Richard Bruton (Dublin North Central, Fine Gael)

I do not have to tell the Minister or the Ceann Comhairle that Ireland is facing frightening challenges on every front. The ESRI brought people up with a sharp jolt when we realised that 300,000 jobs might be lost before the end of next year, potentially bringing unemployment figures on the live register measure to over 600,000. That is an appalling prospect and has been brought on by a series of catastrophic policy failures in this country. We now have the worst public finances in Europe, collapsed competitiveness - where we once were very strong and competitive - banks that are totally frozen and a property meltdown. The first lesson we must learn is that we must understand the policy failures that were made so that we can plot a course that is based on addressing some of them. I find it dispiriting that the recent budget has not properly faced up to the reality that this Government and former Ministers for Finance pursued irresponsible public spending policies.

They were irresponsible in terms of the business cycle and the way money was expanded into the teeth of booming conditions, and in the quality of spending and the willingness to ramp it up, regardless of results. Then there was the refusal to pursue genuine public service reform. The notion was abroad that change did not have to be delivered for money that was given out. Benchmarking was the highpoint of that, money dished out and nothing asked in return. Decentralisation was out of the same stable. It was saying to committed public servants, in effect, "We do not care about the quality of your work or the institutions you are working in. We will move you around, to meet political needs, like pawns on a board". That, again, destroyed the commitment to reform and professionalism in the public service.

We have persisted in running a budget system which, as I have said repeatedly, is not fit for running a corner shop. We take no account of capital costs in the way we fund agencies, allowing them to be financed on the basis of last year's budget, not on any commitment to deliver results. Year after year in the Estimates debates I appealed for change with the Minister's predecessors with regard to the manner in which we were spending our money and putting budgets together, and was met with blank refusals.

Public policy irresponsibly destroyed our competitiveness. That is what happened in the last five years and it was driven by public policy, the cheerleading of the property bubble, the excessive public spending commitments, the willingness to buy out problems instead of confronting them, the cosy relationships that meant regulators did not turn over the stones and did not demand standards from those they regulated. Then there was the inability to confront failure in public commitments or waste in public spending, or rip-offs coming from public sector bodies. These all enormously coroded the basis on which our country managed its affairs, and have to be confronted. The cost of running Government in Ireland is simply too high. We are not effective at doing what we are charged with overseeing. That has to be addressed and should have been at the core of this budget. Unfortunately, that has not been the case.

Equally, we emerge from a legacy where those who challenged were frozen out. They were described as being "suicidal" or ought to be committing suicide, as the former Taoiseach said of those who questioned the soundness of our model. That was another element of irresponsibility in the face of serious issues which were coming our way, the denial and refusal to face up to things, and now we are paying. Ordinary families, who were crippled in the recent budget, are paying. They are being asked to give up early childhood supplements for the under-fives, mortgage relief and to shoulder the levies. They do not see the corresponding strategy, however, that says this pain is getting us somewhere. Neither do they see reform in the way we spend our money or in the public services. They do not see a strategy to protect employment at a time when it is haemorrhaging at an extraordinary and appalling rate.

People are despondent because the essence of what is needed from Government is a coherent strategy that confronts all our problems. This budget solely looked at one narrow public finance problem, and addressed it in just one way - by hiking up taxes to fill the gap. Some 75% of the adjustments that were made on the current side to fill what the Minister called his structural deficit were achieved by demanding people to pay extra taxation - only 25% came from the Government cutting the cost of running its own affairs, and that was the wrong balance. On top of that, of course, we cut capital spending, and thereby hangs another tale.

Having looked at all that and the pain that is being imposed, it was particularly disappointing to find what the Minister had achieved as regards the 10% structural deficit he said had to be adjusted. Only 16%, less than one sixth of the structural deficit he said had to be corrected was done in year one. On his strategy for next year he will get a quarter of it, so even at the end of this year's tax increases along with the other €2.5 billion he has pencilled in for next year, we shall only be a quarter of the way towards dealing with the structural deficit the Minister says has been caused by our poor policies.

There is insufficient confrontation with the problems we face in the manner the budget was put together. We must look at strategies that protect employment. What can we do better to protect it? What can we do to cut the costs of running Government - particularly the costs that impact on jobs, but also those that affect what we are doing on a day to day basis? We have to find new ways of investing. Fine Gael put forward a strategy on how to invest in infrastructure we need for the future and the response from the other side of the House was just to scoff. That was a robust approach and one we ought to be seriously looking at. At this time we must look at where our opportunities still lie and work those relentlessly. Instead, this Finance Bill is persisting with the very narrow agenda that was in the budget, and that is not good enough.

