Wednesday, 14 December 2011
Fiscal Responsibility (Statement) Bill 2011: Second Stage
I welcome the Minister of State to the House, as always.
On 25 May last, this Seanad convened for the first time and we were then concerned about the implications of the IMF having to rescue us about this time last year, as well as the need to change the way in which governance operated in this country. It was obviously unsustainable to have to be bailed out by the IMF and to have the troika here. In that context, the Seanad wishes to play a role in assisting the Government in the reforms which are needed because when a country has to be rescued by the IMF, it needs reforms. This Bill is intended to contribute in that regard.
I have noted the speech in the Dáil, on 5 December, by the Minister for Public Expenditure and Reform, Deputy Howlin, who said: "We will enhance the role of the Oireachtas ... all of these reforms support Oireachtas Members, as representatives of the public, in holding Government to account." We are therefore pleased to respond to the Minister, Deputy Howlin. Ministers have found that there is a ready welcome for their reform proposals in this House.
The other important context is in the Wright report which was published just about this time last year. Mr. Wright came from Canada to advise us on the difficulties in which we then found ourselves. On page 25 of his report, he stated
In the current budgetary process, the period for public dialogue on economic and fiscal challenges facing the economy is far too short. Departmental advice on the economic outlook and sectoral challenges, for example, should be subject to more public and external scrutiny before Budgets are finalised. The process must also support a more rigorous commitment to the planned quantum of fiscal action. The object of a renewed budgetary strategy should be to enhance ministerial responsibility to Parliament and the public by:
creating a meaningful consultation period and seeking broad feedback on the Government's fiscal plan,
releasing more departmental analysis to inform public debate, and
providing third party validation of departmental analysis and the Government's fiscal plan through some form of Fiscal Council.
We support those sentiments, also. In fact, at the Joint Committee on Finance, Public Expenditure and Reform we met the members of the fiscal council. Their professionalism and independence are to be greatly admired, and we support them.
It is an important part of the way in which we organise our finances and look to repair the faults which cost us all so dearly in recent years.
The Bill provides a context for economic statistics to be injected into the budgetary process and its basic components come courtesy of the IMF, particularly the design and statement of a fiscal rule. The troika will welcome the fact that a House of Parliament is debating these important matters as it corresponds to having the economic sovereignty of the country restored. Our added value lies in an active role for Parliament; unlike technocrats, Parliament is essential to the process. There is a quote from the US Supreme Court judge Louis Brandeis that "sunlight is the best disinfectant;" the public finances need more sunlight and have needed it historically.
With regard to the IMF agreement, we are preparing institutional reform of the system, taking into account anticipated reforms of economic governance procedures at EU level. A reformed budget formation process would be put in place. Furthermore, we would introduce a fiscal responsibility law which would include provision for a medium-term expenditure framework, with binding multi-annual ceilings on expenditure in each area by the end of this year. There would be a budgetary advisory council to provide for an independent appraisal of the Government's budgetary position, while forecasts would also be introduced. These important reforms would enhance fiscal credibility and anchor long-term debt sustainability. If what we propose was to achieve that credibility, it would make it easier for Ireland to return the markets.
As can be seen in the Bill and the definition of terms, there would be a desire to build surpluses, as indicated by the cycle, which would be used, as happens in Sweden, to finance the country when there was a downturn. Section 1 has a definition of counter-cyclical policy, structural changes and fiscal sustainability, with other definitions. In an era in which the Maastricht treaty 3% borrowing limit and the 60% debt-to-GDP ratio did not work, with great doubts in the markets as to whether what was agreed in Brussels last Friday will work, this could add credibility to the idea that Ireland has decided to adopt a stance approved of by the IMF and which has proved to be highly successful in Sweden particularly.
We seek to provide for stabilisation in case we ever go through a period like 2000 to 2005 again when we should have been running surpluses. That might have provided funding for the rainy day we have experienced recently. The aim of the Bill is to make Ireland like Sweden, in which the lessons of a banking crisis and painful recession were turned into an effective fiscal council, which we would have, with a permanent staff and budget, which we need. There should be a policy of running structural deficits in a period of recession and surpluses when there is full employment in the economy.
The drafting of a fiscal rule has many American and European aspects to it and it is important to preserve the context in which the need for legislation has arisen. It is a statement of goodwill on behalf of Parliament to commit to fiscal rectitude, with parliamentary and public scrutiny of the budgetary process. It would be a firm statement to join "spendaholics anonymous" after two fiscal disasters in 30 years. The text and definitions draw heavily from the work of the IMF on the evaluation of fiscal rules and what can be considered best practice. The critical elements of the statements are taken directly from the IMF's evaluation of a Bulgarian fiscal rule in a working paper dated 10 November. The Government has committed to introducing such legislation and the Bill is aimed at making the most of this opportunity to put in place a state-of-the-art fiscal rule that would be flexible and respectful of democracy but which could still change the conduct of public administration and the political culture of boom to bust.
The legal issues can be surmounted if there is the political will. John Maynard Keynes said about the foundation of the IMF and lawyers, "I want him to tell me how to do what I think sensible, and above all to devise means by which it would be lawful for me to go on being sensible in unforeseen circumstances some years hence." We know from the fiscal council that stimulus packages do not work in Ireland as the multiplier is small. We need something like this commitment from a Parliament to balance our budgets during the cycle. The Maastricht treaty agreement did not work and what was agreed in Brussels last week seems extremely draconian, with a borrowing allowance requiring a debt-to-GDP ratio of approximately 15%. There is no way countries such as Greece and Ireland could take that level of austerity; therefore, this would be an alternative.
In the context of having a small, open economy, the Bill would attempt for the duration of the troika programme and into the future to change public administration and the political culture in order that when the Government spent more than it earned, it would have to make a clear and accountable statement outlining how it would return to a position of structural balances. It does not attempt to put in place numerical estimates and would, in fact, be a soft budget constraint which would not enter the Constitution in the way a hard budget constraint in keeping with the German suggestion would. The recent EU agreement is draconian and implies a long run debt-to-GDP ratio of 17%, as Mr. Colm McCarthy stated.
Fiscal rules must be context-driven and respectful of the parliamentary system. Imposing transparency would open the curtains of the Departments of Finance and Public Expenditure and Reform; in so doing it would look to prevent us from engaging in the Sisyphus approach to fiscal policy, as he kept rolling a rock up the hill at intervals. We have done this and must learn from how we failed to respond to the crisis in the 1980s and how we can act in a better fashion now. It would give an example to the European Union as a whole. Parliament would take this issue seriously in order to design a better system to deal with structural and cyclical deficits.
We must recognise the constructive role Senators have taken on, in my experience, to assist reforming Ministers in the reform of our institutions since we assembled on 25 May. I commend the Bill to the House.
I second the motion and welcome the Minister of State. This is an interesting Bill and we should be grateful for the opportunity to have Senator Sean D. Barrett in the House. We do not often have an economist of such stature in the Seanad who is able to do what is contained in the Bill. While I studied economics in UCD, I never really got on top of some of its ideas. I attended the presentation last night by the Senator and when I went through the details, I was still somewhat confused. We should be appreciative of him as he can help us on that basis.
I was in business for many years and one would run a business by considering how much money was brought in and how much could be spent. Every now and then that is misjudged; the same idea applies to running a country. The Government must estimate how much money will be taken in and how much will be spent, and every now and then it will be wrong. The Senator used some lovely terms. He spoke about rolling a rock up a hill, which sometimes can come back down. He also spoke about adopting a belt and braces approach.
