Arthur Morgan (Louth, Sinn Fein)

-----for at least 18 months. If there is more than 2% growth in the next 18 months, it will be good going. That will not be enough because even a substantial global bounce will have a lag of 12 to 18 months before it will impact on the huge numbers of unemployed people in this State.

It is wonderful that as we come up to Hallowe'en the Minister is appropriately scaremongering to some degree. In the course of his contribution he said that a higher rate of tax for top earners would cause them to flee the jurisdiction. That is interesting. It is causing the Minister substantial worry. Is the Minister worried about the people who have just graduated leaving the State? They are leaving in droves every month. Fully qualified nurses are leaving the jurisdiction every month but neither the Minister nor any of his colleagues has expressed concern about those people leaving the jurisdiction. However, if there is a marginal tax rate on very wealthy people the sky will fall in because they may leave the jurisdiction. I do not buy into that hypothesis for a moment.

I will refer to the Minister's speech because it was fascinating. In it he told us, "Irish people will still hold onto most of the gains that we have built up over many years of strong growth and that they enjoyed since the mid-1990s. Over that period we took many steps forward. We are now only taking one step back". If the Minister thinks that somebody losing his or her home is one step back from where he or she was five or six years ago, I can tell him it is several more steps than that. That is another of his phrases which I can no longer accept, any more than the phrase, "the worst is over" or the other comments he made which I will not go back over because I will waste everybody's time and I want to give the Minister some of our perspective on the economy.

On the phrase, "one step back" the Minister should go out onto the doorsteps and canvass if people are not coming into his constituency office. I do not mean to personalise the debate to the Minister, but his backbenchers should be telling him what is going on in the real world if the Government does not know because I can tell him what is happening. There is a high level of poverty out there. Substantial numbers of people are struggling to feed their children. I am meeting people and dealing with some of their issues and I can assure the Minister that what I said is absolutely correct. To talk about taking one step back is missing the point regarding the level and extent of the deprivation which is out there.

There may be a bounce in the economy but the real test of the economy is employment, growth in employment and a reduction in unemployment. We see the huge numbers of unemployed, some 449,000. We know that figure will continue for some substantial time and that is the real measure of the economy. We have economic indices and all the rest of it but if the Government wants to count it in real terms, it should count it in human terms because we are dealing with society.

The Government has cut and slashed in the past three budgets. It has imposed levies and taxes on low income families and what were the consequences? I will tell the Minister what they were. We now have a flat economy, huge unemployment, revenue is still falling and there is no strategy in place to deal with it. The cost of borrowing is 6% or more and still growing. Why is there is no market confidence in Ireland? It is because the markets know that the Government has told lies and bluffed for so long that they have no confidence whatsoever in it.

We need to get back to a point where politicians have some integrity and when they speak people will at least believe what they say. There is no respect out there for politicians generally, and certainly none for the Government side and what has been wrought on the people of this State. Is it any wonder that the international markets do not have confidence in the Government? It started off with €4.5 billion to bail out Anglo Irish Bank, which increased to €9 billion, then €12 billion and the Minister now claims it is €29 billion but I estimate it will cost €37 billion, as have a number of other people including Peter Matthews and other people of integrity.

Whatever measures the Minister puts in place, until we get to a point where the characters on the Government side of the House can be believed - they cannot be believed at the moment - the markets will have deep suspicions about our capacity to work our way out of this economy. People out there believe that the Government could not lie straight in bed at night, much less exercise some integrity regarding the economy.

I will briefly deal with the Sinn Féin proposals. I thank Deputy Ó Caoláin for agreeing to bring forward our pre-budget submission to Monday of next week because we want to ensure that the Government has the maximum amount of time possible to examine our proposals. Unlike the Minister we do not think that there will be a huge flight of very wealthy people from the economy if we introduce a 40% tax band on individual incomes in excess of €100,000. The proposal was in our pre-budget submission last year and will be there this year. We are not expecting the Minister to accept that given his comments today.

We want to see a 1% wealth tax but only on assets in excess of €1 million which is income linked. What is the thrust of that? It is asking the wealthy and those who can afford it to pay rather than what happened in the budget last year. We know what is coming this year. The Government is going after people on €15,000 per annum with levies and taxes. That is grossly unfair on the people who cannot afford to pay. We will standardise discretionary tax reliefs which will raise over €1 billion.

We will have some very sensible measures for a stimulus. A stimulus is absolutely essential for growth and we will be offering a substantial proposal in regard to it. I do not often agree with Fine Gael but I have to agree with Deputy Noonan on the pension fund. To use some of it to invest in the stimulus package to try to make sure we get the economy moving again is a sensible move. Government blather about protecting the less well off when it means the complete opposite will not wash with me or my colleagues.

