Enda Kenny (Mayo, Fine Gael)

Yesterday's Budget Statement was the defining moment of the Government's attempts to win the next general election. No Minister for Finance in the history of the State has addressed the Dáil with as much financial giftware as Deputy Cowen. No previous Government has had such an opportunity to prepare our people for the future challenges which lie ahead but unlike this one no previous Government has wasted the opportunities it had.

The budget provides an opportunity each year for the Government to signal the policy directions required to address the challenges our economy and society face. Those challenges should have been the priority yesterday. It is fundamentally the job of Government to protect the structures and observe the imperatives which drive economic growth and sustainability to ensure the society we want is funded properly. What is required is the protection of the taxation and Revenue regime built up since the 1990s to allow us to sustain and develop it to ensure Ireland remains competitive and among the world's most successful economies. We need a regime in which enterprise and commercial creativity are encouraged and rewarded and an Ireland in which jobs and opportunities reflect our community and future shape of society.

It is also the Government's job to create the environment in which a successful society can prosper. We must build a new Ireland from the bottom up in which family and respect for values are fundamental and in which care for each citizen is central in the context of the correct balance of rights and responsibilities. Such a society is one in which the innocent are protected and anti-social trends and criminality are punished and dealt with. Such a society is one in which the sick, elderly, mentally ill and young are served by a well-managed, planned and effective care structure. Such a society is one in which local services and administration are reorganised to support the creation and development of real communities with amenities, access to essential services and meaningful transport systems and in which effort is directed as much to the creation of decent, stress-free lifestyles as profit.

The Government's job is also to future-proof the country by organising its planning and investment to underpin long-term sustainability. We require proper planning and identification of future needs in the medium and long terms across all sectors and social, education and economic infrastructures. Education must be placed at the very core of our sustainability planning to equip the leaders of tomorrow with the skills and capacity to succeed and the standards and ethics to make wise judgments. We require a safe, sustainable environment for all and the putting in place of structural mechanisms and processes to protect and build that environment into our economic, financial, physical and social infrastructure. The function of accountable Government is to provide an equal and sustainable Ireland for all and it is against these criteria that yesterday's budget must be measured.

I welcome two budgetary measures especially. These are the increase in the old age pension and the package for small businesses, both of which are long overdue. I wish like other Members to pay warm tribute to our pensioners who were for so long the backbone of the economy. They built the country when times were tough and jobs and money were scarce. It was a time, ironically, when keeping a family together meant fathers and mothers taking the boat to England from where they could send money home. It was a generational reality which is unimaginable for families today. Their pension increase is, therefore, welcome and deserved. Overall, however, the budget is about dealing with the incompetence of the past rather than the needs of the future.

The budget takes little account of how families are struggling and people on good incomes are finding it harder to make ends meet than before. Its context is ten years of budgets, in which time, opportunities and billions of euro were wasted, and the achievement of two Irelands, one private and one public. One of those Irelands is very successful while the other is chaotic. Private wealth is met with public waste. Ten years, ten budgets and tens of billions of euro later, people who try to access vital services find themselves tangling with a system which is hopelessly out of step with the lives they lead, the standards they expect and the taxes they pay. We have seen €1 billion after €1 billion come and go. Never has a Government had so much money or achieved so little in its spending. Maximum spend has, in many cases, brought minuscule return. In private life the world is always on while in public life it is too frequently off thanks to Government incompetence.

The Minister for Finance, Deputy Cowen, said the budget was about reform and placing the citizen at the centre of our concerns, but the Government cannot deliver the necessary reform because it lacks the courage to make tough decisions. The mindset and practice that created the problems in our public services is not the mindset that can fix them. In the ten years and ten budgets the parties opposite have not been able to figure out or understand that when a Government spends money without exercising accountability and responsibility, without expecting and demanding reform, it ends up subsidising problems and not solving them.

Real reform will require a change of Government, a better Government and above all a Government for public services, working in the public's interests. Delivering those public services entails three fundamental requirements — competence, accountability and responsibility. We need to set a new gold standard in each. Every Minister should stand up and be accountable. We can have no more disasters of accountability like e-voting and PPARS. Every Minister should know that the hard work starts when the press conference ends and not vice versa. Every Minister should be able to take the credit and blame in equal measure. Any Minister reckless with the public's money or clearly incompetent should be dismissed. If people want to see the difference between me and the Taoiseach, that is one. He did not act, I would have done.

What have the people got for their billions? They have got the reality of public life in Ireland in 2006, namely, waiting. They are waiting in their cars for hours on the way to and from work as happened this morning — two and a half hours from Lucan. They are waiting for hospital beds on lists that were promised to have been eliminated two years ago. They are waiting four and a half years for an assessment for a child with mental illness. They are waiting for neurosurgery, and cancer and brain surgery. They are waiting on trolleys in accident and emergency units. They are waiting for criminals who are running loose to be caught. They are waiting for gardaí to show up on the beat and deal with escalating crime. They are waiting for programmes to tackle the persistent literacy and numeracy problems in our schools.

