Alex White (Labour)

The former Fianna Fáil people who are heckling me from beyond do not know either. Let us try to be more realistic. I am urging those on both sides - I am prepared to take on board some of this myself - that if we are more realistic in the claims we are making and sometimes in some of the criticism, we might make more progress in what we are trying to do with the economy which is in such a serious state. The Minister talks about growth - I hope he is right. If it is growth, the difficulty is that we are likely to face a period of relatively jobless growth. History tells us that is what happens coming out of recession. The other downside is that even if we have growth of 3%, 4%, 6% or 8% - God help us, will we ever see it again - unfortunately we will still be holding a multibillion euro bill for what has had to be done with the banks. That is the true context of what we are dealing with.

On Second Stage we are usually urged to look at the general philosophy behind a Bill. Sometimes we forget that is what we are called to do. I am somewhat critical of the Minister's speech in that regard. Why is that so? I remember in 2003 when the last regime was introduced, it came off the back of considerable debate in Government and more widely as to perceived flaws in the regulatory system including in the Central Bank. These radical changes were introduced in the 2003 legislation. Rather than the Minister simply saying that in order to avoid the mistakes of the past we need to have the legislation, I would have preferred the Minister - not for the purposes of brickbats from my side but for the purpose of us having a genuine and intelligent debate - to outline the mistakes to which he refers. It is not for the purpose of him flagellating himself or anything, but so we can debate the matter and understand what was wrong with the 2003 regulatory system that now needs to be changed. It is not enough for the Minister to say things we do not like have occurred. That is a matter of fact and there is evidence that there was insufficient regulation and that was one of the factors that needs to be addressed - I do not know if it is the gold, silver or bronze medal in Professor Honohan's sense. Precisely what was wrong with the 2003 regime that needs to be changed now, seven years later? It is almost like an alibi to say that because there have been very unsatisfactory developments, to put it mildly, poor regulation and breakdown in regulation, we will therefore change the system. What precisely in the system needed to be changed? That would take us into a broader debate.

Let us not forget that the light-touch regulation that Senator MacSharry rightly criticises and drew into question in his speech was an absolute article of faith for many people, including many of prominence in his party, one of whom was Minister for Finance. Light touch regulation was not something that happened by accident. In his speech the Minister said these things needed to be done in order to have the sort of Central Bank that would best serve our interest. The entire financial system is based on having an independent central bank, a Government bank that stands aside from the fray and overlooks and supervises the operation of the financial system. That has certainly been the case since the settlement after the Second World War. The philosophy behind central banks is that they should be robust and engage. They should be monitoring and understand.

What has happened is a source of amazement to people. Everybody has these anecdotes. When I was buying my first house and when many of us here were looking for loans for the first time, we were told we could not get more than 80% and no more than 2.5 times one's earnings and perhaps once the earnings of one's spouse or the person earning less money. Those regulations were always very irritating to us when we wanted to get loans, but those were the rules that were in place. What happened to them? The Minister is not inventing something new in putting in place a robust and proper regulatory system. He is going back to what should have been in place all along and what was in place for many decades - a far more interventionist Central Bank.

What happened for it to change? There was a change in political approach and philosophy which won through. It was not just that we drifted into light touch; an actual decision was made to do that. That is why there is political sensitivity on the Government side to these issues being addressed. They are not simply technical mistakes that somebody made at one stage. It was not that somebody did not get up early enough in the morning or did not add up the figures properly. That is not what occurred. An entire edifice of control of financial institutions and the banking system, not just in this country but also in other countries admittedly, was actively changed. It was not just by drift. It was done for a reason.

Professor Honohan talks about the system being overly deferential. I will not upset the Minister or anybody else by going back into the crony narrative. However, we should think about what he is talking about there. He may not necessarily be talking about a tent full of people who have an unhealthy relationship, whether across banks, developers and politicians. However, there is certainly a clear statement by him when he talks about a deferential culture of something going on which is entirely different from what one would expect from a regulatory system such as the kind of system we always should have had and did have for a very long time. Only a few months ago - I believe it was at the opening of the Aviva Stadium or something like that - when the former Taoiseach, Deputy Bertie Ahern, was asked about macroeconomic policy, tax incentives and so on, he was quoted in the newspapers as having said that endless pressures were put on him and the Government. Government Members cannot say that the Opposition politicians and critics of the Government are making all this up. This is the relatively recently departed former Taoiseach acknowledging the existence of these endless pressures.

I would have preferred the Minister to have elaborated on the elements of the 2003 legislation that needed changing. I would have thought there is much in the Bill before us that is quite acceptable, correct and appropriate. My quibble is that although we had much of this type of approach in the past, we threw it away and now we are just going back to it. It is not a new invention. That we had a departure from that regime was rooted in a particular political and, if I may say so, ideological philosophy in respect of the proper role of an independent central bank. It might be better to address other issues on Committee Stage that have only been touched on such as the role of credit unions. However, I would like the Minister to address the so-called mistakes of the past. What were the problems with a system only put in place in 2003? What was the mischief he felt he had to address? I would appreciate it if he looked at this in detail.