Brian Cowen (Laois-Offaly, Fianna Fail)

The particular issues affecting us now with regard to the downside risks that have come to pass, such as higher commodity prices and a global financial crisis, probably the worst we have seen since the 1930s, means an open economy such as ours cannot be immune from these developments.

A particular issue on the domestic front also affects our performance, that is the reduction in residential housing output, which has a drag of approximately 4% on growth this year alone. That in itself is a particular reason beyond what one can look to in other countries as being a reason for the present performance of our economy. During that period, this economy also provided itself with the ability to reduce its debt considerably. The National Pensions Reserve Fund represents another 14% of GNP, which is an asset to the country.

While this year and next year we will face into a far more difficult set of circumstances, the purpose of the budget today will be to frame an objective where we seek to restore stability to our public finances and create a pathway back to current budget balance in time, recognising — I would not regard this as wanton waste — that we have had an unprecedented capital investment programme, practically all provided for from cash from surpluses in the past.

We are talking about continuing with a very significant public capital programme for which we will borrow. The return on the investment we saw from the last national development plan was in the region of 18%. Borrowing for capital purposes is absolutely above board as far as I am concerned, despite the fact that in previous years we funded the investment from surpluses.

Where we have an issue is with regard to the current budget deficit and the need to stabilise that situation and work back without cutting back unnecessarily on public services. We must provide a balance in our budgetary strategy that recognises social welfare provision of approximately one third of current spending, public sector pay and a pensions bill of approximately one third of spending and the rest being spent on current day-to-day spending and the delivery of services in all other areas. To find a balance will require further reforms and policy changes, the beginnings of which will be announced today.

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