Brian Lenihan Jnr (Dublin West, Fianna Fail)

On 7 April I will present to the House a supplementary budget which will set out a comprehensive strategy to place the public finances on a sustainable footing for the rest of this year and the years ahead, and to prepare the economy for renewal and revitalisation when international conditions improve. The supplementary budget will build on a sequence of measures deliberately introduced to respond to the difficulties in the public finances. The domestic and global recession, and the banking crisis, have put enormous pressure on the public finances. Added to this, the loss of confidence and reputation due to the actions of some in the banking sector tarnished the reputation of the financial services industry at a time when we could least afford it. This challenge presents the Government with the opportunity to renew the economy, revitalise the public finances and reform the banking system. I will set out the means by which we will achieve these objectives in the Dáil two weeks from today.

Since the announcement of the Government's intention to bring forward a supplementary budget, any fair-minded person would have to agree that I have given the Opposition parties unprecedented access to information and briefings. At the start of the month, at my request, my officials gave Opposition spokespersons a thorough briefing on the broad budgetary framework. I also made the Department available to the Opposition for confidential costings of any budgetary proposals they might have. I do not know the extent to which the parties have taken up that facility because it is confidential but this facility has never been offered to an Opposition party outside of election time.

The Opposition has sought information on the numbers on which the supplementary budget will be based. Deputy Bruton has written to me seeking some detailed figures. The Cabinet is deliberating upon those numbers and will make its judgment, based on advice about their economic impact, in the coming days. It is for the Government to come to an informed decision on these matters. It is my understanding officials continue to be available to the Opposition for further briefings, subject to the requirement to maintain Cabinet confidentiality. It is the responsibility of the Government to draw up the budget but we have done everything possible to ensure the Opposition has the information it requires to make constructive suggestions and criticisms. I am open to considering all constructive proposals to get us through this economic crisis and I am looking to the Opposition for support for the necessary measures we will take.

I note that Deputy Bruton yesterday outlined proposals for dealing with the structural deficit and the size he viewed as appropriate to it. This was an important intervention. There is some common ground between us and I would be happy to engage further with him next week. I respect the role of the Opposition parties in holding the Government to account but it would be helpful if we could reach some level of agreement.

We are experiencing a sharper adjustment and slowdown than many other countries. Although we face considerable challenges, many of the factors which facilitated Ireland's economic success in recent years remain. Our society is cohesive and we enjoy political stability and a shared understanding of our economic challenges. In recent discussions the Commission and the president of the European Central Bank were struck by the seriousness of our political system. The inherent flexibility of the economy is evident in that asset prices, wage and price levels are all adjusting rapidly to the new circumstances, thus helping to restore competitiveness. That flexibility was noted and acknowledged at a recent meeting I had with the Commissioner for Economic and Monetary Affairs, Mr. Almunia, and it will be a considerable asset in getting us through this difficult economic period. The fiscal adjustments we are pursuing will also help to underpin the long-term sustainability of the public finances. Our medium-term prospects remain favourable.

We have a young, flexible and highly educated English-speaking workforce. We have a flexible and export-oriented open economy, with a low corporation tax rate and a pro-enterprise focus. The pace and scale of the current global economic deterioration are without precedent for over half a century and advanced economies such as ours are expected to be among the worst affected. Internationally, global economic activity will contract by between 0.5% and 1% this year according to the International Monetary Fund and more particularly for us by about 3% in the advanced economies with which we predominantly trade as a small open economy.

The Government is taking timely and appropriate action to stabilise the economy. We are repositioning it to be able to achieve sustainable, export-led growth when the global economic climate improves. Notwithstanding current difficulties, Ireland retains the ability and capacity to recover and benefit from the global upturn when it emerges. Our medium-term prospects remain positive and the economy has the capacity to grow at a healthy pace once the current difficulties are overcome. The achievement of this potential, however, is contingent upon implementing the right decisions now to lay the foundations for recovery. Control of the public finances remains the key pillar in our recovery. The economy has been weakened but the need now is for strong, yet appropriate, management by the Government. The policies we decide to follow will serve to renew the economy, address the budgetary crisis and position the economy to benefit as the international environment improves.