What is the Government talking about? We hear some rumbles about potentially having a property tax. Swathes of people are struggling to pay their mortgages. I hear in my constituency office on a weekly basis that people are going to the St. Vincent de Paul. I have gone to negotiate some kind of moratorium for constituents who were being threatened with foreclosure by the banks. That is a growing problem; it is not reducing. To talk about the prospects of a property tax in this environment is nonsense. We heard the Minister, Deputy Gormley, refer to prepping for water charges. I know he can wrap it up, as he did with the carbon tax, in some kind of green cloak but he is once again affecting poorer people from low-income families. In doing so, he will squeeze the life out of the economy.

People refer to front loading the so-called adjustments. I will have to get some explanation of what the word "adjustment" means. In this context it seems to be a cut but the Government will not call it that. The next time I need a haircut and go into the barber I will ask for a hair adjustment. I guarantee that he will produce a pair of scissors and hair will fall to the floor in no time. Whatever about the terminology, what the budget is really about is going after the poor and using language to disguise the savage cuts which will take place.

The people who advocate front-loading are those who are invariably on incomes well in excess of €200,000 per annum. Does an income like that not soften the blow of these adjustments? I believe it does. However, those people being on salaries of €200,000 will not soften the blow for the person on €196 euro per week, as Deputy Ó Caoláin rightly referred to in his contribution. That will be no comfort for them and they will be scrimping and scraping and trying to barely make ends meet, yet we are told the less well-off will be protected.

The Government's policies will undoubtedly lead to a significant economic contraction. The fairest people to quote are those at the ESRI, a Government-funded independent body. The ESRI stated that its calculations suggest that savings of up to €15 billion could be needed, which is twice the sum under discussion at the time Ireland and the Commission agreed to the 2014 deadline. It expressed concern about the potential negative impact on the economy of this scale of adjustment over the period of time while accepting that the 2014 deadline is unlikely to change. This will be particularly punitive.

The ESRI states that when the package was signed off with the 2014 date the debt was only half of what it is now; it was €7.5 billion and not €15 billion. A sum of €500 million either way matters little to those who will face these cuts. The ESRI also accepts that it is unlikely to change. This is because the Government has indicated to it that it will not go back to Europe to try to negotiate a more reasonable approach. There should be a reasonable timeframe for dealing with the financial crisis bearing down on us. No person in his or her senses would undertake a huge mortgage over a 15 year period, he or she would want to repay it over a substantially longer period, such as 30 years.

I was going to deal with the behaviour of the auditors of some of the banks but I thank Deputy Ó Caoláin for dealing with Ernst & Young and a number of others in his contribution. There is no accountability whatsoever because those auditors, like the bankers, are working in the economy and getting paid huge sums of money like the developers and the speculators who are on €200,000 each from NAMA to keep them in luxury, this after what they have done to wreck the lives of so many people in this land. On it goes. We know the bankers have gone off with their huge pensions and bonuses. Michael Fingleton was mentioned. He is supposed to be returning his bonus of €1 million. However, he has not yet done so. He is still flying around the world enjoying himself with no sign of him giving us back that money.

In his speech, the Minister stated that the people will have to accept cuts in public expenditure and higher taxes. I agree with that sentence and he is right. However, where should those higher taxes be? The Minister for Finance tells us he will widen the tax net. He will bring those on the minimum wage into the net. When I state that I agree with him, I agree with the sentiment of the statement but we should be taxing higher income families because they can afford to pay. Higher income individuals are those earning in excess of €100,000 per annum. The current levy system will mean a substantial contribution from this category but those in it are better able to carry it than somebody on €196 per week. We hope it will be for a relatively short period, we estimate it will be for six years. We would make cuts in the public sector in particular and we would put a cap on people earning in excess of €100,000. We would also trim the salaries of Ministers, Deputies and Senators.

Two years into its purge, Ireland has a budget deficit of 32% of GDP. It is 11.9% if one strips out the bank bailouts. Ireland's debt is ballooning while its capacity to pay has collapsed. The current debate is on implementing a programme of extreme austerity versus austerity. However, moving towards austerity is an ideological choice and not an economic reality. There is a need for sustained, substantial and smart stimulus instead of "timely cuts" as they are called. When we are told that the economy is shrinking significantly, that Government spending is far too high and Government borrowing is becoming unsustainable, that the economy is becoming uncompetitive, that workers are being paid too much, that the minimum wage must be lowered and that social welfare rates are too high, we should know that this is not common sense, it is the agenda of an ideology that serves the interests of a small wealthy class in our society.

