Eamon Gilmore (Dún Laoghaire, Labour)

The Minister for Finance began by stating that more information has been made available before this budget than before any other. It is true that we have a great deal of information about the state of the economy and much of it was contained in the pre-budget outlook published last week. It tells us that the economy will contract by 7.5% this year, and estimates contraction of 1.5% next year. Taken with the fall of 3% in GDP in 2008, this is one of the worst recessions experienced by any developed country since the Second World War.

It tells us that the unemployment rate will average 11.75% in 2009 and 13.75% in 2010, and that employment will fall by 7.75% in 2009 and by 3.75% in 2010. Recent data show that unemployment in Ireland is now the second highest in the OECD, and a third higher than the eurozone average.

The pre-budget outlook shows us that confidence in the economy is so low that consumption will fall at a greater rate than incomes. Consumption, according to the outlook, will fall by 7.5% in 2009 and 3.5% in 2010 in response to a rising savings rate. It tells us that the Exchequer borrowing requirement for 2009 will be almost €26 billion and next year, after corrective action, it will be almost €20 billion, while the general Government deficit for 2009 and 2010 will be 12% of GDP, four times the Stability and Growth Pact target. By the end of 2009, the level of national debt is set to be double the 2007 level. By the end of 2010, the general Government debt is forecast to reach 78% of GDP. The cost of paying for all of this has been pushed up by the mishandling of the banking crisis. The cost of ten-year Government debt issued in today's auction is some 140 basis points above bund rates. The money that has been handed over to the banks amounts to €4 billion to Anglo Irish Bank and €7 billion between AIB and Bank of Ireland, and that is before we come to the €7 billion that may be lost in the NAMA project.

That is the legacy of Fianna Fáil, after 12 years in Government. In any other democracy a Government with that record would have resigned or fallen in the face of those economic failures. When Deputy Mary O'Rourke states that the only policy the Opposition has is a general election, she is right. The only solution to this is a general election and the sweeping from office of the Government and the main party which is principally responsible for this tragedy.

The Government's only policy appears to be one of a brass neck. Fianna Fáil and the Greens have tied themselves together and to office, and their only answer to the economy is to demand to know what the Opposition will do about it. The Labour Party has been clear that the fiscal deficit must be dealt with now, rather than adjustment being delayed. We have, therefore, accepted that an adjustment of approximately €4 billion is required in the coming year. We should not pretend this will be easy, such is the scale of the problem that Fianna Fáil has created. This will be a difficult adjustment, no matter how it is done. What we must seek to ensure is that the least damage is done to the economy and that the burden of adjustment is fair. Where we face choices is in the make up of those adjustments.

In April last, the Government, through the Minister for Finance when he spoke in the budget debate, set out a mixed approach to the €4 billion adjustment, consisting of €1.75 billion in taxation, €1.5 billion in current spending and €0.75 billion in capital spending cuts. Since then, however, the Government has utterly shifted its position, explicitly advancing the argument that there is an economic benefit from cutting expenditure alone.The Minister for Finance today, in a speech in which he told us nothing, might at least have offered an explanation as to why he has shifted his policy and why Government policy has shifted as to the mix that should go to make up the €4 billion adjustment. The Government position is a dangerously partial and one-dimensional reading of the situation which ignores important economic and social realities.

For the budget to succeed it must be credible to both domestic and international audiences. To achieve that credibility requires a realistic policy mix including spending reductions and revenue raising. It also must be fair, and be seen to be fair. Where possible, the measures adopted should be based on reform – reform of taxation, reform of spending and reform of administration. I have already stated that there should be a negotiated reduction in the public sector pay bill. That must be knitted into an agenda of reform in the public service, something for which Labour has been calling for years. Across-the-board pay cuts are an admission of failure because they will not deliver the necessary changes in working practices and organisation of the public service. We need a Minister for public service re-organisation, but we also need far more autonomy and responsibility to be devolved to Departments and agencies.

As capital budgets were increased during the bubble, tender price inflation eroded the volume of output that was achieved. Now, tender prices in construction are falling. The Society of Chartered Surveyors estimates that tender prices for general construction fell by 17% in the second half of 2008 and the first half of 2009 and commensurate savings can be made on the capital budget, without affecting the level of activity. Reductions in capital budgets, however, must be accompanied by two policy changes. First, we need a new national development plan that takes account of changed economic circumstances and that sets out a clear set of priorities for Government investment. We can no longer afford the laid-back approach to capital budgeting that has been seen to date. Second, the Government should move on proposals to access non-traditional sources of investment financing, to deliver on infrastructural needs, without impacting on the general Government balance. There are a number of ways in which this can be done, including through a national investment bank. Again, there were promises made in the April emergency budget, but nothing has happened.

If spending cuts are to be part of the budget mix, as they must be, so must revenue raising, which must be accompanied by reform. Ireland simply cannot afford the vast array of tax expenditures that are still in the system. Labour has identified many of these over a long number of years. There is still more than €600 million in rent relief for landlords, more than €400 million in property-based tax reliefs and a series of reliefs across the system that are too generous in current circumstances and which can be pared back. Labour will also support a carbon tax, which would raise approximately €0.5 billion.

We need to seek a contribution from the better off in society. Labour has proposed a third rate of tax on single incomes over €100,000, and the Government must deal with the scandal of tax exiles who are not making their contribution. One cannot talk the language of fairness but then insist on pursuing cuts in social welfare without seeking any contribution from the best off in society.

There are choices. There are real options if the Government has the courage to embrace them, but it does not and it will not. I do not accept that there is only one way to deal with this problem, nor do I accept that the person who wants to inflict the most pain on the weakest sections of society somehow has the greatest grasp of the problem. Frankly, we have had enough of that kind of undergraduate advice. It shows little understanding of the past and no regard for the future.

There is a dangerously divisive tone to public debate in our country now. Fianna Fáil is promoting a beggar-my-neighbour approach, in the hope that by dividing the country, by isolating and demonising particular sections in society and the workforce, it can pretend that those sectors alone can carry the burden of adjustment. That is a false choice and a sum that does not add up. We will not get through this crisis by creating division. The problem cannot be hived off onto the backs of one group or another. It can be dealt with only by all of us pulling together.

We will get through the crisis only on the basis of unity and a negotiated national agreement. If we abandon the partnership approach, it could take a generation to restore. People who are sent away from the negotiating table will not be enticed back when the economy improves. One will be faced with conflict and higher wage claims when the economy starts to recover.

It will serve the interests of no one to go down the road of conflict and industrial action. I am not just saying that here, but have already said it at trade union conferences. That is why I have advanced a set of five proposals that, I believe, should form the basis for negotiations on a new agreement for national recovery. They comprise a moratorium on home re-possessions, a coherent jobs strategy, a negotiated agreement on public sector pay, a budget based on fairness and industrial peace.

Today, the Government borrowed a further €1 billion and we paid 1.4% more for ten-year money than the German Government would pay. By seeking out conflict, by facilitating those who are trying to dodge paying their fair share, Fianna Fáil is making the problem worse. A negotiated and shared approach, on the other hand, would send a powerful signal that Ireland is united in its commitment to dealing with its problems. http://www.labour.ie/press/

The most depressing thing I have heard in this debate is the promise from Deputy Charlie O'Connor that Fianna Fáil must continue to do what it has always done. Fianna Fáil has always looked after itself and let the country go to hell.

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