Martin Mansergh (Tipperary South, Fianna Fail)

Scarcely a day passes without favourable reference in the international press to the decisive budgetary action taken by Ireland to deal with the severe budgetary imbalances common to many countries at the present time, in the wake of the international financial and banking crisis. The fundamental issue over the past 18 months has been, whether we wish, within the supportive framework that eurozone membership provides us with, to undertake the necessary corrective action ourselves, allowing us discretion to decide how the burden is best distributed, or whether we let others simply dictate to us what we must do.

In the case of the most recent budget, the adjustment fell almost entirely on the expenditure side, which is outside the ambit of the Finance Bill. Anyone who studies the gap between nominal or gross pay on the one hand and net or take-home pay that falls within the tax net on the other will need little convincing that we have pretty well used up in the past 18 months any spare headway that may have existed. There is a considerable gap at this stage between what employers must pay out and what employees receive in their hand which, if it were widened still further, could become a considerable disincentive to employment, as has long been the experience in some continental countries. Calls for a higher rate of tax mostly focus on the larger headline salaries which exaggerate the scope for increased tax rates and levels rather than actual net pay. It was striking to note in the table circulated last night by the Minister for Finance with his speech in Private Members' time that, with the exception of only some Secretaries-General, the net salary of all other senior public servants in the Civil Service - deputy secretaries, assistant secretaries and equivalent grades in local government and the HSE - is now well under €100,000. The public, for the most part, does not realise this. Protecting those on lower income levels, while they have not been untouched, has been the priority - notwithstanding a barrage of propaganda to the contrary - because they generally have the least margin for manoeuvre.

Much of the language surrounding economic debate contains assumptions which bear little relationship to reality. Outside of public sector employment, which grew roughly from 230,000 to 330,000 over the past decade, a number which now has to contract somewhat because it is more than we can afford, the Government does not create or provide jobs. It can at best create the right framework for job creation. We do not live in a command economy where government can summon up at will investment and jobs for places badly hit by unemployment. It can promote areas, improve infrastructure, and provide retraining. Capital expenditure, while still high, has to contract also to a level that is sustainable and that we can afford. Incentives, often costly, have to be carefully chosen. In the construction area, they contributed to over-capacity, for example, in the hotel industry. Ministers for Finance in the future will have to turn a deaf ear to most of the pleas from developers for incentives. I received representations recently on behalf of medical practitioners with regard to extra incentives to build private health centres. I was totally unpersuaded by the argument on behalf of people who are considerably better remunerated than the average. Normally profitable industries, wealthy people and politicians will have to get away from the "grants and incentives with everything" approach. The call for a stimulus package almost inevitably involves higher levels of Government expenditure, much of which is likely to benefit other economies more than ours, or using up the reserves in the National Pensions Reserve Fund, or selling off and privatising assets in a depressed market.

There are many in society at present who need help from the Government - there is no doubt about that. However, the scope for additional help is extremely limited given the State's financial situation. We have to make the most of the help available. In the contributions today from the opposite benches, one gets no sense at all of the current financial situation. It is simply a case of "why don't you reduce this and that tax and increase this and that subsidy". A more hard-headed approach, realising the realities we are working under, would be helpful.

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