I welcome the opportunity to support the motion of confidence in the Taoiseach and the Government. Needless to say, it is disappointing that we have to dedicate Seanad time to have an unnecessary confidence debate on a day when we should, in fact, be debating the Regling-Watson and Honohan reports, the findings of the Saville inquiry or getting on with the work of placing Ireland on a path towards sustainable economic growth. That said, the motion provides the Government with an opportunity not only to set the record straight, but also to reaffirm its commitment to aid recovery. What we have in mind is not recovery in the opinion polls in the short term but real and lasting economic recovery, on which the people will pass judgment in the only poll that counts in two years' time.
The truth is that we are operating in a period that presents a grave challenge for the country, the currency, the European Union and the global economic system. This is a time in which the capacity to sustain confidence abroad is just as important as the ability to deliver the correct policies at home. The people know that Ireland is now on the right path, but they also know that we still have some distance to travel. To make the journey safely, the country needs steady, determined and calm leadership. The Government, under the leadership of the Taoiseach, will continue to provide the necessary leadership.
Rather than addressing issues, regrettably, the debate has been personalised to the point where it now a motion of confidence in the man who in the past two years has led Ireland through one of the most difficult and challenging periods in its history post-independence. The capacity of a Taoiseach to lead a team of Ministers, particularly a team formed from a coalition of political parties, and through that team a country, is best tested in periods of significant challenge when difficult choices have to be made. The capacity to provide leadership demonstrated by the Taoiseach in this regard in the past two years is without precedent. It is evident in his ability to understand the silent majority and appreciate the importance of leadership to "bring the people with you" in order to achieve enduring change and progress.
The Taoiseach has mapped out a course for the country that will not just see it recover but also ensure it will achieve long-term and sustainable growth. The actions taken to stabilise the public finances, restore competitiveness, rebuild the tax base and repair the banks run in parallel with a strategic vision for the development of a smart economy. Investment in critical infrastructure, job creation, education and the productive sectors has been prioritised. In the past week crucial progress has been achieved in the reform of public services.
I make this point, not to ignore issues that have prompted the motion, but to highlight the reality of where we stand today. The Government, under the leadership of the Taoiseach for more than two years, has demonstrated a capacity to implement difficult but necessary policies at home and sustain international confidence abroad, as affirmed by fair-minded observers both inside and outside Ireland. While there are significant lessons to be learned in the path taken by the domestic banking sector in the previous decade, they are lessons for all of us. Support for the economic orthodoxy of the day was either explicit or implicit across most parties in the Oireachtas. The proof is available for all to see in election manifestos. It is there in the many statements made in both Houses of the Oireachtas calling for more homes to be constructed, further relief from stamp duty for home buyers or more to be spent in every area of Government expenditure.
The banking reports make it clear that the Government was ill-served by much of the advice it had received in the period up to the crisis. Even the surveillance provided by external institutions such as the IMF, in terms of economic policy and financial stability, failed to sound alarm bells about the impact of policy decisions made. The analysis actually provided reassurance that the general policy direction taken was the correct one. With the benefit of hindsight, I have no doubt we all would have altered our positions and approached some issues differently. Today, knowing what we now know, it is right that all should be held to account for what has been done, as well as what was left undone. Our determination in that regard is evident in our decision to appoint distinguished and independent experts to conduct a robust assessment of the reasons for the banking crisis. We are determined to continue that examination, analysis and reflection in order that full and fair assessments can be made, lessons learned and the basis established for a full political assessment of performance to be made in due course.
The Taoiseach has made it clear that he accepts responsibility for all of the decisions he took when Minister for Finance and has taken as Taoiseach. The record, informed by the expert analyses published in recent days, demonstrates that he acted to correct imbalances in the tax relief system and rebalance the focus of economic policy from an excessive dependence on property and construction revenue towards having a more balanced and sustainable economy. In that regard, we do not disagree with what Members of this House have said. That this ultimately proved insufficient to prevent our vulnerability from producing the critical situation in which we have found ourselves reflected severe failings in the banking and regulatory systems. As I have highlighted, these were compounded by the failings of external authorities which falsely gave comfort about the performance of both systems. This crystallised following the collapse of international financial markets to a degree nobody had anticipated.
Undoubtedly, this has been the most volatile and demanding period in Irish political life for over a quarter of a century. The acknowledgement by the Taoiseach of his role and responsibility for past policies and decisions is in stark contrast with the rewriting of history and denials of the Opposition as regards its record. The Government has worked long and hard in an effort to get Ireland through the crisis and its track record has been acknowledged by international commentators as the correct response to our circumstances. This has been confirmed by the Regling-Watson and Honohan banking reports. They confirmed the need for an extensive guarantee, that Anglo Irish Bank was a bank of systemic importance at the time of the guarantee, that bank failure would have been disastrous for the economy, that the timing of nationalisation of Anglo Irish Bank did not result in higher costs and that steps had been taken to correct the main issues relating to regulation.