The impact on ordinary families is enormous, as I do not need to tell the Minister, since I am sure he hears this on the doorsteps. Someone on the average industrial wage, €36,400, is on a marginal tax rate of 51%, which is extraordinary for a country where the Government up to now prided itself in keeping the tax on work low. It proclaimed that keeping direct taxes low was the key to Ireland's economic success, and now someone on the average industrial wage must pay a marginal rate of 51%. For a married person who is the single earner in the family, the princely sum of €45,400 puts him or her into the 51% category. That is not, by any means, fulfilling the strategy the Minister said he was going to address.

I find it very dispiriting in the Finance Bill that even after the publication of the ESRI report, with the 300,000 jobs it saw disappearing over the next 20 months, it offers no new initiative as to how we shall protect the employment that is now so vulnerable. Other countries are doing the opposite to what we are doing. They are looking at how they may tweak the tax code to postpone the payment of some taxes, to relax the payment dates. In the UK they are looking at how companies in some form of trouble might be helped by having their taxes postponed. Other countries are trying to rejig the social insurance mechanism to make it easier for people to protect employment. They are looking at the welfare rules to see whether employers may have a system whereby they keep their people close even when order books are very low. They are tweaking their rules, trying to be imaginative, by helping companies and people to get through.

Other jurisdictions are looking at their VAT rates, and as we suggested, cutting them temporarily. In the UK I am aware this did enormous damage as regards the North-South trade, but we could have examined cutting the low rate of VAT, which applies to labour intensive activity. This would have meant a big boost for domestic tourism and home improvements, the types of initiative that need to be kickstarted at this time, with employment under such threat. That dimension has been missing from the way in which the budget was put together. We need to consider initiatives taken by other countries and see if they have relevance for us. That should have been done in the preparation of this Finance Bill but there is no imprint of such thinking.

The danger in focusing on tax correction, to which I have alluded, is that it will destroy confidence in the country. The ESRI report showed that ordinary consumers were hoarding. They have decided that now is not the time to spend. Businesses are hoarding because they are not willing to invest. Banks are hoarding to protect their skins. Everyone is hoarding money. It is a self-fulfilling prophecy and we must find a way of cutting into it.

The core of the Fine Gael proposal is to look at the investments which can and should be made. We should invest in an electricity grid and a telecommunications network. Whatever happens in the next few years we will need these services to be better than they are. This is the time to provide them. Fine Gael showed how this could be done without increasing Exchequer borrowing by one cent. Our proposals have greater attraction than the Construction Industry Federation model which similarly seeks to use pension fund money but does not look at investment in areas which will improve our competitiveness as we struggle out of this economic difficulty. The Fine Gael proposals look at the infrastructure we will need in two years time when, I hope, the green shoots of economic recovery will begin to appear. We can then start to seize opportunities. We must correct the infrastructures which have gone so badly wrong. This has become the most expensive country for electricity and waste management services. In huge areas where the public sector has had responsibility we have become uncompetitive. We are at the wrong end of all league tables of vital infrastructures. We need fresh thinking.

The State must box smarter. The Minister spoke about the smart economy in the document he published before Christmas. In this time of crisis what we need is a smart State. I accept that we are constrained by the state of the public finances and can do far fewer things than we would like. Nevertheless, there are still things we can do, but they are absent from Government thinking. I am dismally disappointed by the lack of restructuring of Government activity. The Minister recognised the need for this when he established the special group on public service numbers and expenditure programmes, under Mr. Colm McCarthy, to engage in a zero budget exercise and recommend genuine restructuring of the way we spend public money. There is not a single fingerprint of such thinking on the emergency budget. It is not good enough to postpone serious restructuring because of the current crisis. We need to see it now. Not only do we need to make the savings it will generate but we must also show that the State is thinking afresh. There is no trace of such fresh thinking in the Finance Bill.

We have a destructive budgeting model that is destroying initiative. I am appalled by what hospitals do when their budgets come under strain. They close down theatres and wards and turn patients away. What budgeting system encourages huge institutions, in which we have invested billions of euro, to behave in this way? Such institutions should try to treat more patients, sweat their assets and deliver a more effective service in order to get through periods of constraint. They should earn their way out of crises by getting more patients in, treating them more effectively and having a greater turnover. Our budget system does not allow this to happen. That is why Fine Gael is hugely attracted to a complete change in the health funding model. We must switch to a system in which the money would follow the patient and a patient who comes in the door of a hospital would be seen as a revenue source. Similarly, in such a system patients would not stay in a hospital "blocking beds". The Fine Gael system would allow them to move to convalescence and free up beds. A hospital, a hugely expensive asset, should not be used as a nursing home. There are 164 blocked beds in the three hospitals on the north side of Dublin, the equivalent of one small hospital taken out of commission, because of our dysfunctional budgeting system. There is no incentive for anyone to move patients and use assets more effectively.

