Richard Bruton (Dublin North Central, Fine Gael)

As each day passes, the ineptitude of the budget that was passed only weeks ago is further exposed. This Bill represents the last part of the jigsaw of a deeply flawed budget. The problem with the budget is that it was flagged by the Government as a serious strategy to address serious times. People looked to the budget to chart a way out of these difficulties. They looked for an approach by the Government that would seek to reinvent the real economy. We were once a strong and powerful exporting economy, but serious damage has been done to that achievement in the last five years. An important aspect of this is our loss of competitiveness, with many of these losses taking place in sectors controlled and regulated by the Government. People looked to the Government to set a new approach to those sectors which would ease the difficulties being experienced by exporters. They looked for a strategy that would support business through these difficult times. No such strategy emerged.

People also looked to the budget to see, for the first time, after all the talk of public service reform, a genuine implementation of reform that would lead to substantial savings in the budget. The public was anxious to see that the cost of running the shop managed by the Taoiseach, the Minister for Finance and their Cabinet colleagues would be lower. That did not come. What came instead were cuts of the most appalling nature. The Government need not look to this side of the House for criticism in this regard. Ample criticism was offered by Government Members themselves. How could a Government decide that the people who should carry the can for the rash budgets of the past and the ineptitude of preparing for these difficult times would be grandparents looking for health care, children seeking a decent education and young girls hoping to receive vaccination against cervical cancer?

It was a deep shock to people that a Government which spoke about strategic change and the new Ireland that would emerge to get us through this difficult time could produce a list of cuts of this nature. That is why people are appalled at the budget and why the Government's ratings have fallen. People did not look to this budget for savage attacks on those who are most vulnerable. It is the toughness of the schoolyard bully to pick out those least able to answer back. That is not what people expected in the budget. They were prepared for sacrifice and change in the context of a strategy that would get us through this difficult period but that is not what they got.

The problem with the Finance Bill is that it comes from the same stable as that flawed budget. As a result of the failure to address fundamental reform, we now stand almost alone among western countries in seeking to address the international crisis by raising taxes and cutting our investment. The EU in its new strategy is looking to precisely the opposite approach, believing that now is the time for member states to introduce an economic stimulus. We could have provided such a stimulus if there had been serious public service reform, if we were not in the position where more than one third of our borrowing is invested not in capital infrastructure for the future but in paying day-to-day costs. This is the direct consequence of the foolish management of public moneys over many years. I acknowledge that this did not happen on the watch of the Minister, Deputy Brian Lenihan. I feel his pain at being landed with this mess by his colleague. The reality is that the Government created the problems it now must face.

The Bill introduces 17 new taxes aimed at ordinary taxpayers, raising €2,500 from the typical household. These taxes have been cobbled together without any serious thought. The income levy has had to be completely rejigged. It is a little more equitable than it was in its original form but it remains unfair. The provisions for betting taxes have also been entirely rejigged. The air travel charge is another example of a decision taken without adequate thought for its implications. Not only are people aged over 70 years being asked to pay for their primary care, they are also being told that the tax relief available on medical expenses will be standardised. It seems the relief available on nursing home charges will also be standardised next year. This provision appeared in the budget but does not seem to be in the Finance Bill. These are significant changes. There is no evidence of clear thinking in the cobbling together of these provisions.

The changes announced yesterday by the British Government will have a significant impact for people living close to the Border. While the rate of VAT in this jurisdiction is being increased from 21% to 21.5%, the corresponding rate in the United Kingdom is being reduced from 17.5% to 15%. We could just about survive with a VAT rate that was 20% higher than in the United Kingdom and Northern Ireland. Now, however, the difference will be 43%. Consumer surveys show that people in the Republic are paying up to 33% more than their counterparts in the North for the same products in the same stores. This situation is getting worse.

Under yesterday's announcement, the low paid in the United Kingdom will be singled out for particular assistance. This is in dramatic contrast to the provisions in this Bill, where we have denied any increase in tax credits and imposed a levy on the low paid. The British Government has also recognised that companies are strapped for cash and have introduced reliefs to ease them through this period. We have done the opposite in asking companies to pay their tax early, involving a figure of close to €3 billion. The interest cost for the ten and a half months is some €250 million. These are substantial sums at a time when banks are making it difficult for companies to obtain funds even to keep their ordinary stock in trade going. It is putting people under significant pressure.

I personally regard the British approach, given that country's position in regard to public borrowing, as a risky move. I certainly would not advise the Minister, Deputy Brian Lenihan, against the background of his budgetary position, to follow its example. However, we should have been able, as a strong economy, to do more. We should have managed public moneys in recent years so as to be in a position to invest when the rainy day arrived. Instead, because we had built huge spending programmes on the back of a property bubble, our borrowing requirement has risen to 6.5% of GDP at the first sign of trouble.

