Liam Twomey (Fine Gael)

I wish to share time with Senator Bacik.

Both reports are important in clearing up what happened in Ireland in recent years. It is sad that they show all the mistakes that were made during the latter years of the Celtic tiger, for which we will pay for decades. They conclude there was a great sense of hubris in the country from 2004 until the time the Celtic tiger died. They give a sense that nobody was in charge and that nobody from the Government down cared about what was happening in the financial sector and even the wider economy. As long as there was a perception that there was loads of money in the economy, it did not matter what might be fundamentally wrong with it.

The reports point to many mistakes, poor and weak regulation and insufficient stress testing of the financial system. Both the Financial Regulator and the Governor of the Central Bank were too close to Ministers and the Government. They were not prepared to stand up on what was going on in the economy and to highlight in a clear manner what was going wrong and what had landed us in the mess we were in. There were concerns. For example, commentators pointed out that in some years the construction sector was accounting for between 12% and 14% of GDP when the European norm was approximately 5%. We had a construction boom and were being told historically Ireland was underdeveloped. Financial institutions provided 100% mortgages to be repaid over 30 years, did not seek deposits for house purchases and allowed people to borrow up to five times their annual salary because they were able to access cheap money in international markets. These circumstances pushed up property prices and the Government did nothing to prevent this from happening. The legacy is that the same properties are worth less than half their purchase price and those who bought them are stuck with them. They are in chronic negative equity and will be for a number of years.

The Minister knows well that if access to credit was almost unlimited, houses prices would increase. They have returned to their normal level because the market has repositioned itself following the collapse of the construction bubble. During the same period the value of the economy expanded by between €12 billion and €15 billion a year, the equivalent of the borrowings of households at the time via the banks. The money was used to speculate on property. It was pointed out that this was unsustainable. It comes as no surprise, therefore, to read comments on this in the reports. One has to ask what was going through the minds of developers and Ministers when everything was crazy. What was going through the minds of the former Taoiseach, Deputy Bertie Ahern, and the former Minister for Finance and current Taoiseach when they said the fundamentals were sound and that anyone talking down the economy should commit suicide? Warning bells should have rung not only in the Regulator's office but also at government level, but clearly they did not. Ministers and officials were either asleep on the job or had been in position too long and lost interest in their regulatory role. That has put us in the mess we are in.

We may be able to make changes that will prevent us from ending up in this position in the future. There is a reason the Government parties did not want to touch the golden goose, the taxation revenue from the property sector. The VAT, income tax and other taxes generated allowed the Government to increase spending and project phoney surpluses. That was the €5 billion or €6 billion that was allowing the Government to expand its spending and project what were basically phoney surpluses at the time, as we now know. That is where we are now, but it is something the Government should have been brave enough to address at the time. Clearly, it did not and we are now left with this issue.

The Government was spending money not on once-off projects but rather using the tax take from the construction bubble on day to day spending. That has left us in a position whereby we must try to cut spending on education and health as well as the salaries of public and civil servants. That is why we are where we are, as the Taoiseach is inclined to say.

An entire range of issues was covered in both reports, and there will be time in the future, perhaps, for us to come back to these. The Regling and Watson report basically spells it all out in four lines. It says this was a home-grown crisis, Government policy added fuel to the fire, with Deputy Brian Cowen's fiscal policy heightening vulnerability of the economy. It says counter-cyclical budgets could have moderated the boom. If these simple findings had been taken into account during the Celtic tiger period, I do not believe we should be in the situation we are. I hope whatever has been learned from these reports will be implemented in the future so we do not find ourselves in such an incredible mess again.