Joan Burton (Dublin West, Labour)

I move:

That Dáil Éireann,

seriously concerned at the recent poor performance of important economic indicators, including:

the cost of living increases, reflected in the latest Consumer Price Index figure of 4.3%, and the even greater increase in food prices which have severely impacted on families;

the increase in the live register by 1,600 persons per week in the first four months of 2008;

the fall in the CSO construction employment index by 11% in the 12 months to February 2008;

the fall in the ESRI consumer confidence index to its lowest level since the index was first introduced;

the first fall in retail sales since 2004; and

the poor performance of tax revenues which are running €736 million below target in the first four months of the year;

alarmed at the job losses in recent weeks in construction, manufacturing and services;

noting:

that the most immediate cause of this downturn is the collapse of the domestic property boom, with housing construction likely to fall by approximately 50% when compared with 2006;

the deterioration in international trading conditions for Irish firms;

the failure of importers from the sterling and dollar areas to pass on price reductions to both commercial and retail customers;

the deterioration in cost competitiveness for Irish firms; and

that the Government has brought forward no positive policy proposals to deal with the downturn or any of its consequences;

calls on the Government to introduce targeted measures to address the downturn in the economy, including:

give a direction to the National Consumer Agency to insist that all goods are priced in euro and requesting the agency to more actively monitor pricing to ensure fair play for consumers and to protect against rip-offs;

develop a major programme of education, training and re-skilling for people losing their jobs in construction and in manufacturing;

proceed with a substantial programme of school building, to absorb some of the spare capacity in the house building sector, to deliver modern schools for students, good value for money for the taxpayer, and to ease the immediate burden of the slowdown in construction;

the introduction of a 'begin to buy' scheme to restore activity in residential construction; and

to shift the balance of advantage within the tax code from property based investment to high-tech, high-risk ventures.

It gives me great pleasure to move this Labour Party motion on the economy. I wish to share time with Deputies Higgins and Ó Caoláin. I congratulate my constituency colleague on his appointment as Minister for Finance, although I confess I am disappointed he is not available to be here in the Chamber for this first debate on the economy for the new Government. On a personal level, I wish him well and obviously any constituency would love one of its TDs to be Minister for Finance and Dublin West is no exception.

The House devotes far too few hours to economic matters. We are thankfully coming to the point when policy makers are, however belatedly, responding to repeated wake-up calls from home and abroad about the state of the economy. It is true our economy has many strong points built up by workers, business people and the public sector. We have a young, educated and hard-working workforce. We have a can-do entrepreneurial spirit in this country that has served us well in the past and which will serve us well again in the future.

We must stimulate innovative indigenous entrepreneurship. We can and must re-orientate our economy towards high-tech, high-value-added activity. We must invest in the infrastructure of education and public transport we need to support this vision of the knowledge society.

This Government has been in denial about the impact of the economic downturn on tens of thousands of people across this country. But the thousands who are losing their jobs, the businesses that are finding the going rough and the home buyers in negative equity know how difficult is the current situation. Already this year, we have seen the largest monthly increase in the live register since 1967 while 1,600 people are losing their jobs every week and this has happened on Deputy Cowen's watch. Economic growth is at its lowest level since 1988. The cost of living is increasing at 4.3%, and three times the rate the Government inherited in 1997. This is happening on Deputy Cowen's watch. The ESRI consumer confidence index is at its lowest level since the index was first introduced. Retail sales are falling for the first time since 2004 and on Deputy Cowen's watch. The CSO construction employment index is down by 11% in the past 12 months. Cuts in hospital budgets being imposed this year are, in real terms, the most severe since 1988, all on Deputy Cowen's watch.

Four months into the year and the budgetary arithmetic is already under severe strain, as tax revenues have come in €736 million below target, down 6.5% on the same period last year, even when inflation was running at nearly 5% for the year. The Minister for Finance is praying he will be rescued later in the year when corporation tax and income tax from the self-employed is due.

If we extrapolate the latest Exchequer figures for the full year, we could see tax revenue coming in much lower than the target of nearly €49 billion, the revised downward target which Deputy Cowen set on budget day. Such is the deterioration in the Government's financial position that the Maastricht criteria now loom on the horizon as a further discipline in 2009. Who would have imagined this as Deputy Brian Cowen promised the world in the run-up to the general election? We need to see revised economic projections. I call on the new Minister for Finance to publish revised projections, both for the tax take and for expenditure, as soon as possible.

