Simon Coveney (Cork South Central, Fine Gael)

I wish to set the tone for what I have to say by quoting The Irish Times of 28 January 1982, exactly 27 years ago. Under the heading "The Price of Power", the editor wrote:

Let no-one underestimate how vital the quality of leadership is to the country in this hour of present danger. Life cannot continue in the spendthrift fashion of recent years. Unless the community is prepared to accept voluntarily, a cut in its standard of living, that cut will be imposed with considerably more vigour from without. A flourishing democracy requires that those who populate it take responsibility — individually and collectively — for decisions taken in its name. That major mistakes were made in the recent past is undeniable; that the community can now shrug off the responsibility for them by refusing to pay up is impossible; the slate cannot be wiped clean at a stroke. Will the country rise to such leadership?"

How true that is 27 years later, as we re-live the same kind of challenges we faced then.

As we assess the challenges of 2009 and beyond, we need to be honest with people as to just how dire the current fiscal crisis is. Ireland as a State, as it currently lives and functions, is broken and is on the dark road to bankruptcy if we do not change direction quickly. In crude terms, we are currently spending so much more than the country can afford that we are forced to borrow €55 million a day to simply stay afloat. We have a broken banking system, blocking access to essential credit. We have an uncompetitive cost environment for business growth, difficult international trading conditions and exchange rates that are working against us. We have a collapse in consumer confidence, enormous personal debt levels and rapidly rising unemployment. Most depressingly, to date, we have political leaders who are seemingly so paralysed by the enormity of the decisions they face, they are unwilling or unable to give the direction needed to steer our country through the storm.

We have seen 15 years of economic growth, job creation and massive increases in public expenditure. With that came the confidence to borrow, invest, spend and fuel a growing economy. That period of prosperity began by developing an economy that was primarily based on export growth. We were competitive and flexible enough to attract significant investment from abroad and also be supportive of domestic business growth. However, as time passed, we began to take our prosperity for granted. We became sloppy, allowed cost competitiveness to dive and began to overpay ourselves. Overconfidence led to over-borrowing to purchase property and material goods, cheered on by irresponsible banking and Government policy.

We know now that we became overly reliant on a construction boom for employment and tax revenue, and as competitiveness fell in terms of export-based business, property took over as the new wealth generator. Those who predicted a crash landing and fired the first warning shots were dismissed as cranks and nay-sayers, but they have been shown to be right.

People are no longer interested in the blame game, nor am I. What people want now is a way forward and leaders they can believe in to take us forward. Most people are realistic enough to know there can be no recovery without some pain and sacrifice. If they do not know that, then we as public representatives have a responsibility to explain why collective sacrifice is now necessary. Simply punishing those who caused the mess may be satisfying and should happen, but it will not solve our country's crises to put bankers in the dock.

Everybody has a role to play but the Government must ensure that those who are most capable of bearing the load are asked to shoulder the most in order that the State can protect jobs and, above all else, protect the most vulnerable. It will take brave, honest and politically controversial decisions to limit the pain of recession and bring us back on course for recovery. The Government's approach, namely, to achieve a consensus with social partners, is the preferable route but may well produce the wrong results. My fear is that achieving consensus among social partners is the most important priority for the Taoiseach, above what actually needs to be done.

Achieving €2 billion in cuts in the most politically palatable way is not enough. The search for consensus can stifle the ability to make the necessary hard decisions. Those like David Begg and Jack O'Connor are good people who do a good job for the people they represent, but they are paid to represent their members and get the best deal possible for them in terms of pay and working conditions. They are not paid to govern the country. The Taoiseach, Deputy Brian Cowen, must do that, and must be answerable to this House for it.

The questions that need honest answers, not politically cute or consensus-based solutions, are straightforward, namely, what are the problems with Ireland right now and what specifically do we need to do to fix them in as fair a way as possible? I am afraid the answers are not as easy as the questions. We have a fiscal crisis to mend, competitiveness to restore, a broken banking system with a credit problem that needs to be fixed and we must try to rebuild confidence in a young nation.

Let me deal head-on with the most controversial of current political questions. The country can no longer afford our public sector wage bill. Some €20 billion per year is not affordable and there is simply no getting away from that fact. We either have to cut jobs or cut pay. There is no ducking this issue, despite the understandable anger of many good public servants, who did not cause this crisis.

The market is already forcing salary reductions and has forced 120,000 redundancies in the private sector in the past 12 months, so the Government needs to do what is necessary in the public sector. We need reform on a wide scale, but in the short term we simply cannot keep borrowing to pay increasing salaries. Wage increases are typically linked to increases in the cost of living but we expect deflation in the cost of living in Ireland this year of approximately 3%, so this is a good figure to use as a starting point. Fine Gael has made it clear that we would only accept public sector wage reductions in the context of higher earners being the first to shoulder the burden. Given what Fine Gael has proposed in terms of a public sector pay freeze for this year and next year is clear on the record, I do not need to repeat it.

In terms of competitiveness, this crisis offers an opportunity for reform. My colleague, Deputy Richard Bruton, has for four years been talking about the need for honest reform within the public sector which would reward people who do a good job and introduce a proper benchmarking model whereby pay is linked with performance and there is flexibility so public servants who are not needed in one sector can move to other sectors where they are needed. I am not one of those who believes there are too many staff in the public sector in Ireland but I recognise we have too much middle management in the HSE and not enough people working in schools. Let us remedy this.

My responsibility is with regard to energy and I will conclude by focusing on this area. The regulatory model in Ireland is no longer suited to the current recessionary situation in which the country finds itself. The way in which pricing is regulated for electricity and gas is essentially based on the need to encourage competition and new entrants into the Irish market and, therefore, prices are deliberately kept artificially high by the regulator. That is no way to prioritise regulation in time of recession.

The Commission for Energy Regulation should be brought into the Taoiseach's office and told that the basis for price regulation needs to change for the next two to three years to try to provide energy as cheaply as possible to businesses and households. While there is a climate change and green agenda which is affected by this, we need to take brave decisions to allow people to survive recession and come out the other side. The cost of energy is a key ingredient in trying to improve competitiveness and the cost of doing business in Ireland.

We can make one of two choices. The Government can either decide to take the politically safe route of trying to limit the damage, although in doing so it will risk a long recession and possible national bankruptcy, or it can take tough decisions now and front-load pain to try to reduce the length of time Ireland is in recession and get us out the other side as quickly as possible.

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