Conor Lenihan (Dublin South West, Fianna Fail)

It has formally given us until 2013 to bring our deficit back into line with the 3% guideline figure that is required. The ECB and its president in particular, Mr. Jean-Claude Trichet, have been enormously supportive. All of us, certainly, in the main parties, Fianna Fáil, Fine Gael and Labour, are of one voice on this matter - without the European Central Bank and the input, influence and affluence of the European Union, we would be facing a very difficult and much worse situation.

I must emphasise that spending cuts cannot be effected all at once. There is a very delicate balance between how much can be taken out of an economy by way of extra taxation and additional spending cuts. Spending has been reined in and, as I said, there will be another budget in October. There has been an imaginative effort by the Minister for Finance to introduce a programme of better early retirement options for civil servants and I believe that will be taken up. That scheme will appeal to civil servants in a certain age bracket who might be encouraged to leave the service.

The exercise of the early retirement option and the embargo on further recruitment will result in a leaner and, I hope, more efficient Civil Service. Our work on public service reform will continue and we expect to receive an important report in that regard. Simply because we have announced a budget does not mean the reform process for the public service has been cast aside. I suggest these efforts will gather pace in the years ahead. The Minister has introduced further positive measures in terms of the three year career break for younger civil servants who do not qualify for early retirement. That will appeal to many people in the current economic climate. The Minister was correct to mitigate the effects of the pension levy on lower paid public servants. Although the levy had to be imposed, many people felt it was unfair on that category of workers.

It is important that we send a message to the taxpayers and citizens of this country that the political class, including Members of this House, is making a profound contribution to the cost reduction programme and the austerity package presented in this budget. Particularly in recent years, a degree of cynicism has been directed at this House and its Members. We should let the public know when we are interviewed on the radio or speak to our constituents that we are also feeling the pain. It is not the case that the political class is out of touch with the mood of austerity and the need for radical reductions in public expenditure.

We have to broaden the tax base. I acknowledge that Fianna Fáil-led Governments over the past ten years might have been overly ambitious with regard to tax reductions. The tax base has been narrowed to the point where 40% of the workforce do not pay taxes and 77% of the tax yield comes from the top 20% of earners. That is a very unusual situation. In some ways it is a reflection of the success of the Government in reducing the tax burden since we came to power. Perhaps we reduced tax rates by too much, but I did not hear many complaints. It is remarkable that prior to the 2007 election even the Labour Party felt compelled to announce that it would not impose additional taxes. Labour Deputies would like to accuse us of reducing taxes by too much, but they also joined the party.

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