Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)

I welcome the opportunity to speak in support of this Labour Party Private Members' motion. There is very real and justifiable concern about implications of the poor performance of important economic indicators. However, we need to be realistic about the slowdown we are experiencing and pragmatic about what can be done to sustain the economy in these turbulent times as well as rejuvenate it for the future. What we need is action from the Government. We need to see hands-on economic management from the Minister for Finance and the Minister for Enterprise, Trade and Employment.

In recent years, the Government and the Taoiseach, when he was Minister for Finance, adopted what can only be described as a hands-off approach to managing the economy. No effort was made to put the economy on a sustainable footing. It was allowed to become grossly over dependent on the construction sector. For the past five years, growth has been driven by domestic consumption rather than exports and nothing was done to address this unsustainable situation. The Exchequer was allowed to become too dependent on tax both from construction and consumption. It is no wonder then that tax revenues have fallen sharply over recent months. The Government was warned about this very outcome, yet it persisted with proposing and implementing further tax cuts, including the reduction in the higher rate of income tax from 42% to 41%.

While the Government had the benefit of the largest Exchequer surpluses ever experienced, it failed to use them efficiently and effectively to improve capacity and quality in our public services. It failed to prepare for the inevitable slowdown in the construction sector. It did not deliver on time and on budget a fast, modern public transport system. It has left us as the poor relation in Europe when it comes to broadband provision and IT infrastructure. These failures have had serious consequences for competitiveness.

The increases in the cost of living are now hitting home for many for many families. Price levels are much higher than in every other European country bar Denmark, averaging at 23% for consumer services and 14% for consumer goods. Inflation is projected to remain high in 2008 and 2009.

Those on low and average income have come under particular pressure over recent years. The pay increases agreed under the last social partnership agreement Towards 2016 were outpaced by inflation. Workers are faced with increasing prices in essentials, such as food and fuel, while mortgage interest rates have also gone up significantly. The rise in food prices is a major concern for those on low incomes. While the average household spends one eighth of its income on food for lower wage earners, it can be as high as one quarter. Demands for wage moderation from these workers demonstrates a clear lack of understanding about the pressure they already face.

The Government needs to play a role in curbing inflationary pressures by greatly improving public services for workers starting with ending the need for private health insurance by providing a decent public health care service, by providing cheap and efficient public transport and by properly funding schools to take the pressure off hard pressed parents to raise funds for their children's school building needs.

The state of the public finances in the face of declining tax revenue is a real concern. It is important the Government acts responsibly to ensure that revenue is adequate to meet spending demands in the time ahead. Proposals for further tax cuts should be immediately dropped. In addition, as the social insurance fund comes under increasing pressure as the numbers of unemployed increase, plans to slash PRSI contribution rates must also be dropped. The Government must close all tax loopholes, including all those enjoyed by property developers.

The Government's greatest mistake over the past six to 12 months has been its total failure to act to protect those at risk of losing their jobs or to ensure increased participation in training and upskilling by vulnerable workers. It has sat back and done nothing as workers face the prospect of unemployment. No action was taken to protect the jobs of those in the construction sector. This could yet be done by embarking on a social construction programme to deliver the 70,000 social houses needed to clear the social housing list.

There needs to be a focus on building a sustainable economy. We should also begin to focus on indigenous enterprise as a means of creating and sustaining jobs in Ireland. Multinationals bring investment and it is welcome but they have no loyalty to Ireland and are always looking for the next country lower down the scale in wages and entitlements. That has been demonstrated month after month in recent years. We cannot compete in that kind of market anymore. We must attract foreign direct investment because we have the skills base suitable and we must create our own enterprise capable of competing on the international market.

It is apparent that Irish firms are struggling to remain competitive as the economy slows. It is important to note that labour costs are only one aspect of the competitiveness debate and that the cost of employing a worker in Ireland is the 22nd lowest of the 30 richest countries in the world. Our overall level of productivity is high, the fourth highest in the industrial world, but it can be improved. More investment in skills, transport and communications infrastructure and public services are key.

Ultimately, Irish firms have much to offer the international market but we need to ensure that all relevant business bodies and the Government are working in harmony to encourage, promote and market Irish business both at home and abroad.

The response of the Government in its amendment to the motion will not reassure those of us in the Opposition that it is serious about tacking the economic challenges about which I spoke. While commending itself on the state of the public finances, it gives us no indication of what it plans to do to ensure public finances are adequate to meet spending demands in the years ahead. Unsurprisingly, it does not mention the fact €927 million or 6.5% less in tax revenue was collected during the first four months of 2008 than in 2007. There is no indication as to whether the Government plans to drop its untenable plans to cut tax. In fact, the amendment gives the clear impression that the Government does not adequately comprehend the extent of the economic challenge we face either in terms of competitiveness or the pressure on workers in vulnerable sectors and the low paid.

What we need from the Government is a change in its approach to the management of the economy that would see a hands-on approach to managing same. We need to see real action to increase the numbers of workers being retrained and upskilled to allow them to access alternative employment should they lose their jobs. We need to see concrete action to improve competitiveness and support the development of indigenous enterprises. I happily declare my support for the Labour Party motion and oppose the Government amendment.

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