Kieran O'Donnell (Limerick East, Fine Gael)

I am glad of the opportunity to speak on this budget. To take up one of Deputy Kenny's points, it is generally accepted that a country cannot tax its way out of a recession but that is what the Government is attempting to do. That is the main thrust of this budget. It hits people on low to middle incomes and it is based around tax increases. Any budget must have three key components. It must restore public finances; ensure we have a banking system that functions properly and provides credit to small business, and it must have a jobs plan. This budget deals with the public finances in a tax-driven way. The last two budgets will cost a typical family on €60,000 per year an extra €8,000, including €4,600 from this budget. The income levy doubled, the health levy doubled, the PRSI ceiling increased and mortgage interest relief is gone, a matter about which I feel very strongly. In the last budget, mortgage interest relief for non-first time buyers was reduced from 20% to 15%, and now it is being fully abolished. That will mean €900 per year to the average family. The reason given by the Government is that interest rates have decreased. In 2002 interest rates were comparable to current rates and the Government needs to take that on board and reverse the decision.

Over the next few weeks the Government will have to reverse the crude measure of abolishing the Christmas bonus for long-term recipients of social welfare and pension holders. It is crude, unfair and small-minded. The Government speaks about looking after the most vulnerable. That bonus was critical at Christmas time for those people to look after their families and to pay heating bills; the decision must be reversed. The budget has cut €30 million from the primary and post-primary schools building programme and €24 million from third level education. In my constituency the Government has cut the environment budget by €200 million. The Taoiseach visited the regeneration project in Limerick a short time ago. Can he guarantee that those cuts of €200 million will not affect the regeneration project? That reduction of €200 million in the capital budget, which specifically relates to social housing, needs to be clarified.

There has been much discussion on the banks in the past number of days. The most critical press conference will be that of the National Treasury Management Agency this afternoon. I was at the meeting with Mr. Patrick Neary, the then Financial Regulator, when he stated the speculative and property loans were €39 billion. He said €24 billion of those were by way of security and €15 billion were the underlying assets. He also said those €24 billion were affecting the other assets. Of what is the other €50 billion made up? Why has it suddenly more than doubled? The Taoiseach says the total will be €80 billion to €90 billion. A 40% write-off of the €90 billion in loans with the main banks is €36 billion. If the Taoiseach is required to put €36 billion into the banks, that is effectively nationalising the banks. Is the Taoiseach prepared to nationalise the banks?

That €36 billion will be provided by the taxpayer and the value at which those loans are taken over by the national asset management agency is critical. If they are taken over at too low a price the banks will be insolvent and the taxpayer will have to bail them out. If they are taken over at too high a price there is no way the Government will get back the value. I understand that apart from the houses that are completed to date there is land zoned for residential development that could accommodate 950,000 houses and I would like clarification on this. It is said we can sustain the building of 50,000 houses over 20 years. How will the Taoiseach get value from the toxic debts the national asset management agency will take over? Ultimately this will rebound on the taxpayer.

A short time ago the national debt was €40 billion. With the level of borrowing the Government is proposing, by 2013, without doing anything with the banks apart from the €7 billion in recapitalisation, the national debt will have reached €150 billion. That is approximately €5 billion extra per year in borrowings repayments. That will rebound on the taxpayer. If the Government examines its budget projections for the next five years there is very little increase in general day-to-day expenditure. It is coming from borrowings and the property bubble. If one has to borrow another €90 billion to bail out the banks and developers, that is approximately €4 billion per year. That is a potential extra debt repayment of €9 billion per year.

Everybody wants funds to flow to small businesses. I agree we must take on the banks issue; it should have been dealt with much sooner. However, what the Government proposes will cripple the State finances and will mean ordinary, hard-working taxpayers - of whom a married couple on €60,000 will pay €4,600 extra per year - will pay for the mistakes of the banks, Government and developers. Not only will they pay for it, but their children and grandchildren will pay for it. The Taoiseach mentioned a potential national debt figure of €230 billion. That is €150 billion, which will happen based on the Government's projections, plus €90 billion. If the Government wants to have a 60% or 40% write-down it will be a smaller figure, but the Taoiseach needs to tell the taxpayers how much the national asset management agency scheme will cost them. The idea that it will cost them nil does not arise. The Taoiseach must come clean and tell the public how much it will cost.

The Minister for Finance, Deputy Brian Lenihan, was before the House during Question Time approximately two weeks ago and when I asked him if he would deal with the banks' debts by way of a toxic bank, he said, "No." This is a toxic bank, and the problem here is that projecting that funds will flow to small business sounds good but the devil is in the detail. The devil is that the €90 billion loans are worth nowhere near that figure and will probably never be worth anywhere near that figure, and the taxpayer picks up the tab.

Our leader, Deputy Kenny, has just spoken on our proposal and the Taoiseach should re-examine it. Our proposal is to establish clean banks from the existing banks, let the bond holders and shareholders share in the losses and give the shareholders some value in the new banks in order that they can have some hope. The problem with the Taoiseach's model is that the taxpayer will pay heavily and it will burden this State into future generations. The Taoiseach spoke about providing loans to small business. I see no mention of a State-backed guaranteed loan scheme. I welcome the €35 million in EU funding but that should be provided to get funds flowing to small business and that is not being provided.

Back in the 1980s there was enormous national debt but very little private debt. During the 1990s and the 2000s that debt switched from public to private, and now the Government is bailing out the banks and developers - one can call it what one likes but that is the reality - and the taxpayer is picking up the tab. Not only will taxpayers be up to their oxters managing their private debt in terms of making their mortgage repayments, in respect of which the Government has reduced mortgage interest relief, but future generations will have to bail out the banks to the tune of potentially €4 billion a year in interest repayments.

In terms of a jobs plan, the Taoiseach said that all these proposals are about jobs. They should be about jobs.

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