Chris Andrews (Dublin South East, Fianna Fail)

I am delighted to have an opportunity to speak on this budget. I believe it is the first of a number of difficult budgets because clearly matters will not improve over night. The situation in the globalised world in which we live today, as in Ireland, is pretty severe. Despite the difficult economic circumstances in which we find ourselves, Ireland today is in a much better place than it was ten or 15 years ago. Currently, we have 2 million people in work. This is not to lessen the impact of people losing their jobs, which is clearly a traumatic experience, or the fact that more people will leave Ireland to find work abroad. However, the need to leave Ireland does not carry with it nowadays the same fear experienced in the 1980s that if one left, one might not get back for many years. The changing world and airline industry makes it possible for one to feel not very far away from home. While people may have to move to another country for work, they will not leave with the same level of sadness with which people left in the past.

There has been a real improvement in living standards in Ireland and we now have a much more generous welfare system. The Government introduced the biggest public investment programme in the history of the State. All these advances were made in the context of good public finances and impressive and record levels of economic growth. However, we are in exceptional times and must make difficult choices. The Minister for Finance, Deputy Brian Lenihan, has made difficult choices. I believe he has a steady nerve and a steady hand and showed his coolness under pressure two weeks ago. The situation with the banks showed the Minister to be a man apart from the crowd. He was impressive and is continuing in that vein.

The global economy is going through a severe storm. I recently heard President Bush say on radio that things are getting better. I am not sure I share his optimism, but who knows? Perhaps he will get one thing right during his tenure as President. In this severe economic storm, Ireland is but a small boat bobbing on the economic seas and has been left open to the harsh winds of the downturn. We must make the right decisions now. While they may not gain us short-term popularity, people will in time recognise they were the right choices. Time will prove that this budget was what was needed to steady the Irish ship in these stormy times. It will be the first of many budgets devised to get us back on course and to take advantage of the upturn in the global economy when it inevitably comes.

Two weeks ago, the Minister for Finance introduced measures to deal with the threat to the banking system and the knock-on effects on the economy. There has been much talk of the Government bailing out the banks. The Government did not assist the banks for the banks' sake. It did so to ensure that the economy did not collapse around us and that families and communities throughout the country were not plunged into the economic abyss that faced us. Many people, excluding the Labour Party who did not support the Minister, believe he handled the matter with great confidence and determination.

The banking system in Ireland differs from the banking system in the US and other models used throughout Europe. Each banking system has grown up with its own differences. There has been much criticism of the regulatory system in Ireland which is made up of the Central Bank, the Financial Regulator and the Department of Finance. Despite what people say, the banks, who are players in this, do not want the banking system to go under. They have as much interest in the banking sector surviving this crisis and in co-operating with the Minister for Finance through the new bank guarantee scheme. Our regulatory framework is among the best in Europe, if not the world.

Last April, I was part of a group that visited New York and Washington to meet with different groups from the Federal Reserve, the Treasury and some of the banks. It was clear that there was no one in the US who had a vested interest in calling a halt to what was happening. From homeowners and brokers who thought they would make a killing right up to Wall Street, everybody felt this could not go wrong. Clearly, nobody was there who wanted to or was able to call a halt.

That is not the case in Ireland. We have difficulties but in America, national confidence in the banking system collapsed. This spread like a virus through the Irish banking system and we now have a real problem. It was not caused by any gross negligence in the banking system but by the lack of confidence in the American banking system. I understand sub-prime lending in Ireland accounts for less than 3% of the residential market whereas in the US it accounts for over 25%. Clearly, our market and banking system bear little resemblance to that of America.

There is no doubt this year's budget has been one of the trickiest in many years as we are not in as healthy a financial position as we enjoyed over the past ten years. We are not alone in this position as countries across the world are experiencing downturns and face tough decisions. When one considers what has happened in Iceland, one can be thankful we have a Minister for Finance and a Taoiseach who could act with such decisiveness and determination. Although their actions were criticised by Germany and England — the British Government expressed concern — those governments realised the Irish model was to be followed.