There is no easy or quick fix. Difficult decisions will have to be taken. There will be pain to be shared but we are determined that the burden will be shared fairly by ensuring those best able to contribute do so. We are determined at all times to protect the vulnerable and less well-off. Many families and individuals face an uncertain future. Unemployment has increased substantially, workers are taking pay cuts, some for a second time, to protect their employment. In these circumstances, the Government is acutely aware of the need to act decisively in the national interest and to show leadership and courage in the face of adversity. There is no doubt that living standards will fall for everybody as we all contribute to the greater good.

The measures we intend to take will facilitate our return to an era of prosperity and growth based on export-led and innovation driven output. We are determined to ensure the gains of recent years will not be lost and that we will make whatever adjustments are necessary to return the public finances to a sustainable path. In that context, it is important to note that the action to be taken on 7 April will be the latest in a series of necessary interventions. From July last year, when full year savings of €1 billion were announced, through to the October budget announcements with tax raising measures of close to €2 billion provided for and the spending adjustments in February which included the introduction of the pension levy for public servants as part of a savings package worth up to €2 billion, the Government has responded to bring the budgetary figures under control. I acknowledge the realism of the people in accepting the level of adjustments already made. Sacrifices have been made in the public interest right across the country. However, the situation continues to deteriorate and in order to adhere to the commitments we gave to return the current budget to surplus by 2013, it has been necessary to introduce new taxation and expenditure proposals to keep the budgetary projections on track.

Yesterday the Commission published the proposed Council recommendation on the excessive deficit procedure for Ireland. This is a normal part of the operation of the Stability and Growth Pact and follows on from the Commission's report on Ireland last month which was triggered because the deficit for 2008 had exceeded the 3% GDP limit. I welcome the endorsement in the Commission documents released yesterday of the Government's aim to reduce the deficit below 3% by 2013 as set out in the addendum to the stability programme and its overall budgetary strategy. Council recommendations are designed to support the member state concerned in the implementation of appropriate, if difficult, budgetary measures. The proposed recommendation has not yet been considered by the ECOFIN Council. It will be discussed at the Economic and Financial Committee which will be attended by officials from my Department later this week. The ECOFIN Council is due to consider the recommendations for Ireland and the other euro area countries, Greece, France and Spain, at its informal meeting on 3 and 4 April. As is normal in these circumstances, I have been in regular contact with the Commission and my European colleagues with regard to the position of the public finances. I have been glad to receive the support of the Commissioner for Economic and Monetary affairs, Mr. Almunia; the ECB president, Mr. Trichet, and my Council colleagues for the overall budgetary strategy we have undertaken in order to restore stability to the public finances, while taking steps also to support economic activity and employment and improve competitiveness.

In the course of the debate many Deputies made references to the banking system. I shall say a few words on the Government's approach to the global financial crisis and the difficulties facing our domestic banks. The financial crisis, as it unfolded, has demanded Government interventions in most developed countries. Governments have guaranteed liabilities of banks, injected capital into them, provided short-term liquidity facilities to ensure they can access funds as required and, in a number of cases, taken banks into the protection of public ownership. This is a global problem and governments across the world have intervened repeatedly to ensure financial stability.

The Government's approach to this unprecedented crisis in global financial markets has been structured and considered. It is important to note that this approach has at all times been informed by advice from, and in consultation with, the Central Bank and Financial Services Authority of Ireland, the National Treasury Management Agency and legal and financial advisers. In addition, the Government has had and will continue to have regard to discussions with and agreed principles at EU level. Through the bank guarantee, recapitalisation and the protection of public ownership, we have provided very real support for the banking sector. As a result, the citizens of Ireland now have a very large stake in its recovery. However, the support is not unconditional and the State will receive substantial fees for the assistance provided. Further conditions such as board representation, a commitment to a bank customer package and restrictions on remuneration have been imposed.

There is no doubt that regulatory and corporate governance failures have contributed to the current state of affairs. The Government is committed to reforming the regulatory system as a matter of priority, a matter to which I will come shortly. I wish to deal with the case of Irish Nationwide Building Society and payments to its CEO. I have stated the board and management team must be reviewed. Recent disclosures with regard to——

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