and Social Council, the reports of which consider all aspects of policy development, including social impacts.

Some Deputies suggested some changes be made to how the fiscal council prepares its reports, and its profile. I remind Deputies that an objective of this legislation is to put the council on a statutory basis, and also to ensure its independence. Therefore, the style and content of the fiscal council reports is a matter for the council but I am sure it is aware of those comments.

With regard to Deputy Pearse Doherty's wish that Government should be required to respond to all of the council's recommendations, I want to point out that we have responded to the council's previous reports in the Medium-Term Fiscal Statement in November last and in the stability programme update in April last. The Medium-Term Fiscal Statement later this month will respond to the council's latest fiscal assessment and it is the Minister for Finance's intention to continue this practice.

There were some comments by Deputies which suggest some confusion about the debt rule. I remind Deputies that the debt rule specifies that when the level of general Government debt exceeds 60% of GDP, the Government must reduce the debt by one twentieth of the difference between that level and 60% - not one twentieth of the whole debt.

With regard to the comments about a solution for our banking debt, discussions are ongoing between Ireland, the ECB and other members of the troika. ECB President Draghi said the ECB "is cooperating with the Irish Government in trying to find a solution" to this issue.

The ECB President also reiterated the remarks of the Taoiseach, the EU Commission, the President of the European Council, and the President of the European Parliament that the Council agreement of 29 June stood. That agreement stands and it is important in the context of the integrity of European Union, relationships between member states and Heads of State, that agreements entered into are fully complied with and implemented and that there be no doubt about that. The discussions taking place are complex and we are focused on delivering the best deal for the Irish taxpayer.

A number of Deputies criticised the Bill as being a charter for continued austerity and therefore not sustainable. What is not sustainable is the prospect of continuing to borrow approximately €1.5 billion each and every month. The recent improvements in market sentiment towards Ireland, as evidenced by much improved secondary bond yields, stem from the fact that we are delivering on our commitments, returning the economy to growth and reducing the deficit in the public finances. Enacting this Bill, ratifying the stability treaty and implementing our fiscal policy in compliance with the Bill are further steps on this path. Any alternative path would be irresponsible. Ireland is committed to returning our public finances to sustainable levels by 2015. This is designed to ensure long-term economic growth, instil investor confidence and bring down the cost of debt which has to be serviced by Irish taxpayers. This strategy has shown recent signs of success with the significant lowering of bond yields since early summer and the successful return of the NTMA to the debt market.

Of course, listening to Deputy Shane Ross on his usual soap box, one would think that no improvement has taken place and no advances of any description have been achieved. Deputy Ross, who is now indistinguishable in his political views from Deputies Joe Higgins and Richard Boyd Barrett, is essentially opposed to everything and recognises no good in anything.

1:15 pm

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It is onwards and upwards for the United Left Alliance.

Photo of Alan ShatterAlan Shatter (Minister, Department of Justice, Equality and Defence; Dublin South, Fine Gael)
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He seems to be blissfully unaware-----

Photo of Shane RossShane Ross (Dublin South, Independent)
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The Minister should stick to writing novels and love stories.

Photo of Alan ShatterAlan Shatter (Minister, Department of Justice, Equality and Defence; Dublin South, Fine Gael)
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Deputy Ross seems to be blissfully unaware that the State, this year, is dependent on the European Union, the IMF and the ECB for €16 billion, which is necessary to maintain public services.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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How much of that is debt interest?

Photo of Alan ShatterAlan Shatter (Minister, Department of Justice, Equality and Defence; Dublin South, Fine Gael)
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Deputy Ross says that Ireland is getting no benefit from its relationship with the European Union but he is entirely blind to the impact on this State if the funds that we can currently access were no longer available.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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How much of the total is debt interest?

Photo of Alan ShatterAlan Shatter (Minister, Department of Justice, Equality and Defence; Dublin South, Fine Gael)
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Deputy Ross referred to the Taoiseach's return from the Heads of State meeting in June as being like Neville Chamberlain coming back to England in 1938. I cannot think of a more despicable, unacceptable analogy to use in describing the extraordinary work that has been undertaken by this Government, led by the Taoiseach and, in particular, the work done by him in bringing about the arrangements that were discussed and agreed last June. It is unfortunate that Deputy Ross, for reasons of personal political opportunism and in the hope of catching a headline, should bring this Parliament down to that level by engaging in such an analogy. I suggest to Deputy Ross that the time has come for him to distinguish between the headline writing of the Sunday Independent and the manner in which he conducts himself in this House. I ask him to give serious consideration to withdrawing the despicable, unacceptable analogy that he uttered on the record of this House.


In conclusion, I wish to reiterate the point made by the Minister for Finance, Deputy Noonan, that this Bill closely follows the articles of the stability treaty, voted for by the Irish people in referendum. I thank Deputy Michael McGrath for indicating his party's support for this Bill. I urge Deputies to support the Fiscal Responsibility Bill 2012 and commend the Bill to the House.

Question put:

The Dáil divided: Tá, 91; Níl, 27.

Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Catherine Murphy.

Níl

Question declared carried.