It could be argued that enshrining a provision in legislation that would push us towards a balanced fiscal budget would be somewhat superfluous as cuts amounting to almost €4 billion have already been announced. It is very clear to Irish citizens that there is little fear that the Government will stray from the EU-IMF path. If we are going to play at being the best boy in the classroom, we must be willing to negotiate much harder with our masters. One must not forget that the IMF is making significant interest on our loan every day. When I was starting in business my father gave me advice to the effect that one's good name is much more important than any money one might save by not paying one's debts. I am one of those who believe we should pay the debts even if we believe they are not our debts to pay and that the banks have to be paid off. Again, from a business point of view, that does not stop us negotiating hard with those who supply us with goods or with money. I would like to strengthen the Government's hand in ensuring that we do negotiate to get the best terms and the best interest. That should not distract us from what Senator Barrett has put forward in the Bill. I am firmly of the belief that we must do our utmost to strive towards fiscal responsibility. As the economic and financial crisis has hit almost every country in the world, it is those countries who get their finances back in line the quickest and the most soundly that will reap the benefit. I want to ensure that we are one of those. Such countries will be able to attract more overseas investment which will spur on their economy. This country must strive to be one of those countries which reaches that level.
The argument in favour of such a fiscal responsibility law is that because politicians are supposedly so terrible at controlling spending — there have been some examples of that — they need some type of check to ensure that they do not allow the public finances to unravel. As Senator Barrett indicated, Germany introduced a similar law in recent years, but we are also following other less developed countries such as Nigeria and Ghana in introducing such legislation. It is interesting to note that a study of budget crises throughout history in the developed world by the Policy Exchange think-tank in the United Kingdom shows that neither legislation nor fiscal watchdogs had much effect on deficits in the countries studied. Mostly, it was down to political will. What Senator Barrett is putting to us is that this is what we should be doing but it is still is going to rest on political will. I refer to the political will of the Government backed by the two Houses of the Oireachtas.
The law is being pressed upon us by the IMF. It is interesting to delve into IMF research to find a 2010 research paper by the IMF itself entitled, Structural Breaks in Fiscal Performance: Did Fiscal Responsibility Laws have Anything to Do with Them? I say this in the manner of a devil's advocate in regard to Senator Barrett's Bill. That paper found that fiscal responsibility laws have had little direct impact on fiscal performance in a country. The authors found limited empirical evidence in support of the view that fiscal responsibility laws have had a distinguishable effect on fiscal performance. However, they noted that fiscal responsibility laws could still have other positive effects on the conduct of fiscal policy, such as enhanced transparency, guidance in the budget process and lower risk premia.
Another recent paper by Professor John Thornton of the University of Wales in Bangor is entitled, Do Fiscal Responsibility Laws Matter? It asked whether the adoption of fiscal responsibility laws have improved fiscal performance in nine emerging market economies. The paper suggests that improving economic performance had little to do with fiscal responsibility laws. Given such research we must be more sceptical as to whether such a law will be a magic bullet. It seems that political will is the number one driver of change. That is the point that Senator Barrett is putting forward in the legislation. On its own legislation will not be enough unless we have the political will to do it.
One could ask how the rule will sit given the recent developments in the European Union or whether there is even a need for such a law given that it seems the European Union will monitor the fiscal policies of member states and will punish those who fail to keep their budget under restraint. As for the EU's so-called golden rule, inserted into each country's constitution which prevents a country from running a budget deficit of more than 3%, irrespective of the economic cycle, we must examine it to see whether we could manage to achieve that goal. The effect of the Bill, to which I urge the Minister of State to give serious consideration, will place us in a position that outlines the limits we must achieve, but on its own it will not be enough unless we have the political will. I believe the Bill should be accepted. We urge the Minister of State to accept the Bill but also to recognise that it will not be enough on its own. We need the political will and determination and for the Government to say it is something it is determined to achieve.
I welcome the Minister of State to the Chamber. Senator Barrett's Bill is a good one and it is timely also to open up a debate on wider economic strategy. Nobody could be against transparency of action on the part of Government in respect of budgetary decisions. If Senator Barrett achieves anything today, he should be commended on bringing the Bill to the House in the first place. That is the type of thing this House ought to be doing and was established to do. Senator Barrett has clearly put much preparation and thought into his Private Members' Bill. He is a renowned economist and we should listen carefully to what he has to say.
I support the notion of incorporating a fiscal rule into the law of a country. That is all the more important when we see the outmoded method of producing budgets on an annual basis instead of having regard to the multi-year cycle. The system we operate at the moment encourages short termism, reduces certainty and makes it more difficult to plan on a multi-year basis. If we were to incorporate Senator Barrett's proposal into law, it would encourage the relevant Ministers to take more than ordinary care in the preparation of budgets. The Bill would not place too restrictive a constraint on the Minister as Senator Barrett has taken care to ensure that the requirement to provide a fiscal statement would apply only in well-defined circumstances.
Credibility, transparency and accountability are, and should be, features of all modern monetary policy. Rules which are designed properly allow us to respond to downturns in economic activity and alert us to the dangers of such negative events developing. If we had a set of robust fiscal rules in the past decade we might not find ourselves staring into the current economic abyss that we now face.
In light of the emerging developments in Europe, we might be a little precipitous in incorporating the Bill into law at this time. Anything we do in this fragile and uncertain economic landscape should have regard for what is happening in the wider arena. Nevertheless, a full discussion of the Bill is a good thing and when the situation becomes clearer, it is vital that we adopt a fiscal rule along the lines of what Senator Barrett suggests. The Bill should be considered in the context of the forthcoming budgetary review process.
In addition, perhaps, we should seek to expand this worthwhile piece of work and take a medium to longer-term look at what we can do — Senator Barrett's Bill will form an important part of this — to place our country in a position that would allow us to take early advantage of the economic upturn which will inevitably take place. We have taken measures to achieve some small level of stability since we came into Government. We can argue about that if we wish. Some will attribute the success to events in the wider European economy and say that we were the fortuitous beneficiaries of these advantages. It does not matter from which analytical position one comes. We all agree that it is a good thing for us to be in the vanguard of an upturn.
On agreeing that we have benefited, it should be possible for us to agree on a set of policy proposals which would put us back in that advantageous position. A good place to start our search for this elusive economic and longer-term tonic would be to examine the international indices or meters which show our current position vis-À-vis our trading partners and devise a legislative, economic and social superstructure that will give us a competitive advantage. One good place to start would be with the Economic Freedom Index which looks at ten measures of what are described as economic freedoms. They include headings such as trade policy, business policy, fiscal policy, government spending, monetary policy, investment policy, financial policy, property policy, labour and freedom from corruption. Despite our recent travails, it is easy to forget that we still score highly across all headings. Some of the institutional strengths identified are strong protection for property rights, efficient business regulation and competitive tax rates and policies that facilitate entrepreneurial activity.
Viewed from outside of this country, there is plenty to ensure we remain hopeful. Even though our competitiveness has been compromised, a strong emphasis on regaining our competitive advantage is vital. That requires a coherent policy response. We have achieved some success in that regard but let us look to the future and take the steps which are necessary to be best placed to take advantage of returning confidence. Senator Barrett's Bill adds to the policy good that is necessary to achieve this aim. I urge the Minister of State to have regard to the Bill when formulating future budgetary policy as it is important that he would do so.
I thank Senator Barrett for the work he has put into the Bill. When the Government is looking at the merits of work done in the Houses of the Oireachtas it will be clear that one Independent Senator has been able to produce a clear, concise and effective Bill where swarms of advisers in the Department of Finance have been unable to do so.
Senator Barrett deserves immense credit for that. The Bill provides more clarity that we received from last weekend's summit in Brussels. Senator Gilroy made a fair point about the importance of finding out what really happened last weekend and what it means for the country. Whatever changes are proposed, they will be substantial enough to require a referendum. Whether a referendum is legally required or not, the people deserve a say in any changes that are made. The sooner the Government gives as much clarity as it possibly can on the negotiations last weekend and the ramifications for the country the better. This is not a criticism. I am just giving a point of view. I do not believe the country can wait until March. President Sarkozy has said he will have his legal advice by Christmas. The Taoiseach says he expects to have legal consultation completed by March. That lead time is too long. I ask the Minister of State to expedite that.