We have already witnessed from Fianna Fáil and the Government the five typical phases involved when a shock or a bereavement occurs. These are denial, bluster, bargaining, depression, and finally, reluctant acceptance. If a week is a long time in politics, then for this Government the denial phase lasted an eternity. Ministers, led by Deputy Cowen, buried their heads in the sand and pretended the problems would go away. They had a bad collective case of ostrich syndrome. I am sure many Deputies have read Charles Dickens's novel, David Copperfield. One of its characters is a loquacious character named Mr. Micawber, a man who owed much, and who earned less. He was always certain that, "something will turn up". For the past year, Deputy Cowen has been more Micawberish than Dickens ever imagined.

After denial comes bluster. Fianna Fáil Ministers are like the New Orleans officials who denied there was anything wrong after Hurricane Katrina, until the water was up to their necks. These Ministers confidently predicted a soft landing and derided realists for talking down the economy. Bertie Ahern famously suggested that all the doomsayers should just go and top themselves.

Now they are telling us that the worst is over. Present events, they say, are no more than a necessary correction to an overheated market. They tell us there has never been a better time to buy, and so on and so on, in even more desperate tones. They tell us that all will be well in 2009 if only people would stop worrying. They seem to be waiting in hope for the Celtic tiger's third coming.

This Government was happy enough to ride the crest of an economic wave for a decade, taking all the credit when things were going well but are only able to point fingers when things go pear shaped. They create excuses in their heads as to why something is happening. There is always someone else to blame, never themselves. This is what is happening at the moment, but it does not wash. Psychiatrists could write a whole book on the way Ministers have reacted to the events of the past year. Now the truth can no longer be avoided. From the coal face, the redoubtable Owen O'Callaghan warns, "There will be blood". This is a hard lesson in economics for the many Fianna Fáil slow learners even if his choice of words is hardly very original. We all know how that film ended. Greed drove away everything that was dear to the Daniel Day-Lewis character.

Profit margins in the construction industry are down from 33% to 20%. There will be blood indeed. Let us hope it is the speculators who lose out, not the decent building firms and construction workers working in the industry for the long term.

To his credit, the Minister for the Environment, Heritage and Local Government, Deputy Gormley, recently proposed the introduction of windfall charges on speculative land purchases. This would strike the average person as a common-sense proposal. However, Deputy Cowen was not having that and he slapped down the proposal. He also refused to close the section 110 loophole used by property developers to avoid stamp duty and it is clear his priorities have not changed.

All economists forecast that things are on the downturn and all this happened on Deputy Cowen's watch as Minister for Finance.

We have a housing slump. Owen O'Callaghan has let the cat out of the bag, advising people to hold off buying for a while yet, so it appears we are not out of the woods. Thousands of people who bought houses on 100% mortgages over the past year are in negative equity. The first tremors in the housing market were seen when the Government fuelled speculation about stamp duty reform. We then saw not one bout of reform but two, a stark admission that the ill-thought out reform had been botched the first time around. In any asset market, the worst possible course of action is to introduce uncertainty. This is one part of the problem. Another part of the problem is that property development was treated by Government as a speculative get rich quick scheme, particularly the land speculation part of it. They pump-primed the housing market, egging on people to pay more and more for homes. They fuelled the hysteria about the race to get on the property ladder. It was a get rich quick scheme all right, for all the property developers who gather for their annual love-in at the Galway races tent. The people set to lose out are the thousands of mainly young people and families who are now faced with negative equity and years of worry and uncertainty. Soaring house prices boosted consumer confidence, consumer spending and the broader economy on the way up. We are reaping a bitter harvest for the Government's short sighted concentration on a purely bricks and mortar economy rather than more balanced economic development.

Falling house prices have seriously undermined consumer confidence, now at its lowest in a decade and still falling. This has hit consumer spending, particularly on big-ticket items like cars and household goods. Recently we saw the effect this is having, for example, with the closure of Habitat stores.

The fall-off in house building is not only leading to job losses in the construction sector, but to job losses across the wider economy. We have job losses on a scale that most young people have never witnessed and are an unhappy distant memory for everyone else. We see job losses all around the country and in all sectors, even in the previously robust financial services sector.

These cold realities are beginning to strike home and it is not a pleasant sight. People are beginning to feel the pinch and to tighten their belts accordingly. Yet, faced with this scale of crisis the Government has flinched from its obligations and has refused to take corrective action for entirely political reasons to do with the recent upheavals in Fianna Fáil. While the rest of the country was worrying about the economy, Fianna Fáil was worrying about the succession and taking its eye off the ball.

I worry about higher food prices. The price of flour is up 40% in the past year and milk is up 30%. That affects every family and less well-off families more than others. Those on low, fixed incomes and on social welfare find it more and more difficult to put dinner on the table. The Government should show leadership by considering whether its own salaries deserve to jump by up to €38,000 per year, more than many earn in a year.

