Seán Haughey (Dublin North Central, Fianna Fail)

I welcome the opportunity to speak in this pre-budget debate. For some considerable time the Government has announced its intention to reduce the budget deficit by €4 billion next year. Earlier today the Minister for Finance indicated that the scope for increases in taxes is minimal and that reductions in expenditure will be the priority on this occasion.

Over the last 12 months the Government has moved speedily to address the difficult economic situation which the country faces. As well as additional budgetary measures to tackle the deteriorating budget deficit, it has also had to deal with the banking crisis and the establishment of NAMA to handle the toxic assets crippling the banking sector. It has been a difficult period for the country on several fronts but it is widely recognised that this Government has moved with conviction and resolve to begin to address the problems besetting us at this time. We have implemented corrective measures amounting to 5% of GDP. We have agreed to reduce our budget deficit back within the EU 3% limit, by 2013-2014 and have had this plan approved by the European Commission.

Already, we are beginning to see concrete results. Labour costs are expected to have fallen by 7% this year, relative to our EU partners. High levels of unemployment represent real hardship for many families but while unemployment is at a high level there was a drop in unemployment in October, which is welcome news. The unemployment figures impact on the budgetary situation in two ways, by increasing social welfare costs and reducing tax income. Therefore, any improvement, however small, is to be welcomed.

Ireland's exports continue to perform well and our balance of payments may move into surplus next year. A number of other factors are a further source of encouragement. A recent business sentiment survey indicated that Irish companies reported stronger levels of activity, felt more optimistic about the economy and were more up-beat than at any time since the survey started in late 2007. Elsewhere, an economist with the IMF recently indicated that the recovery has started while our Central Bank has suggested that our economy may be over the worst. Furthermore, the Government ratified the Lisbon treaty, ensuring that our commitment to Europe is perceived as being back on track. This should help to maintain foreign direct investment in this country.

However, this is not in any way to diminish the unprecedented fiscal challenges we still face. The budgetary difficulties can be illustrated in stark but simple terms. We are spending in the order of €22 billion more than we are generating in tax revenue. This situation is unsustainable in the longer term and further action needs to be taken now if this problem is to be resolved in the medium term. Some have argued for taxation increases but the Government considers this approach alone is likely to have a deflationary impact, with income from taxation already contracting. It appears there may be a year-on-year decline of 20% in tax revenue. Although the Commission on Taxation has produced its report there appears to be a consensus in some quarters that any new taxes introduced should replace rather than complement any existing taxes already in place. In any event, we have increased personal taxation in the past 14 months so the scope for further increases is not realistic. Furthermore, any increases are unlikely to assist in maintaining jobs that are often already under threat.

In promoting economic recovery, the Government is committed to achieving a fully functioning banking sector and bringing sustainability to the public finances. To achieve these goals, reductions in public expenditure are required across all Departments. No Department can escape because all have benefited from the increased revenue available over the last decade. When we examine the fruits of the last decade, we see new transport and other infrastructure, increased and enhanced social welfare payments, greater numbers of teachers and special needs assistants, additional nurses and gardaí. However, if the current budgetary situation is to be resolved - as it must be - then all aspects of public expenditure will need to be re-visited.

My own Department of Education and Science will not be immune from the examination process. However, the recently re-negotiated programme for Government has re-affirmed the commitment that education remains a priority for this Government. I welcome that the Government has agreed in general that there will be no further reductions in the pupil-teacher ratio. I wish to highlight that there are mechanisms open to schools to apply for additional resources, for example, in cases where they are experiencing large increases in enrolment. There are independent appeals mechanisms for allocation of teachers, including language support teachers. Five hundred additional posts will be available that can be targeted at schools with larger classes. However, I stress that funding for these additional teachers will need to be considered in the context of overall funding available to the Government for 2010.

My colleague, the Minister for Education and Science, Deputy Batt O' Keeffe, has introduced a number of measures in the past year which have been the subject of some attention. However, the determination of the Government to protect scarce resources for education can be demonstrated in two areas where my Department has received concessions in the past year. The Departments of Education and Science and Social and Family Affairs were fortunate to get an increase in allocations in 2009. In addition, when the Government introduced a moratorium in the public service, a special arrangement again was made for the Department of Education and Science, which prioritised the filling of teacher and special needs posts, a privilege not extended to all other Departments.

While the programme for Government emphasises the priority of investment in education, difficult choices still must be made by the Cabinet. My Department of Education and Science, a high-spending Department, will not be exempt but will play a part in the overall budgetary corrective measures, while protecting, in so far as is possible, most vulnerable citizens.

I turn to the area of lifelong learning. In view of the high level of unemployment, education and training become critically important, not only in responding to the immediate challenge but also in securing our long-term recovery. Late last year the Government published its framework document, Building Ireland's Smart Economy, which outlined its strategy to drive an enterprise economy, improve competitiveness, establish Ireland as an innovation hub and encourage research and development while also promoting renewable energy and the creation of green-collar jobs.

Skills will be the engine behind a new modern knowledge-based economy. The national skills strategy sets out clear goals and objectives with regard to upskilling the workforce over time. Speaking as the Minister of State with responsibility for lifelong learning, the Departments of Education and Science and Enterprise, Trade and Employment are adopting an integrated approach to a number of activation activities. A range of measures have been introduced to expand services to the unemployed and to promote a flexible learning environment tailored to the specific needs of the individual.

The Government will focus on resolving the budgetary situation while continuing to give consideration to maintaining and improving supports for the unemployed. Since the beginning of the year, substantial additional resources have been directed to doubling job search capacity, providing more training places and supporting redundant apprentices and those wishing to avail of third level studies while improving the back to work enterprise allowance and back to education allowance schemes.

The Government will continue to implement innovative measures to support the unemployed in accordance with its overall strategy as outlined in the smart economy document. It will also ensure that, despite the need for difficult expenditure reductions across all Departments, it will achieve maximum impact from available resources for those losing their jobs. The forthcoming budget is likely to implement many cost saving exercises that will have far-reaching consequences, but the Government will find the resources to see that those in education and the unemployed will continue to receive the supports required despite a diminishing fund of resources.

To listen to Members of the Opposition speak in this debate, one could get the incorrect impression that those motivated by compassion are only those who sit on the opposite benches. Nothing could be further from the truth, but the Government must be committed to taking the difficult measures now to improve our budgetary situation and to help stimulate a more competitive economy. We have not been and we will not be found wanting in this regard.

See this speech in context