Willie Penrose (Longford-Westmeath, Labour)

I thought I had more time than that.

I am pleased to have the opportunity to speak in this important debate on behalf of the Labour Party as the party's spokesperson on enterprise, trade and employment.

I recall the then Minister for Finance, Deputy Brian Cowen, launching the NDP in January 2007, which he described as an ambitious plan which would secure the further transformation of our country, socially and economically, within an environmentally sustainable framework. In his Indecon public policy lecture last November, Deputy Cowen stated his first priority was the delivery of the NDP. I do not doubt the sincerity of the Taoiseach's commitment to the NDP but I consider that the projections of growth in tax revenue on which it was based were absurdly optimistic. When the plan was launched, housing completions had peaked and the Minister must have been aware of how dependent the Exchequer had become on taxes from the building industry. At a time when construction in the rest of Europe comprised about 5% of GDP, construction in Ireland reached a totally unsustainable 11% of GDP.

The Taoiseach must now recall with embarrassment the famous comment of Michael McDowell before the last election that, "we do not need" the revenue from stamp duty. As stamp duty receipts plummet, the Government must surely accept that a tax which was never intended to be a major source of Government revenue became central to projections of tax receipts and consequently, Government spending. As Minister for Finance, the Taoiseach must have been aware the housing boom would come to an end with a consequent sharp fall in employment and tax receipts.

It was clear as early as 2002 that the increase in population would sustain a rapid expansion of the building industry and that the many tax relief schemes introduced in the late 1980s and early 1990s, which my colleague, Deputy Burton scrutinised in great depth, were no longer required. Yet as Minister, the Taoiseach extended some of these schemes when it was apparent to everybody but the Construction Industry Federation that they had outlived their usefulness. He did not take any serious action to curtail these schemes until last year and the result is that we now have hundreds of unsold houses which were built under tax relief schemes rather than in response to real need.

While we have a plethora of poorly constructed and poorly insulated houses, remote from public transport and other facilities which make a mockery of the Government's commitment to sustainable development, the provision of social housing is wholly inadequate. We have a grotesque situation where hundreds of private houses sit empty while thousands are living in substandard accommodation as they wait for the provision of social housing which the Government is unable or unwilling to deliver. As house-building in the private sector declines, the Government must ensure the social housing programme is accelerated. It must also ensure it achieves value for money in these schemes. With declining activity in the construction sector, costs will fall and the Government will be able to ensure a greater level of output for any given level of spending.

Notwithstanding the gloomy comments of economists, many of whom seem more comfortable with recession than boom, it is important to bear in mind that although we must reformulate policy in view of reduced tax receipts, we are not experiencing a fiscal crisis. Borrowing last year was 24% of gross domestic product, GDP, which is minuscule compared to the crisis of the late 1980s when borrowing reached 151% of GDP. The current level of debt is equivalent to three months' tax revenues. The picture is even less alarming if we look at general Government debt, which takes into account the assets of the National Pensions Reserve Fund. On this measure, Government debt is only 14% of GDP, or less than a quarter of the 60% allowed under the EU's Stability and Growth Pact.

While there is no possibility that we will breach the borrowing levels permitted by the Stability and Growth Pact, it will undoubtedly be difficult to maintain the current budget deficit below the permitted 3% of GDP. However, the Stability and Growth Pact should not be used as a bogey man to frighten us into fiscal submission. The Stability and Growth Pact was famously described as "stupid" by Mr. Romano Prodi, former President of the European Commission and Prime Minister of Italy. When France and Germany breached its limits, no action was taken against them. Instead, the Stability and Growth Pact was revised to allow for the 3% limit to be exceeded in times of severe economic downturn. We will not entertain Government claims that the Stability and Growth Pact represents an insurmountable curtailing or limiting factor.

The fiscal situation is not so bad that drastic cuts must be made in the national development plan. If cutbacks are unavoidable, they should not be made in those areas that affect the prosperity and future stability of our society. Of the €184 billion to be spent under the national development plan, more than €80 billion relates to non-infrastructural projects. Much of this spending, particularly in education, is vital not only for economic growth, but to create the just society to which the Taoiseach claims to be committed. The Government's proposals cast doubt on that commitment.

Some 40,000 children are being taught in prefabricated classrooms. Hundreds of schools are without adequate facilities for physical education. Hundreds of elderly people are in acute hospital beds because of the lack of step-down beds. Providing for all these needs would go a long way towards mitigating the decline in activity in the construction industry. In my own area, for example, commitments have been made to provide a national school in Loughegar, to undertake refurbishment and extension works at St. Brigid's national school in Ballynacargy and Sonna national school in Rathowen and to provide a new secondary school at Athlone community college. There are many such examples throughout the State.

