Joan Burton (Dublin West, Labour)

At the opening of his speech, the Minister, Deputy Lenihan, referred to households and businesses that continue to work off the excesses of the boom. He made the adjustments and cuts sound like a walk in the park just after the Christmas dinner or, alternatively, like joining the gym or going to Unislim. It is a way of working off the excess built up during the boom years. It is a pity that such slimming of income has been applied to working people and those on middle incomes because they are the people doing the heavy lifting in this budget. I daresay the Minister must be aware that people with children took the biggest cuts this year and last year. Let us remember child benefit is paid almost universally to women. I suppose that is a comment on how few women are Members of this House and what little political power women exercise compared to bankers. The Minister always says "Yes" to bankers but in his different budgets he always finds it difficult to make payments in respect of children.

The table of reductions in expenditure is spot on. Well done to the Minister, who has passed the first test in the memorandum of understanding. It is spot on for the IMF and the European Central Bank. The reductions of €2,192 million are very close to the figures in the memorandum so when they are sent over on Friday, as per the memorandum of understanding, I imagine the Minister will get one star for getting so close to the required figures. However, it is very noticeable that out of cuts of €2,192 million, the Department of Health and Children will take a cut of €746 million and the Department of Social Protection will take a cut of €873 million. Those two Departments, Health and Children and Social Protection, will take a hit of €1.6 billion from total cuts of €2.1 billion. That is a really heavy hit on a particular sector which, more than any other, encompasses the notion of social solidarity and need. We should remain a one-Ireland society. Yes, we had our billionaires but we should remain close to that notion. The principle of the Labour Party is that we are a one-Ireland society and those who have most should contribute most.

Coming after 13 years of Fianna Fáil misrule, this budget might be described as the last sting of the dying wasp but it is a fairly vicious sting and one that carries a long tail life, not only for today but for the coming four years. The people who will feel the biggest sting will be those with children. I shall return to that issue presently. There is enough austerity in today's announcement by the Minister, Deputy Lenihan, to make even the most ardent Tea Party fan grin in delight. There is pain for the poor, money for the rich, particularly for the bankers, and the rolling back of the State.

In Ireland, we are now entering our third and a quarter year of fiscal austerity. It is very important that all the international cameras and press which have been covering this country should understand this fact. This is our sixth budget or adjustment statement since July 2008, shortly after Deputies Brian Cowen and Brian Lenihan were elected to their current offices. The first five budgets and adjustment statements took €14.6 billion out of the economy but those in the austerity and hairshirt camp want more. The Irish are a little like Oliver - "Please sir, give me some more austerity". Today, €6 billion of further austerity will bring the total taken out of the Irish economy over three and a quarter years to an eye-watering €21 billion, or 16% of GNP.

I and my party met with the IMF on a number of occasions during the recent talks and it was very clear to us that those people clearly understood there is no modern example of a developed economy deflating to this extraordinary degree but claiming it can grow like Topsy. The €21 billion of deflationary reductions risks putting Ireland into the dreaded deflation spiral, the terror of the Hoover years of the Great Depression in the United States. That is why the Labour Party argued for an adjustment of €4.5 billion, which, of course, would be extremely tough. There is no doubt about that. However, we wanted to promote and leave room for the certainty of growth. I met Mr. Rehn when he was here and discussed the magic figure of €6 billion which had appeared. I talked with him about what had happened in Finland and Sweden during those countries' banking crises. Mr. Rehn told me that the Swedes had learned a great deal from the Finnish banking crisis and what the Finns did, in nationalising and taking the banks into temporary public ownership, and so on. Then he said, "And Ireland ... " but he left any further comment unspoken. Ireland did not learn from Finland or Sweden. This budget smacks of Ireland having done case studies in Japan, with all the unfortunate effects of zombie banking on that economy. Unfortunately, we have mirrored that situation to an extraordinary extent. Japanese people who live in Ireland talk continually about the close parallel between what happened in their economy and what is happening now in Ireland. Japanese people I know tell me what the next thing will be.

It is very unfortunate. Mr. Rehn, having delivered the €6 billion adjustment, I presume on behalf of the ECB, last week came back and reduced his forecast for the Irish growth rate to 0.9%. What has all the austerity and deflation done for us as a country so far? In more than two a quarter years of austerity, unemployment has risen from 4% to 14%, which is 435,000 people. Austerity has slashed growth, it has killed consumer confidence and turned us into a nation who are busy paying down debt or saving - anything but spending. Those who study the behaviour of people in depressions, in particular shopkeepers and not just economists, can tell one that in a great depression such as we in Ireland are enduring, people change their spending patterns permanently. People who know people who lived through the great depression in the USA know that those people remain what the Americans call "frugal" and "tight" right to this day because they had the searing experience of what happened to them then. Many people fear that all this austerity is doing the same to Ireland. When walking down Grafton Street, one used to see people with two or three shopping bags. One would need to be a very dedicated, well off fashionista to come from Grafton Street with two or three shopping bags nowadays. One is lucky to see one shopping bag, often just a tiny one tied up in a bow.

