Brian Cowen (Laois-Offaly, Fianna Fail)

——the implications of so doing and the extent to which such a development would contribute to competition and innovation. I do not wish to say any more than that. Deputy Kenny has put forward a policy document and we can debate it when the opportunity arises.

In the context of rising unemployment and during a period in which the economy is contracting to a considerable degree, we are cognisant of the fact that people's very real concerns lie behind the statistics. Some 224,000 are in receipt of payments in respect of being unemployed for a full week and over 50,000 are receiving payments in respect of being unemployed for part of the week. In the context of the budget, we will do all in our power to reallocate existing resources into areas where activation, reskilling and other opportunities can be created in order to assist people who were unfortunate enough to lose their jobs in recent months.

I cannot discuss taxation at this particular juncture. The Minister for Finance will outline his position in that regard in full on Tuesday next. The major problem with the Government finances in recent months relates to the fall-off in tax revenues. We must seek to replace those revenues. A structural deficit has emerged because, as a result of the change in activity in the economy, the tax revenues that have been lost are not likely to be replaced from the same sources of income from which they were originally collected. That deficit could be of the order of 8% or €16 billion. There will be a need to examine tax expenditures and consider other means of raising taxes. We will also be obliged to cut expenditure programmes that are no longer regarded as necessary or to redesign them in light of the new circumstances in which we find ourselves. The challenge the Government faces not only in the context of next week's supplementary budget, but also in the coming years, is to redesign the tax base and the systems relating there to in order to ensure that they will be sustainable. The gap that has emerged cannot be bridged by relying on the sources of income on which we relied in the past. That is what we mean when we refer to closing the structural deficit.

We are in a recession and world trade is down. As a result, there is less demand for our goods and services abroad. However, that demand will return as growth returns. That is the distinction we are seeking to make in trying to analyse what happened and communicating to the public the nature of the problem and the changes that must be made in the context of putting in place a new taxation system. Some of those changes will relate to increased income tax, while others will come about in due course on foot of a broadening of the tax base. There is a fine judgment to be made with regard to Deputy's proposal in respect of reducing VAT or other taxes. As already stated, I do not wish to pre-empt what the Minister for Finance may wish to say in respect of these matters on Tuesday next. However, I hope I have provided some indication of the Government's thinking.

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