This was a budget of missed opportunities. The budget continues the reckless expansion of Government taxation and spending without the necessary public sector reforms to ensure value for money. In the period 2000 to 2007 the percentage of national income devoted to Government current spending has increased by almost 7 percentage points from less than 25% to almost 32%, hardly the record of a low-tax, low-spend Government. The total tax burden is now approaching 38% of GNP, reversing a pattern of steady decline that characterised both the former rainbow Government and the early years of the present coalition. This places Ireland in the upper third of OECD economies in terms of the size of Government, debunking the myth that the Government has offered a low-tax low-spend economic strategy. As pointed out by Deputy Bruton, of the past four Government combinations, Fianna Fáil and Progressive Democrats from 1989 to 1992, Fianna Fáil and Labour from 1992 to 1994, Fine Gael, Labour and Democratic Left from 1994 to 1997, and Fianna Fáil and Progressive Democrats from 1997 to 2006, the only Government in that period to reduce the overall tax take was the Fine Gael, Labour and Democratic Left Government from 1994 to 1997.

This money is being poured into an unreformed public sector. The public will not see any significant impact. A recent study by the European Central Bank found that Ireland ranks poorly in public sector efficiency. The Government's national competitiveness council has also reported that "the rapid rise in current and capital public spending in recent years...has sometimes reflected not an increase in the quality or quantity of public services, but instead inflation of pay and non-pay costs".

The Government has not honoured its income tax commitments to ordinary families. In delivering its final budget, the Government will be acutely aware of its failure to deliver on its most specific tax promise in the programme for government, which was to ensure that no more than 20% of income-earners pay tax at the higher rate. The Minister has changed the basis of his calculations to disguise the fact that 31% of taxpayers will pay at the higher, 41%, tax rate next year. This means that 235,000 people have been let down by a Government that has failed to honour a clear commitment. It is indicative of the Government's priorities in this area that its other specific tax promise to complete the extension of the single low 12.5% rate of corporate tax for exporters to all companies was delivered on time. The Government has kept its promise to give more profits back to banks and property developers but not its promise to ordinary families on average incomes. This means that 1.4 million income-earners, approximately 65% of the total, who are not paying tax at the higher rate, will see little if any benefit from the budget as the impact of the small increases in the credits and bands will be offset by the rising cost of living.

It was also a budget in which the Government could have taken action in a targeted way on stamp duty. It was an occasion to relieve first-time buyers in particular without any adverse interference in the housing market. This is not a budget for hardworking families. An increase of €10 euro per month or €2.50 per week in child benefit will not put any dent in the €1,000 per month child care costs — the baby mortgage. Nor will it make any dent for families with a second or third child in child care. The Taoiseach made no reference to child care in his speech. These child care costs represent the major public priority in every major city in the country and the hardship being felt by hundreds of thousands of families is not addressed in this budget. The lesson was not learned prior to and since the Meath by-election. The stay-at-home spouse is still being severely discriminated against for making that choice, which was more than likely made in the interests of rearing children and is now being punished. The allowance and extension in respect of widows and widowers is miserly in the extreme.

The Government could have faced up to the reality of climate change and given some slight hint that it was aware that we now live in a carbon-conscious world. However, the budget does nothing of the sort. It displays the short-termism and the shocking casualness that goes from the very top to the very bottom of this Administration. Even apart from living up to our international responsibilities, particularly to the poorer countries which will be hardest hit by climate change, though they contribute to it the least, there are the stark economic consequences for us at home in fines, higher costs, higher emissions and eventually greater failure. Clearly action could have been taken in respect of heavier fuel using vehicles. However, this has been put off to another day with another kite to be flown for rebalancing within the overall tax system.

We are witnessing the early stages of a transformation of the global economy, driven the by the integration of 2.5 billion low-wage Chinese and Indian workers into the international trading system, rapid improvements in information and communications technologies, declining transport costs, climate changes and environmental degradation. Many developing countries have replicated the strategies that made Ireland successful — low corporate taxes and skills availability — and can now make the goods and services that higher cost companies in Ireland make. Camouflaged by a debt-driven property boom, the impact of these changes has appeared limited to date. That will not remain the case. The competitiveness pressures facing Ireland will become more intense than anything ever experienced before.

Already, our international competitiveness has deteriorated under the Government's watch. According to both the World Economic Forum and the IMD, Ireland's competitiveness rankings have dropped seriously over the past five years, reflecting a number of negative developments. Ireland is now the most expensive country in the eurozone and prices here continue to rise faster than in most comparator countries. Our share of world trade peaked in 2002 and has since been in steady decline. While world trade grew by an average of 6%, in value terms, per year between 2002 and 2005, the value of Ireland's exports grew by an average of just 2% per annum in the same period. Our manufacturing industries have lost over 32,000 jobs since the Government entered office. As a share of total employment, manufacturing has declined from 15% to 11% and has been overtaken by the construction industry as the single largest employment sector in this country. Ireland's balance of payments with the rest of the world shifted from a surplus as recently as 1999 to a deficit of €4.2 billion — 3% of GNP — in 2005. According to the Central Bank, the latter will deteriorate to a deficit of €6.9 billion — 4.25% of GNP — in 2007. These are not the achievements of a Government that takes the competitiveness of our industry seriously.