Fianna Fáil supports the introduction of a fiscal responsibility Bill and we support the Bill introduced by Senator Barrett. We state our commitment to such a measure in the National Recovery Plan 2011-2014 and we are committed to the memorandum of understanding. We all want additional transparency.
The Government has established the Irish Fiscal Advisory Council, but the fiscal council has reported only once. It did not even report formally after the budget. In Britain, there is a totally different situation where, as the Chancellor of the Exchequer is delivering the budget, the fiscal council gives a commentary on it. The Irish Fiscal Advisory Council has not even commented on the capital plan. I mean no reflection on the individuals who are members of the fiscal council when I say it lacks the statutory powers required to ensure that its voice is heard. That is why a fiscal responsibility Bill is required. When the fiscal council advised the Government that the adjustment should be to the tune of €4 billion, the Government simply said it did not like that figure and did not accept it. While I accept that the Government's task is to govern, after the budget I would have thought the fiscal council should have reported on the budget, how it will play out and what it is predicated on. The projected growth rates on which the budget was predicated have already been revised downward by the OECD and the ESRI. I believe in what Senator Barrett's Bill is trying to do. That is why I will be voting for it. Until a body is set up on a statutory footing to give it real powers it will not have the required effectiveness. We live in difficult times, and not only in Ireland. It is good to see Irish people taking a broader European and worldwide view of late. That was not the case in 2008 and 2009. The Bill will ensure proper oversight and reporting on our budgets. This is badly needed.
The Minister for Finance has given a commitment that the Government will bring forward a fiscal responsibility Bill. Can the Minister of State tell us when that will happen?
If I were a betting man, I would say it will not be far from Senator Barrett's Bill, which is very well put together. He is a man of immense experience and knowledge in this area.
I ask the Government not to reject the Bill merely on the basis that it comes from the Opposition benches but to allow it to go through Second Stage and propose amendments which can be discussed in the House. The Minister for Finance, prior to the budget and in his Budget Statement, and the Taoiseach, on the formation of the Dáil, both said clearly that politics would be done differently. I welcomed that. They said the views of other people would be listened to. If a cross-party or non-party approach is to be taken with regard to budgetary matters and if the Government is looking for real input and feedback, as I know the Minister of State is, I do not see anything wrong with the Government accepting legislation from the Opposition side, allowing it to move to Second Stage and proposing Government amendments where it wishes. Legislation should not be voted down simply because it does not emanate from Government. This is an important Bill. It is well put together, as was the Family Home Bill 2011. Many Government Senators voted for that Bill but it was defeated by the Government simply on the basis that it had originated on the Opposition benches. We have not seen an alternative to that Bill, even now as we approach the last week of the 2011 sitting.
I urge the Government to accept the Bill. I thank Senator Barrett for the work he has put into it. The Bill makes sense. The Government is committed to the measure. Senator Barrett has behaved in a manner that is fiscally responsible and has saved the Department of Finance hundreds of thousands of euro by producing the Bill himself, as opposed to having departmental officials produce the Bill, which they still have not done.
I agree with what Senator Darragh O'Brien said regarding our colleague, Senator Barrett, bringing forward the Bill. We are lucky to have an academic economist of the stature of Senator Barrett in our midst. The Seanad is a better place for his presence. He is not one of these doomsday economic commentators.
Neither is he one of the fair day economists Before he became a Member of the Seanad, when I read his articles I always thought he was a balanced individual in his thoughts and commentary.
I welcome a Bill of this nature coming before the House. It is unfortunate that we did not have such a measure prior to 2007.
The then Taoiseach would not have been allowed to buy the 2007 election to get his three in a row. He would not have had to send the former Minister for Finance, Deputy Charlie McCreevy, to Europe to get him out of the way. Deputy McCreevy did his utmost to maintain fiscal stability.
The Bill sets parameters which must be met and kept, by this and future Governments. That is why this is very important legislation. Senator Barrett must be commended on that.
I liked the comments of Senator Feargal Quinn. I come from a business background and I am of the same view as Senator Quinn. We have to pay our way. I agree with his sentiments regarding paying our debts. I am not a pyromaniac who wants to burn all around him, to burn the bondholders and do anything but pay our debts. One's standing in society and community goes back to what Senator Quinn said about paying one's way.
I did not like Senator O'Brien's line regarding the Department of Finance officials.
I am pleased to welcome the Minister of State, Deputy Hayes, back to a House where he was a clear and concise performer whose contributions to debate I remember well. I would like to join in the accolades to my colleague Senator Barrett, who is not a Member of the Opposition but a Member of the Independent group. It is a pity that Senator Sheahan could not resist the opportunity to score a couple of political points. It is uncharacteristic of him, but——
Yes, but it was unnecessary because the situation is far too serious and I know the Senator is a serious man with a clear view on the issue.
I share Senator Sheahan's regret regarding Senator Barrett. I greatly regret that Senator Barrett was not elected to the Seanad at least ten years ago. If somebody of his clarity of vision, expertise and technical competence had been elected, those attributes would have been of considerable significance. This is a good day for Seanad Éireann because we have shown through the introduction of this Bill, under the tutelage of Senator Barrett, that we can do profound work. I was unable to attend the briefing but I downloaded the material provided. It was not altogether helpful because it contains some very abstruse mathematical calculations that left me dumbfounded. It seems — Senator Barrett may, if I am wrong, correct me when he makes his final comments — this Bill is an attempt to correct the boom-bust cycle by which politics have been bedevilled.
Senator Barrett puts it very elegantly in his excellent explanatory financial memorandum that economic analysis has also found that election cycles result in fiscal myopia and a lack of internalisation of the costs of budgetary actions over the medium to long term. In other words, political parties serve their own ends and rarely think beyond the next election. That is the reason that five, ten, 15 or 20 year projects have sometimes got stuck in the works. It is because governments have a tendency to look to their own advantage. This is not confined to one party or government but is a fact of political life. In that context, it is extremely important — something I see as a central trend of the Bill — to return these matters to parliamentary accountability. This is vital, because there is a growing lack of democracy in these areas. As I have already said, I found some of the calculations impossible to follow, but I can follow the general explanation, and however abstruse and academic the arguments are, they have an impact on us as ordinary people and citizens.
In the explanatory financial memorandum, Senator Barrett reminds us that the Government has agreed with the IMF that it will introduce a fiscal responsibility law. Therefore, the ground is prepared. We have, as a country, committed to doing this and I believe Senator Barrett has done us a favour by producing this Bill. It is the practice of Government from time to time to accept the principle of legislation and then adapt it. I hope this will be one of those occasions that this will happen. The Government may find, for one reason or another, that it is not prepared to give an immediate commitment on this, perhaps because it needs a Cabinet decision. There has been a practice with previous legislation where a certain number of minutes allocated to the debate are left unused so that Bill remains on the Order Paper. I suggest that since this is such an important Bill, that should happen in this case. Perhaps Senator Barrett should seek advice from the officials of the House with regard to how some minutes may be left unused so that the Bill remains on the Order Paper to be resumed. The number of minutes remaining may be only three or four minutes, but this time can be expanded by direction of the House. I see the Minister of State nodding and I hope it is a nod of agreement and not of somnolence. I hope this will happen.
I fully agree with Senator Quinn's father, whom I never had the pleasure of knowing, that it is important to have the reputation of paying one's bills and being a person of integrity and honour. However, at the same time, one does not want to be a complete fool.
