Eamon Ryan (Dublin South, Green Party)

The people of Ireland are afraid because the legacy costs of the property boom and bust experienced over the past ten years are beginning to become evident. Just as one would advise someone in personal debt difficulties to not simply let bills rest at the bottom of a door but to begin to open and manage them, this is what the Green Party is doing in government. The Green Party was not responsible for that boom and bust and probably was the political party that warned most about the likely costs. However, by dint of electoral circumstances, it is the party's job to fix the problem and that is what its Members are doing.

There are three areas of debt in which a particular problem exists. The problems associated with bank debts have been particularly difficult. The solution has taken time and I acknowledge this has not helped confidence. However, it was far better to be honest and rigorous in that process to achieve certainty as to what was the real legacy cost in the banks and this now has been done. We can now move to a process whereby the banks will begin to work for us, rather than against us, as has been the case in the past ten years. In addition, as the banks recover we can look to profit as a means by which some of our losses can be recovered. It was the right approach and I have not heard an alternative approach in this House that is credible.

The issue of private debt also is a cause of fear at present and some individuals who are in negative equity because of the property bust are in real difficulty. As social solidarity is critical at this time, the Government will ensure they also are protected and helped and are able to get back on their feet, which will be for the benefit of all. Moreover, the work of Hugh Cooney and his group, the establishment of which the Green Party insisted on, is doing positive and progressive work and will propose further recommendations to help such people. This is an essential element in the management of that debt legacy. However, I also wish to provide a sense of hope and confidence that this issue is manageable and some simple figures do so. At present, average Irish household interest paid still is less than 10% of disposable income. Many Irish people will recall the experience of the United Kingdom in the late 1980s and early 1990s when it experienced a property bust, albeit not as dramatic or difficult as ours. At that time however, interest payments there as a percentage of disposable income was closer to 15%. Consequently, while the costs are high and the legacy for certain key groups are very difficult, it is not impossible. I will provide another figure from a macroeconomic perspective to give people a sense of confidence that we can succeed. I acknowledge that we have a lot of debts. In 2009, loans to Irish households totalled approximately €201 billion, which could truly frighten one. However, another figure in the same Central Statistics Office statistical outlook indicates that as a country, our household assets in shares, deposits and insurance premiums totalled €306 billion and consequently, we can manage this. As we are saving very large amounts, we can draw down our debts and get our country through this legacy of debt issue.

The Government debt is causing particular difficulty at present and is being looked at by the markets. The problem arising from the boom and bust legacy of the property bubble is that we built up a tax base that was dependent on huge transactions in construction and in the buying and selling of property. This now has ceased and will not return. Moreover, I do not necessarily seek to return to some of the bad things from those years. While I wish to retain what was good, this will not return and nor will the unsustainable tax revenues that were dependent on this property boom culture. Both the present Government and the next Government must address this structural deficit and it is the job of the political system to do this. I am confident that all sides in this House can do it but it must be done. It is not in our interests to delay or put it off.

People ask the reason the figure now is €15 billion, when it stood at €7.5 billion one year ago. I will explain the changes that have occurred to create this €7 billion gap. A total of €5 billion of it is accounted for by lower growth forecasts for 2011, 2012 and 2013. Growth in 2010 actually has been what had been predicted but various market analysts have stated it now is less likely that growth for 2011, 2012, 2013 or 2014 will be as high. This may be excessively pessimistic and I am confident that Ireland will end up growing at a slightly faster rate than expected by the aforementioned market analysts, which would make our case and task easier. However, at present the market has stated that we must operate on the basis of the growth rate of approximately 2.75% the Department of Finance has calculated as a consensus figure among different market outlooks. Approximately €500 million of the adjustment to reach the changed figure of €15 billion arose from a statistical change within the CSO on how it measures national accounts. I acknowledge the remainder of approximately €1.5 million to €1.8 billion is accounted for by higher debt interest payments because the costs of the banking crisis are higher than the Government had expected and because of higher interest rates the State must pay at present. This explains the change and the rationale behind the figure being €15 billion, rather than €7.5 billion. Some people say we should delay action. However, to return to that household metaphor, that would be akin to us simply adding increasing amounts of money to our credit card bill, thereby obliging us to pay ever-increasing interest payments. It would not be clever or rational to end up paying such a high proportion of our tax revenue in interest payments. It is better for us to address and recognise the issue and to close the gap.

Primarily, this will require much more efficient public services. That huge increase in spending on social welfare, education and health, which was based on proper instincts, was not managed properly. We did not get real value for money because it was thought the country would be on an ever-upwards stream in which revenue increased continually. While one should be honest and clear about that, now is the time to manage this issue and we will be able to do so. The job of the political system is to achieve efficiencies in the public service that will allow us to meet the change that will take place.

To use, however, a term I have heard in this Chamber, just as anger is not a policy nor do I believe fiscal rectitude alone is a sound economic approach at present. The Government is not making this adjustment on an ideological basis and is not suddenly stating that Keynes was wrong. It simply is a recognition that given Ireland's particular circumstances, the aforementioned boom and bust has left behind it a structural adjustment that must be made. This does not pertain to ideology but simply recognises what went wrong and what must be done to adjust to this. In addition, this State cannot return to an over-reliance on fiscal conservatism as an economic policy. That policy dominated some of the thinking during the early decades of the State but did not serve us well. We must get the budgetary approach right and we must get the banks to work because failing to do so would act as a constraint on proper growth. However, it will not be the driver of growth itself and will not stimulate the economy in any way.

I wish to provide a sense of confidence by noting that a fairly wide overview of our economy demonstrates that we are in far better shape to achieve that growth, even as we make a fiscal adjustment, because the other underlying factors that are the real drivers of growth exist and are stronger than they have ever been. For example, Ireland has a tax system that encourages and supports enterprise. While one needs good, competitive sound infrastructure, Ireland has such infrastructure like it never had before. We need skilled people and the investments we have made in our education will stand to us now. These factors are what will drive growth and these policies still are in place and will remain. Even in tighter fiscal circumstances, we have the money to spend on capital areas and can keep that sector working. We can revert to a model that is truly sustainable and which works for this country, and that is our job. The Green Party in government has not simply been in office to fix the problem but to introduce new thinking and new ways of looking at how one stimulates such growth and this is what it has been doing. The smart and sustainable economic plan the Government announced in December 2008, to no great acclaim at the time, is starting to work. Exports are growing strongly. We are back in the black, as a country. Foreign direct investment has a research component that will fix those companies into this country. We have critical infrastructure, such as broadband and electricity, that are starting to work and will bring jobs.

Most critically for the Green Party, we are bringing a change in politics because that was one of the legacy issues that we needed to change. We have cleaned up our planning system, which was at the root of the property bubble and the dysfunctionality around it. We will remove the corporate influence from Irish politics, which was also a root cause of some of our difficulties.

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