Mary Harney (Dublin Mid West, Independent)

I listened to the Deputy.

Businesses are running with huge precautionary cash surpluses on the scale of the deficit.

To put matters in perspective, since 1995 this country's per capita income has grown by 30% more than that of the EU 27 and by 16% more than the eurozone average. Almost 900,000 more people are at work today than were working in the late 1980s. At one stage in the late 1980s, the rate for ten-year bonds was between 5% and 10% per annum. For many of those years, the rate was over 7%, which is higher than the rate that obtains today. In the late 1980s, repaying the national debt consumed 25% of the revenue collected whereas today the figure is under 10% and will rise to between 14% and 16% over the coming years. This is why I ask for a sense of perspective.

The initiatives that had to be taken under what have become known as the MacSharry budgets in the late 1980s are not on the scale of what is required now. However, because of the sense of direction they gave people, they inspired confidence. Without confidence, there will be no investment or expansion, and householders and businesses will not spend money. Without it, one will not inspire people to lend us money so we can run the country on a sustainable basis.

With regard to front-loading, we have a gap of €15 billion. The main parties in this House are committed to a 3% debt-to-GDP ratio by 2014. If we are to close the gap in a credible fashion, that is, credible to those who are bankrolling us, we must be able to get money at a sustainable rate. If we do not do so, it will inflict far greater pain on people, or perhaps we would not be able to get money at all, in which case others would make decisions for us. This is why front-loading is so important. It is to inspire confidence that we, as a Government and people, have the capacity to make decisions that are necessary at this point of our economic history.

The sad reality is that adjustments of the order discussed are immense. There must be a balance between current spending, capital spending and taxation. We must get the balance right because it matters. It matters in terms of generating confidence at home and abroad.

We withdrew from the bond market not because nobody would lend us money, as some have suggested in this debate - we have a cash buffer that will last until the middle of next year - but because the rates of interest were unsustainable and not affordable. Therefore, the decisions we must take on the four-year plan must be clear. They must give a clear sense of direction such that we can see our way through the enormous deficit of €19 billion between now and 2014.

We must fix the banks, the public finances and continue to invest in research and improving skills. We must promote exports and enterprise and regain the reputation we have lost and which can only be won by having the capacity to take the tough decisions required over the coming weeks.

The health budget accounts for 27% of current spending. It consumes 133% of income tax and half of all the taxes collected. Clearly, any fiscal adjustment will have a major impact on spending in the public health services. There are no easy choices in health and no low-lying fruit.

There has been much discussion on generic medical products. The total output from generic and off-patent products is €325 million. Unless we got all those products for nothing, one could not get €300 million, as has been suggested by Members opposite. I ask Members to refer to the Mark Moran report, which was published recently. Last year we succeeded in achieving a 40% reduction in prices, worth €123 million in a full year. We must achieve more reductions. In the next two to five years, approximately €300 million worth of drugs will come off patent and we must receive substantial reductions. Over the past two years, we have lowered drug costs by €0.25 billion. One must compare like with like and account for the increase in demand for drugs, the increase in illness and demographics. We must do more.

Issues arise in regard to management and administration and they must also be addressed. Deputy Shortall should note that every effort will be made to protect services for patients and others who use the health service. I refer in particular to mental health services and disability services. These cater for the most vulnerable in society.

This economy is not as strong as it was a number of years ago but it is still wealthy. It is worth €160 billion. Its value has lowered by almost 20% from a peak of €190 billion. Given our population of 4.3 million, that categorises us as one of the wealthiest economies in the world. The economy will not go under. We are very heavily reliant on exports. In the second quarter of this year, there was a balance of payments in our favour of 23%, which is very encouraging. The exports will not vanish. Our economic growth will come from fuelling consumer demand in addition to export-driven growth. The exports pertain to food, pharmaceuticals, medical devices, information and communications technology and tourism. These will not disappear and do not all pertain to foreign direct investments. Half the medical devices companies in Ireland are indigenous.

I will attend an event later in the day at which those responsible for a number of health research projects will be in discussions with medical devices companies in respect of the commercialisation of research that is taking place as a result of SFI and other Health Research Board funding. Some extremely exciting research being done in this country can be commercialised and what is happening in this regard represents the future.

The remedy required in respect of the difficulties we face is somewhat different from those which were applied in the past. For example, we had our own currency in the late 1980s but we are now part of the euro. We cannot encourage female participation in the workforce on the scale we did in the 1990s because there is now such a high level of such participation. We do not have those tools but we do have better business know-how and we have a higher level of skill in the area of research. Educational attainment among 15 year olds here is on a par with that which obtains in Sweden and Denmark. We are at the top of the OECD's chart in respect of the number of people under 35 who have obtained third level qualifications.

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