Joe O'Reilly (Fine Gael)

Ba maith liom fáilte a chuir roimh an tAire Stáit.

A recurring theme running through many of the contributions is an attempt to ascertain the degree of culpability of the Fianna Fáil section of the Administration for our current ills. I do not propose to devote too much time to that aspect given that we must look to policy positions and the future, other than to say it would be in the best interests of this House to clear that up. There is no avoiding the fact the Government in office during the last 11 years allowed an unquestionable culture of waste, recklessness and reckless spending to develop in this country. I will cite four instances where the Taoiseach, when Minister for Finance, contributed to our economic woes to date. In 2005 his decision to extend tax breaks for property developers and investors was done against the advice of the National Competitiveness Council and all current advice at the time. From 2005 to 2007, Government expenditure was extended by twice the sustainable rate of growth. There was a runaway increase in Government expenditure over that time. Because of mismanagement, over-spending and lack of controls it is not clear that we have an infrastructural bonus to match that sort of expenditure.

An assurance was given by the then Minister for Finance, Deputy Cowen, in 2006 to home owners that our economic fundamentals were strong. The failure of the Financial Regulator to interfere with the banking sector was ignored during all that time. That puts it on the line that culpability for the current position rests with the Administration in place during the past 11 years. There is no denying that. In terms of how we move forward, it is unhelpful not to accept that. The attempts, in so far as they have been some by Members on the other side of the House, to suggest the contrary is not assisting their cause. It is as well to take that as read and try to move forward. It is clear from many sources that the necessity for those on the Government side, as they perceived it, to win the last general election stopped reaction to what they knew was the developing ills of the economy.

We are in a situation where strict regulation of the banking sector is required at home and internationally. We should contribute to that. There is no doubt there was a huge international contribution as well as a domestic contribution to our economic ills. We need to be associated with the international efforts to regulate the financial world. The same laissez-faire, light touch regulation can never again be allowed again. We have all learned our lesson.

Good news emanated from the European Commission in that respect today, but we, as a State, must be at the vanguard in promoting international financial regulation, and we have to begin that at home. Clear regulation and control of the sector domestically is needed. There is a need to remove boards, directors and for a huge culling in the sector. There is also a need to eliminate the astronomical salaries and bonuses, which contributed to a hedonistic atmosphere, childish irresponsibility and a lack of connection to reality that permeated the banking sector and the top echelons of the developer sector here such that they lost all sense of reason, connectiveness and balance. That must be taken into consideration.

The banks are short of capital due to loan losses. Consequently, they have cut credit lines to small and medium sized enterprises, but that cannot be allowed. The banks cannot be allowed to solve their difficulties in that fashion, if they are to be supported by taxpayers. They are anxious not to use their capital in that way because they are afraid of bringing down share prices. They are only concerned with profit and with maintaining the value of shares. It is important we do not let the banks away with cutting off credit to the small and medium sized enterprises and to individual consumers. It is important to ensure such credit is maintained.

The banks lack of creditability internationally is damaging their capacity to borrow. They are also afraid to dilute share prices. The strategy Fine Gael recommended to Government and on which we look favourably is the idea of buying preference shares. Buying them has the advantage in that a preference share takes precedence over ordinary equities and preference shares are a safer bet for the taxpayer. This does not mean we would become hands-on bankers, which is not necessarily a role for the Oireachtas, although we should have tight control of the sector.

There is no point in giving the banks extra capital that they can use for lending overseas and on other speculative ventures. The extra capital they get must be to power the domestic economy and strict controls should apply. AIB recently bemoaned the fact it would only have a profit of €500 million this year, that its profit would be down to that level. The onus in this respect should be on generating our economy and on there being only modest profits for our banks. If there is to be taxpayers' investment in the sector, that should be the case.

Recent statistics suggest that 43% of small and medium sized enterprises are waiting for money and in need of financing. It is shocking that Mr. Wallace recently — I know the Cathaoirleach is anxious we do not name individuals——