The establishment is united in the need for cutbacks in workers' pay - although it is much more hesitant about cutting executive pay - for cutbacks in Government expenditure including in health and education, for cutbacks in social welfare rates and for increases in taxation that affect those on the lowest incomes, to the extent of drawing low income earners previously outside the tax net into it. This is because it wishes to preserve the present system.

The demand that countries balance their budgets is a euphemism for selling off the public domain and slashing pensions and public spending on education, medical care and the other basic preconditions for raising labour productivity. The drain of payments to creditors and absentee investors forces countries to balance their budgets by selling off their public domain. Credit rating agencies threaten to downgrade countries that do not play ball by giving up their basic infrastructure, along with their gas, water and other natural resources on the cheap. That has happened in plenty in this State.

Under austerity, Government revenue is used to pay debt service, bail out banks and make other transfer payments or subsidies to the finance sector at home and abroad rather than being spent to raise productivity. Banks and financial institutions should have been let fail. Private deals were made between them. As Deputy Ó Caoláin stated, the value of one's investment may go down as well as up. The Government is indifferent to real businesses and the SMEs, which are failing, but has made every concerted effort to help the financial pirates. It seems we have a banks' spokesperson rather than a Minister for Finance.

NAMA is using large amounts of the wealth produced by taxpayers to bail out the stakeholders of the banks and the speculators who invested in them now that their reckless lending has left them facing huge losses. This reckless speculation was also socially destructive as it drove up house prices creating the now collapsed property bubble, leaving many households with punishing debt.

Pension funds need to be used productively to lessen the reliance on fickle foreign investors. We need to have in place instruments that are fit for investment. That we are dependent on bond vigilantes and international capital markets is perverse. Countries should not be brought to their knees because of the whims of these international players.

It may seem astonishing that we face such economic and social deficits after 15 years of boom but these are the consequences of pursuing a failed low-tax, low-spend model which sought short-term gains from the speculative activity of a small but very powerful golden circle. Choices were made in the late 1990s and in the early 2000s by Fianna Fáil which diverted the economy away from industrial upgrading and new investment priorities, onto a path of speculative booms, a weakening tax base and public finances that were dependent on boom-time growth rates.

Supporters of Government policy argue that there is no alternative, having learnt their economics from Mrs. Thatcher. The Government wants all stakeholders to accept its assumptions and policies - the expenditure cuts and the recapitalisations - all of which the Government deems to be necessary to mitigate recent policy mistakes and excesses which occurred on its watch. This happened over the past 13 years on its watch. To date, the Government has introduced three austerity budgets. On each occasion it has argued that we are living beyond our means and that it has no option but to cut public spending.

It is argued that cutting spending will reduce the State's borrowing requirement and that fiscal rectitude will also convince the markets that the Irish State is a sound investment and in turn, will reduce the cost of borrowing. Some chance. Unfortunately, none of this is supported by the facts. With each austerity budget the Government has pushed the economy further into recession. Cuts to wages and social welfare mean less money in people's pockets. Less money in people's pockets means less money spent in the real economy. Less money spent in the real economy, means more people out of work. As unemployment rises, tax revenues plummet, from €47.8 billion in 2007 to an estimated €30 billion in 2010, pushing up the deficit and the State's borrowing requirement. There is a clear disparity between the economic policies of the Irish Government and those of the other industrialised countries. While most countries in the G20 adopted some form of stimulus measures, Ireland's unique experiment in contraction continues to depress activity and tax receipts, boosting only the unemployment level and the budget deficit.

Rather than realise the error of its ways, the Government, supported by Fine Gael and the Labour Party - I hope that situation changes - is determined to continue cutting public spending in order to reduce the deficit to the agreed 3% of GDP by 2014. These kinds of policies squeezed into a four-year timeframe will have a devastating impact on both our economy and society. Unemployment will continue to rise. Tax revenues will continue to fall. The deficit will grow larger. The cost of borrowing will increase. Hundreds of thousands of people will be pushed further into poverty. It is happening on a daily basis. Ultimately, such policies will jeopardise the economic viability of the State itself. When it becomes apparent that the Government will be unable to meet the 2014 deadline and that the efforts to do so have caused great damage to the long-term capacity to recover, there will be another convulsion of confidence. The international markets may well choose to come back after us at that point. Is the Government approach feasible in terms of where the economy is now situated, and should the emphasis continue to be on deflating demand?

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