Eamon Gilmore (Dún Laoghaire, Labour)

In Mr. Fitzpatrick's world, which is also the world of Fianna Fáil, the Progressive Democrats and the Green Party, children and old people come last in the budget. Class sizes are getting larger. Cuts are being implemented for language support teachers, the early school leavers programme, the school books scheme, grants for youth services, while in-service development and school transport charges are being increased. After all the years of prosperity, we still do not have a preschool education programme and the early years subsidy has been cut.

Mr. Fitzpatrick must be one happy banker this morning with what has happened to the old. Pensions will increase by a mere €7 while medical cards have been removed from the over 70s. Rather than confront the vested interests in the medical profession, which made the scheme so expensive, the Government has targeted the over 70s. This move will cause untold distress and anxiety for older people.

As I have repeatedly said, the problem in the public finances has been caused by the recession, not the other way around. What we needed, therefore, was a budget that would stimulate economic activity and get people back to work. Instead, we got the opposite. This is a deflationary budget, which will suck money out of the economy and reduce purchasing power. The knock-on effect will result in job losses.

This is just year one of a three-year strategy to cut the deficit by 5% of GDP. That is a severe fiscal contraction by any standards. Corrective action is necessary, but we are in the middle of an unprecedented banking crisis, which has already led to a major tightening of credit conditions in the economy. At the same time, we are facing a major international recession and downturn in international trade, which will limit exports as a source of demand. For the Government to further curtail demand will cost jobs.

One cannot compare Ireland now to the country it was in the 1980s and say that fiscal contraction is good. In the 1980s, Ireland had its own currency, whereas it is now part of the euro zone. That fact fundamentally changes the equation for budgetary policy. Our Government deficit will not affect interest rates or inflation. Given our low debt-income ratio, the macro-economic risks of Government deficits are limited. That is not to say that we can run large deficits indefinitely. I am not suggesting that, or that difficult decisions are not required, but taking 5% of GDP out of the economy over three years is very risky indeed. What is the objective? To get back to a position, by 2011, where we will once again be funding capital spending out of current income, at the expense of jobs?

This is not the time to destroy jobs, it is the time to create them, but where are the initiatives in this budget to create jobs? What is being done to find alternative employment for people who are losing their jobs? Where is the major programme of re-skilling and retraining that is needed for those 80,000 people who have joined the dole queues in the past year?

The expert group on future skills needs says that at least 500,000 people must improve their qualification levels over the next decade. Why not start now with those who are losing their jobs? Thousands of people are losing their jobs in the house building sector. They could have been put to work building schools, social housing, urban regeneration schemes or house insulation, but what did we get? The Exchequer allocation for school buildings is being cut and the insulation scheme amounts to €20 for each house that needs retro-fitting. Can nobody in the Government effectively champion the need for energy conservation? Instead of a major retraining programme being launched, the back-to-education initiative is being cut.

Two weeks ago, this Fianna Fáil-led Government wrote the biggest welfare cheque in the history of the State. Not a social welfare cheque, but a society welfare cheque. It was worth tens of billions of euro and was made payable to some of the richest people in our country — the bankers. We were told it was necessary because those same bankers lent out untold fortunes to property developers, the friends of Fianna Fáil. They are the people who pay for expensive advertising campaigns which tell voters that only Fianna Fáil can manage the economy.

The Government has been spinning hard that this budget will protect the vulnerable at the expense of the better off, but it will do nothing of the sort. Social welfare incomes have been increased by the bare minimum of 3%, in a year when the price of bread is up 17%, flour by 34%, milk by 25% and bottled gas by 15%. That is why the Society of St. Vincent de Paul called for a €15-per week increase in welfare rates. Instead, however, they got a pathetic €6.50. If somebody on social welfare is also on a rent allowance, €5 of that €6.50 will be clawed back by an increase in the minimum contribution that social welfare recipients on rent allowance are required to make to their rent payment.

Increases in the fuel allowance are paltry and progress on all other social welfare areas has been stalled. The living alone allowance, a particular concern of Age Action, has been left untouched. A set of mean-spirited, unfair, harsh and unwarranted restrictions has been placed on people who have just lost their jobs and have recently signed on. These are the people who had a contract with the Government; they paid their PRSI and never expected to have to collect benefits, but now their entitlement to claim benefit has been severely restricted.

We were told that top earners would pay most, but that is simply not so. In fact, the budget booklet shows that a couple on €120,000 will pay the same, in percentage terms, as a person on €60,000. The low paid are now effectively in the tax net, wiping out the additional increase they were supposed to receive under the social partnership agreement.

The spin from the Government this morning was that Labour had introduced the same type of levy in 1993. We did so, but made sure to exempt people earning less that £170 per week, which is the equivalent of €416 today. Moreover, anyone on a medical card was exempt from the levy.

I will quote from the budget speech of the then Minister for Finance, Deputy Bertie Ahern. He may not have been socialist himself, but at that time he was surrounded by a few socialists.

See this speech in context