Brian Cowen (Laois-Offaly, Fianna Fail)

It is about protecting to the greatest extent possible the progress that Ireland has made over the past decade. It is about ensuring that Ireland has a solid basis for economic recovery when world economic conditions improve. Every Deputy in the House, stepping outside the confines of adversarial party politics, recognises that we are in extraordinary economic circumstances. The global economic and financial climate means we face stark choices. If we do not make the right choices there will be catastrophic consequences for the future prospects of the economy and we will threaten the livelihood of current and future generations of people.

The turmoil in international financial markets provides the backdrop against which this budget has been framed. No one yet knows the full extent of these adverse developments or how quickly stability can be restored. It is not credible to suggest that any government could ensure the winds of global recession which are battering at the door of every other nation would by-pass this country. We must deal with realities as they are, not as we might like them to be. Ireland is an open economy and we depend on exports as a major driver of our economic success. In good times we benefited more than proportionally from the benign world conditions. In these difficult times we are being severely impacted by these stormy international conditions. The first requirement, therefore, is to seek to stabilise the current situation and chart a pathway back to economic recovery in the coming years.

Unprecedented times call for unprecedented measures. The first such measure was to bring the budget forward from the usual December date to yesterday. Fiscal stability has been central to Ireland's economic success of recent years. It has been the firm foundation for building an enterprising economy which rewards hard work but also has a strong social provision. The second major decision was to take decisive action to secure our banking system. We need a strong banking system to support our economy and to support hard-pressed families and businesses.

Up to this year, the economy was growing year on year and hundreds of thousands of jobs were created, which brought in increased tax. We used that money to reform our income tax system and reduce tax on workers and businesses and invested heavily to address the underinvestment of the past by providing better public services in health, education, social welfare and other areas, and investing in capital infrastructure to build up the country and meet the demands of a growing country. While doing all this, we put more than €20 billion into the National Pensions Reserve Fund to help provide for the future and we halved the national debt in a decade. That decade is now over and those improvements are there for all to see. We made sure that more working families retained a greater part of their income than was ever the case before.

This year, the rapid slowdown in the global economy and the downturn in the housing market have dramatically reduced the revenue available to run public services. The 2009 budget is the most crucial budget in modern times. Our tax revenues this year were significantly less than budgeted for because of the sharp slowdown in economic activity. In 2007, we achieved 6% growth and this year growth has contracted by approximately 1.5%. To deal with this sharp deterioration in public finances as a result of that reduced activity, we have chosen a direction based not on soft options, quick fixes or political expediency. Sound and stable public finances are a prerequisite to the delivery of long-term economic and social improvements.

The approach has to be sufficient to restore stability, yet measured such that it does not accelerate the economic slowdown. The budget arithmetic achieves this balance through a combination of targeted reductions in spending and measured approaches to increasing revenue. It addresses the budgetary challenge in 2009 and, importantly, paves the way for healthier and more sustainable fiscal outturns in the years ahead.

We are raising tax revenue by close on €2 billion in net terms to keep within our financial targets and we are cutting expenditure. Significantly, we will have to continue to work to reduce the current budget deficit which will stand at more than €4.7 billion even after the budget changes.

On the capital side we are still investing heavily in Ireland's future. The priorities of the national development plan have been maintained. The pace of improvement, evident in recent years, will continue. Taking direct Exchequer funding of €8.2 billion and a public private partnership contribution of somewhat less than €1 billion, total capital investment next year will be €9.2 billion or 5.4% of gross national product. This is in keeping with our commitment in the national development plan to keep capital spending during these years at between 5% and 6% of gross national product. In the past, all our capital spending came out of cash surpluses. Now we have to borrow, but that is totally defensible because of the economic rate of return we receive from the investment we envisage in the next year on capital. This is prioritising the spend on areas where there is an economic return in the short term on transport and environmental infrastructure and in the longer term in respect of education and research and development investment. This significant investment in transport, research and development, environmental services and communications will enhance the competitiveness of our economy and drive future economic progress.

Given the very rapid increase in expenditure on services in the past ten years, it is not unreasonable that we should reduce the pace of growth in the short term, when this is clearly in our long-term interest. In this period of global economic crisis, it is easy to lose sight of what Ireland has achieved. We must consolidate that now and build for the future by continuing to invest so that we can increase productivity and be more competitive.

When times were good, we invested wisely in schools, roads, public transport——

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