Peter Power (Limerick East, Fianna Fail)

The difficult decisions taken by the Government yesterday will have implications for all Votes across all Departments. These decisions were vital and have but one purpose, namely, the elimination of unsustainable levels of borrowing for day-to-day public expenditure to provide the platform needed for economic growth in future.

Let us not be under any illusions. The reasons we must eliminate unsustainable levels of public borrowing, borrowing for the sake of borrowing and borrowing to repay borrowing is that, as we found in the 1980s, the costs of borrowing will eventually become unsustainable and every single penny raised in income tax will be used to pay the interest on the borrowings. We have learned one lesson from the mistakes we made in the 1980s, namely, that we need to borrow to invest in the future. While we need to borrow, we must do so at affordable rather than unsustainable levels. The decisions taken yesterday must be considered in that context.

In the limited time available, I will focus on the decision to reduce the total budget provided for overseas aid and development from €891 million to €796 million. Notwithstanding the decisions made yesterday, our best estimate is that our overseas development assistance expenditure next year will be in the order of 0.53% compared to 0.55% two years ago. We should not overlook that Ireland's aid programme is at historically high levels in the international context and, notwithstanding the decision taken yesterday, we will remain the sixth most generous donor in per capita terms in the world.

The announcement has been criticised in some quarters. I will emphasise a number of points which informed thinking on the decision. If we chose not to reduce public expenditure, including overseas development assistance, as we did in the 1980s, and the economy were to go into freefall, we would simply offer our development partners, principally in Africa, a proportionately larger slice of a rapidly shrinking cake. It is also widely recognised in the development community that long-term borrowing for development programmes at exorbitant interest rates is untenable and unsustainable. It is a lose-lose scenario in which the developing countries would lose and our development programme would lose credibility.

The size of all international aid programmes is expressed as a percentage of gross national product. Increasing the percentage of assistance given in the context of a seriously declining GNP would not be in the interests of the poorest people in the developing world or the credibility of Ireland's aid programme internationally. The bare truth is that if the economy were to continue to decline at the current rate, we would provide an ever decreasing amount in overseas development assistance. The absolute imperative therefore is to provide for national economic recovery, thus enabling us to resume the expansion of the programme. It is the Government's intention to expand the overseas aid programme again, as we did when times were good, the economy was expanding and gross national product was increasing.

All aid budgets internationally are under pressure as the global economic crisis begins to affect the developed and developing world. The reduction in overseas development aid must be considered in that context. Having said that, Ireland has a proud record in development and Irish people can be justly proud of the Government's aid programme implemented by Irish Aid. Ireland is the sixth most generous donor in the world in per capita terms and I am confident it will remain so in 2009. The overarching objective of our programme is the reduction of global poverty and hunger. Ireland is making a real difference to the lives of the poorest people in the developing world.

We are significantly closer to achieving the 0.7% target we set ourselves, and which all developed countries have set, than most of our EU partners even after the painful decisions we took yesterday. Only Sweden, Luxembourg, Denmark and the Netherlands have higher percentages than Ireland.

My immediate priority as Minister of State at the Department of Foreign Affairs with special responsibility for overseas development is to ensure the budget provided for the development programme is implemented effectively and in line with our priorities. What will our priorities be? Two weeks ago I signalled that the fight against world hunger would become a cornerstone of our international aid and development programme.

That is our response to the hunger task force report which set out a real sense of anger and frustration on behalf of the Irish people that, notwithstanding the enormous difficulties we are facing in our country, there are still, as we go to bed tonight, 1 billion people who will not have enough food to eat. That is one person in every seven on the planet. To put it in context, the number who do not have enough food to eat is 250 times our population.

It puts some of our own problems into some perspective. Our response this year, even in the context of the new realities we must all face, is to take a leadership role internationally in this area and encourage our development partners, all of whose budgets are under pressure at the moment, to refocus on the issues that matter, putting food in the mouths of the people who are hungry on the planet today.

I have signalled to my ministerial colleagues this week at the development ministerial council meeting in Prague that we intend to take a leadership role in this area in 2009. In the context of the decision made yesterday we will examine every aspect of the programme to ensure its effectiveness in the fight against poverty and hunger. We will adjust the programme in line with yesterday's decision and with a clear view to minimising the impact of those most in need.

Regarding the macro-economic situation, the defining characteristic of the recession which has hit us over the last 12 months is the rapidity with which it hit not just Ireland and the developed world. Why is it so different from other recessions which did not hit us so quickly? It is clear evidence, if it is needed, that we are in a truly globalised financial economy and economic trading environment and only those countries which are able to compete effectively and ably in the technologically and internet based financial and economic global world economy will survive.

Unless we get our public finances under control and do so quickly we will not be allowed to borrow. We need to be in a position to borrow that money so we can invest in the globalised trading economy. What does that mean? It means producing the best and most creative students in the world whose ideas go into the computers we used to make in Limerick, but can no longer make because we are not competitive in the assembly and production market.

We need to produce people in this country who can make software and develop creative ideas, such as those of Microsoft, that go into computers. That is the new reality and globalised economy we face. To compete in it, we need to invest in it. To invest in it, we need to borrow. There is only one key determining fact in our ability to borrow and that is our ability to repay our borrowings. If we do not control public finances, with all the real pain and hardship that causes throughout the country, we will not be able to borrow a single penny.

We will repeat the mistakes we made in the 1980s which were not to invest in our infrastructure, young people, roads, hospitals, schools or universities because that is the surest way for this recession to go on and on. That is why, even though they are painful, we needed to make the very difficult decisions yesterday.

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