Martin Mansergh (Tipperary South, Fianna Fail)

The coming together of financial, banking and economic crises, part-global, part-domestic confronts this State with one of the biggest challenges to its independence that it has ever faced. In its suddenness and scale of overall impact it came upon us completely unexpectedly, even if a few people had anticipated individual elements such as the housing crash. The supplementary budget involves maintaining, in so far as it is possible for any government in a globalised and interdependent world, control over our own destiny rather than throwing in the towel and becoming helplessly subject to the dictates of outside agencies with few sensitivities to our values and priorities. If we had failed to act in an appropriate and credible way and to assert our determination to master this crisis we would have run the risk of making the past sacrifices to achieve and maintain national independence seem largely in vain.

Looking north of the Border to murderous attacks by splinter groups on the peace that has been successfully established one is struck by the utter irrelevance of their actions to the different acute economic challenges now facing the survival as a credible political entity of a sovereign independent Ireland. We should not underestimate our strengths in coming through this situation or the many solid advances that were made during the Celtic tiger era. If we have an ability as a people it is in battling and overcoming adversity, refusing to be beaten and being able to call on remarkable resources of community solidarity. The prerequisite for changing any adverse situation for the better is a realism in analysing it and assessing what is needed to correct it. Leadership is also needed and it took political guts to bring in a budget such as the day before yesterday's, which had no parallel even in the early 1980s. Conspiracy theories always beloved by Oppositions and which have undeniable public appeal regardless of the truth, will not distract the Government from what needs to be done.

Between 1987 and 2007 we all succeeded in bringing our national finances back within what appeared to be prudent parameters with even a significant margin of safety. Yet in the past 12 months our finances have experienced a severe deterioration, carrying us far outside the agreed Maastricht guidelines of a 3% Government borrowing level for eurozone members. As the Taoiseach said yesterday morning, the Exchequer cannot go on borrowing €20 billion without severely undermining ours and our children's future. Corrective action is essential but the scale of the problem is such that it cannot be all accomplished at once. We are not pursuing a policy that would lay waste to all we have achieved in employment growth, improvements in living standards and better public services to achieve a predetermined but elusive cyclical budgetary target.

The essence of what we are attempting to do is to ensure the minimum necessary cuts in expenditure and increases in taxation fall as far as possible on those who are able, perhaps, with some difficulty to bear them rather than on the weakest and most vulnerable sections of our society. Nobody is minimising the fact that this has had to be a tough budget if we are to hold the deficit within bounds and begin to arrest and reverse what has been its alarming runaway growth. The lesson of the mid-1980s was that carefully chosen expenditure cuts have a less damaging impact on the economy and confidence than a strategy based purely or mainly on increasing taxes.

In this budget, expenditure is cut by a further €1.4 billion, making nearly €5 billion in total since the 2009 budget was first introduced last autumn, with revenue raised by a further €1.8 billion. Because of increases in certain categories of Government expenditure in a recession - social welfare, medical cards, etc. - known to economists as automatic stabilisers, gross Government expenditure will still increase by 2.2% against a background of a fall in prices of nearly 4%. In this budget, expenditure is cut by a further €1.4 billion, making over €4 billion in all since the first spending adjustments were made in July of last year.

It is accepted that the cost of overheads in Government expenditure had to be tackled. The political system has to give leadership and show example. I am on record since January as suggesting the number of Ministers of State could be reduced to 15, corresponding with the number of senior Ministers and I reiterated that view only a fortnight ago during the debate on the Fine Gael Private Members' motion while stressing that this decision was for the Taoiseach and the Government. There is no doubt that the tasks of Government have increased and despite public and media perceptions to the contrary, existing Ministers of State are kept fully occupied and have important sectoral and delegated responsibilities. That was the justification put forward when the rainbow coalition increased the number of Ministers of State by two to 17 in December 1994 and it was the justification when they were further increased by former Taoiseach, Deputy Bertie Ahern, to 20 in 2007, a situation inherited by the present Taoiseach. Circumstances have compelled a review of this situation. The reduction in the number of Ministers of State will also be accompanied by a reduction in a variety of Oireachtas allowances and paid positions. These reforms are welcome as they change for the better, aspects of our mode of operation which detract from public regard for the Oireachtas so we can respond more firmly to those who would denigrate our core democratic institutions.

The Minister, in his speech, made a point of potentially as much significance as any of the specific measures announced when he said he had asked the review body on higher remuneration in the public sector to undertake a full review of top-level payments to take account of the changed budgetary and economic circumstances and the changed private sector environment, and to benchmark rates against those of other EU countries of comparable scale. He believes pay at leadership levels in the public sector should be more in line with pay in other countries rather than with top-level private sector pay in this country, which had become over-inflated in recent years and is now falling.

The Minister has defined in a nut shell what has gone wrong over the past decade. The the late 1990s private sector pay at higher levels was powering ahead and those in the public sector felt they were losing out, with those at the top feeling they were of as much value to society, if not more, as many of their private sector counterparts. Whether that was true or not, such benchmarking was misguided and those who work in public service must return to the ethos that it has an intrinsic value that can never be measured by salary levels, bonuses or other perquisites. When I joined the public service by open competition in 1974, there was no such thing as bonuses and the public service was the better for it.

The one area where there have been no serious, let alone deep, cuts has been social welfare. Last autumn, welfare rates were increased by approximately 3.5% for a year when the cost of living is expected to fall by approximately 4%. Taking account of the cancellation of the Christmas bonus for the time being, that represents a real increase. For a long time there was a debate on the cost of child care, whether there should be a direct payment, tax credit or pre-school provision. I am personally delighted the Government has opted for a free early child care and education year, which is most progressive as well as effecting a net saving. If I remember correctly, that was also the drift of Labour Party policy. This will also address some of the operational problems facing community child care facilities in a context of rapidly rising unemployment and help secure their future in which a great deal has been invested. As one resigned Minister of State to another, I add my congratulations to the Minister of State, Deputy Barry Andrews, on an important political achievement in the best traditions of Fianna Fáil.

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