What else has austerity done? It has brought the return of the emigrant aeroplane. It is reckoned by the ESRI that by next April 100,000 people will have left this country, some of them our brightest and best young people who will have left during the austerity period of the first quarter of this budget. It is very sobering, particularly in regard to people who came home and began to build a life here and then left again. We know that GAA clubs throughout the country, not just in rural areas but even in Dublin, can no longer be sure of getting the guys and girls for teams at weekends because they have gone away to get work as, unfortunately, many of their grandfathers and grandmothers also did. It is very sad for people in Ireland to have to relive this experience.

The European Commission and ECB are understandably outraged at what they see as Ireland's fecklessness but should the punishment be visited disproportionately on the more vulnerable sections of Irish society? Ever since the fall of Lehman Brothers, the Government and orthodox economists have insisted that bank losses should be socialised whereas bank profits during the boom years were privatised. The debt burden which Ireland now carries, and which this budget is designed to ensure we repay, smacks more of reparations than of repayments. A more holistic approach adopted by our international "helpers", with burden sharing of the bank restructuring, including by bondholders and foreign banks, and a longer timespan would leave us better placed to repay and to be part of a European wide reflation. In the end, this would be better for Germany as well.

In one of Keynes's best known works, The Economic Consequences of the Peace, he predicted that reparations to be paid by the German people after the First World War and the Treaty of Versailles would produce an economic and political catastrophe. To quote Keynes, "If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp."

Europe and the European Union has an extraordinary range of achievements to its credit and membership of the Union has been exceptionally beneficial for Ireland and its people. The European Union rests on a fundamental concept of solidarity. Without the glue of solidarity, Europe as a concept could be fatally undermined, not just in Ireland but in all those weaker countries, from Greece to Portugal and even to Spain, Belgium and Italy. A new Government should seek, as a priority, to renegotiate the terms. We need a cheaper interest rate, a longer timeframe and the kind of interest rates the IMF would normally apply to a country like Ireland, which could be as low as 3.2% and as high as 4.2%. That is the kind of interest rate the Government and its negotiators should have negotiated for our people.

I know that many people are nervous of market reactions to large public deficits and sluggish growth. Let us imagine the market reactions to no growth and much larger deficits. What has driven the panic in the bond markets over both Ireland and Portugal is just that. There was the belief that both economies would be stagnant in the coming years and, therefore, would become even more indebted because we were so mired in the consequences of our banking failure. Growth matters desperately to Ireland's prospects. Ireland, Spain and Portugal - all very different economies - are crudely lumped together in a bond market sin bin. We can escape from that sin bin if we can restore confidence in future growth from all sectors of the economy, not just the export sector. This means getting ordinary people buying and spending again, not just saving.

Who are the winners and the losers in today's budget? The winners are undoubtedly the banks, both Irish and foreign, which are hoovering up our money, not just to bail out Irish banks but to bail out the bondholders who so foolishly lent to our out-of-control bankers and developers. There is no doubt Ireland had exceptionally greedy and foolish bankers and developers, who borrowed like crazy when the flow of cheap money from the euro zone seemed literally like the gold at the end of the rainbow. There is no doubt Ireland and its failed system of governance and regulation carries the major share of the responsibility. However, some responsibility must be borne by those foreign banks which lent so recklessly and greedily. The ECB, from its lofty perch, should have been more familiar with bubbles.

Another class of winners are those developers and property tycoons whose comfortable exile has been enabled and abetted by our kind and generous Government regime, which permits those who owe billions of euro in unpaid loans safe and easy transfer of very large amounts of assets to spouses and family - perhaps all those tycoons with their multi-million pads in nice places like Connecticut, within easy commuting distance of New York city, like Mr. Dunne and Mr. Drumm. We read all about them in the newspapers, this weekend and every weekend. To use the Minister, Deputy Brian Lenihan's phase, "they continue to party on" - it is Unislim for the rest of us but party time for them.

Who are the losers? A family with three children will lose €40 a month, which is in addition to the previous cuts in child benefit last year, where they lost a significant amount. Jobseeker's benefit is being reduced by €8 and there is a cut to disability benefit. Most of those on disability benefit have limited capacity for work and their expenses are normally higher due to their disability but their benefit is being cut by €8 per week to €188. In addition, a payment to a person who is blind is down by €8 to €188 per week and carer's benefit is also being cut by €8 to €204 per week. Payments for those with adult dependants have been decreased by €5 per week. Therefore, a couple in these categories will experience a reduction of over €13 per week. That is tough when one is on a fairly tight income. People in these categories are certainly losers.