The Taoiseach has told us that the FÁS apprenticeship budget will be cut. Only last week, however, the director general of FÁS, Mr. Rody Molloy, made the case that this service should be expanded. This proposal jeopardises our future. Bord na Móna and the ESB are no longer providing the flow of apprentices they did in the past. Mr. Molloy referred to apprentices completing their apprenticeships abroad. What message does this send to young apprentices who have been released by their employers? A knife is being wielded with no thought for the future. Cutbacks in spending may help to balance the books now but will add to costs in the future. Much of the crisis in the health system is due to the drastic closure of hospital beds in the late 1980s. We must not repeat the mistakes of the past.

We generally talk about investment in terms of physical infrastructure or sometimes as research, both of which are crucial for economic development. However, investment in people offers the highest returns. In 2005, the National Economic and Social Forum produced a cost-benefit analysis which showed that every €1 spent on early childhood education yields a return of €7 at a later date. Children who receive pre-school education will be more productive workers who enable Ireland to compete effectively in the global economy. Moreover, allocating resources to pre-school education now will mean we spend much less in the future in dealing with the consequences of crime, unemployment, poverty and poor health.

National development plan investment is vital in terms of attracting foreign investment. The chairman of the Industrial Development Agency, IDA, stated at the launch of the authority's annual report last week that it is absolutely imperative that the infrastructure element of the national development plan be completed on schedule and in full. The great success of the IDA in attracting foreign direct investment has been largely due to the quality of our labour force. If we are to continue to attract investment, we must continue to increase the education and skills of our labour force. This can only be achieved by increased investment. It is a great tribute to the calibre and commitment of our primary and secondary school teachers that they have achieved such impressive results when so little has been spent on educational infrastructure. As information and communications technologies become ever more important in education, there must be no reneging on the national development plan commitments in this area.

Our commitment to the euro means the options available to the Government to stimulate economic growth are limited. Devaluing our currency and spending our way out of recession are no longer options. Instead, we must rely on domestic productivity growth to improve our scope for further growth. To do this, we must continue to invest not only in physical infrastructure, but in enhancing the education and skills of the labour force.

The number of pupils leaving school without a qualification has remained stubbornly high and many of these young people end up unemployed or in unskilled jobs. More than a quarter of the adult population has literacy or numeracy problems, yet spending on adult education is low compared to other EU countries, where the problem is less severe. Third level institutions are still obliged to charge fees to mature students embarking on third level education unless they qualify for VTOS grants for which the income threshold is low. If cutbacks must be made to the national development plan, the last area to be considered should be education and training.

More than half of all planned Exchequer spending under the national development plan is on social exclusion and social infrastructure projects which include a large element of current spending. While there may be some room for reordering these spending commitments or finding more cost effective ways of delivering the programmes, any major reductions will simply reduce the potential for economic growth and store up social problems which will require greater expenditure in the future. I urge the Taoiseach and Minister for Finance to ring-fence the €5 billion that has been allocated to the building and refurbishment of primary and secondary schools. As Deputy Gilmore remarked, this will have the added benefit of stimulating the construction sector.

Since adopting the Stability and Growth Pact, the Government has been enthusiastically entering into public private partnerships, PPPs, as a means of keeping borrowing low. I am puzzled by the Government's eagerness to embrace PPPs given that we have never remotely approached the Stability and Growth Pact borrowing limits. The results of some of the PPPs have been disappointing. Any such future arrangements should be subject to detailed cost-benefit analysis before we commit hook, line and sinker to this method of funding infrastructural projects.

The limitations of the PPP model were made clear when the McNamara group withdrew its arrangement with Dublin City Council for the redevelopment of St. Michael's estate in Inchicore and other locations when it realised the anticipated profits would not be forthcoming. Deputy Gilmore recently visited O'Devaney Gardens, which was also due to be redeveloped under a PPP, and encountered the despair of the residents who are to be left living in difficult and demanding conditions because private developers see no profit to be made from redeveloping their area. I question the efficacy and worthiness of these projects. The schools building programme should not be based on a system whereby the Government sustains the ambition of developers to amass huge profits where they see an opportunity.

I am unconvinced by the concept of public private partnerships. In many cases, the State takes the risk while the private firm takes the profit. The Government must not rely on PPPs for the provision of essential public services. I am alarmed at the substantial sums to be spent under the national development plan on PPPs without adequate cost-benefit analyses of the projects. We are told PPPs offer value for taxpayers' money. In reality, they provide not what the public needs, but what the public sector is willing to pay for. Furthermore, the user charges imposed by firms providing services under PPPs are inherently regressive, unlike taxation which is at least potentially progressive.

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