If obligations are imposed upon us from outside and by institutions outside of the State, without the democratic consent of the people, and we are left paying the bills of other people, we should certainly negotiate. I think what Senator Quinn's father was suggesting was that while one should pay one's bill, one should not pay everything that is demanded by a bully. Rather, one should negotiate, and there appears to be the possibility of doing that with this excellent Bill.
Senator Barrett is a distinguished academic and the memorandum was most helpful. The definitions were also helpful, with the exception of a few words, such as "exogenous". Because of my smattering of Greek, I worked out this meant shocks "that occur from outside our control", and he confirmed that. I suggest we should keep the language as simple as possible so that the explanatory memorandum does not need to be explained to a reasonably intelligent colleague. That would be helpful. However, I did understand it, by intuition.
The idea of accountability and preparation for the rainy day is very important, as I said on many occasions during the boom. I am glad, for example, that the Government of the day did put some money aside, into the NTMA and the National Pensions Reserve Fund. I applauded that and asked for more of that because I thought it was good. When the NAMA legislation was introduced in this House, we met into the early hours of the morning. There are some survivors of those early morning meetings here today. Not many people stayed throughout the night, but I did. I remember being here at 3 a.m. and succeeding, with former Senator Joe O'Toole, in having six amendments included in the NAMA legislation requiring parliamentary accountability. I am proud of that, even though it has never been recognised. Seanad Éireann did a good night's work that night, but this has not been recorded anywhere. That night's work is an argument for the survival of the Seanad.
This is a short and clear Bill. Clarity and conciseness are excellent qualities in a Bill and I hope most of this Bill will survive this examination and that the Minister of State will give a commitment to the House that the essence of the Bill will be preserved. For me, the most significant section is section 2, which states the budget shall set forth the indebtedness and continued liabilities of the State, proposed expenditure as appropriations shall not exceed funds, and estimated Revenue receipts will be available for the fiscal year as shown in the budget without triggering a fiscal responsibility statement by the Minister for Finance and the Minister for Public Expenditure and Reform. This is crucial and is what we want.
Senator Quinn, as always, was generous and gentlemanly when saying the Department of Finance does not always get the Estimates right. I would be grateful for an indication of an occasion on which it got them right. I do not recall one, certainly not in recent years. I have watched this over the years. I know producing the Estimates is difficult. It is an art rather than a science, but the Department has often been very wide of the mark. Perhaps this is due to exogenous shocks.
I thank the Chair for the opportunity to address Senator Barrett's Bill on behalf of the Government and to address the House. I congratulate the Senator on the publication of this Bill and on this debate, which is important for all of us. I was struck by what Senator Quinn said about "reputation". The essence of a small, open economy is its reputation. Once a reputation is lost internationally, retrieving it is difficult. A reputation affects foreign direct investment, FDI, banks' capital flows and a country's capacity to extricate itself from a difficult situation. Since last year's bailout, our reputation has diminished extraordinarily. Therefore, the first task of the new Government was to restore that reputation step by step, block by block and brick by brick though discussions with our international partners and the international community at large.
All three of the worst decades in the country's economic history since independence were brought about by horrendous political decisions. The economic war in the 1930s was an horrendous decision by de Valera because it immediately brought to an end our classic economic relationship with Britain. It took us 15 years and the great skills of Lemass and others to extricate ourselves from that no-win situation.
——and Fine Gael and Labour failed in the 1980s to arrest that situation, which continued until Ray MacSharry and Charlie Haughey took the right decisions in the late 1980s with the support of Alan Dukes. Horrendous public expenditure decisions taken in the first decade of this century have left us all in this situation. Inherent in each of these three decades, which saw a collapse in the economy and confidence, were political mistakes.
Undoubtedly, the most pressing issue for each House is how to navigate a way out of the current difficulties. In the Government's view, we need clear fiscal rules to ensure the country regains its sovereignty. As Senator Barrett stated, the fundamental problem we face is a structural deficit, in that we are spending more than we are collecting. One can bridge a deficit for a few years with the support of external partners — we are delighted to have them — but the difference next year excluding banking debt will be €13.6 billion, representing 8.6% of GDP. This is the inherent problem we face. In the view of the Government and the Minister for Finance in particular, clear rules on fiscal responsibility are necessary if we are to chart our way out of this situation and ensure that we never get into such a mess again. This aim is crucial for the country's reputation.
It is the Government's firm view that a fiscal responsibility Bill will be published by the end of March 2012. I can give this assurance as that Bill is a specific commitment under the memorandum of understanding into which we have entered with the troika. We must adhere to the commitment to publish the Bill, but the legislation's passage through the Houses is a matter for them. No international agency, be it the IMF or anything else, could put a gun to the head of either House and tell it when to pass the Bill. Senator Barrett's Private Members' Bill is important in this context.
The Government's Bill will place the Irish Fiscal Advisory Council on an independent statutory basis, an issue about which Senator Darragh O'Brien asked. Senator Barrett's Bill does not provide that basis.
The council will also review the plans set forth by the Government and the Opposition. Fianna Fáil agreed with our assessment that the proposed adjustments to the budget deficit should be €8.6 billion, but its view differs from that of the fiscal council.
The council's figure is more than €4 billion. The second part of the Bill will introduce fiscal rules, which Senator Barrett has set out in his Bill, and give legal backing to binding, multi-annual expenditure ceilings. These are important provisions.
As Senator Barrett knows, the Department of Finance and other Government agencies have done a considerable amount of work on this matter. The Department published a discussion document in March, a successful conference was held this year and the heads of the Bill are being drafted. The discussion document is available on the Department's website and sets out the main heads of the Bill and proposals. On 30 May, the Department of Finance and the Department of Public Expenditure and Reform jointly hosted a well-attended open seminar based on the discussion document.
Separate to the EU-IMF programme, there have been ongoing developments in the area of fiscal governance in the EU, as we are all aware. The initial round of developments culminated in the adoption of the so-called six pack to improve the functioning and effectiveness of the Stability and Growth Pact. The five regulations and one directive that were finalised in November and came into force yesterday have been taken into account in the continuing work on the heads of Bill. For example, key elements of the EU directive on budgetary frameworks are going to be transposed into Irish law in the Government's Bill. These include providing for the establishment of a medium-term budgetary framework, introducing country-specific numerical fiscal rules and requiring annual budgets to be prepared in accordance with medium-term budgetary frameworks. The regulations are already the law of the land and do not need to be transposed into Irish law, but it is critical that the provisions of the fiscal responsibility Bill are fully consistent with them.
As Senators are well aware, the European situation has continued to change rapidly in response to the ongoing euro crisis. The most recent developments came at the European Council meeting last week where euro area Heads of State and Government plus those of most other EU member states committed to establishing a new fiscal rule with a number of elements. Senator Barrett's Bill predates last weekend's summit. While the heads of the agreement were struck last weekend, the legislation's specific proposals will not be worked through until February or March. Much can change between now and March when I hope the agreement will come into place.
Last week's commitment must be turned into an intergovernmental agreement that will be ready for signature in March. The question of whether a referendum is required on the agreement will be decided when it is concluded. The provisions of the agreement would need to be given effect in Irish law through legislation. Given the work already under way, this will probably be through the fiscal responsibility Bill. I am sure that Senator Barrett appreciates that much can change before March, in which case it would be wrong to reach a decision on the matter this evening.
The Bill will provide for the introduction of fiscal rules. The current proposals are largely as set out in the Department of Finance discussion document. Three fiscal rules were proposed to apply in different situations. However, the commitment by the euro area Heads of States and Government has introduced new elements that will need to be taken into account in the legislation, particularly in the design of the fiscal rules that will apply to the preparation of the Irish medium-term budgetary framework and to our annual Estimates.