The overall aim of the budget is to rebalance the public finances. This will not be done in one or two budgets and may not even be done in three. We must do it and savings sought by the Government must be found. They will be sought through indirect taxes, such as the rise in cigarette and fuel taxation — there was some discussion as to whether the tax on cigarettes should have been increased by more for health reasons. In considering health issues, one must take the broad view that, on balance, the increase achieved by Government is fair. The same applies to the rise in the cost of petrol.

The €200 levy on non-principal residences is innovative. I represent Dublin South-East and a large section of the constituency has second homes or non-principal residences. All these people have said that although they would prefer not to pay it, the levy is there and they are not that upset about it. They recognise that paying a small levy is not a significant inconvenience.

I am satisfied this budget is pro-business and aims to encourage new commerce and research, which is vital to keeping the economy healthy in the long run. Measures include an increase in the research and development tax credit from 20% to 25% and the remission in capital gains tax for new companies in their first three years. The filing of tax returns is always a big concern for businesses and the Government proposes to encourage take-up of the Revenue Commissioner's on-line service by providing a general extension to existing deadlines where returns and payments are made via the on-line system. This is a good initiative which is about encouraging people rather than penalising where possible.

It is very important that corporation tax is kept low and achieving this aim has been prioritised. Even US presidential hopeful John McCain is now talking about this in his speeches.

We are all aware of the recent controversy about medical cards but it is important to focus on the fair deal initiative, for which the budget has provided €55 million. The deal will make arrangements for financial support for people who need long-term care, which is vital to ensuring stability and security for people in old age. In the past few days we have seen that security and being able to plan for the future is a very important requirement for older people in the community.

I welcome the increase in mortgage interest relief for first-time buyers. The decline in house prices has offered some opportunity for those seeking to get on the property ladder but it is nevertheless daunting for those trying to purchase a home. I spoke to a group of young people in employment today who said it was a good budget for them because prices are coming down and mortgage interest relief is going up. It has been increased from 20% to 25% in the first two years of a mortgage and to 22.5% in the third to fifth years. The rate has reduced from 20% to 15% for non-first-time buyers. It is a good initiative.

Although we speak of the rising unemployment rate, we must remember that over 90% of the workforce is still in employment. Such people see house prices coming down and are closer to the opportunity to buy a home, which is good. Every cloud has a silver lining and such people see it.

There has also been a significant increase in investment in social and affordable housing, which I fully support. This is being done largely through the extension of the local authority mortgage scheme and the introduction of the Government equity scheme.

There is no doubt people will have to make sacrifices. I welcome the 10% cut in Ministers' salaries, although I am not sure Ministers would welcome it. It sends a signal. None of us wants to pay tax — if we had a choice we would not pay any — unless one is from an ideological party which believes so much tax should be paid that nothing would ever work. To refer back to America, I heard US presidential hopeful Barack Obama say he would prefer to pay no tax. Although nobody wants to pay tax, we recognise we must do so to get the balance right. The Government has done this and its approach has been to make tough decisions now so we can ride out the economic downturn and be in a good position to avail of the upturn when it arrives. There is no doubt we are in a better position to do this than we were ten, 15 or 20 years ago.

I will briefly refer to the medical card. Today's announcement and the accompanying figures will put older people's minds at ease. A significant aspect for older people is having a bit of security and being able to plan for the future, as I mentioned. The issues surrounding the medical card have shown that people were very upset by these events and I am genuinely sad at the upset and concern which older people felt on the withdrawal of the card. Many people were unclear as to whether their medical card was to be withdrawn, although in many cases it would not.

Those who would have been affected by the original proposal were clearly upset and everybody knows people of advanced years. I welcome today's announcement. The Minister has shown he is willing to listen and to bring about changes when the case is strong. Older people had a strong case, which they made, and the Government will get on with managing the country. In many ways, the Government has acted as a union for older people and Members must ensure they continue to protect older people.

See this speech in context