“Two aspects of our
ongoing problems with the banks merit attention. The first is the painfully slow
process of determination of what went wrong and whether, and to what extent, any
criminal act was committed. The reasons for caution are clear, i.e. the need to
ensure that individual rights are not trampled on, verification that laws have
been broken, and that any case that might be brought should be as watertight as
possible. Unsurprisingly the slow pace has been much criticised and contrasted
unfavourably with the speed with which the US authorities are perceived to have
acted when confronted with white collar crime. The wheels of Justice, Irish
style, are seen to move at their own slow pace.

The second aspect is more
worrying. It is now over two years since the banking collapse, a period which
has seen a stream of revelations regarding the behaviour of certain banks and
bankers, as well as spiralling costs to the taxpayer of sorting things out. Some
types of behaviour may eventually be determined to have been illegal, others to
have been merely unethical. Yet there is no sign of any legislation being
prepared or introduced to tighten up the law or to criminalise and/or establish
penalties for doing the same things again. There is a strong case for
introducing new or amending legislation now to remove any doubt about the
permissibility of similar actions in the future rather than awaiting the outcome
of the ongoing slow investigations.

There is a particular additional need
for some action now. This is to give reassurance to the public that the
government is in charge and that, whatever about the past, any future wrongdoing
will be transparent and will not go unpunished. This would represent not some
populist gesture to appease public opinion, but rather a confidence building
measure at a time when much is being demanded of the public to help put the
economy to right.

For there is anger out there, and not just among those
who have lost their jobs or who could lose their homes. There is anger at the
realisation that our recent prosperity was temporary, is now gone and a feeling
that the public were deceived about this.  We were never one of the richest
countries in Europe, as some politicians had us believe. Fianna Fail is the
target for not shouting “stop” as the property frenzy unfolded and as having
exaggerated our economic wellbeing (but in truth what government would have
cried wolf?). There is anger also, separately at the banking fiasco and the
government’s perceived mishandling of it. Declaring “never again” and backing
this up with appropriate legislation would help.

There are times when
this government seems loath to take any action whatsoever on particular issues
where there is an obvious case in common (and political) sense for doing
something, however small. One such issue concerns energy prices, where our
electricity costs are already among the highest in Europe. In the current
economic climate, where businesses and the public are pressed for cash, the case
for not allowing things to get worse is overwhelming. Yet this year a “carbon
tax” was introduced several months ago, impacting on all fuels, to be followed
from October 1st by a 5% increase in electricity charges – to help subsidize the
development of non-carbon based energy! Surely in the current climate this could
have been phased in over several years. Again, in the hospitality area,
officials are forcing compliance with legislation dating from the 1940s (i.e.
before the flood) requiring restaurants to pay employees double for Sunday work at a time when our wage costs are
seriously out of kilter with competitors. Some restaurants have simply shut on
what was one of their busiest days.

In recent years much regulation has
been hived off to various quangos, euphemistically entitled regulatory agencies
(the energy regulator, the financial regulator, the aviation regulator, etc.)
and separated off from the relevant government department. Given the particular
clouds over the financial regulator’s office in the wake of the banking fiasco,
it is understandable that the government will tread warily where others are
concerned, particularly where the agency is seen to be pursuing its duties with
zeal. Nevertheless there is surely need for some mechanism for interaction
between a minister and a particular quango when the public interest is involved,
rather than just a hand wringing declaration that nothing can be done. After all
the government has been elected to govern and this includes taking decisive
action where necessary or desirable. There are precedents (dismissal of the RTE
authority comes to mind). Even an informal communication system would be better
than nothing provided the public were made aware of it.

This is all the
more necessary for the government – any government – to help enlist public
support and acceptance for the harsh economic measures in prospect. The past
weeks have seen clarification of where Ireland stands economically. It is not a
pleasant picture. Firstly, it has emerged that we have given promissory notes of
up to $65 billion, to be paid over 10 years, to pay for the banks (much more
than earlier estimates  though it could be less if the commercial  property
market recovers). Secondly, thanks to the collapse in tax revenues, our income
is currently two thirds of our expenditure. While this has been apparent for
some time, and has nothing to do with the banks, the unpleasant facts have now
been spelled out by our friends and creditors in terms that even the most
dim-witted can grasp.

We simply cannot afford our current standard of
living. The cost of borrowing to keep afloat has risen to dangerous levels.
There must be cuts in services and welfare payments or tax increases or both.
The government has been told by Brussels, which is now propping the economy up,
to produce detailed plans for cuts and taxes for the next four years, in advance
of the December budget. Even with an election in the offing, the opposition
parties are snookered; if elected sooner rather than later, any alternative
government will have its fiscal hands tied.  The days of campaign promises, of
buying support through the promise of largesse, is over.

Separating out
the hysteria, what lie ahead are probably four years of increased and new taxes,
combined with significant reductions in social welfare payments. The situation
is serious, particularly as we face a short term liquidity problem, but not as
serious as in the 1980s. So, though there will be much pain, it should be
possible to keep real hardship to a minimum (and even a modest easing of the
fiscal situation should permit the government to assist those in clear need).
Barring a worldwide recession, when the dust has settled, around 2015, we will,
as a nation, be considerably better off than we were even 10 years ago, though
disposable income will probably be below the heady levels of five years ago.
There are still numbers in denial but by and large the public now accepts this
as the reality. Some simple steps to build public confidence could boost morale
and greatly enhance the prospects for, and the speed of, recovery.”


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