It would be great to have the room for manoeuvre available to some countries to reflate their economies. We are not in a position to do so. I put the blame in this regard squarely on the shoulders of the Minister's predecessors. Ironically, we may be in a position to piggyback on the reflation that is taking place elsewhere in Europe. The Minister may have to make some gesture towards reflation in order that we can keep this strategy going. Unfortunately, because of the way the Minister and his predecessors have mismanaged the situation, this option is not substantially open to us.

At the root of this, I do not understand how the Minister and his colleagues could have agreed over the past three months to pay €2 billion in extra public service pay between the September increase, the increase next August and the increase the following May. When the Minister looked at the books when he returned from holidays, he must have seen that the only way to fund that €2 billion increase was through borrowing. The money simply is not there. I cannot understand how a Government that was contemplating axing free primary health care for the over 70s and reducing all types of supports in schools did not see that this was an unaffordable pay deal. The Government is repeating the mistake that was made in the benchmarking exercise. The message is that while reform is desirable some time in the future, the pay deal will nevertheless go ahead.

If there is to be some logic, the Government would undertake to introduce a radical reform in public services after which, if progress is being made, there would be bonuses for staff. People would understand that and there would be an incentive to drive reform. However, the Government has done precisely the opposite. The only reform proposals we have heard about are those that were leaked. This is the same mistake that was made in the past. It is a tragedy and I was blue in the face from telling the Minister for Finance's predecessor about the need to reform the way the budget is compiled. The budget only considers inputs and not outputs for citizens. It only considers what is demanded by agencies and not what is needed by clients. It only considers what will be spent not what is to be achieved. We cannot continue with a budget system drawn up in such a way and this is what must change fundamentally. We are chronically condemned to under-perform if we continue with such a system.

Many people in the public service have been failed by the Government because they are trapped in a system which does not serve their interests or encourage high performance. The budget system does not hunt down waste and it does not reward high performance. When money is short it turns on the weak and vulnerable, which is unacceptable, instead of attempting to reform the bureaucracy. This is not the purpose for which we were elected and we must change it.

I do not wish to put all the blame at the door of the Minister for Finance but the tragedy stems from the actions of the Government, through its decisions on benchmarking, decentralisation and the establishment of the HSE. These decisions were designed to send a message in code to the public service that performance to professional standards does not matter; that the Government does not care; that it will move public servants around like pawns on a chess board; and that it is not interested in the quality of the work of public servants, only in the political gains from such movements. The same applies to benchmarking. The Government was not interested in what would accrue in terms of reform. It took the soft option and used an ATM machine to get the public service off its back. These decisions were tragic.

I did not agree with the command and control system decided on by the Government when it came to the establishment of the HSE. However, if the Government was to have such a system, it could at least have removed layers of management and ensured the HSE would be a slim organisation capable of providing significant returns from shared services left, right and centre. It could have cut out human resources departments throughout the organisation and cut out managers no longer deemed necessary because of the streamlining of the system. Why did none of this happen? I imagine it was not because the Minister for Finance took no interest in greater efficiency, but because the Government decided it had no wish to disturb the hornets' nest. This sent a message to people in the public service that the Government is not interested in being professional, in high standards or results at the end of line. It indicated there is enough money with which to paper over all the problems. Such decisions damaged our system, and there is no getting away from those decisions.

We must accelerate the change. Since 2000 the Government has spent €20,000 extra for every family in the country. This is difficult to believe and one would expect a Rolls Royce public service as a result of that expenditure, rather than having grandparents sitting in accident and emergency units for 24 hours as happened to some 30 people in the Beaumont and Mater hospitals last week. One would expect such problems would be cracked. One would expect to see many other problems tackled also. One would have expected the grandiose strategies announced for climate change, health services or e-government to be delivered. However, we never got these. The reason is that we have locked ourselves into a budgeting system which does not serve its purpose.

We must completely change how we operate. This means making a courageous decision, which involves empowering the public service to deliver high quality services and to make the service providers accountable for the results. It means that the Government should not control everything to do with the pay levels set, the people employed or the way operations are run. Such matters should not be controlled from the centre. The Government should give the public service the authority to make these necessary changes and hold it accountable for the results. Rather than waiting for agencies to demand money, Ministers should ask what they intend to deliver next year and only then should they consider whether to allocate the money. Ministers should enter into deals and financial agreements with those agencies and units specifying what is to be delivered and any financial allocation should be dependent on these stipulations. This is a wholly different approach from the model now in place. Managers must be given the authority to manage and if we seek high performance such a change must take place. The Minister for Finance and his predecessor have been dancing around and have refused to grasp this fact and to bite the bullet in terms of changing the way we spend money. While the Minister continues in this vein, the public service will continue to under-perform.