The Minister for Finance suggested that the budget measures announced yesterday will help to restore some of the competitiveness lost over the lifetime of this Government. Some of the individual measures are helpful. I welcome them and they are to be commended. A number of them were suggested by Fine Gael in recent months and years. I welcome, for example, the tax simplification measures for small business and the incentives for the provision of risk capital for entrepreneurs and other innovative small businesses.

However, much more needs to be done. Tinkering around the edges will do little to address the cost competitiveness pressures faced by struggling Irish manufacturers and other exporters. Some of the pressures to which I refer are as follows: the escalating costs from the badly-regulated electricity, gas and waste sectors; the escalating costs of delays from an under-developed transport system; and the exorbitant costs of office space and industrial accommodation that are a result of our dysfunctional planning system. One must also consider the escalating costs that are emerging as a result of the effective privatisation of water and sewerage schemes. The latter will become a serious political issue in the near future, particularly when one considers that charges in Sligo are €5.14 per 1,000 gallons and that small businesses, ratepayers and farmers whose supplies are metered will be obliged to pay continually increasing charges going forward.

Where are the policies to control Government imposed-costs in these sectors? Where are the measures to support the retraining of those put out of work by import substitution? If anything, the budget threatens to further undermine the competitiveness of small businesses and exporters. The relentless and uncontrolled increases in current spending and taxation, the extra pressure on inflation, the further stoking of the property market and the construction sector, the failure to do anything about the dangerous rise in household debt are all bad for small businesses and exporters and they give rise to a deeper fragility in the vulnerable manufacturing and business sectors. Construction inflation has risen and productivity and exports have fallen at a time when these sectors face critical challenges.

This budget represents a missed opportunity to advance the changes in the tax system that are required to ensure Ireland plays its role in protecting the global environment. Climate change, in particular, is one of the greatest economic and environmental challenges faced by Ireland and other high-income countries. Instead of making difficult decisions, however, the Government prevaricated and delayed, and has promised to take action only after further analysis, consultation and reflection. We are another report away from action. It is as if the Government has only just realised that Ireland's energy consumption patterns are unsustainable from a competitive, environmental and security perspective. The only significant commitment the Government has made is to set aside €270 million of taxpayers' money for the fines that Ireland will be obliged to pay for this Administration's failure to meet its emissions obligations under the Kyoto Agreement. This is an appalling admission of failure on the part of the Government to honour the commitments to which it signed up in respect of that agreement.

The Minister for Finance could have implemented proposals put forward by parties on this side of the House. I refer, for example, to those contained in Fine Gael's policy document, Energy for the Future, which could have helped bring about real progress. Among our proposals are the following: the introduction of legislation to compel all fuel retailers to blend bio-fuel into fuels such as petrol, diesel and home heating oil; the removal of all excise duty on bio-fuels produced from renewable energy crops — in practice, this would mean that producers would not be obliged to pay excise duty on the bio-fuels, which they produce, with the knock-on effect being that consumers would enjoy cheaper fuel at the pump; an open public competition for capital start-up grants for the establishment and operation of bio-fuel processing plants; and a requirement that all public transport and public service vehicles to convert, where practical and feasible, to using forms of bio-fuel, whether in their pure or blended forms.

In his budget speech, the Minister did not refer to the appalling situation that obtains on the M50. I refer here to the upgrading works, the opening of the port tunnel and the development of the new terminal at Dublin Airport. This matter has not been addressed. I recently put forward a number of practical proposals to the Taoiseach but there is no reference to them in the documents relating to the budget.

Disposable incomes and private wealth are rising, but what all the new challenges to which I refer have in common is the need for competent public action across a range of areas, namely, education, health care, crime prevention, environmental protection, transport and urban planning. Addressing these challenges will require private sector enterprise, combined with political leadership and competence. However, the Government has lost the trust of the population to solve problems that require public action. Confidence in public action has bled to death from a thousand cuts. I refer here, for example, to the following: the culture of unaccountability, at official and political level, in respect of delivery; a lack of reforms to accompany benchmarking; a lack of investment in staff training and better management; the bungling of IT projects; and the shambles that is decentralisation. With regard to the latter, the Minister's Budget Statement refers to a "presence" in the locations originally chosen in respect of the movement of 10,000 public servants, on a voluntary basis, inside three years. The decentralisation project has been a complete and utter failure.

The Government is comfortable with private affluence and public inefficiency. These challenges require a relentless pursuit of efficiency across the economy, in both the public and private sectors. The people of Ireland have been playing their part but the Minister for Finance and the Government have not.

The Progressive Democrats appear to have been suffocated in the fumes given off by SUVs.

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