Other losers are the small and medium businesses, in respect of which the budget does not mention the flow of credit. We were promised credit would flow like milk and honey once NAMA got under way. Instead, NAMA seems to involve a reverse proposition sucking life out of the economy because its operations are so large. NAMA is probably the biggest property company in western Europe and it dominates a huge sector of commercial activity. The people who provide professional services charge service fees of up to €240 million per year and NAMA is sucking the capacity out of banks to give credit to SMEs in the villages and towns of Ireland.

I believed the Government, including the Minister, would have had something to say about the people who are under water or in difficulty with their mortgages, particularly after the Government Members' experience of campaigning in Donegal. These mortgage holders are facing Christmas terrified that they may lose their homes. The Government, in addition to saying "Yes" all the time to bankers, could make an effort to provide people with certainty that they will not lose their family homes, particularly when those family homes are also the homes of their children.

A popular show that many teenagers like and produce is called "High School Musical", one of the hits of which is called "We're all in this together". Bearing in mind all the catch-phrases and soundbites that come from this dejected set of Ministers, nothing grates more than the sound of our two Brians repeating, "We're all in this together". I have news for them: nothing in this budget offers a shred of evidence that they really believe this themselves. Every line of the budget suggests the exact opposite.

At the end of this set of Fianna Fáil budgets and as a direct result of the Government's policy, the gap between rich and poor will have widened. Ireland, after this budget, will be a more divided society than ever. It is the disadvantaged who will carry the bulk of the cost and those whose reckless antics caused the disaster will survive best of all. While their wealth will be diminished, they will have escaped, waiting for the chance to strike and come back again.

The experience of past recessions shows the legacy of the past three years will be long-lasting. Unemployment at an early age can leave permanent scars. Many studies have shown that someone laid off during a recession suffers an earnings loss even when he returns to the labour market. He returns to less well-paid employment and earns less than those fortunate enough to remain in work. Even 15 to 20 years later, these losses continue to take their toll. There are wider social costs. The loss of a job has a marked impact on health and results in an average loss of life expectancy of one to one and a half years. Children suffer when their parents are laid off. They are more likely to fall behind in school and tend, on average, to earn less than the offspring of those who stay working.

It is remarkable how standard orthodox policies have come a cropper in the past few years. Unemployment is a case in point. According to the Tea Party types, countries with flexible labour markets and low minimum wages find it easiest to adapt to the more challenging environment while those countries that insist on higher wages for workers reap the consequences of being soft. However, it has not turned out like this. Remarkably, Spain, which took the orthodox route, has a youth unemployment rate of 40%. Germany and Norway, which have protected workers rights, have kept their jobless rate at a low level. Therefore, I do not buy the argument that there should be a reduction in the minimum wage.

We all know about the famous three Rs that are the bedrock of early education. There is another set of three Rs that became the bedrock of economic recovery in the post-Depression era and formed the basis of the post-war politics in Europe, irrespective of the country or party in power. These three Rs are reflation, redistribution and reform. If the Labour Party is in Government after the next election, reflation, redistribution and reform will be what its participation in government will be about.

Governments have abandoned financial regulation with the calamitous consequences that are evident today. Where would we be now if there had not been some international reflation in 2009 after the shocks of 2008? The Taoiseach constantly points out, correctly, that our export sector does well. It has continued to do well because of international reflation. However, if the rest of the world had experienced the deflation that Ireland has experienced, our export sector, which unfortunately is not as employment rich as it once was, would not be doing nearly so well.

The Government must bring the budget into balance by a reasonable target date. The least plausible way of doing this is to starve the economy excessively of money in the short term. An adjustment of €6 billion is excessive at present. Next year is not the first year of a four year plan. As stated, we have already endured two and a quarter very difficult years, and adjustments amounting to €14.6 billion in the past two years. Can the Taoiseach honestly state the adjustments have achieved their objectives? If he cannot claim this, how can he prescribe more of the same medicine?

Why is the Government doing what it is doing? To some extent, it is because it is mixing with the wrong people. It has forgotten the advice of religious teachers in school on the dangers associated with keeping bad company. The Taoiseach and his party mixed with developers for years and wined and dined with them. They gave the developers every tax break and subsidy they demanded. They now associate with bankers, who are totally obsessed with the security of their position and, therefore, with budget harshness. Do Members remember that after the Taoiseach very kindly bailed out Anglo Irish Bank on the first occasion, Mr. Seán FitzPatrick stated on the radio, without a moment of self-reflection, self-awareness or shame, that he wanted cuts to the old-age pension, child benefit and all the social welfare payments. He asked people to take their medicine and to give the money to him. This is what the Taoiseach achieved; he gave the little people the medicine and gave Mr. FitzPatrick's bank, Anglo Irish Bank, the money.

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