For instance, the impact of the requirement that general Government budgets shall be in balance or surplus, which will be deemed to be respected if the annual structural deficit, as a rule, does not exceed 0.5% of nominal GDP, will have to be taken into account in the fiscal rules in the Bill. The issue of structural deficits is a complex one and the explanation given by Senator Barrett about them in the explanatory memorandum of his Bill is very useful and timely. Senator Barrett is correct in his view that the focus should be on structural deficits because, as he points out, a cyclical deficit brought about by recessions or below-potential GDP output can be accommodated. In other words, nominal deficits are possible under a balanced budget rule in structural terms because the automatic stabilisers, such as higher unemployment-related expenditure, are taken into account in estimating the underlying structural deficit. Senator Barrett made that point in giving flexibility in the Bill to apply that rule.
However, the estimation of structural budget deficits is complex and difficult for small, open economies such as Ireland because of limitations with the method. For instance, how does one estimate the potential increase in the labour force in an economy that has a common labour market with the UK? Another problem is the huge structural change the economy is going through at present. What is the structural rate of unemployment when the construction sector is downsizing rapidly? There are many limitations in any exercise that tries to estimate the cyclical position of the economy. These technical, but non-trivial, issues will have to be tackled in the negotiations on the inter-governmental agreement in the first instance and then catered for in whatever fiscal responsibility Bill goes through these Houses.
The fiscal rule proposed in the discussion document last March is that the public finances correction rule, or the stormy weather rule, would apply when the general Government deficit is greater than 3% of GDP. The second area was the prudent budget rule or bad weather rule, which would apply when the Government deficit is under the reference value of 3% of GDP and general Government debt is under 60% of GDP but the general Government deficit is still above the medium-term budgetary objective. The third area was the sustainable expenditure rule or the good weather rule. Further thought has already being given to whether the coverage of the proposed expenditure rule should be expanded to include capital expenditure and to how cyclical expenditure should be treated. It is not proposed to include non-voted expenditure in the expenditure covered by the rule. This type of expenditure consists primarily of our debt servicing costs and treaty obligations, such as our annual contribution to the EU budget. It is also likely that the rule will be modified to take account of discretionary tax measures in both directions. If discretionary tax measures increase the projected level of tax revenues, the growth in expenditure may take it into account but the converse would also apply, that is, if tax cuts were leading to lower tax revenues they would have to be taken out of the permitted increase in expenditure.
The discussion document also provided for exception provisions under which the application of the rules could be set aside. Escape clauses in the case of a national emergency or a severe macro-economic imbalance are a common feature of fiscal frameworks. Senator Barrett made that point in introducing the Bill.
I refer to the multi-annual expenditure ceilings. In the comprehensive expenditure report 2012-14 published last week by the Minister for Public Expenditure and Reform, a completely new and reformed system of managing public expenditure was set out in some detail. The new expenditure framework is anchored in a clear, sustainable medium-term plan, setting out the total quantum of public expenditure broken down by current and capital categories and based on the resources that are available. The Government's medium-term fiscal statement of 4 November represents a first decisive step in this regard.
Within the overall spending limits, multi-annual expenditure ceilings have been set out for each Department for each of the next three years. The old, annual Estimates campaign, conducted privately within the system of public administration, is now being replaced by a modern, multi-annual framework that will allow for full transparency about allocations. Crucial to the success of that process, in teasing out expenditure items with Ministers, is a fundamental engagement with committees on the expenditure profiles of each Department. There will be a proper stress-testing of that expenditure, whether it is achieving its objectives and whether it represents value for money and will make a difference. I contrast this with the old-fashioned notion of plus or minus last year's allocation. That is no way to run a modern economy and one of the reasons we are in this dreadful mess is that old-fashioned view of expenditure profiling across public administration. The Minister for Public Expenditure and Reform announced a fundamental reform of how we analyse expenditure profiles here. This requires proper engagement of committees of the Houses to ensure we get value for money.
As required under the EU-IMF programme, the fiscal responsibility Bill will also establish the Irish Fiscal Advisory Council on a statutory basis. The council, which commenced operations in July 2011 on an administrative basis, has the following functions. It assesses the soundness of the economic and budgetary projections and forecasts underpinning the stability programme and the budget, whether the Government is complying with the fiscal rules, and the appropriateness of the fiscal stance adopted by the Government in the stability programme and the budget. The council will be fully independent of the fiscal authorities in the performance of its functions and will be required to publish its assessments. The Bill will not include any sunset clause for the Irish Fiscal Advisory Council. This body is, and will continue to be, a key and permanent player in the reform of our fiscal and budgetary system. Shortly after our election to Government, we set up the council on an administrative basis so that it can be put on a statutory basis when the Bill is through the Houses.
I thank Senator Barrett for his constructive suggestion in this Bill. I am not a Member of this House, I have no vote and no standing here. Bunreacht na hÉireann does not refer to the Government in this House. It is a matter for the 60 Members of this House to determine their views on Senator Barrett's Bill. Sometimes people look to the Government for advice and that is always a dangerous thing. If this debate were to continue in parallel between the clear objectives and constructive proposals in Senator Barrett's Bill and the legislation we will publish by the end of the first quarter of next year, it could be a constructive position to take.
In allowing the Bill to remain on the Order Paper for continued discussion with Senators who may not have had an opportunity to speak today, we would provide the space and time to consider these matters, given the EU context and the degree of change that could occur between now and March. The Government will have its Bill and we look forward to support for that Bill in this House and in the Dáil when it is debated. I do not see any difficulty in having a parallel process in which this Bill can be run at the same time. It is a matter for this House to determine its view on Senator Barrett's Bill but that constructive approach is the one to be taken. This is an issue of crucial importance to this country because the way out of this mess is a totally new way of organising public expenditure and public finances. Fundamental to that are clear fiscal rules on how our economy is governed and how a sustainable economic path can be set out to get this country to a better place. I thank the Senator for his valued contribution and his constructive proposals.
Gabhaim buíochas don Seanadóir Barrett. Is obair thábhachtach é an Bille seo. Mar a dúirt Seanadóirí eile, ba cheart dúinn tuilleadh oibre mar seo a dhéanamh sa Seanad. I thank the Senator Barrett for bringing forward the Bill.
While I welcome the Minister of State's comments about the Government introducing legislation, unfortunately, the last time he said that was during the summer about a Fianna Fáil Bill on the family home, when he said there would be a big announcement before the budget and that Senators would have a free vote. Unfortunatley, the Fianna Fáil Bill was voted down. It would send a huge signal about parliamentary and Seanad reform and democracy if the Government stayed silent on this Bill and did not oppose it. It should be allowed to sit on Second Stage. It is unlikely to reach Committee Stage, but it would put more pressure on the Government to deliver on its commitments under the four year plan, the EU-IMF agreement and the programme for Government. I urge the Government to stay silent and allow the Bill to pass.
It is up to Senator Sean D. Barrett to decide whether he wants to take Senator David Norris's advice, which was to adjourn the debate on the Bill before time was up. He would have to discuss that issue with the Government Whip to see if the Government would be prepared to facilitate this. It would send such a positive message that we were taking our role seriously and doing something constructive designed to help the Government and country while avoiding the disasters outlined. Had the Bill been in place ten years ago and if we had done more of what Charlie McCreevy wanted to do and less of what some of the other voices who are giving out now about the Government wanted, we would be in a far better place.
It is incredible work, but we must make the point about parliamentary reform, that on these issues on which we are not in conflict and not attacking the Government but saving the State money, the Seanad must stand on its own two feet and not force a division on this Bill. It must make a statement of support to the Government but also give recognition to the fact that parliamentarians can come in here and draft legislation, which is our fundamental duty. Whatever way the Bill goes, I urge the Department of Finance to invite Senator Sean D. Barrett in to sit down with them. He might have to give out to some of the officials, but he is a nice man and does it in a nice way, except for students who got into trouble at Trinity College where he was something of a disciplinarian.
