Mary White (Fianna Fail)

I welcome the reports for their frank and direct analysis and conclusions. They reflect some of the down sides of being a small country where decision makers and influencers meet and know each other.

The Honohan report refers to an "excessively deferential and accommodating" regulatory approach and comments that "rocking the boat" and being prepared to "spoil the party" would have required a particularly strong sense of the independent role of a central bank.

The question for the future is how can we ensure the regulatory system does its job without fear or favour. We are fortunate that the two key persons appointed by the Minister, Deputy Brian Lenihan, Professor Honohan, Governor of the Central Bank, and Matthew Elderfield, Financial Regulator, have the independence of mind and action to act without fear in the public interest. They have demonstrated that clearly so far.

The members of the board of the Central Bank have their responsibilities, namely to ensure their approach is fully supportive and not afraid to rock the boat when required, but the main responsibility for the crisis, according to the Honohan report, was the abandonment by the banks of their own rules for managing credit risks in embracing property development and their decision to follow Anglo Irish Bank in winning such business. They tolerated a gradual lowering of lending standards including decisions to authorise numerous exceptions to stated policies. Where were the boards of the banks during all this? How can we ensure this does not happen again?

The two reports under consideration are to guide the work of the proposed commission of investigation into the banking crisis, which is to complete its work in six months.

With all due respect to the Department of Finance officials here with the Minister of State at the Department of Finance, Deputy Mansergh, who are too young to have been around when all of this was going on anyway, I would like to see the role of the Department of Finance officials during the lead up to September 2008 included. The Department of Finance officials saw on a monthly basis the growing share of property related taxes in the tax take. They saw the explosive growth of private sector lending by the banks and the build up of private sector credit.

I support the recent comments of the former head of the NTMA and one of the most respected public servants, Dr. Somers, that the Department of Finance's role should be included in the examination by the commission. I want to draw on comments made by Dr. Somers in the Friday interview in The Irish Times of 11 December 1998. It is an extensive interview and it underlines the pervasive power of the Department of Finance, but I pick out two points. It states:

Getting the Department of Finance to change tack is extremely difficult, he says [this from an ex-assistant secretary in the Department of Finance]. He recalls advice given to him when he was entering the Department: "If you try to change things there are three possible results. The first is they may improve, the second they may disimprove... or there may be no change. So you only have a one in three chance of success — don't change anything."

In 1998, Dr. Somers, in the interview, stated:

That is why there are no fly-overs, no underpasses or decent roads. The Department of Finance simply blocks everything.

I stated that myself on the Order of Business this morning about many of the social changes such as the introduction of free child care for every child aged three years. I put down the lack of money going into education and into social areas, and the lack of free breast screening for women over 65, to decisions made by the Department of Finance.

In that extensive interview in 1998, Dr. Somers argues that the Republic needs to move to a US-type environment where the top echelons of the Civil Service change with the Administration to effect modernisation. As we have had so few changes in Administrations, that is really not relevant but he did go on to suggest that the Civil Service could at least incorporate recent changes to the British model where talented people from the business community come in for a number of years. Dr. Somers stated:

You need to be an extremely determined and stubborn politician to get any change through Finance.

We are saying the politician must be extremely strong and self-confident. I have my personal experience, when I tried to get the removal of stamp duty on intellectual property with then Minister, Deputy McCreevy, and I had to engage with the civil servants from the Department of Finance. I had a meeting with the Minister and two of the most senior civil servants and I raised the matter that it was contradictory if people who came up with a new intellectual development would have to pay tax on it. I was getting nowhere with the Department officials and I asked the Minister why did the UK get rid of this tax, and it was over and done with.

I apologise to the two civil servants in the Chamber at present. This is not personal. Senator Ross has stated everyone has been praising the two reports etc. We are indebted to Dr. Somers who, in a public interview on Saturday, suggested the Department of Finance should be covered by the commission. The Minister of State, Deputy Mansergh, has been a participant in and observer of the Department during the years under various Taoisigh. He probably knows more about the relationship with the Department than anyone in this or the Lower House. He saw it as a model adviser and public service, for which I thank him.