Enda Kenny (Mayo, Fine Gael)

I move:

That Dáil Éireann recognises that:

the current Government strategy for restoring the public finances, the banking system and wider economy has failed to secure public support or international confidence, and that both the Irish public and international financial markets funding the banking system and our Government are losing patience;

unless we urgently take new measures to stop Government borrowing from spiralling out of control, other measures to support our struggling small businesses, exporters and job seekers will have little effect;

the Government no longer has the luxury of the time needed for the long consultation processes by advisory groups before taking further decisions on public spending, reform and taxation in 2010;

calls on Government to introduce a new budget for 2009 as a matter of urgency that:

sets out specific measures to substantially cut the €40 billion Government borrowing requirement for 2009 and 2010 that is being forecast by most commentators;

is ambitious, wide ranging and comprehensive in its scope;

is fair in its execution by showing what role is being played by all groups in society, particularly those who are in the best position to contribute more;

offers radical reforms to our budgetary system to squeeze out waste and poor value for money;

looks not just at spending cuts but at additional tax and other revenue raising measures that can drag our public finances back under control."

I wish to share time with Deputies O'Dowd, Ring, Coveney, Creighton and Feighan.

I move the motion in respect of restoring stability to the public finances in my name and that of all Fine Gael Deputies. Last week the Tánaiste said the public finances were under control. The announcement by the Taoiseach to the House today that the public finances could be out by €2 billion by the end of the year clearly means that they are actually spinning out of control. According to some estimates, Exchequer borrowing this year could be as high as €25 billion, with general Government borrowing of around 13% of GDP, including the cost of bank recapitalisation. That means we can expect to borrow somewhere between €21 billion and €25 billion by the end of the year. Without further decisions, borrowing will remain at this level in 2010 and 2011, leading to a tripling of the national debt by comparison with 2007 levels.

No other country is suffering from such a rapid and uncontrolled deterioration in its public finances. This is because the last Fianna Fáil-led Government, under the direction of the Taoiseach, Deputy Brian Cowen, then Minister for Finance, allowed public spending on unreformed public services to rise dramatically on the back of a temporary and unsustainable tax windfall from the overheating property sector. The disappearance of this tax windfall which, according to some estimates, had reached €15 billion by 2007, has left an enormous structural deficit in the public finances which will not be repaired by a return to normal growth rates alone.

While many things need to be done to stop the haemorrhage of jobs and improve the situation of struggling businesses, exporters and job seekers, nothing will have enough of an impact, unless we take the hard decisions now to mend the broken public finances. This is because the jobs crisis, the shortage of bank credit and the spiralling Government deficit are inextricably linked for two particular reasons. First, the banks cannot lend money that they do not have. They do not have easy access to funding because, as the public finances continue to deteriorate, international markets are losing faith in the Government's guarantee that they will be repaid in the event that the banks run into difficulty. Banks, therefore, have problems in terms of liquidity and, as a consequence, in lending and extending credit lines to businesses. Second, the rapid budgetary deterioration is leading to fear and uncertainty among businesses and consumers regarding future tax rates and Government spending. This is generating paralysis in investment and consumption decisions that is killing economic activity and jobs. Uncertainty is always the enemy of stable economies. The fact is that people cannot budget for their households from one month to the next. They do not know whether their children will be able to continue on to third level or if they are facing tax increases. There is no picture as regards the economic landscape that lies ahead. Businesses do not have any idea as regards what the borrowing requirement or the reduction in the national debt will be in the period 2009 to 2011. If business does not have a perspective on the economic landscape, it cannot project for investment purposes or as regards the running of its affairs. That uncertainty, confusion and paralysis caused by the Government is a major cause of the lack of confidence in business, both family enterprises and SMEs.

That is why it is long past time for the Government to bring to an end the current state of denial and prevarication. Its strategy for the public finances and wider economy is clearly failing, and both the public and international markets funding the banking system are losing patience with it. The world outside wants a clear message that Ireland has changed direction and that there are reasons for believing in the Irish banking system and financial institutions. My view is that an election would give a mandate in providing such clarity, but obviously people are welded together and the numbers speak for themselves. Other countries have achieved very successful turnarounds, including Sweden in the 1990s, by taking decisions that were broad, comprehensive, fair and frontloaded in areas where the pain did not continue interminably.

The current strategy for the public finances, centred on the public sector pension levy and the updated stability framework for the period 2009 to 2013 fails on two grounds. There are no specific measures apart from the public sector pension levy. This has fostered the impression among public servants that they alone are being asked to carry the burden of budgetary consolidation. While Fine Gael has long argued that the public service payroll must be reduced in order to fix the public finances, it is unfair and self-defeating to present this element of fiscal consolidation in isolation from other measures. There are also clear anomalies in the pension levy that reinforce the impression of unfairness among the lower paid, as the Minister of State, Deputy Michael Kitt, knows. Public servants have been pilloried. I respect the work they do. They want to work in a service that is efficient, meaningful and lean and which gives them job satisfaction. They come to me as leader of Fine Gael and point to areas where there is wastage on a daily basis right across the State sector.