I am concerned about the Minister of State's remarks about the rules suggested last Friday for the fiscal responsibility Bill. It seems to be very important we have a European Union Act next March when these rules are brought in, that we do not just start downgrading the importance of events on Friday. What happened was very important; Britain vetoed whatever it vetoed, although I am not clear what exactly it vetoed. That means this arrangement is not necessitated by our membership of the European Union, which would be protected under the Constitution, rather it is an intergovernmental arrangement. Under what was proposed on Friday, the European Court of Justice would be given the status of an adjudicator on whether we had implemented fiscal responsibility rules in accordance with the document at constitutional or equivalent level. It seems we could only do this by way of a referendum and that we could not do it simply by amending legislation. I will challenge that aspect and I am sure I will not be first in the queue in the High Court if the Government decides to implement it without a referendum.
We have concerns about this issue. Senator Sean D. Barrett's notes set out the significant impact a 0.5% structural deficit target would have on the European economy. Officials must listen to those economists who were not listened to before and accept their advice.
We welcome and support the Bill on which we do not want a division. I urge the Minister of State to listen to this point and accept the Bill. Senator Sean D. Barrett must take his own counsel on the matter.
I also welcome the Minister of State and his comments on the way forward with this Bill. There is a mechanism whereby we can keep the door open on it. That is a progressive way to do it.
From a personal perspective, I serve with Senator Sean D. Barrett on the Joint Committee on Finance, Public Expenditure and Reform. He is a credit to this House and that committee. Without being overdramatic, he is not a drama queen of the economics world in the way certain other economists are. I welcome everything he has to say; he is a thoughtful and thought provoking individual who has a great deal of common sense to offer. I would give more than a passing nod to anything he puts before the House. I thank him personally for the work he put into this significant legislation. It should be acknowledged by the House that this is incredible work that he has brought before the House. Not only is the Bill incredible work but the explanatory memorandum is also incredible. Even with the Senator's explanations, I still need a dictionary of economics to dissect the memorandum.
This discussion is significant because it deals with transparency in decision making. Those of us engaged in public life must be conscious that we are standing at a crossroads in political life. Unfortunately, in the past in political life a lot revolved around the lack of transparency and involved clientilism in smoky rooms in which decisions were made in dark corners in order that the ordinary man in the street would not know what was happening. We are, at least, in spite of everything in the current crisis, in a scenario where most people are talking about the decisions being taken in the European Union and by the Government. We have become a society in which economic decisions are not subject of articles on the back pages of The Irish Times but are being discussed in every house. We must move forward in the way we engage democratically with economic thought.
Whatever Bill we adopt, be it the Government legislation in March or Senator Sean D. Barrett's Bill — I hope we end up with an amalgam of the two — I hope we will end up with a much more open, democratic and transparent system that moves away from clientilism and that will allow us to determine the decisions made by parties in certain circumstances. We would then have real choices between parties and policies such as tax and spend. There must not be the under the counter decisions we had in the past.
In response to our Fianna Fáil colleagues' remarks on the family home Bill they put before the House, the Labour Party Senators opposed the Bill, although it had were good aspects, on the basis it had certain fundamental flaws. We asked them to withdraw it and were prepared to come forward with an agreed Bill.
The one point I would make about Senator Sean D. Barrett's proposals is that there is no magic bullet. We can have legislation to deal with the issue of fiscal responsibility, particularly matters to do with counter-cyclical ability. We have tried this historically in EU foreign policy, as well as pricing policy, but no matter how many times we tried to balance the market, we have ended up with lakes, mountains and other indicators of excess. We should not fool ourselves into believing that, regardless of what fiscal stability measures we put in place, we are not dealing with an uncertain world and market. We must take into account that we cannot offer the people false promises. There are measures that are necessary and would give greater certainty to those who require certainty in their lives. However, there is no magic bullet. Irrespective of the measures Senator Sean D. Barrett is proposing, we have learned that, in spite of our better efforts, we have not been able to establish exactitude regarding market equilibrium. I hope we will learn more in the future, but we will continue to live with uncertainty. I again thank the Senator for his efforts.
Mar aon leis na Seanadóirí eile, ba mhaith liom míle fáilte a chur roimh an Bille seo ón Seanadóir de Bairéad. Tuigim an méid oibre a chuaigh isteach ann, ach caithfidh mé a rá ón tús nach bhfuilimid ar an bhfealsúnacht céanna maidir leis an Bille seo. Ní bheidh muid ag tacú leis an Bille, ach i gcomhthéacs na díospóireachta, má tá an Bille seo le fágáil oscailte le plé ar Chéim an Choiste, is fiú an díospóireacht a fhágáil oscailte. Dá bhrí sin, má thagann sé go dtí vóta, bheadh muid ag claonadh leis an deis a thabhairt tuilleadh plé a dhéanamh.
So-called fiscal responsibility and the call for more rigid controls over structural deficits are all the rage these days. It was the logic that informed Dr. Colm McCarthy's slash and burn an bord snip report in 2009. It was also the logic used by Fianna Fáil in its four year plan for so-called national recovery in 2010, the aim of which was to reach a structural deficit of 3% of GDP by 2014. It was the same logic that drove the EU-IMF austerity programme which, building on Fianna Fáil's ill-fated policy, sought to reach the same target by 2015. It is the same logic that underlines the Fine Gael-Labour Party budget for 2012 which, in keeping with their Fianna Fáil and EU-IMF mentors, seeks to reduce the structural deficit from 10% of GDP this year to 8.6% in 2012 and 3% in 2015.
The argument made is very simple: we are living beyond our means and falling tax revenues and rising expenditure are fuelling a debt and deficit crisis that must be brought under control. The solution proposed is equally simple: bring spending into line with revenue through cuts to public sector pay and front-line services and increases in taxes and charges. The analogy of the household budget is the most often quoted simplification. Unfortunately, as the argument goes, politicians cannot be trusted to make the right economic policy decisions. In pursuit of electoral advantage from voters or sectional interests, they become weak and make bad decisions.
They are unable to take the hard decisions required to get the State's finances back in order. Therefore, in the absence of politicians of real calibre, with backbone and determination to do the right thing, no matter how unpopular it is, we need institutionalised mechanisms to save politicians from themselves — enter fiscal responsibility. If governments will not make the right decisions, we need checks and balances to force them to do so.
Senator Sean D. Barrett's Bill is what might be described as a soft mechanism. It would introduce balanced budgets as the fiscal rule — spending should never exceed revenue. It would require the production of a fiscal responsibility statement should a Government break this rule. It seeks to make Governments more compliant with the European Union's Stability and Growth Pact's excessive deficit procedure in order to restore the rule and return to what deficit hawks call sound finances.
Last Friday in Brussels Fine Gael and the Labour Party signed up to what can only be described as a hard mechanism, agreeing to enforce a new and draconian 0.5% of GDP structural deficit ceiling. This new excessive deficit procedure proposes to go much further than the existing Stability and Growth Pact. Both the European Court of Justice and the European Commission are to be given new powers to enforce compliance and, where necessary, impose alterations to a member state's budgetary and fiscal policy. While these two mechanisms differ in detail, they serve the same aim, namely, the reduction of public expenditure. While the narrative proposed by the proponents of so-called fiscal discipline may sound like common sense, it is, in fact, pseudo-economic science mobilised in the service of a regressive and right-wing political agenda, otherwise known as austerity.
