'You are all practising and practical politicians and you will be fairly aware of the clientele in every constituency, and you will have a queue down in the clinic looking for write-offs on Monday morning if there is any announcement of universal write-offs."
With a single sentence, Michael Noonan knocked the idea of blanket debt forgiveness on the head last Friday. But it's amazing how you can mean to say one thing only to end up saying something totally different. Noonan is right, a stampede of 'me-too Me Feiners' would be the most likely results of a blanket debt forgiveness policy. Sadly, Noonan's warning has come far too late. And when Patrick Honohan chimed in that he opposed "banks giving gifts to borrowers", one wonders how carefully he thought about it beforehand. As regards Mr Noonan's comment, the "queue down in the clinic" syndrome has already taken its toll. How else did builders and developers get tax breaks and planning permission for reckless speculative development? How else did banks get the last government to turn a blind eye to the regulator's crazy lending practices? How else did trade unions get their piece of the action from the huge property tax bonanza -- which was paid for by those very mortgage borrowers who now need help -- to feed their ridiculous pay rises, rises so generous that leading trade unionist Brendan Ogle admitted his members were "spoilt" and enjoying "gravy" and "great jobs". As regards Mr Honohan's point, were all these not "gifts" from borrower-taxpayers to bankers, developers and the public sector and, if he agrees, is he opposed to this as well?
Mr Honohan also warned that a blanket forgiveness could bring us all back to square one by depleting bank capital. On that last point, he is right. Having said that bank recapitalisation involved tens of billions injected as a result of reckless commercial lending. Injecting a fraction of this into borrowers who were fleeced by the mistakes of banks and the regulator and by the greed of developers (via high prices) and Government (via stamp duty) is hardly a threat to the banking system.
The extent to which borrower-taxpayers might be gifted by banks under any such scheme is anyhow dwarfed by the gifts they were forced to extend to developers, banks and the State after the crash. If it's "queues" we're talking about, then the best of them happened when builders and developers queued seeking the inclusion of their properties in Nama. And when financial institutions queued to be included in a recklessly designed guarantee scheme. And then trade unions queued to have their pay and conditions protected from reality by the Croke Park deal, a deal which protects the pay of all of the central bankers, TDs and civil servants who took part in Friday's Joint Oireachtas committee meeting.
Unlike the other players in this tragedy, our borrower-taxpayers deserve help, not moralising. Of course there were a minority who recklessly bought trophy homes. But by seeing borrowers as taxpayers and giving them their stamp duty back we aren't just righting a wrong, but helping the economy. This week the ESRI seriously downgraded its growth forecasts. As well as slowing international growth, the domestic economy is stagnating and -- as Friday's exchequer figures prove conclusively -- this is due to excessive tax rates in the economy. Income tax rose but this is merely, and reflects the illusory first round impact of, the universal social charge. As the Live Register proves, higher income tax is pushing unemployment in a way that will soon reverse that revenue impact. Falls in VAT receipts show that despite drops in some VAT rates, the decline in disposable income caused by tax hikes -- all imposed to fund continued waste in spending -- is killing demand. Likewise declines in corporation taxes are an ominous sign of how massive state spending and the resultant tax and rates burden is crushing small business. The only good news is that thanks to a substantial fall in the rate of stamp duty, activity in the housing market has improved leading to a substantial rise in revenues. This is proof that cutting wasteful spending and cutting tax rates is the only route out of domestic recession.
So what the Government must now clearly do is to take money from a wasteful bloated state and give it back to taxpayers. And as Anglo Irish Bank boss Mike Aynsley told us last week that its bailout costs would be €6bn less than expected -- and as the ESRI forecast our national debt to peak at a significantly lower level than before -- we now know the money is there.
Instead of a misconceived debt "forgiveness" policy , we need a "debt restructuring" policy to help Middle Ireland start spending. A debt agency involving some debt forgiveness is part of that. But the part of the household sector not in dire trouble -- but which was overtaxed in the boom -- also needs help. And talk of "silver bullets" -- dumbed-down snake oil ideas designed to grab headlines -- is neither here nor there.
Instead we need a toolbox of carefully selected policy instruments to do the following: a well-designed stamp duty rebate should undo the wrongs inflicted on those who bought in the boom and ease the burden negative equity placed on those willing, but currently unable, to spend; targeted mortgage interest relief can help first-time buyers who were victims of insane land and zoning policies; a tweaking of pension tax reliefs can help those who need to trade up but can't due to negative equity. How to fund this? Selling off needless assets and cutting billions still being wasted is one way. A more obvious way is -- to use Patrick Honohan's phraseology -- to return the money gifted to the banks by borrower-taxpayers, starting with the €6bn that Anglo Irish Bank no longer needs.
And this policy solution must not be based on cute hoor nod and wink "don't tell everyone" approach. We have seen what that did to our country. From now on transparency must be the watchword.
Marc Coleman presents 'Coleman at Large' each Tuesday and Wednesday from 10pm on Newstalk 106-108fm