The lack of any guidance to families and businesses as to how the Government intends to repair the public finances in the coming years is hurting consumption, investment and employment. People and businesses need visibility and a sense of the economic landscape ahead before they will make decisions on savings, investments, house purchases and pensions. One cannot expect otherwise. Uncertainty is always the enemy of stable economies and the air of uncertainty and drift surrounding the Government are killing economic confidence. That is the message the Minister of State needs to understand. Economic confidence is killed stone dead by Government prevarication and its refusal to face reality.

The updated stability framework for the period 2009 to 2013 has not served to restore trust in Ireland's credit worthiness among international lenders because there is too little detail and most of the adjustments are back-loaded, deferred to 2011 and beyond. Of the estimated €16.5 billion in fiscal measures of tax increases and spending cuts planned by the Government in the next five years, €10.5 billion has been deferred until after 2011. It is like the decentralisation programme. While nobody would expect the budgetary hole to be filled in one year — after all, it took the Taoiseach four years to destroy the public finances — the extent of the back-loading creates the perception of a Government which does not have the political confidence, legitimacy and credibility to take the hard decisions needed to put the public finances back on track where everybody wants them to be.

Time is running out. Both the public and the international financial markets are losing patience with the Government's inability to present a credible economic recovery plan. We cannot delay any longer, with the €20 billion hole in the public finances facing us and getting bigger each day. We no longer have the luxury of having the time needed for long consultation processes by Government advisory groups before taking further decisions on public spending, reforms and taxation in 2010. It is better that we take decisions quickly for ourselves rather than have outsiders do it for us later this year or in 2010. This is about protecting Ireland's financial sovereignty and independence. The Minister of Finance has echoed these words on a number of occasions in the recent past. It is time to face up to this reality. That is why it is vital that the Government should announce now that it will within the next month deliver a new budget that will substantially cut the €45 billion Government borrowing requirement for 2009 and 2010 combined being forecast by most independent economists.

The Fine Gael Party will enter the debate constructively. Nothing is off the table. Given the continuing deterioration in the public finances, to be credible it is necessary to implement new measures this year, on top of the public sector pension levy, to reduce borrowing by a further €1 billion, to be followed by a programme of expenditure cuts and tax increases of €5 billion next year. Taxation measures alone will not deal with this problem. What is vital is that the Government sketch the measures to be taken in both years, with the details of the measures planned for 2010 being elaborated on in the forthcoming budget.

There are possible measures that could be considered, including a carbon tax of €25 per tonne from April. That would save €500 million in 2009 and €750 million in 2010. National recovery taxes, for instance — one point on the top and standard rates of tax — would save €500 million in 2009 and €750 million in 2010. The suspension of public sector pay increments would result in a saving of approximately €250 million. Given the tax buoyancy effects, these changes would cut Government borrowing by just under €1 billion in 2009.

There are additional measures that Fine Gael has already pointed out, including a cut in the cost of the national drugs bill — approximately €200 million — in moving from branded to generic drugs; a carbon windfall tax, referred to by Deputy Coveney on many occasions, on the ESB of approximately €300 million; a cut in the FÁS budget for in-company training of approximately €150 million; a voluntary redundancy programme targeted at back-office public servants — approximately €250 million; a 5% cut in public sector pay for those earning above €100,000 which would bring in €100 million; additional efficiency measures in current spending across all Departments resulting in a saving of €1 billion; price reductions in capital programmes resulting in a saving of approximately €1 billion; and cuts in personal and PAYE tax credits resulting in a saving of approximately €1 billion. Additional taxes are obviously being considered by the Government in the property sector and so on. All of these issues need to be teased out.

The people are willing to face up to the problem provided they know its scale. They are also willing to contribute to having the problem sorted out but want to know two things in particular — first, that their contribution will go towards sorting out the problem and, second, that it will be dealt with fairly. That means that instead of hiding behind the worsening reality, the Government will deal with it because it will only get worse if it does not. From that perspective, our view is that a new budget should be introduced which is broad, comprehensive, fair and will deal with the full range of issues that must be addressed. Dealing with it from a taxation perspective alone is only one measure that will not cover the entire scale of the problem. The issue of current spending must be examined, in particular, waste and inefficiency, to ensure we will have a public service that responds to people's needs, represents value for money for the taxpayer and is responsive in terms of where we must go. That means dealing with the banks also and, as a consequence, the issue of confidence to ensure job investment, creation and protection.

There are enormous opportunities in the health, energy and construction sectors. These are issues the Government should be facing into with confidence but what the people need is a plan from it that sets out the economic perspective over the next three years to ensure business can invest with confidence, that we can protect and create jobs and get back to a point where confidence can be given to consumers, families and business and Ireland can begin to trade again, as it did previously. That will be a very painful process in the next few years but it must be dealt with. From that perspective, Fine Gael calls for a new budget to deal with the new reality. Every issue across the spectrum should be debated fully in the House.

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