The problem is that economies do not operate like households. Fiscal discipline, or austerity as it is more commonly known, does not reduce structural deficits. If Members do not believe me, they should consider the facts. Since the onset of the recession Fianna Fáil, Fine Gael and the Labour Party have drained more than €20 billion from the economy in spending cuts and tax increases on low and middle income earners. Despite this massive adjustment, the underlying deficit has hardly declined. It fell from 11.7% of GDP in 2009 to 11.5% in 2010 and a projected 10.3% this year. By the end of this year the Government deficit is expected to reach €22 billion. However, the advocates of so-called fiscal discipline forget to say that in the past 12 months the Government pumped €20.4 billion into banks, including the first €3.1 billion instalment of the Anglo Irish Bank promissory note.
It does not take a genius to do the maths, given that we have a deficit of more than €20 billion and a bank bailout cost of over €20 billion. Our problem is not fiscal irresponsibility but Government adherence to a failed banking policy that forces ordinary citizens to pay the full cost of the failure of the banking system. I agree with the sentiments expressed by Senator David Norris. I also agree with Senators Tom Sheahan and Feargal Quinn who said it was important to have a good reputation and pay back one's debts. However, I have yet to come across a business which is willing to pay off the debts of another, which is what is happening. We are paying off the bills of others.
Austerity and bank bailouts are the cause of our debt and deficit problem, not excessive public spending. Behind these two policies lies the human misery of 440,000 people on the dole; the 6,000 emigrating every month; the chaos in hospitals; the inequality in schools; the hundreds of thousands of families in mortgage distress; and the hundreds of thousands of families living in poverty or on the poverty line. This is the real human cost of so-called fiscal responsibility.
Are deficits good? They certainty are not. Do we need a credible strategy to reduce our debt and balance the books? We certainly do. However, the Bill before us and the more extreme proposal contained in last week's eurozone deal are not part of the solution. Instead of bank bailouts and austerity — the real policies that lurk behind the rhetoric of fiscal responsibility — we need to argue for restructuring of our debt and investing in jobs, as detailed in Sinn Féin's fully costed pre-budget submission released last month. Debt sustainability and economic growth are the keys to sound finance, not excessive deficit procedures and arbitrary deficit ceilings.
We will not be in a position to support the Bill, but we appreciate the work Senator Sean D. Barrett put into it. It is important that there be extensive debate on these issues and we would like to bring our viewpoints to the table. We certainly will not block the Bill proceeding to Committee Stage. Therefore, we will abstain in a vote in order to allow the debate to continue.
I thought I would contribute to the debate on the Bill which represents such an important part of everything we do. Everything we do in this House should be based on the objectives behind the Bill. Fiscal responsibility is the aim of everybody elected to this House, of everybody who is not elected to it and of those behind the Members elected. This gives us the opportunity to put our best foot forward and say where we see good and where we see things that should be supported.
The Minister of State has said the Seanad has responsibility for its own actions. I have a few questions for him. He spoke about the Fiscal Advisory Council which we know is an independent body. I presume this would prevent a person such as Senator Sean D. Barrett from being nominated or being an adviser to the council. However, although the Senator has been elected, he is an Independent and his expertise in the Bill demonstrates he has valuable knowledge that might be of advantage to it. He would be seen to be independent because a Senator is not elected as an Independent unless he or she is independent.
Section 7 of the Bill refers to keeping within the limits, except "in extremis". What the Minister of the day might regard as extreme might not be extreme in the view of the general populace. I do not know who would determine what would constitute extreme conditions. We are currently experiencing extreme conditions.
I read the explanatory memorandum in an effort to find out where in the Bill reference was made to what had been agreed with the European Union. It states a reformed budget formation process should be put in place. The Minister has stated the Government will bring forth legislation in this regard. I wonder whether it would be possible to incorporate in Senator Sean D. Barrett's Bill the need to take into consideration what is coming down the road in the European Union. We do not yet know what has been agreed.
The Minister of State, Deputy Brian Hayes, referred to the stormy weather rule. I do not know what it is. We are in stormy waters and I would like to know what the rule is. It might perhaps be incorporated into the Bill.
I propose that the Bill be reviewed and that its best pieces be incorporated into the Government's Bill. Perhaps, just as an asterisk denotes a Government amendment to a Bill, a square box might be used to denote a recommendation made by Senator Sean D. Barrett which the Government is prepared to accept. This would be an indication that the Seanad works. There is expertise in this House which should not be ignored in the way the Government ignores legislation introduced by individual Members. I propose that the Bill be allowed to remain on the Order Paper as a mechanism to assist the Government.
I was a little surprised to hear Sinn Féin was not supporting the Bill. However, I note it has not brought forward a reasoned alternative, other than to ask from where the money will come from. This is pseudo-economic science. Money must be available in ATMs and people must be able to pay their bills. Senator Trevor Ó Clochartaigh has not suggested an alternative.
I welcome the Minister of State back to the House. On the last occasion I spoke to him in the House we were dealing with Fianna Fáil's Bill on homeowners in mortgage difficulty, at which time I suggested there was a wink and a nod that the Bill was worthy of progression. I regret his colleagues did not take the hint and that the Bill failed to receive support. Despite promises made at the time that the Government would bring forward a Bill to support people in financial difficulty, nothing has happened.
The Taoiseach, when in opposition and during the election campaign, promised that things would be done differently in terms of supporting Bills tabled by the Opposition that had merit. We have before us a Bill, not from a political party which could be accused of tabling a Bill for political gain, but from an esteemed lecturer in one of our best universities, yet it, too, despite huge praise and offers of support from the other side, will be voted down by the Government with, of course, a promise that it will bring forth a Bill which will introduce many of the measures proposed in it. It is ironic that, despite that many Members opposite are speaking in support of the Bill, one which it cannot be suggested is being introduced for political reasons, Senator Sean D. Barrett's Bill will mostly likely be voted down by the Government, which offers an example of just how dysfunctional is our democracy. The Senator has put enormous effort into putting the legislation together. He is, I hasten to add, probably more qualified in this area than anyone in the Minister of State's Department. We must wait not for elected representatives to bring forward a Bill but for public servants to do so. We do not know when this will happen, although we are promised it will happen soon. However, we were also promised that legislation to assist mortgage holders in distress would be introduced before Christmas. That was the promise made when Fianna Fáil's Bill was voted down.
There are plenty of measures contained in the budget. While I do not suggest Fianna Fáil's Bill was the panacea for all mortgage problems, had it been greeted with the chorus of "there is merit in some of the proposals which can be rectified on Committee Stage——
I am glad to have obtained the learned opinion of Fine Gael and the Labour Party. I could be wrong, but amendments are made to most Bills as they progress through the Houses because they are not as good as they should be, including Government Bills.
I thank the Senator for pointing that out to me. We are now being promised the same on this Bill. It is not Senator Sean D. Barrett who will be writing our fiscal responsibility legislation. There is no doubt that it will be written by civil servants in Germany and elsewhere in Europe. I look forward to its introduction. It was said to me today that if some of it were to be written in German, some of my colleagues opposite might think it was in Irish. I am sure that when it is brought forward, our colleagues opposite will wholeheartedly support it and that the sections of this Bill supported by colleagues opposite will not be included, in respect of which they will receive briefings from the Fine Gael and Labour Party offices on the reasons they were not included. No doubt, the Bill will be considered to be fundamentally flawed.
It is great that the advice of the Attorney General will be sought.
Fianna Fáil will be supporting this Bill. There is no one more qualified in the Houses of the Oireachtas or any Department than Senator Sean D. Barrett to bring forward this legislation. It is regrettable that the Government has seen fit, while applauding some of the measures contained in the Bill, not to support it.
I compliment our esteemed colleague, Senator Sean D. Barrett, on bringing this important Bill before the Seanad. I compliment any Member who introduces a Private Members' Bill, a it is a difficult task. The Senator's expertise shines through in the Bill before us.
