In a week dominated by Budget 2014 and its implications, it’s good to have a time for reflection over what has happened to this country in recent years.
In recent years, Ireland as a country and we as a people have been forced to question ourselves and our institutions in a most fundamental way. Trust is central to any well-functioning society. In many respects trust has been broken in Ireland.
Politics, the Catholic Church, many of the professions, the media, have all been undermined by failure and scandals. Trust is very easily broken, but once broken, is very difficult to restore.
We made a serious mistake in Ireland when we gave so much unfettered power to so many people and institutions. In some respects Irish people were too trusting, too loyal, too unwilling to question.
If we are to restore a reasonable level of trust in Irish society it will need to be based on stronger foundations than in the past. Part of our responsibility as citizens is a requirement to actively engage in the civic and public life of our country, to have a questioning attitude and to welcome open and honest debate. Institutions and individuals must be held to account. “Systems failures”, is something of a cop out frankly.
In addition to the breakdown of basic trust, the banking collapse and the national economic crisis which followed exposed major weaknesses and failures in politics, public administration and regulation. It became obvious that many of our institutions and practices were not fit for purpose. Confidence in the basic capacity of the State was undermined.
Darwin said that it wasn't the brightest who survive, but rather those who showed a capacity to adapt. As we move from a broken economy to a restored economy, adaptation is the key commodity. Adaption of our politics, adaption of regulation, adaption of the banking culture and adaption of the professions who work through all three.
There can be no going back to the way we were. This Government was entrusted by the people to restore stability and security and to rescue the country from a very serious situation. It’s a matter for others to say how we have done. Ultimately it is a matter for the people to judge.
This task is not confined to Ireland. We are part of the European Union and the Eurozone. As well as capacity building in Ireland we also participate in institution building in Europe and in making the European Union more resilient and more responsive to a world where rapid change is the new normal.
And this week, Budget week, is an opportunity to reflect on what has been accomplished in one specific area – fiscal and budgetary policy. The structures put in place: the Economic Management Council, the Fiscal Advisory Council, the establishment of a separate Minister for Public Expenditure and the reorganisation of senior levels of the Civil Service have all contributed to better management of government finances.
We need to do more - by involving the Dáil more directly in the budgetary process from start to finish. Crucially the Dáil needs to assert its independence over the executive and the executive needs to far less centralised in its approach to policy decisions.
The unprecedented financial crisis which has gripped the State since 2008 has required an equally unprecedented legislative response. The Constitution explicitly permits interference with property rights where necessary in the common good. Since the crisis began, where there was an overwhelming necessity to take measures to address the financial circumstances, it was constitutionally permissible to interfere with property rights to a greater extent than would have been possible in more ordinary times.
The various pieces of “Fempi” (financial emergency measures in the public interest) legislation, which imposed various reductions on the pay and pensions of public servants, politicians, those providing contractual services to the State and the judiciary, are a good example of this. There would have been less constitutional scope for the alteration of the terms and conditions of various contracts which was effected by that legislation if it had not been an economic necessity to do so in the public good.
As well as legislating to address the imbalance between receipts and expenditure a suite of legislation has also been introduced to address the financial sector in particular. This commenced with the bank guarantee legislation in 2008. What followed was a huge consolidation of legislation in the financial area. This legislation has included:
· The Anglo Act in 2009, which nationalised Anglo Irish Bank,
· The NAMA Act in 2009 which established NAMA and provided for the acquisition of land and development loans from certain systemically important financial institutions
· The Central Bank Reform Act in 2010 which provided for the reform of the Central Bank and introduced a “fitness and probity” regime in respect of those involved in the management of financial institutions.
· The Credit Institutions Stabilisation Act 2010 or “CISA” which provided for resolution tools to restructure certain elements the financial sector and which provided for the subordinated liabilities order which facilitated the recovery of circa €4 billion from subordinated bondholders.
· The Credit Institutions Resolution Act 2011 (or “CIRA”) which provides for a steady state resolution regime and to apply to all credit institutions and Credit Unions.
· The Personal Insolvency Act which reformed the antiquated bankruptcy laws and which provided alternative debt resolution mechanisms to persons unable to meet their debts as they fell due, without requiring bankruptcy.
· And the Supervision and Enforcement Act which provided a suite of regulatory powers to the Central Bank of Ireland to help prevent a recurrence of the banking crisis in the future.
· Finally, the IBRC Act in 2013 provided for the special liquidation of IBRC and provided for the mechanisms to enable the promissory notes in IBRC to be exchanged for long term sovereign bonds, resulting in a cashflow benefit of around €1 billion per annum for the coming years. It is to be hoped that this legislation, together with the forthcoming exit from the Troika bailout, will underscore the turnaround in the economic cycle.
The Government is also pursuing a comprehensive programme of public sector reform to ensure that the public sector is capable of meeting the challenges ahead. But given the scale of the crisis it is necessary that all our institutions are fit for purpose. Professional organisations are no exception. If anybody thinks that the era of self-regulation served this country well, I would just say two words – Priory Hall.
The legal profession and the provision of legal services must also be part of the reform agenda. The Minister for Justice, Alan Shatter, is pursuing the legal reform agenda with vigour. Reform and change is not just for the public sector. Coming out of this crisis requires that all bodies and institutions in Ireland critically consider their role in Irish society.
And let me conclude by making this point. Ireland is a small country but to paraphrase the words of W B Yeats: “We are no small people”.
But we must remember this – nobody owes us a living. We have to look out for ourselves and if necessary fight our own corner. And if we allow ourselves to become vulnerable there will be plenty to take advantage of our weakness.
As a small country we need to be smart, we need to be versatile, we need to be resilient. But above all we need to be able to read the geography and environment of our times and adapt and change in order that we may survive and prosper.
At the beginning of last year most national and international commentators were confidently predicting that Ireland would not exit the bailout programme and would most likely default and need a second bailout. They were wrong. Thanks to the patience and resilience of the Irish people we will be the first of four programme countries to exit the EU/IMF bailout. Once out we must stay out.
Persistence, hard work and determination have brought us to a better place. Conditions are being created which will allow this country to come back from a terrible place. The government hopes that the raft of new legislation, which had to be enacted amidst enormous pressure, will help create a new era of personal, regulatory and corporate responsibility.
The primary law in this area has been radically altered. This backdrop will I hope, give us the confidence to spur on a new period in our economic history, where the boom to bust cycle of economic madness will be forever replaced by sustainable economics.