Martin Mansergh (Tipperary South, Fianna Fail)

I thank all those who have contributed to the debate. As a Member of the Other House, I did my calculations and found that at least one in five Senators contributed to this debate, which is good.

I will respond to two general points before addressing some more detailed matters. The stringency of the budget in December will not be mainly due to the bank situation but to the gap between revenue and expenditure, which is in the order of €18 billion to €19 billion. This gap has to be reduced. I qualify that to the extent that it is the case that the sovereign debt crisis and additional pressures imposed by the banking crisis mean we need to be even more up-front in the forthcoming budget than we had originally intended. The straightforward equation that the pain in the budget is because we have to bail out the banks is false. The budgetary correction is because a huge gap has opened up between expenditure and revenue. This has relatively little to do with what we have had to do in terms of the banks.

My second point is also budget related. It is often suggested that the Government should put all its cards on the table. As many speakers noted, Opposition spokespersons have been briefed on the general parameters of the financial position facing us and there is discussion with party leaders. I warmly welcome the decision of the two main Opposition parties to agree and accept the goal of a 3% budget deficit by 2014. They have made a vital contribution to maintaining confidence in this country. Such confidence is essential if we are to borrow to address the gap to which I referred.

On the issue of laying one's cards on the table, it used to be the case that the economic outlook relating to the budget and a preliminary Book of Estimates were published several weeks before the budget. I have no particular problems in principle with this approach, although the Estimates were generally somewhat revised in the budget, especially social welfare expenditure.

On taxation, laying one's cards on the table, as it were, is simply not an option. Resolutions dealing with VAT and excise changes are passed very quickly on budget night for a reason. If there were an authoritative general discussion from the Government on what it proposed to do, people would take all kinds of evasive action, for instance, hoarding. There is, therefore, a rationale for budget secrecy on the taxation front. This also applies to various forms of business taxation. We should be a little more realistic in our discussion of these matters.

I thank Senator Donohoe who spoke first for the Opposition and, not for the first time, made a fine speech. The Senator referred to Professor Tom Garvin's book on the 1950s and the existential doubts some people harboured at that time. A point I have made in many speeches both in my constituency and in the House is that, as we approach the centenary of the 1916 Rising, the idea that one wins independence and sovereignty once and can take it for granted forever after is far from being the case. In each generation, we have to defend our independence and sovereignty, as we are having to do at present. We did not expect to find ourselves in this position two or three years ago.

Senator Donohoe was also correct to refer to the fact that subordinated bondholders, albeit by no means all of them, are pleased with the situation. Senator MacSharry asked whether banks are being over-capitalised to secure them against a future scale of risk that is unlikely to arise for the foreseeable future. The Central Bank is independent in the regulation of credit institutions, including the setting of regulatory capital levels. It does so having regard to the risk weighting of the assets and other features of particular banks. The Central Bank is also having regard to the new capital guidelines being formulated in Basel III and at European Union level. The Senator also asked whether NAMA has been slow in starting its work and issuing bonds. One must remind oneself that NAMA was only established last December and is just over ten months old. Obviously, it had to be staffed and established, codes of conduct had to be drawn up, etc. It already has taken in loans with a nominal value of €27 billion and is expected to complete its work on valuation by the end of this year. Moreover, the banks have access to markets and the European Central Bank with appropriate collateral for funding.

As Senator Norris effectively paraphrased the Minister for Finance, anger is not a policy and he was correct. Sometimes each generation thinks the crisis it faces is the worst that has ever been faced. The truth is that over many decades, Irish Governments have faced acute problems. This was true in the 1920s, 1930s, 1940s and 1950s in particular but also in certain years during the 1970s and 1980s in respect of the currency crisis and so on. This undoubtedly is a particularly bad economic crisis and it probably does not have a parallel either here or elsewhere, leaving aside wartime, except for the late 1920s and early 1930s. However, in respect of the mass unemployment and general poverty that then existed, we obviously are not in the same league at present.

The Senator also made a valid point about what the Government is being forced to do. Obviously, it would much prefer to deal with deficiencies in the social and health services and so on. However, the Government is forced to deal with the banks and deficit issues because without that, everything else would fall. One could argue about what led to this point and if I have time, I will argue a little further later on. However, over the past two years the Government has had a real struggle to maintain the basic fabric of our institutions. I refer both to the banking system, without which an economy cannot function, and to the social services in order that the Government can pay civil servants and social welfare recipients and can provide our health and education services. While one can argue strongly at the margins whether this or that should or should not have been cut, or that more money should have been provided here or there, at least all the basic services have kept going. The Government was threatened with a much more dire situation than that. In addition, it has been threatened with the prospect of what would happen unless it took affairs in hand itself and to be fair to the Opposition parties, including their spokespersons, they understand this point very well. Either we deal with these problems ourselves or we let someone else come in and dictate to us, probably with very little sensitivity, what we cut or eliminate and what taxes we change. I consider it to be very important to maintain control over our own affairs and I believe this sentiment is shared right across both Houses.