I was astounded by the contribution made by the previous speaker, Senator Mark Daly. He came into the House at the end of the debate and suggested the Government would vote down the Bill. Had he been listening to the debate, he would have realised that Government Members do not intend to vote down this worthy Bill, as they strongly support many aspects of it. Moreover, they are willing to allow it to remain on the agenda and on the Order Paper, with the permission of Senator Barrett.
The Minister has responded generously to Senator Barrett on the matter and it ill-behoves a Member to come into the Chamber and make accusations about what this side of the House will or will not do when that Member obviously has not followed the debate for the past two hours, unlike other Members.
—— that he has come into the Chamber to try to score political points towards the conclusion of a very good debate. It was a debate during which most sides of the House were fully in agreement and it is irresponsible of Senator Daly to introduce this note of discord by making these remarks at the end of such a wonderful debate.
I have listened to quite an amount of the debate on the monitor and it has been good, constructive and positive. This is needed because the difficulties we are in, some of which are domestic and others of which are global, have their genesis in a failure of regulation and a failure to have in place effective medium to long-term good, intuitive fiscal policies. Countries right across Europe, as well as the United States, are displaying serious issues from which it will take considerable ingenuity to extricate themselves. I have been concerned for some time that our political systems are not up to the challenges we now face internationally. I recently spoke to a diplomat from the German Embassy on the question of whether anyone in the last decade, until about two or three years ago, could have envisaged a scenario in which one contemplated the possible abolition or collapse of the euro, which in turn might trigger a collapse in the European Union. I went a step further and wondered aloud what it might do for democracy. Democracy itself is in the spotlight and is being tested by what has happened. When one considers some of the centrally managed economies, China in particular, but others such as Indonesia and the BRIC economies, there has been a shift in the relative global economic status that has obtained for the past century or thereabouts. Someone once told me that China was the leading economy in the world at the end of the 18th century and into the 19th century. It was only with the emergence of the United States subsequently and the Communist revolution in China that it declined.
As for our political system, I will reiterate a point I made in this Chamber previously. This is not a partisan point but 15 people out of 226 Oireachtas Members control all the decisions made. When I sat on the Government benches, effectively I only bucked the whip once. One goes with the whip and the Members opposite have been doing so since they went into government. Moreover, Members on this side do so in opposition and the same practice operates in the Dáil. I consider this to be a corruption of the checks and balances that should exist in this system. Rather than looking at piecemeal populist measures, root-and-branch analysis of the entire democratic system must be undertaken in Ireland and in other countries to establish what can be done. I have come to the conclusion that there must be a complete separation of the Executive from these Houses to enable the Houses to function independently and to be more strenuous in holding the Executive to account. This would be good for the Executive and it is akin to the position in sport whereby coming up against a good player or team brings out the best in one. It is the same in politics and my concern is that this has not been happening. Moreover, this is not limited to Ireland. I recently met a parliamentarian from Greece who holds an international position and we discussed the direction taken by the European Commission and European Union and how all the focus has been on Germany and France and in particular, on the leaders of those countries. He said they wanted to lead but to be able to do so, they must be able to tell people to where they are leading them and they do not know. The same thing is happening in the United States and Members should consider the present levels of partisanship in Congress. I refer to the difficulties experienced, which had an international knock-on effect at the time, when trying to come to some form of agreement between the two parties on coping with that country's serious debt issues.
I will reiterate to the Leader a point I made in this Chamber previously. This House is at its best in debates such as this debate, today and on other days and that is its function. I have suggested to the Leader and the Cathaoirleach that Members should invite to the House people of the calibre of Nouriel Roubini, an internationally-recognised economist, or Roberto Newell, who as a director of Smurfit Kappa would be accessible and who was involved in the banking crises in three South American countries of which I am aware. By so doing, Members would open their minds to a range of things they must do. In this regard, I compliment Senator Barrett on introducing this Bill because one measure that must be taken in Ireland is the introduction of absolute transparency. I would go further than transparency but the Bill under discussion refers to transparency and perhaps that is as far as the House can go under the Constitution.
On the introduction of a deficit budget and in particular, once a structural deficit as mentioned here today many times has been identified, it should be accompanied by an analysis as to how it is to be corrected. I recently attended the Georgian parliament in Tbilisi while its Minister of Finance was before the House. He was explaining to the Parliament, in respect of some of the measures he was taking and deficits he was introducing, how he intended to eradicate them over the following 12 months. Moreover, he was asked strong and incisive questions as to how he would do that and we need to do the same. However, the political establishment here does not have the expertise. Obviously it was lacking in the Department of Finance and certainly it did not exist in the Central Bank or the office of the Financial Regulator. It is only by exposing ourselves to such international expertise and then putting in place the requisite disciplines that we will ensure this does not happen again. I acknowledge that this does not deal with the issue of how we can extricate ourselves from our present position, which will be a major challenge.
I followed with interest what went on in Brussels last week. It was interesting to read of the penalties that emerged that would apply to countries that would contravene the regulations in place and will be and should be put in place in future. Missing from those regulations was one stipulation I would love to see. As a long-time politician at local level and in this House, I acknowledge the need to place disciplines on them. In this context, I would welcome a condition whereby the introduction of a deficit budget in excess of a certain percentage of GDP must lead, within 120 days, to a general election. Nothing focuses the minds of politicians like facing a general election. However, politicians need disciplines.
I thank all ten Senators who contributed. I also welcome the Minister of State. He heard a wonderful debate this afternoon and we have them quite regularly. I hope he will communicate to anybody in authority who might ask him that the Seanad is a wonderful and most meaningful place where all sorts of ideas——
We put on a special performance for the Minister of State this afternoon. I thank all my colleagues for their comments. Some of the compliments were fulsome. They reminded me of something Dr. McDowell of TCD said when he attended a funeral and listened to the eulogy. He said: "I must be at the wrong funeral because I knew the diseased".
The Fiscal Advisory Council already has a Barrett serving on it and there is not a need for it to have two. Alan Barrett along with John McHale, Donal Donovan, Róisín O'Sullivan and Sebastian Barnes of the OECD most ably serve on it.
I thank the Minister of State for his response. I note he will bring forward legislation and that he is engaged in genuine dialogue most thoroughly on the points we covered here. I hope the Bill he brings forward in the first quarter of next year will correspond to the requirements of my Bill. We will also engage with the Fiscal Advisory Council through the finance committee as Senator Hayden mentioned. We had a meeting with the representatives of the troika during their visit here in October. We are ad idem in pressing forward with this important measure because nobody wants to be in this situation ever again. I will not be pressing the issue at this stage.
I hope I have not used up the four minutes allotted and that there is time remaining for this debate to continue in the spring. This debate has been more valuable and it is vital. The IMF probably overlooks Parliament. We have a huge role to play in getting this country set up again. We have always assured all the reforming Ministers who have come here that this will be one of our functions. We are assisting the Minister, Deputy Reilly, on some health issues that arose in the Milliman report and the Minister of State, Deputy Ring, on tourism matters. We will help where we can because we all have the one goal which is to ensure that this country could perform, for example, like Sweden. Senator Ó Clochartaigh was a bit pessimistic. Sweden has a nominal growth of 5% per annum and a gross debt of 36% of GDP and it had a strong fiscal council. Let us set that as our target and all work together.
I thank everybody, the Cathaoirleach, the Leader, the Bills Office who helped us, and Dr. Charles Larkin, my assistant, who did much of the research on it with the younger economists. I believe the Minister of State will find as he reaches out to them, they will be more than pleased to assist the Government in any way they can to have fiscal responsibility enshrined in legislation in rules with openness before the Parliament and Parliament fully participating. It was the closed system, as several Senators said, that got us into so much trouble. We are in the great tradition of Burke, Grattan, Daniel O'Connell and Parnell. We have done a lot in Parliaments and restoring the economy of this country is a task which this Parliament should embrace.