Sean Barrett (Independent) | Oireachtas source

I welcome the Minister to the House. The deadline for submitting amendments was 1 p.m., so if some of the amendments I have submitted have been answered in the Minister's speech, it is because I did not know what was going to be in his speech.

What the Minister is doing is important. We know our banking system was not fit for purpose and that it had the faults Senator D'Arcy has just mentioned. When we look at how the loan book evolved from approximately 1998-2000 to the time the banks went to the Department of Finance to be bailed out, we see that one of their bigger faults was that they were obsessed with property, financial intermediation and personal lending. The loan books show that hardly any of the extra money went to either industry or agriculture.

Has the corporate culture of Irish banking changed? In addition to reducing the high cost base to which Senator D'Arcy referred, can we stop the banks using the Minister's money this time around to do a repeat performance of what they did the last time? I do not know how we can cure the banks' obsession with property, financial intermediation and personal lending. Do they know anything about small and medium enterprises? Have they divorced themselves so completely from small industry that they will not know it when it comes seeking the lending the Minister proposes in this Bill?

The Minister said in his speech that the Bill tries to iron out the cycles of mad lending in the Irish banking system, where there were huge rates of increase in the supply of credit for those areas I mentioned. This destroyed the environment in which small and medium enterprises try to operate. What counter-cyclical measures can be invoked or to what was the Minister referring in his speech? On the purpose of the Bill, the Minister seeks to address the compelling need to facilitate the availability of suitable credit in the economy of the State, and we commend that. However, do we need to avoid pro-cyclical lending policies? How can we restrain such policy, because it was undoubtedly a feature of what got us into so much trouble. Do we have investment appraisal expertise in the Department, which will supervise this new strategic bank, and in the banks, given they made such a shambles during the boom period when they went on a large investment spree? The expertise that can be brought in from KfW and the European Investment Bank will be important in that regard. On page 6 of his speech, the Minister mentioned the counter-cyclical manner in which the corporation will operate. I will be interested to hear what mechanism will be used to ensure this when the Minister is back for Committee Stage.

I note that the Comptroller and Auditor General will be involved and believe this is important. We must get to a culture of accountability and value for money and we must find out where mistakes were made and correct them. During his time in opposition, the Minister was Chairman of the Committee of Public Accounts. It is a pity that the expertise in the Office of the Comptroller and Auditor General is used after a disaster has happened and it will be good to get his involvement at the beginning. He will have a pretty good idea of where things can go wrong, because he will have examined many cases in the past where they did go wrong and seen what lessons should have been learned.

The last page of the Minister's speech deals with tax exemptions. Will these exemptions be allowed continue in the general reform of corporate taxation. I am against tax exemptions in principle, on the basis that a single, low rate of corporate tax across the board is better than building in more exemptions. The Minister also mentioned a steady and secure supply of credit. This means the corporation must act in a counter-cyclical kind of way. It must not have the faults of the banking system which we have already mentioned. It must avoid a property fixation. If any of this money ends up in the property sector, that will further restrict the development of small and medium enterprises. We spend too much money buying and selling houses and farms to and from each other.

Section 11 provides that the Minister shall be sole shareholder, but is there any scope for having other partners in this operation? The Bill provides under subsection 11(6)(b) that the Minister "shall without delay subscribe for those shares". Might the Minister also have the option to seek market funding, to try to create a market and persuade Irish banks to lose their property fixation and join him in this project? I welcome the fact the Minister will lay these documents before both Houses of the Oireachtas and commend him on that.

Do we have the expertise to do this? We certainly need expertise. The explanatory memorandum states: "We will seek to encourage effective competition in the provision of credit in the State." This is important and should dilute the impact of the pillar banks, but how will we ensure it happens? This is a question I would like an answer to during Committee Stage.

What the Minister is doing is important as our banking system is still not fit for purpose and is remarkably slow to learn lessons. In addition, it still has a remarkably high cost base. The executives of State-owned banks bailed out by the State insist on paying themselves multiples of what the Taoiseach earns. I hope this new body will not follow suit, because we are trying to get the Irish economy competitive again. The banks are the core of our problem, but we will try to address that in the inquiry into the banking system.

This Bill is a good response to the issue of the banks and I look forward to developing my points further on Committee Stage.