We must rethink the way we budget. This change is a core issue which Fine Gael has been articulating. If the Government will not confront these necessary changes now in a time of crisis, they will never be confronted. In the past the Government bought out problems instead of confronting them. That has done untold damage to the public service culture. We have public servants with real commitment but they feel trapped in a system which is not working. They are trapped in hospitals and schools. We must empower school principals. It is unacceptable that a teacher who is not up to scratch could blight the future of children. This is not a reflection on the principal. We must empower people who are managing public money to address these problems and live up to the professional standards to which they are committed. We can do this if we start to change the budgeting system.

We must expect performance to be reported upon and take performance failure seriously. This does not happen. Last year Departments failed to meet 40% of their targets, but nothing happened. The Minister for Finance did not take this failure seriously, neither did the Departments. One cannot have a system which routinely tolerates failure to deliver. Failure is tolerated from year to year on Estimates and, even more, big strategies such as that on climate change. Our climate change strategy was supposed to change the world but after eight years it has made no impact on our carbon footprint. No one takes responsibility for that failure. We cannot accept this any longer, either from Ministers or from the managers they appoint to do their work for them. When these changes occur, we will see a different approach to the use of public money. This was the time to make these changes.

The Government has focused on tax increases rather than job protection and creation or on cutting the cost of government. We can see the threads of this failure in the Budget Statement. At present, 12.5% of income tax is needed to pay the interest on Government debt. Under the Minister's projections, by 2013 interest repayments will need 60% of income tax. If we add to this the debt which will be engendered by buying the assets from the banks, 75% of our income tax receipts will go in interest payments. This will close off huge blocks of tax revenue from potential spending and investment. We are going down a dangerous road. We went down this road before and cannot afford to slip down it again. In this budget I see the threads of an approach which will take us down it. This approach does not confront our problems.

One does not get many chances to cry "Wolf" and make changes. How many times has the Minister brought a so-called emergency budget to the House and hyped everyone up with promises of great changes which did not happen? We have not seen great changes in the way we spend public money or in the demands we place on electricity companies or those who manage waste facilities. When one such opportunity is missed, it is very difficult to recreate the intensity required for major change. That opportunity was missed in the budget.

I return to the main element of the budget, that is, the NAMA measure. I am concerned that it is a time bomb. It is important to put some questions on the matter and the easiest are the simple ones. Will it get credit going? Is this the least expensive way of doing so? If it does not work, will it be possible to pull out without incurring too much cost? Is it possible that we will become too committed by taking this route?

Recently, I read a book entitled 20/20 Foresight. The author discussed the different forms of uncertainty one may face. Sometimes it is a case of facing a prong on the road and choosing the first or the second. Sometimes the uncertainty is so vast that one does not know where in the spectrum the ball may fall. The thesis of the book is that one may still analyse choices and what may happen, even in a very uncertain world. By and large, one does not take a large bet in such an uncertain space. One does not say because one does not know enough about it, "This is the time for all or nothing. Let us gamble the house on this option." I am concerned that the Minister is gambling the house on this NAMA notion and I do not know from where it has come.

I realise Professor Bacon has his view, but he is a single economist and it seems there are a heap of others arraigned who do not agree with it. I presume the Minister also has advisers. However, many of these advisers were supposed to be riding shotgun on the banks. All we have seen in the public domain is a short summary of a larger document in which we are supposed to have faith. People simply do not have faith. I do not have it and I try to keep myself as well informed as possible on what is taking place. I do not believe the wider public has faith either.

It is very much a case of festina lente. This is a small country and we should not pioneer Big Bang solutions to problems of this nature. We should examine the changes we can make now, examine their impact and consider the next step. That is why I am very attracted to the idea of a wholesale bank which would provide credit for good activities, which would be willing to buy the good elements of the loan book, which could stimulate refinancing and provide liquidity for the good elements of banking activity. We need a State wholesale bank which could still be called a national management asset agency because it would buy good assets instead of bad ones and begin to generate liquidity for the banks. It could provide a source of funds and if banks were offering mortgages or business credit, they could sell these on, in turn, and securitise them to the wholesale bank.

My first question was if such an enterprise could get credit going and the answer is yes straight into the vein. It could begin to provide liquidity. This would allow time to consider what to do with the bad assets. One should not become a world pioneer in providing a Big Bang solution and establish a State company owning assets worth €90 billion, or approximately 70% of GNP. Vast tracts of land, empty houses and God knows what else would be owned by such an agency, according to the proposals made. It is a very large throw of the dice. The Taoiseach recently quoted Professor Honohan who stated the proposal was Napoleonic in scope. However, the Taoiseach was somewhat economical in quoting Professor Honohan.

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