People are worried about the price of fuel. It is costing more to fill the tank with petrol, the tractor with diesel and the central heating with oil. Not only are people spending longer stuck in traffic burning fuel, but it is costing them a packet. Fuel poverty is becoming more of a concern. Increases in fuel allowances have not kept pace with fuel inflation. Yesterday, we heard about the proposed increases in fuel prices by the ESB and Bord Gáis. It is the poor who will take the hardest hit.

When the currency is strong, one expects to see a dip in inflation, yet Irish inflation remains stubbornly above the eurozone average. At a time when our exporters are taking a hit from the weaker dollar and weaker sterling, our consumers are still faced with higher prices. It has become clear that many retailers are not passing on the benefits of cheaper imports to their consumers. In many British high-street chains the full extent of this rip-off is evident. Prices are often marked in sterling and euro side by side. This makes transparent just how out of kilter are the exchange rates being used. The remedy for many consumers is obvious. They go up the road, 90 miles to Belfast, spend their money there, convert to sterling and get much better value. That is what people from the North used to do when our economy offered value. Why should people from the South not do it in reverse?

The National Consumer Agency and the Competition Authority have key roles to play. The Government must direct these agencies to be more aggressive in protecting consumers from predatory pricing and rip off. They must insist that all goods are priced in euro, to actively monitor pricing policies and exchange rates to ensure fair play for consumers and to protect against rip-offs.

When Labour last left Government, we were creating 1,000 jobs a week. According to the live register, 1,600 more people lose their jobs every week. This year we have already seen the largest month-on-month jump in the live register since 1967. This is the legacy the Taoiseach, Deputy Brian Cowen, has left to the new Minister for Finance. The question is what the Minister will do about it.

Priority number one for the new Government seems to be public sector reform. I think all Members agree we need a more effective, efficient and citizen centred public service. Priority number one for any Government, however, must surely be to get the country working.

Our economy and our public finances became too dependent on house building as a direct result of Government policies. It was not sustainable that we were building nearly as many houses as the UK every year in a country only a tenth of the size. The question facing the country is what to do now. The Labour Party has a number of proposals to make. The Government may not like them all but we expect the Government to come up with some of its own proposals.

As an absolute priority we need to implement a programme of education, training and reskilling for all those coming out of the construction and manufacturing sector who have lost their jobs. Many young men, in particular, are at risk of falling into the unemployment trap if clear pathways are not outlined for them to acquire transferable skills. There must be a significant focus on retraining and educational opportunities for such workers. We want to see some of those workers getting a chance to go to university and compete for the high end jobs where there are vacancies particularly among some of the multinationals here. In fact, we should be ambitious that the people who have worked hard in the construction industry and in manufacturing have genuine alternatives to which to go.

An area that will become increasingly in vogue over the coming months and years is the so-called "green-collar" jobs, namely, improving the environmental standards of existing buildings, retrofitting and installing insulation and other energy efficient measures. This is another area where, particularly if the Government oriented some reliefs and incentives towards home owners, houses could be brought up to standard and made more energy efficient. In the process, as with Denmark, we could create much good quality employment from going green.

For years, there has been serious under investment in the Irish education sector, particularly on the capital side. It is testament to the quality of the teachers that our education outcomes are so good. From Donegal to Wexford and from Dublin West to Kerry South there are schools in serious states of dilapidation. We hear of children having to take classes in converted toilets and the like. This in a country which purports to have a knowledge economy.

We have an opportunity to end this disgrace and use the spare capacity in the construction sector to build schools to a standard of which we can be proud. With the current fall in the construction sector, the Government should be able to get better value for money through the tendering process in building and refurbishing schools.

This is an area where the Labour Party calls for the front-loading of national development plan expenditure for immediate investment in building and refurbishing our schools. Not only would this provide work for many people coming out of the house-building sector with the right skills, it would also help our education system by ensuring adequate capital investment.

Another measure which could have an immediate impact here is the restoration of the summer works scheme. These are not the long-term answers, but they would help smooth the transition to a more broadly balanced economy. Investment in education is imperative. It will be the foundation of our knowledge economy and of the opportunities for future generations.

At the weekend I saw that all the profiles of the new Minister of State at the Department of Finance celebrated the fact that he is a Cambridge man. I am sure the Minister of State in his Cambridge days enjoyed a pleasant punt on the Cann River. On a day trip to Cambridge, as a tourist, I recall seeing the people from Cambridge punting on the river. I saw many punters spend their time going around in circles and some going backwards. Punting can be fun and I am sure it is not as easy as it appears. It is not preparation for navigating the stormy seas surrounding the economy. The sea around us may be choppy but those on the Government benches who are in charge of the economy carry on as if they were at a summer picnic. That is not good enough, the country deserves better.

Over the period of the Celtic tiger we built an economy, of which we can all be proud, on the backs of the work of our people, including business people and public servants. It is a pity to see so much of that effort going down the drain on the watch of the Taoiseach, Deputy Cowen.

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