Brian Cowen (Laois-Offaly, Fianna Fail)

I am glad to have an opportunity to contribute to this debate, albeit for just ten minutes. The Minister for Finance has set out as per the pre-budget outlook the basic parameters within which we must operate. The narrative being suggested here is that nothing has been happening since this Administration took over which is at variance with the facts. We have taken corrective measures. In respect of taxation and the fiscal consolidation the tax changes in the two budgets that the Minister for Finance has introduced have been progressive, seeking to reduce the impact on those with low incomes and to ensure that those on high incomes pay and contribute more. That is precisely what has been done in the progressive nature of the tax changes which, in addition to the expenditure savings, were taken as a first part step in the approach to stabilise our public finances.

We do not need to engage in a long introductory debate on what this economy has had to contend with in the reduction in international trade, the collapse of the financial markets, the adverse impact of currency exchange rate on our competitiveness and the pressure that has placed on exports. In response to what Deputies have said about taxes, the marginal tax rate on the average industrial wage increased from 26% to 30% as a result of changes made in 2009. The marginal rate for those on twice the average wage increased from 43% to 51%. The marginal rate on earnings over €175,000 increased from 43.5% to 52%. That has brought about a progressive change in respect of who is making the contribution on the tax side.

It is wrong to suggest that the Government has been indifferent to that matter or that it is not interested in fairness on that issue. Quite the contrary is the case. We must also accept that the economic model that we built up over time brought employment to almost 2 million people at the height of our prosperity, when we were at a different stage in the economic cycle before the financial and economic market collapse. We had a competitive marginal tax rate which helped in maintaining employment and an external investment policy that brought in many world leading companies in new growth industries and sectors.

We must be mindful in the debate on taxation that we do not, at a time of contraction in the economy, seek to burden a labour market which has already experienced job losses of 165,000 or 170,000 in the past year. Thankfully the level of unemployment has not bottomed out to the level anticipated last March but we face a rise in unemployment next year because growth will return in the second half of the year if we take the action required now.

There are aspects of the deficit that will recede as a result of growth, buoyancy and increased revenues if we take the right corrective action in a timely fashion. The most benign interpretation of the structural element of the deficit from the ESRI and others is €10 billion, while other more pessimistic outlooks put it at €15 billion to €16 billion. The €4 billion in cuts to be undertaken in this budget will start to make an important impact on the overall structural deficit which will not be eliminated regardless of the growth that will return to the economy. It is also true that the tax revenues that come from export-led growth will be less than the domestic driven growth we have seen in the past.

We neither have the time for or people interested in a history lesson. However, the narrative that comes from the other side of the House is about profligate Government spending. When one checks the record, at a time when there were still budget surpluses, the critique from the Opposition was that Ministers were too mean. Ebenezer Scrooge was one name ascribed to me by Fine Gael Members during the budgets I brought before the House.

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