Leo Varadkar (Dublin West, Fine Gael)

I want to use my contribution to outline in broad brush strokes where Fine Gael stands on the macroeconomic position of the day. We need to do four things. We need to restore the public finances, growth, competitiveness and faith.

Dealing with restoring the public finances first, the Fine Gael Party has committed to achieving the 3% of GDP deficit target by 2014. In private circles, some economists and people from different political parties state that cannot be achieved. I believe it can. It might take a little help and it certainly will take a little growth but we should not be fatalistic about our inability to achieve this target. Let us not forget that in 1987 we managed to reduce the deficit from 7% to zero in one year with a little help.

As some Members will be aware, I wrote an article in The Sunday Business Post some weeks ago suggesting that the Government estimate that we would need to reduce the deficit by €7.5 billion was inaccurate and I suggested the IMF figure of €10.7 billion was probably more accurate. Unfortunately, I was being very optimistic in that article and it now appears that our deficit reduction target will be somewhere closer to €15 billion. We will do everything we can and everything necessary to reduce the deficit to 3%.

We have argued that such adjustment should be front-loaded and that, if not the majority of it, certainly the greater part of it should occur in the first year so that people have certainty and will know for real that this budget will be the last worst budget and that they can then go on with their lives. If one spreads it out evenly over four years or, even as some suggest, over seven years - it would need to be much more than €15 billion if you spread it over seven years - that would destroy confidence in the economy for ever. We have already seen in the past few weeks how spending has reduced, how fear has increased and how people are living in fear of the forthcoming budget. We cannot go through that next year, the year after, the year after that again and then for another three years. We need to do as much as is possible in the budget this year, so long as it is not so much that it puts us back into recession.

My party has argued for a mix of spending reductions over tax increases of three to one. That is not an ideological position. It is one that is based on evidence and on fact. It is based on the myriad of the studies from the OECD, Harvard and elsewhere. These studies show that reducing public spending has a lesser bad effect on growth and unemployment than has increasing taxes. Increases taxes does more to slow growth and more to damage employment, and that is why we favour this mix of three to one. It is based on evidence.

This has been done previously. Twice in the past 20 years it had to be done in the United Kingdom. On one occasion it was implemented as 1:1 ratio while on the other it was on a ratio of 2:1. It has been done in Sweden, where they reduced public spending by 11.5% without damaging services. It has been done in Canada, as some have mentioned recently. It has been done in New Zealand and in Finland. It can be done.

We have the tools to implement such a programme. We have the McCarthy report, most of which we all, or, certainly, this party, can agree to. We have the local government expenditure review, which most of us can agree to in large part. We need to reform our welfare system, maybe not by reducing rates but certainly by the way it works and through eligibility. We can change the way our health service is funded through the Fair Care model which Fine Gael has proposed. We can dismantle FÁS and the HSE. We can also give citizens personal care budgets to allow them decide how they want to spend their money, if they have a disability or if they need home care.

We can rationalise the State quangos and agencies, something I have spoken about for two years now. The Government has gone some way but has much more to do. Since 2007 alone, the Government has established 16 new agencies. They have established as many as they have abolished.

We need to look at the tax side. We need to get rid of or restrict many of the tax exemptions that exist in our economy, which are very unfair and which are largely used by those who do not need them, the best off, to avoid paying their fair share of tax. They should go.

We should charge for water. We should broaden the tax base. Everyone should pay something, even if it is only a small amount. Even if it is only 2% or 3%, or 4%, everyone should pay something and make a contribution to the economy.

We need to ask graduates to make a contribution to their third-level education. Nobody benefits from a third-level education more than those who receive it and they should make a contribution towards it. Somebody who leaves school aged 18 and who works in McDonald's should not be paying tax so that somebody else can attend medical school. That is something that needs to be changed. It is a matter of basic fairness.

We need to avoid increasing marginal income taxes too high. They are already 54%. I have heard some suggest that there should be a 48% tax rate. If one includes the health levy, income levies and PRSI, it is already 51% for those on €36,000, which is not a high income, and 54% for those on higher incomes. Once it goes over 50%, the law of diminishing returns applies and people will not work. People will not want to be promoted because they will have to give away most of it in tax. They will not do overtime. For example, at present, a nurse already doing overtime loses 51% in tax. Also, it encourages people to go into the black economy. We made that mistake previously. Let us not make it again.

We need to avoid property taxes. There are other, much better ways to tax capital and wealth than a property tax.

As I stated earlier, we need to restore growth. That is why Fine Gael has a fully costed stimulus plan to use €11 billion that is in the National Pensions Reserve Fund to invest commercially in infrastructure projects here in Ireland and also to sell off some non-essential semi-State assets and invest that in the economy too. We can increase capital spending this way.

Finally and importantly, we need to restore faith in our system. The public does not understand why certain bank executives and certain public officials who caused this crisis have not been brought to book. They are right to be angry about it. I am angry about it too. It is incumbent now on the Taoiseach to use his influence to make sure this happens. I do not believe the public can move on until we see the arrest of those who caused this crisis. These people have done more damage to the economy than the IRA did and they should be treated like subversives. The Taoiseach should meet with the Garda Commissioner and with the DPP, not to direct a prosecution because he cannot do that but to state clearly to them that these people have done as much damage to the economy as subversives and must be treated as subversives, and they must use any legislation possible to ensure their arrest. As the House will be aware, Al Capone was done, not on racketeering but on tax fraud. Whatever it takes, whether that be the tax Acts, corporate law or the Road Traffic Act, these people must be arrested and prosecuted. The public cannot move on until they are.

I believe the bond markets would respond to this. If they see that Ireland is not a banana republic and that we do not have a Government that protects corporate criminals and white collar criminals, they will respond positively. The most important development we must see in the next six months is the arrest and prosecution of those persons.

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