Kieran O'Donnell (Limerick East, Fine Gael)

I wish to deal with the issue in context. The cuts, which are emergency measures, are designed to restore financial stability to the economy. I will return to the measures, but first we must examine the matter in an integrated way. We must get funds flowing to small businesses and mortgage holders. We need an integrated approach because nothing happens in isolation. The banks, the public finances and small businesses all operate together. Otherwise, we cannot function.

It is critical that we get funds flowing to small businesses and mortgage holders. Equally, it is critical that we get control of the public finances. However, we should go about that in a way that does not hit the vulnerable. The pension levy leaves a lot to be desired in how it is applied to the lower paid. My view is that people are entitled to see a return for the contributions they make.

Deputy Kennedy's only comment on the legislation was that the Minister will consider tweaking the legislation in terms of the impact on the lower paid in the public sector. The Minister needs to elaborate on that. He must state what exactly he intends to do. He needs to explain the benefits of the levy. Currently, the lower paid in both the public sector and the private sector are suffering because of the cost of living and exorbitant mortgages. People are concerned about negative equity and being able to meet their repayments, and they have additional expenses.

I note that section 8 gives the Minister power to exempt a class of public servant from the need to make pension levy contributions. I hope that on Committee Stage the Minister will allow us to devise a scheme that is fairer. The Government is going ahead with the pension levy. We, as a party, feel it is unfair and unbalanced, given that people on higher incomes will pay a lesser contribution than people on lower incomes because of differential tax rates. In addition, a single person can pay less than a married person with three or four children because he or she is paying a higher rate of tax. Anomalies such as those need to be ironed out. Section 8 will need to be examined in depth on Committee Stage.

The Minister indicated the pension levy will result in savings of €1.4 billion. Will he confirm whether a freeze on increments due to public sector employees in 2009 is built into the sum of €1.4 billion? The increases would be of the order of €250 million. That matter must be clarified.

We also need to know whether the pension levy will be a short-term or long-term measure. He indicated the matter would be reviewed in the context of how the economy is doing. The pension levy is a financial emergency measure and the definition of emergency is usually something that is designed for the short term to deal with a crisis.

In addition, it is extremely important that we get clarity on a range of issues relating to the banking system. We need to know exactly what is happening in terms of Anglo Irish Bank, the Irish Nationwide Building Society and Irish Life and Permanent because the uncertainty is undermining the economy and the confidence people have in the Government and how the political process works. It is clear that the financial regulation system has failed. Currently, the regulation system is investigating itself. Major questions need to be asked in that regard. The ordinary person who is concerned about his or her job is asking why we are not getting answers and it is important that we do.

The savings in the overseas aid budget of €95 million is regrettable. The cut in that area is far more severe than cuts across other Departments. I hope the Government will live up to its commitment to provide 0.7% of GNP to overseas aid by 2012.

The curtailment of the early child care supplement is regrettable also. The payment is to be reduced by €100 and the payment will cease for children when they reach the age of five and a half years. That cut will affect those who are most vulnerable and have difficulties in making ends meet.

The Government has introduced two levies to date, namely, the 1% income levy that applies to everyone earning more than the minimum wage, and a pension levy that applies to everyone earning €15,000 or more. That is not a significant amount of money. Basically, the pension levy is unfair.

Fine Gael has proposed a different set of proposals to raise the €2 billion that is required. I accept they are tough and that we have made difficult decisions, but they are fair. We propose that no pension levy would apply but that there would be a freeze on increments and pay increases for 2009, which would save in the order of €500 million. We propose pay cuts for everyone earning more than €100,000 in the public sector and a saving of €200 million by ensuring pharmacists dispense generic rather than branded drugs. A windfall tax on energy companies would generate €300 million. In addition, various quangos cost €50 million annually and they should be abolished. Fine Gael has outlined straightforward measures but the Government has come up with ill-thought out, complicated schemes. The original proposals were published on the basis of gross figures to give them the appearance of being progressive because the more money one earns, the more tax one pays. However, the Government did not realise the major anomalies this would create. People on low incomes will pay a higher levy after tax than those earning a higher income and, ultimately, the level of benefit of the levy to the lower paid is questionable and the Minister must clarify this issue. Those who pay the levy must receive a return and he needs to tweak this.

The Government's measures are rushed. The Minister said greater value for money will be achieved in capital projects. Why will he not carry out a review of the projects and fast-track those that are labour-based to retain jobs? Proper job creation proposals should also have been made. Fine Gael proposed an employer's PRSI exemption to generate new jobs. Why will the Minister not examine other measures to retain and create jobs in various sectors? Reform of the social welfare system has been mooted but, instead, the Government parties announced half-baked measures, which inspire no confidence. They are also not moving properly to restore integrity and trust in our banking system, even though they are the custodians of the taxpayers' money.

The Government nationalised Anglo Irish Bank, which issued non-recourse loans totalling €300 million last year. The taxpayer will pick up the tab for them. Will the money be repaid to the bank?

Fine Gael put forward alternative proposals that are fair, tough and balanced and they do not target the low paid in a severe fashion similar to the pension levy. The Government must, as a matter of urgency, deal with the financial regulation system and provide clarity regarding the ten individuals who secured the non-recourse loans. Above all, it needs to bring forward a job creation programme, show leadership and begin to act as a government.

See this speech in context