Consider the 2007 output statements which appeared some ten years after the Government was first asked to produce them. I examined the figures for seven Departments. Some 37% or 106 targets we not delivered in those seven big-spending Departments. One would expect some money to be returned to the Exchequer following the failure to achieve 37% of targets and the failure to deliver on output commitments. There was no such refund. One would expect that senior managers would be told that bonuses would not be paid because targets were not delivered. However, bonuses were paid. How can this be squared with the demand of the Government, the Opposition and the electorate that public money should be spent prudently and that it should be allocated based on high performance?

The Minister should not pretend the targets not delivered were trivial. Some were very serious targets, including a commitment to 100 extra primary care teams, 110,000 extra general practitioner hours, the expansion of cancer treatment and screening, 800 respite care beds for older people, research and development projects, high potential start-up enterprises, 9,000 social housing units and 5,000 social and affordable units. There was a commitment to build ten new schools catering for 7,000 pupils, many of whom no doubt live in Deputy Joan Burton's constituency and similar growing constituencies. There were commitments relating to a contract for the new prison at Thornton Hall and the implementation of the Childrens Act 2001. These were significant issues and were important to people. They were not trivial matters; these were targets committed to but not delivered.

I cannot stand over a budgeting system which allows such under-performance and which allows the people managing that money to receive bonuses. This is what galls people and this is the reason people are frustrated that we are not seeing any change. We will be locked into this under-performing system until consequences are introduced when targets are not delivered and until managers are rewarded for targets delivered. It is appalling to see hospitals claiming to be short of money and closing down wards. What sort of signal does this send? If one is running such an organisation which is short of revenue one would cut overheads and increase patient throughput to earn more revenue. One would sweat the assets to meet targets. People could then say that such a hospital was responding to public need. However, if one closes down wards there are expensive consultants, highly equipped theatres and nurses underworked because a "bean counter" decided that the way to manage the health budget is not to reward people for output and to encourage high performance, but to adhere to a budget decided some time previously. The view of such a person is that a given budget is appropriate for a hospital of a given size, regardless of whether the hospital is performing well or badly. That is the system to which we are married. The Minister is in a position to change the budgeting system, but until he does so we will continue to live with such under-performance.

I examined the health service output statement for 2008. It is frightening to consider what happened to under-performing departments. They were given more money and the ambitions or targets of such departments were reduced. The Government has not indicated to under-performing departments that they are not living up to expectations and has not reallocated finances to high-performing units and departments. Under-performing departments are told that since they have worked their way into a hole and since they are so inefficient, the Government has decided to allocate to them more money and settle for less in return. This is not acceptable. We must tackle the problem at its core. The greatest change necessary is to ensure Ministers are serious about their responsibilities. Their job is to buy in services from units and agencies and to deliver to our clients, namely, those who elect public representatives, those queuing in accident and emergency departments and those in classrooms throughout the country. These are the people we should consider when voting to deliver results, rather than the demands of the agencies, their inputs or the lists of what they seek. We should consider what to give to our clients. All this must be brought centre stage in the budget, but it is not mentioned here. We will search in vain for anything to do with outcomes in this budget. That is not what our budgets are about, but it has to become what they are about. I feel strongly about this and I felt strongly about it with the Minister's predecessor. I am still "pissing into the wind"; that might be unparliamentary language.

I notice that provision is made in the Bill for specialist palliative tax relief. It is not that I object to tax relief, but I am a bit puzzled as to why we would make it retrospective to 13 March. It sounds like someone has got a deal that has been made retrospective. I welcome what the Minister is doing with the credit for research and development, but what is the justification for relaxing the treatment of buildings? We are not interested in buildings for research and development, but rather activity in research and development. The Minister seems to be under pressure from someone to give the relief to the building rather than the research.

The change on betting tax is welcome. The difficulty for bookmakers is that there is no other business in which a levy on turnover is the way to tax it. As I understand it, that levy is not passed on to customers. What is then the net margin in some of these businesses? People have claimed to me that the net margin is barely 2% in many bookmakers' shops. Many people are also running telebetting operations, and have located their head offices abroad, which is an effective ruse to avoid paying the tax. The transaction takes place between an Irish-based punter and an Irish-based company, but because it is routed through some brass plate operation in Malta, no tax is paid. If the Minister's proposal does not target these companies, then he will only target the operations that have high street locations employing people in Ireland. That is an issue of some concern.

I am also concerned about the thresholds the Minister has picked for the levy. The threshold of around €18,000 is marginally above the minimum wage, which is an extraordinary low level at which to ask people to pay taxes. There is now a complete riddle of these levies with different thresholds, such as health levies, PRSI levies, the special income levy and so on. They all have different thresholds for the low paid, with an exemption limit for some and a threshold for others. There does not seem to have been much thinking put into it.

I will not hold up the debate any longer. Unfortunately, we will probably have endless hours to get to know one another much better in the dungeons of the House as we go through the Bill line by line. I look forward to that debate.

See this speech in context