Sean Barrett (Independent) | Oireachtas source

I welcome the Minister of State, a former colleague on the Joint Committee on Transport and Communications when he was Chairman before being elevated to a ministerial post recently. It is a great pleasure and honour to second the reading of Second Stage of Senator Quinn's Bill.

A problem arises when there are asset bubbles in an economy. When we get over our temporary difficulty on Friday we have to address that. The economy went wrong between 2000 and 2008 and how do we repair the damage that was done by 2008 and afterwards? A large part of that problem, as the Minister of State will know, was a property bubble. We got a good deal of material from the Royal Institute of Chartered Surveyors in the United Kingdom and we did not know enough about this, but it has now assembled information. If this starts to happen in other countries one would reduce the loan to value ratio. The institute would say it should never be above 80%. That figure should be brought down to 70% if a market starts to heat up. We will know better how to do all of that again.

We had a person from AIB before the finance committee who was dealing with an outstanding debt of €340,000 for somebody whose income was €34,000. That is reckless banking and the Governor of the Central Bank, Professor Honohan, said that when he came before the committee. We need laws in that area and we have a Bill listed on the reform of banking. Unless we prevent that happening again and unravel, as Senator Quinn has tried to do, what happened during the last property bubble, our recovery will be unfortunately delayed.

When one inflates property prices, as house prices were in Dublin by 500% between 1996 and 2006, and by even more on some commercial properties, with absurd prices being made for land as in the case of the veterinary college site, that bubble has to be burst. The people who did it were gamblers, entrepreneurs. They still own the properties but how come we have given them, as Senator Quinn has said, the property rights to prices right at the very top of the market, which was irresponsible and which none of us in this House would ever allow to happen again. We will have banking laws, much stricter control of the banks and stricter regulation by the Central Bank. I would say to those people that they certainly filled up enough property pages and they called themselves wizards but they backed the wrong horses. Inherent in what they did was that what goes up, comes down and my goodness it came down with a bang. Holding those properties at artificially inflated rents so that they appear as hugely valuable assets in people's balance sheets in property companies is not on. I am delighted that houses were sold in Monaghan during the week for €30,000. We need those asset prices to fall, as Senator Quinn has said, in terms of the cost of being in business. Where house prices are lower, it makes the cost of living lower and it will make Ireland a competitive economy again.

Like Senator Quinn, I do not think there is a property right in the Constitution whereby one is entitled to maintain the property price right at the top of a bubble. The strong economic case is very much to the contrary. Those prices have to fall. That is an integral part of our economic recovery. We will all be working, I hope, from next Monday on designing banking rules to make sure this does not happen again. We as politicians will have to get together to do it because from my experience with the banks and property developers, they would start this all over again and we would be back to having 50-page property supplements in the newspapers.

This is a danger in Irish society. Property has held too much sway and entrepreneurs and small businesses have not been listened to.

In regard to moral hazard, people will say some borrowed to move to a slightly bigger house. Real moral hazard applies to people who invested recklessly in the kind of properties to which Senator Quinn referred and to reckless bankers. I would have said in the example from AIB that 70% to 80% of that case, where a man with €34,000 owed €340,000, must be due to reckless bankers. I would not go on a case-by-case basis. This should be rules-based. We must get rid of this property bubble and ensure we never have anything like it again. With sensible economic policies and good people like Senator Quinn, I am sure that can happen.

In regard to the rights to private property, I am not a lawyer but I remember when the courts deregulated the taxi business. People who had a piece of paper called a taxi licence were very annoyed and brought cases. In this regard, I mention Mr. Justice Roderick Murphy, the judicial review by Mr. Justice Paul Carney and the judgments by Mr. Justice Declan Costello and Mr. Justice Hugh Geoghegan. The taxi drivers still have their taxi licences - it is a piece of paper - but they do not have a property right to keep any newcomers out of the business, which is what they were trying to do. They still own the property but they backed the wrong horse and it is now worth one quarter or one tenth of what it was before. They should not come looking to the taxpayers for any assistance because they are broke as well because of the €64 billion they had to pay to finance this kind of nonsense.

I want a capitalist system which takes some of the risks and stops sending it back to new entrepreneurs. In this case, we are probably bailing out large international property companies, insurance funds, big banks and so on at the expense of the small entrepreneur, which was what we were discussing earlier with the Minister's ministerial colleague.

The exaggerated definition of property rights is that one is always entitled to be paid at the top of the market. Even we should have known that what was going on was grossly irresponsible. We might take a look at countries which did not have a property bubble such as Norway, Singapore and Canada. I gather China is heading towards one but there will be really strict rules.

Confusing asset price bubbles with proper economic growth and entrepreneurship was a serious mistake the last time. This is part of the curative measures we will all have to take one way or the other. We must be beware of lax monetary policies and reckless lending by banks.

Property speculators drove prices to levels which the Exchequer or the economy cannot now sustain. The Minister knows well the situation in the public finances and we will cope with that on budget day. The kind of property prices Ireland had were unrealistic and Senator Quinn's Bill is a major step forward. These people never lost any opportunities and they were not great entrepreneurs or visualisers; they were speculators and they lost. We do not pay out on losing horses in the 3.30 p.m. in Leopardstown. These prices should fall and we should not attempt to put a floor under them. We should have been far more sceptical when some of them came calling to Government Buildings five years ago last weekend.