Brian Lenihan Jnr (Dublin West, Fianna Fail)

In the supplementary budget last April, the Government set out a multi-annual plan to correct the public finances. This plan has been welcomed by the European Commission. The immediate need is the stabilisation of the deficit in 2010 and this is Government's proposed aim. This will require difficult decisions to be made for budget 2010 which will presented to the Dáil on 9 December. The bulk of the corrective action in budget 2010 will have to come from the expenditure side as further significant increases in the tax burden would impact on enterprise and growth prospects. The measures that must be introduced will undoubtedly be difficult, but the imperative for action is clear and we must make the necessary adjustments now in order to stabilise the public finances.

At the publication of the end September Exchequer returns, my Department announced that tax revenues could finish the year in the region of €32 billion. Later today, my Department will publish the most recent Exchequer returns for the period covering to the end of October. While the poor performance of tax revenue has continued, it is not out of line with what had been anticipated. To put this in perspective, overall tax revenue in 2009 is back to 2003 levels while gross voted expenditure has increased by about 70% since 2003. Consequently, we will have to borrow approximately €26 billion this year to fund the voted services and the central fund.

Bridging the gap between income and expenditure through ongoing increased borrowing is not a viable solution in the medium to long term. Taking the necessary action now will ensure that confidence is maintained in the Irish economy and that Ireland is favourably placed to benefit from global recovery as it takes hold. Delaying the necessary action is not an option and would require harsher measures to be taken later. It would also result in ever increasing amounts of scarce Government resources being used to service the mounting debt.

In 2009, gross voted spending divides into three main areas with 37% going on social welfare spending; 35% on the public service pay and pensions bill; and 28% on other programmes, including the capital programme. The priority must be the stabilisation of the deficit next year. It is clear, therefore, that all areas of expenditure will have to be considered in the context of deciding on the adjustments.

The pre-budget outlook, which my Department plans to publish in mid-November, will provide an update on the macroeconomic outlook and set out a technical fiscal forecast. The House will have the opportunity to discuss these forecasts in a pre-budget outlook debate. The budget will be published on 9 December and will provide full details of the nature of the corrective measures being undertaken.

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