I wish to put four or five questions, although I might have more. I am unhappy with the Governor's comments on dealing with people's personal debts and mortgages. I am annoyed by the Government's delay on this issue. I do not accept that finding a solution is impossible. A range of solutions that can be matched to different people will be necessary.
Given banks' access to our details, from credit and Laser cards to everything we spend, it is possible to see who is in trouble. If I am wrong, the Governor can correct me. He is trying to avoid a moral hazard, in that helping some people will cause other people to throw in the towel as far as their mortgages are concerned, but we must accept that this problem will not go away. We are more than two years down the road and we still have no solutions. A 12-month moratorium is not a solution. The markets are concerned that we are not providing solutions and that we are hoping the problem will go away, but it will not go away. There are various concerns about how large the problem is, although the Governor is in a better position than most of us to know exactly how large it is. The Government committee must come forward with a range of solutions that can be adapted to the needs of different people because this situation will not go away. In general, it is about mortgages and homes that are going to pass through generations in families. There are options for dealing with this - parking debt might be one but there are others. Imagination must be applied. There will be a cost to Government in any event, either through the banks which we more or less own anyway, social welfare, or through the housing budget. If one losses one's house one must have another house which will be paid for by the State. Let us look at the spend on housing, therefore, and see whether we can solve it using imagination. In addition, there may be a way of packaging a product so that private investors could buy a share of people's houses. There have to be solutions; I do not accept there are none.
I understand the situation is complex but it is no longer good enough to say merely that it is complex. We are two years down the road and there should be ten options for dealing with it. The markets will expect to see them because they are concerned about the problem. In addition, there is a moral need to help people who are under serious pressure. We are doing a disservice to people by not finding solutions.
I have referred to mortgages but we must also consider the short-term debts of people. There are many people who have such debts of €30,000 or €40,000, perhaps even more, which are costing them a fortune. I hope the Governor, through his position, will be able to work with the banks on developing financial products to solve that problem. If a person has two credit cards, a bank overdraft, a credit union loan and so on, all at 10% in interest or more, it costs a great deal of money to service those debts. There is a duty on the State and the banks to come together and provide a product that will ease that pain. I do not mean debt forgiveness but a way of spreading the cost over a longer period. There are two reasons for doing this: first, people need it and, second, the economy needs it so that people will begin spending again. It is not good enough to say the situation is complex. I realise that Professor Honohan is not a politician or a Minister but we get the same answer from Ministers and it is no longer good enough. I am sorry. That was a separate matter from my questions but I am annoyed by the attitude taken to this problem because it is very serious and yet has been ignored for so long. It must be dealt with.
I have some specific questions. I understand Professor Honohan commented on the IMF today, to the effect that it might not be necessary to bring it in and that any measures it might take would not be very different. Was that what he said? If so, will he elaborate on those comments? Some people assume it would be great to bring in the IMF. I do not agree with them but they have the impression the IMF would solve some of our problems.
Regarding our national debt, my colleagues spent much time trying to identify a sustainable interest rate. Some of our existing debt was at low rates but this will have to be rolled over in years to come. From 2014 or 2015 onwards a lot of debt must be rolled over and reissued. There is a concern it will become unmanageable if the interest rates remain too high in four or five years time. The planned interest bill for 2014 is already €8.5 billion but that was when some of the yields were 6%. I know the Governor hopes that with four-year plans and so on we will reduce that yield but it is a concern. My concern is about what will happen after the four-year plan and the debt arrears that will have to be rolled over.
Professor Honohan stated the banks have not recovered the confidence of the markets and that the impact on investor confidence is not yet as strong as might be hoped. Does he see that improving in the near future and, if so, when? As my colleague, Deputy Mitchell, noted, since April the banks have not been able to get money in the normal market. When will that situation change?
Professor Honohan stated that the managers of the public finances, namely, the Government, were lulled into a false sense of security. I find that a very soft comment. Health expenditure went from €5.3 billion to €15.3 billion in eight years. Social welfare went from €6.8 billion to €17.7 billion in the same period. Education went from €3.7 billion to €8.4 billion. There were massive increases in spending that were not sustainable and about which the Government was warned numerous times, budget after budget, by many people. Those concerned were not lulled into anything. A decision was made to increase spending massively. Anybody with a financial background should not have let that happen but it happened. It was not a question of being lulled into it. One does not proceed in jumps or increases of 150%, 160%, 120%, 187%. Decisions were made to spend that money and it was not sustainable. There are people who made personal decisions to borrow money, buy houses, or whatever, based on their Government job, a low-tax economy, or whatever. They made decisions because they were led into them. They were lulled into it, all right, but that is different. Now those people will suffer greatly during the coming four or five years when we make the adjustments to the finances. It was private individuals who were lulled.
Professor Honohan mentioned that many small businesses are under pressure because of property debt tied to the business. Does he have a solution to untangle that or is he satisfied progress is being made in that regard? I agree with him this is an issue. Many small businesses that might have survived will go under if we do not deal with that issue. The head of the credit review committee who attended this committee agreed there might be a need for a national recovery bank, or that such an idea might be considered. Fine Gael's belief in that regard is to get credit available to small businesses. His logic was different. He believes there might be a lack of competition left in the banking market if there are only two or three main players. Professor Honohan referred to three banks being essential but in reality we may have only two players. Does he see a need for a State recovery bank for a period in order to deliver money to small businesses?
In regard to NAMA, I am glad the Governor said what he said, namely, that many of the big guys were able to insulate themselves and distance themselves from their debts. I believe that too and have persistently asked the Minister about it. We are told that all personal assets of those bound up in NAMA will be chased and taken but I do not believe that is legally possible. The Governor made the same point. Is there much debt that is so very much separated from the original person who took it out that we will never get it? Is it the case that some of the figures in NAMA will not add up because of that? Is the amount significant?
We changed the threshold of loans being transferred to NAMA from €5 million to €20 million and so the banks have kept them under €20 million. How healthy are the loans in that bracket? It might be of concern to the markets too, that there is an issue about which we are not sure. I questioned the regulator on this matter as well. I ask Professor Honohan to outline his concerns about those loans.
The chairman of Anglo Irish Bank commented recently that there might be a need to see other banks introduce the good bank-bad bank scenario whereby they too would have their own little management asset agency within the bank. I do not believe that to be the case. What does Professor Honohan think? Are AIB and Bank of Ireland considering such a scheme to deal with loans under €20 million?
There is a question I have asked all delegates to this committee. Do the banks have the skills to deal with the current set of problems? I am not convinced they have. If not, what can be done to give them those skills? Many people, especially small business people and others with debts, are feeling the brunt with unskilled staff constantly telephoning and chasing them without being in a position to deal properly with them. That is causing major problems. I believe I am right about that but I would like to hear Professor Honohan's opinion.
I shall leave it at that. There are other questions I would like to ask but I do not want to go on too long. I have one final point. The Government has spoken of plans to take a holiday of a couple of years on interest payments on the promissory notes. What does Professor Honohan think of that? Is it wise? It is only deferring the problem for a couple of years. The Governor might comment unless it is an area he does not wish to cover.