Our efforts are paying off, as international commentators, including the OECD, acknowledge the economy has reached a turning point. Other countries are facing up to their difficulties. That we are on the correct path is emphasised by the actions being taken in recent weeks in other EU member states such as the United Kingdom, Spain and Germany which are behind us in taking steps to rebalance their budgetary figures. Ireland has first-mover advantage in this regard and we must maintain a steady path to ensure we position ourselves in the best position for the future. The determination of the Government, under the Taoiseach's leadership, to move early and decisively to address problems confronting the public finances has generated approval and confidence abroad, from which we continue to benefit.
Members are aware that the Government's plan for recovery involves four key pillars, namely, repairing the banking system, restoring stability to the public finances, regaining Ireland's competitiveness and supporting enterprise and job creation. Arguably, getting the banks working again presents one of the most significant financial challenges ever faced by the State. The reality is simple however — the Government must repair the balance sheets and get credit flowing again to support economic recovery and create jobs.
The Regling-Watson and Honohan reports highlight the reasons we find ourselves in the position where we are obliged to provide so much support for the banking system. The reports conclude that the major responsibility for Ireland's banking crisis lies with the directors and senior managements of the banks. They highlight that fundamental errors within the management of individual banks led to excessive risk taking, that banks became too dependent on wholesale funding, that inadequate financial regulatory controls were implemented in Ireland and other international economies based on a mistaken view of governance within banks and that property tax incentives in place in the period from the mid-1990s should have been abolished many years before the December 2005 decision to so do. They also highlight that individuals were left in dominant positions within individual financial institutions for too long a period, with too little management turnover, and that there were significant failures in corporate governance. In addition, there was a failure to impose international stability risk assessments and protection systems that took account of the interaction of global financial systems and a failure to ensure more intensive compliance regulation of those financial institutions which were too big to fail. They further highlight that the higher capital requirements for speculative property loans in Irish banks introduced at the start of 2007 should have been imposed many years earlier before the rapid escalation in property lending took place.
The reports highlight the failures that resulted in the domestic banking system being so exposed on the eve of the international financial crisis. They are welcome confirmation of the contributing factors, the majority of which we had grown to understand since the onset of the banking crisis. It is the role of the Government to implement policies and introduce reforms to ensure such banking crises can never happen again in this country. Under the leadership of the Taoiseach, it already has done so.
The Government's response to the banking crisis has been robust and involved a series of actions, including the guarantee of Irish banking liabilities, the establishment of NAMA, the appointment of a new Governor of the Central Bank and a new Financial Regulator and the integration of a new central banking commission and the Financial Regulator. The Government's actions also include the introduction of a radically changed regulatory system, the setting of higher capital requirements for Irish banks by the regulator, restrictions on bankers' pay and supporting the independent investigation and prosecution of criminal actions in the banking sector. Ensuring the existence of a stable and strong banking system for the future is critical to Ireland's future prosperity. The availability of credit for sound business proposals is the lifeblood of any enterprise economy and the key to job creation.
The second element of the Government's plan is to restore order to the public finances. While the good news is that stability has been restored, the more difficult news is that we have further to go and that more difficult budgetary decisions lie ahead. Despite the fiscal correction of 5% of GDP achieved to date, it is important not to allow an air of unreality to develop to the effect that Ireland is out of the woods. While we certainly are on the correct path, we have much further to go. I accept fully that some of the decisions, particularly those pertaining to expenditure that the Government has been obliged to take in making this adjustment, have created anxiety and difficulty for many. However, I again assure Members that in taking these decisions the Government was guided at all times by the national interest and the need to ensure public services can be sustained into the future. For the year ahead, a further €3 billion of adjustments will be required in the budget for 2011. There will be less money available for public services and we must achieve more with less. Without the measures the Government has taken to date, the budget deficit would have ballooned to 20%. There simply is no room for complacency and we must persevere with the agreed deficit reduction programme in the coming years. As confidence in Ireland abroad rises as a result of the course the Government has charted, it would be a mistake to do otherwise.
The restoration of Ireland's competitive position as a global economy is another key element of the Government's path to recovery under the leadership of the Taoiseach. It is an element on which I undertook considerable work in the past two years as Minister for Enterprise, Trade and Employment. The drive to restore Ireland's competitive position is, in certain ways, the most difficult of hurdles to overcome and on which to achieve quick results. It requires myriad actions across both the public and private sectors. Members should be in no doubt, however, that addressing Ireland's cost competitiveness is of fundamental and key importance to achieving long-term sustainable growth in the economy. Considerable positive movement has been achieved in this regard in the past year. For example, between 2009 and 2011, it is expected that Ireland's unit labour cost will have fallen by 12%. Consumer prices have already fallen by 2.5% this year, well ahead of the eurozone average. Moreover, energy costs, property prices and commercial rates have also fallen. Such competitiveness improvements bring Ireland back into contention for foreign direct investment that it previously had been too expensive to win. They also are improving the competitiveness of Ireland's exports.
Ireland remains a small open economy and a nation reliant on exports which have held up well during the most severe global downturn. The future of the economy clearly depends on its ability to export and ensuring Ireland is made more cost competitive in that regard must be and is a key element of the work the Government is undertaking. It is only though creating the right conditions for job creation and growth in the private sector that lasting economic growth will be achieved in the medium to long term.