There was much debate on the question of holding people to account, to which I made my own contribution. While doing so, I hope I made it clear that what I was talking about was not a form of retribution, and future deterrence always is as important as retribution, but recovery, by which I meant that moneys that were wrongly appropriated would be recovered. I expressed a view shared by everyone, which is that our system seems to work very slowly. Although the United States, like Ireland, has a written constitution, the Americans appear to be able to cut to the core a lot more quickly than are we. As I noted in my contribution, I wonder whether we have built up a system of legal and constitutional protection that hinders the process in such situations of bringing to justice those who ought to face justice. I do not simply refer to errors of judgment or of policy, as there is a clear system of political accountability and governments are subject to the electorate. I refer to cases in which laws have been broken and reckless or false trading fall into that category.

In the case of a lot of financiers, the cry during the French Revolution was not so much to the guillotine but À la lanterne, as people were simply strung up. No one is suggesting anything like that and no one wants summary justice. However, it is a paradox that in a democratic and republican system that is regulated and institutionalised, it seems to be quite difficult to achieve even proper justice within a reasonable time. One measure that might be adopted in the future is to get an appropriate set of people to investigate what have been the obstacles to achieving this during the period under discussion.

Senator Alex White spoke on whether matters have been stabilised. In a sense, the answer is both "Yes" and "No". Matters have stabilised in the sense that the rapid deterioration in the public finances that set in during 2008 has stopped. Moreover, as I stated during my contribution, the budget projections are on target. However, stabilisation has obviously not been achieved in the sense of being back on safe ground where there is nothing more to be done except for ticking over. This is the reason the country has a stringent budget ahead of it and a four-year plan is being discussed between the leaders of the main parties. The Stability and Growth Pact has a threshold of 3% of GDP. We cannot, in the true sense of the word, say we have achieved stability until we are back under that level.

Senator White talked, a little exaggeratedly, about catastrophic loss of confidence and so on. There is much confidence in the Governor of the Central Bank and in the Central Bank under his management. There is, clearly, much public confidence in the Minister for Finance, Deputy Brian Lenihan, who has had to lead the economy and the finances through this extraordinarily difficult situation. He has done so with great courage and determination and has been articulate in the leadership he has given on the subject.

As to forecasts being wrong, in a rapidly moving situation, as it was in 2008-09, it is extraordinarily difficult for anyone, here or in any other country, to make firm and accurate forecasts. The forecasts that have been made this year are accurate, with some relatively minor adjustments. Notably, the current growth forecast is somewhat lower than at the beginning of the year. Sometimes people talk as if decision makers should have perfect foresight and knowledge of the depth of a problem when it first arises. That is unrealistic.

A Member on the Government side of the House said that if the country had followed the policies advocated by Deputy Gilmore and the Labour Party, the banking system would have collapsed and the IMF would have taken over our finances. I would like to come to the defence of the Labour Party in this regard. I pose this question. Would the Labour Party have done what it advocated in Opposition had it been in Government? My frank answer to that is that I doubt it.

A Senator - it may have been Senator Coghlan - referred to the question of a State bank, such as ACC or ICC. The Labour Party has a proposal for a State bank. It is, I suppose, a revival of the third banking force idea. I remember Fianna Fáil's openness to the third banking force being set out in a paper the Taoiseach of the day sent back to the Labour Party in 1992. Our openness to the idea was one of the factors that facilitated the formation of the historic Fianna Fáil-Labour coalition. Funnily enough, when the Labour Party came into Government, it did not appear to have much further interest in the topic, but there we are. One might say we have several State banks now because so many have been nationalised. The problem with a State bank is whether it operates according to commercial criteria or whether it is a sort of soft bank that will lend to enterprises that ordinary banks would not. There is a genuine dilemma there. If State banks operate according to softer criteria, can they be accused of violating EU state aid regulations? The idea that a bank is in State ownership is no longer an easy solution to a problem and will not get us much further. I am deeply sceptical of that solution to our problems.

I full endorse what Senator Hanafin and others said about the importance of managing our own affairs. He raised the subject of the media. I was vastly amused a month or two ago when I read a report, which was not greatly highlighted, of an international survey that rated the Irish media the freest in the world. That would not surprise me. Notwithstanding my immense respect and affection for much of the output of RTE, I doubt if there is a state broadcasting station in the entire world - democratic or undemocratic - that is so free to be as critical of and hostile to the Government of the day. I am, obviously, talking only about certain individuals or programmes. Whether that is something of which we should be proud or about which we need our heads examined I am not absolutely sure. I suspect that while Senators on the Opposition side may have an opinion today, were they to be on the Government side of the House in two, three or four years' time, they might have another opinion.