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Column The challenges and changes we've seen since the bank guarantee

On the anniversary of the bank guarantee, the leaders of four Irish organisations reflect on the 2008 decision – and the subsequent changes they have observed in their sectors over the past five years.

FIVE YEARS AGO today, the government made a decision to issue a €440 billion guarantee on all liabilities in the Irish banking system.

The succeeding years have seen much debate about the decision made on the evening of 30 September 2008, and whether it was the right decision for the country.

Here, the leaders of four Irish organisations reflect on the guarantee – and on the subsequent changes they have observed in their sectors over the past five years.

‘It is deeply disappointing that the risks in the balance sheets of banks were not fully understood’

Ian Talbot, Chief Executive of Chambers Ireland

Chambers Ireland is the country’s largest business organisation

With hindsight many have argued that this was a mistaken decision, yet what choice did the Government really have? This was a macroeconomic action by the Government to offer a backstop that ensured that there would be ‘cash in the bank machines’ the following morning. It raises the interesting question of which banks or which services banks provide are “systemic”. Some of the functions which are undoubtedly systemic are;

  1. Trusted store of deposits
  2. Provision of money transmission mechanisms, and
  3. Providers of loans to the economy.

These are all vital requirements of a functioning society. A Government that fails to act to protect these resulting in them closing down does this at its peril. Therefore the Government had no choice but to act. It is deeply disappointing that the risks in the balance sheets of Anglo Irish and other banks were not fully understood and that our Cabinet did not have access to the scenario planning skills needed or the time required to identify alternative options.

We will never know if Ireland really could have got away with repudiating the debts of banks regulated by that self same Irish Government. They may well have ended up on the State’s balance sheet in any event as International Bond Markets may have given the State and other entities no other choices as taxation collapsed and we needed to borrow to pay for social services and public sector salaries.

The downturn resulted in a collapse in demand which fed into a fall in taxes and drove the decline of property prices, which knocked our banks over. Businesses have been grappling with this ever since. We are now seeing tentative signs of an improvement. Budget 2014 needs to support these baby steps to deliver on a recovery.

‘We work with more hungry children each year’

Barnardos CEO Fergus Finlay

Barnardos is a charity working with vulnerable children and their families

Even before the bank guarantee, within days of the ESRI predicting that Ireland was heading into recession, five public-private partnerships collapsed. Those partnerships were supposed to deliver regeneration for five communities in Dublin in desperate need of regeneration. Ever since then, hundreds of families have lived in totally unsuitable housing, in extremely disadvantaged communities (some of which we work in), while the struggle to find a different way of delivering regeneration has gone on.

Immediately after the bank guarantee, in a budget speech that he described as a call to patriotic action, Brian Lenihan began the process of cutting public expenditure. As the crisis got worse, he introduced two Budgets the following year – the start of a series of “austerity budgets”, in which he cut child benefit by €16, nearly halved the support for young job-seekers, and cut the pay of lower-paid public servants.

Since then, austerity has targeted lower-income groups – including lone parents, people with disabilities, and families with children – entirely disproportionately. As a result, the pressure within families has grown exponentially. In our projects around the country, we work with more hungry children each year, more children who cannot go to the doctor when they need to, more children and parents who find it harder to cope with the costs and pressures of school. The people who work in Barnardos are reporting to us that more and more families are suffering from the stresses and strains of increasing poverty. Drug and alcohol misuse, mental ill-health (especially depression), and domestic violence are increasing facts of life. And it’s not a coincidence that these conditions have got worse, hand in hand with financial pressure.

Of course, the recession and the austerity cutbacks have also had a negative impact on our capacity to help. In budget after budget, there have been squeezes in the resources the state makes available – the allocation to Barnardos, for example, has been cut by around 20 per cent. The same thing applies right across our sector. The ever-widening gap between increased need and reduced capacity to help is a vicious circle that will do untold social damage to a generation of children unless it is reversed soon.

‘Supply of social housing has fallen dramatically while waiting lists grow’

Donal McManus, Executive Director, Irish Council for Social Housing

The Irish Council for Social Housing is a national representative and advisory federation which assists the development of social housing services

There have been dramatic changes in recent years in the provision, financing and management of social housing in the non-profit housing sector. Firstly, state capital funding to the housing association sector has reduced by up to 80 per cent, including capital funding targeted for family housing which has been terminated altogether.

Supply of social housing by the sector for families and special needs groups has correspondingly fallen dramatically yet waiting lists have still passed 90,000 in the meantime with increased waiting times. With the massive reduction in state capital on social housing, this has meant a significant policy shift by Government from traditional ‘bricks and mortar’ subsidies to revenue subsidies such as leasing properties from the private sector (who have showed little interest) and even some properties from NAMA.

As part of the new leasing initiatives, housing associations were encouraged to access private finance to supplement the severely limited state capital funding. This process has happened with a few financial institutions and the Housing Finance Agency. Although still in its infancy this process emphasised the rapid need for regulation, a process which has begun but needs to be completed.

Housing associations and their tenants have encountered significant cuts in a range of areas whether housing, health or social. However against this they have continued to innovate and develop new housing options even on a limited scale. Although carrying more risk with raising private finance, housing associations are keen that the state shares any risks and takes a greater enabling role – a challenge to the Government.

‘The disability movement has been hit hard over the past five years by the continuous erosion of vital services and supports’

John Dolan, CEO of the Disability Federation of Ireland

The Disability Federation of Ireland is the national support organisation for voluntary disability organisations

As an organisation, we represent the interests and rights of people with disabilities to be fully included in all aspects of Irish society. The disability movement has been hit hard over the past five years by the continuous erosion of vital services and supports, making our work all the more essential in light of the challenges posed during these years of austerity.

There are over 600,000 people with disabilities in Ireland. Over the past five years, we have seen the services and supports which they and their families need to access consistently withered away by the harsh measures imposed through recent budgets. Their disintegration has damaged the social infrastructure which allows people to live with health and independence in their own communities, denying people with disabilities the right to live the ordinary lives they are entitled to.

It has become evident that Government lacks any meaningful understanding of the challenges facing people with disabilities in their everyday lives. Financial considerations have taken greater priority in governmental decisions than sustainable social inclusion outcomes. Cuts to supports which allow people with disabilities and their families the flexibility and independence which they have a right to – such as the reductions in personal assistance and home support hours, cuts to respite care grants and housing adaptation grants, and the changes to the Mobility Allowance, for example – demonstrate such shortcomings.

On top of the impact of these cuts to disability-specific supports, people with disabilities have been substantially affected by the cutbacks to mainstream social and health services which have come into place over the past five years as well. This acts, unfairly, as a double hit, and this is a major issue which can no longer be ignored.  People with disabilities want to be treated as equals, with equal opportunities and equal access, but, at the moment, this isn’t the situation.  All public services and supports need to be far more accessible to people with disabilities.

30 Days in September: An Oral History of the Bank Guarantee>

Everything you need to know about the bank guarantee, but were afraid to ask>

Five years older and deeper in debt… So why don’t the Irish protest more?>

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Caitriona O'Neill and William Gallagher
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