Derek McDowell (Labour)

The thrust of what has been said in recent days is interesting and correct. There is clearly a moral perspective and an aspect of fairness to this issue. The financial sector is the most profitable in Ireland. On occasion, the profits of financial institutions border on the immoral. We are all customers of the banks and we are more than entitled to insist that some of those profits be passed on to us.

What was the policy basis for the interest rate reduction in the first instance? I would be among those who would say that the interest rate regime we had here in recent years was not suitable. We have had an economy with double digit growth, whereas interest rates ranged between 3% and 3.75%. The economy was galloping away, while interest rates were encouraging the growth of inflation. That is now no longer the case. The ECB made its decision to reduce interest rates because it recognised, belatedly, the need to stimulate growth in the eurozone area. For once, that decision is right for Ireland, because, like those elsewhere, we need to stimulate growth.

Much of the focus in the debate has been on domestic borrowing, mortgages in particular. We should, perhaps, be looking more at business and at the need to use the interest rate reduction for the purpose for which it was intended, namely, to stimulate the economy. We should have more focus on the rates of interest paid by business. We should not be looking only at personal overdrafts, we should also consider business loans. The banks, which still frequently insist on the provision of personal guarantees, are still screwing small businesses by charging them interest rates of 10%, 11% and 12% when inflation is running at less than 5% and their wholesale interest rates are 3% or lower. This is intolerable in light of the economic position in which we currently find ourselves.

The banks must know this because bank managers are interviewing people with business ideas who, perhaps for the first time in a few years, are under pressure because their cashflow is not as good as it used to be and customers are not as plentiful. The banks know that small businesses need a break and we need them to provide it. We are not merely talking about these businesses, we are also concerned about their employees. The economy needs the stimulus to which I refer in a way that it has not done for a number of years. It is imperative that the banks pass on the rate cut.