Terence Flanagan (Dublin North East, Fine Gael)

The message that will come through to the ordinary man on the street from budget 2008 will be that the party is over and that it is time for one to tighten one's belt. This Government which has built its reputation of good economic management on the back of a debt fuelled property market must now face the music. The reality is that the property boom is over resulting in less taxes for the Exchequer. This is the reality of a boom which has been squandered. There is little money left in the kitty for a rainy day.

We have had high spending without public sector reform. No Minister is stepping up to the plate and taking responsibility for serious blunders as recently witnessed in the Shannon debacle and the e-voting farce. There have been big increases in bureaucracy as seen with the establishment of the HSE but with poor delivery at the frontline. The ordinary patient is, as recently stated in the Fine Gael Private Members' motion sponsored by Deputy James Reilly, suffering because of the cruel cutbacks imposed by the Minister for Health and Children. We have also witnessed incompetence in terms of preparing Ireland for a transition which is essential if we are to meet the challenges presented by globalisation, technological change and environmental deterioration.

Research published by the ESRI today has confirmed the emergence of a €5 billion black hole in the difference between the economic assumptions in the Fianna Fáil manifesto and the Minister for Finance's pre-budget forecast for the next three years. The vanishing bonanza of the property boom now reveals the harsh reality of how Fianna Fáil has managed our tax resources. It has engaged in high spending without delivering efficiency in public services.

The Department of Finance's new projection for tax in 2008 is €2.2 billion lower than predicted in the previous budget. Despite the Minister's promise to maintain a budget surplus, he is now proposing to compensate for this loss by borrowing extra money. In place of a predicted surplus of €800 million for 2008 the Minister is now proposing a deficit of €770 million. He is still planning, however, to increase current Government spending 45% faster than the rate of economic growth. This is not right and not sustainable. Borrowing should only be on a short-term basis. The Minister must avoid the temptation to use borrowing to fund day-to-day spending as a long-term strategy. The new projections show that in the next three years a gaping hole of €5 billion will emerge in the Fianna Fáil manifesto, and is likely to rise to €6 billion in the longer term. This effectively wipes out the entire programme of commitments for tax reform and spending in the manifesto, which was to have been achieved by that time.

There is something familiar about Fianna Fáil's boom and bloom attitude before the election, changing to doom and gloom shortly after. In 2002, ordinary families and small businesses bore the brunt of the cost of filling the hole in Government finances. We are familiar with the stealth taxes introduced at that time. It does not look different this time and people have a right to know which promises will be kept and which will drop off the radar. The Minister can, at best, afford 20% of his promises by 2012.

The vanishing bonanza of the property boom also reveals the harsh reality of how Fianna Fáil has managed our tax resources. The party has engaged in high spending without delivering efficiency. Current spending has consistently grown 40% faster than the rate of growth in the economy over the past seven years. This has ratcheted up the amount of tax needed to support this Government.

The Government has spurned every opportunity to deliver efficiency in favour of soft option politics. The robust system of expenditure review, initiated in 1997, might have exposed inefficiency but it was scaled down and is now almost abandoned. Benchmarking was seen as an opportunity to introduce real change in the delivery of public services. However, it came and went without anything being done.

In the face of poor delivery from health spending, the former Minister for Health and Children, Deputy Cowen, expanded the number of health boards from eight to 11. Then the Government abolished the health boards and imposed a super health executive, the HSE. As each decision was made, the bureaucracy grew. The front line has been starved of resources. No administration job was lost in the process and no economies of scale have been achieved and no one is accountable.

The September Exchequer returns signalled that the property slowdown will result in a shortfall of tax revenue of up to €1.5 billion in 2007, the year of SSIA multi billion windfalls. In the ESRI autumn quarterly commentary, GNP growth for 2008 is forecast at 2.9%, compared to the forecast of 3.7% made in June.

With falling house completions expected over the next few years and builders having asked staff not to return after the builders holidays, we face a crisis in the housing market. The ESRI estimates that every reduction of 10,000 new housing units is equivalent to 1.2% in growth. The Government collects 28% of the cost of a new home, through VAT at 13.5%. This is a surprise to many given the debate on reforming stamp duty and making it more equitable for home owners to trade up. The Central Bank forecasts GNP growth of between 3.25% and 3.5% GDP during 2008. This reflects slower domestic demand growth. This will be accompanied by easing inflationary pressures but there will be a rise in unemployment.

The HSE has been unable to live within its budget, which has increased by 16% this year. This budget overrun only came to light some weeks ago. This issue is affecting the frontline and is unacceptable. A week hardly passes without the launch of a public quango to commission reports from the consulting industry, which has received over €400 million in public sector revenue since 1997. This litany of waste is continuing, one of the latest being a planned climate change awareness publicity campaign ordered by the Minister for the Environment, Heritage and Local Government, Deputy Gormley.

There has been minimum public service reform in the decade when staff levels have increased by 100,000. After the budget the Government will receive a review of the public service from the OECD, the governmental think tank. I urge the Minister to take the report seriously and take the difficult decisions.

On 4 October the Minister for Finance, Deputy Cowen, stated that average increases of 8.9% agreed in the first benchmarking process, cannot be repeated in the recommendations of the benchmarking body, which are due at the end of this year. He stated that the body is likely to give greater weight to the value of the public service pension package when making comparisons, in view of developments in pensions across the economy in recent years. The previous benchmarking process was a failure from the outset. The public service pension terms that give any retiree the same increase as those in the grade he or she last worked in was not taken into account in comparisons with the private sector.

I welcome the publication of the pre-budget outlook statement, launched last year. Unlike other budget documents it gives a snapshot of the total budget and the additional spending proposed. There is limited ministerial accountability and output statements published by the Departments could be improved. Some Departments have not provided targets for outputs and content themselves with listing input and spending plans. The Department of Education and Science is particularly bad in this respect.

I ask that Deputies have more input into the budgetary process. Although it has been stated in the media that things look bad, I hope that will not be the case.

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