Micheál Martin (Cork South Central, Fianna Fail)

For many reasons it is highly appropriate that Deputies have paid tribute to the late Brian Lenihan during their contributions to this budget debate. No Minister for Finance has ever faced the combination of dramatic challenges which confronted him during his two and a half years in that office. The scale of the problems and the speed with which they kept changing placed an enormous burden on him. Nonetheless he confronted them with urgency and vigour. He always acted in good faith and was motivated by the republicanism which has always been a proud hallmark of his family. In preparing last year's budget he, along with all of his colleagues, was determined to set out a clear framework for restoring Ireland's fiscal and economic health.

The Minister for Finance, Deputy Noonan, and the Minister for Public Expenditure and Reform, Deputy Howlin, together with the Taoiseach, the Tánaiste and the Minister in the Chamber, Deputy Rabbitte, have spoken repeatedly of how the budget announced last year has succeeded in showing the world that Ireland is on the right track in consolidating its budget. They have also pointed out how economic growth returned while that budget was in operation. Of course, they have not managed to acknowledge that they voted and campaigned against the budget that they now spend so much time claiming credit for. Although in a position to do anything they wanted, they chose to leave it unaltered in any significant way.

It is impossible to listen to the Government contributions to this debate and fail to remember what the same people were saying when they were looking for votes. Last year the Taoiseach stood in this spot and condemned the budget as "stale, unfair and out of touch", "devoid of hope, ideas and imagination" and he of course called for the immediate burning of bondholders. On Sunday he praised that budget for having "restored confidence". Before he assumed his current responsibilities, the Minister, Deputy Howlin, said of the budget, "I have listened to many budget speeches in this House over the years but none was more disingenuous and more dishonest". He attacked education charges and said the claims made for the budget reminded him of the theory of "the big lie" as contained in Mein Kampf. On Monday that budget was, for him, merely a "first step".

The truth is that over the last nine months this Government has taken few significant decisions and has coasted on the back of plans already in place or ready to go. Its most hyped initiative, the downgraded jobs budget, has damaged investment and cost jobs. In spite of having a secure majority, which will survive even in the unlikely event that more Labour backbenchers remember the policies they stood on, the Government has been timid and obsessed with political manoeuvring. Never before has a Government spent so much time praising itself while actually doing so little.

At the end of a long month of leaks and press conferences we have in the last two days finally seen exactly how Fine Gael and Labour intend to govern. We have finally seen them move from vague generalities to taking real decisions. We no longer have to take them at their word, and we can see the cold, hard facts of what are their priorities. This is their budget. They spent six months preparing it and have rolled out the largest number of media briefings, both official and anonymous, ever used to promote a budget. The Minister, Deputy Howlin, has said that he personally examined every area of spending and that the decisions taken are based on political priorities. The Minister, Deputy Noonan, has confirmed that the Government was entirely free to make its own decisions within a set deficit target. Both the Taoiseach and Tánaiste have confirmed that they support this target and would want to hit it irrespective of where the State is borrowing its money.

The Government has choices to make and is accountable for them. Through the mountain of detail and the hours of announcements, what has emerged is a deeply unfair and damaging budget. This budget is the most regressive in years, it will cost jobs, it breaks an unprecedented number of promises made only months ago and it may lead to a serious shortfall in Government revenues as soon as early next year. It will not promote recovery, it will endanger the achievement of fiscal targets and it will shift an unfair burden on to groups which are least able to manage. It shows a Government which is wasting an enormous amount of public goodwill as it shows a self-righteousness which is on display every day in this Chamber.

The single most important element which will create jobs and ease fiscal pressures is overall economic growth. We support the fiscal target set in the budget. It is a reasonable compromise between the need to get to a sustainable deficit level and to protect the potential for growth in the economy. We set out a detailed series of budget proposals that were constructive and credible and which had been costed. Some of them have been adopted by the Government, which we welcome. We accepted fully that unpopular choices were required and rejected the tactics followed by the Government when in opposition of pretending that there were easy solutions to even the hardest of problems.

Within the overall target for next year, many approaches can be taken. Measures could be targeted in order that they would do as little damage as possible to the potential for growth and job creation. Last week I directly asked the Taoiseach about the Government's forecast for growth in 2012. The Taoiseach and the Minister for Finance, Deputy Michael Noonan, confirmed that they were sticking to a growth target of 1.6% as per the forecast made. Yesterday the figure was reduced to 1.3%, which was probably justified by the latest forecasts for the European and global economies. It is unclear why it took until yesterday to announce this. Perhaps Ministers were concerned that it would raise too many questions during their cavalcade of press conferences in recent weeks.

Of much more serious concern is the fact that the measures announced in recent days are likely to cause further downward pressures on growth. When it comes to spending cuts and revenue raising, not all measures have the same impact on the broader economy. A consistent theme of the spending plans and tax measures proposed is that they include nothing significant to promote growth. However, they include many measures which might cause serious damage. The accelerated cut in capital spending, the undermining of investment by pension funds and the VAT increase are highly likely to depress economic activity beyond the figures produced yesterday. Everyone knows that VAT returns pose the biggest concern for the Exchequer. They are well behind projections, while underlying consumer confidence is weak. The overall deficit target cannot be met if VAT returns continue to underperform and if the increase drives consumers away from already hard-pressed shops.

We are now in the bizarre position where the Government is making directly contradictory claims about VAT changes in different parts of its budget. When it was cutting VAT for selected industries in June, it claimed that thousands of jobs would result. It stated cutting VAT was the best way to create jobs. Now, when it is front-loading VAT increases of 2% on a much wider range of goods and services, it claims there will be no impact on the economy. The Minister has claimed that he is increasing VAT because of the extent to which he cares about jobs. The failure to include any economic impact of the VAT increase in the budget figures directly undermines their credibility. The Government predicts the increase will yield €670 million but does not take into consideration the impact of the increase on sales, which will be particularly evident in Border counties. This has arisen solely because Fine Gael wants to be able to claim it has left income tax untouched. Instead of targeting revenue measures at the highest earners as we proposed, it was decided to rely on the most regressive tax, the one which, increasingly, is under-performing. This has introduced uncertainty into the programme of fiscal consolidation which the Government may come to rue.

There is a complete lack of a stimulus or investment in the growth potential of the economy. Fine Gael's €7 billion NewERA is missing, as are the billions which the Labour Party stated would be pouring into the economy from its strategic investment bank. There will be projects bearing these brand names, but they will be minor side projects with no serious national impact. If the Government wants to promote growth, it should adopt our policy and replace the pension levy with an investment fund which would combine a compulsory investment by the pensions industry with State resources. The billions involved would stop damage being caused by the levy and provide major resources for job creation investments. It would also yield a return for the industry rather than penalising pensioners of Tara Mines and other companies. Effectively, the Government's policy on growth is to hope it turns up in the international economy and helps our exporters, at which point it will no doubt be ready to claim credit for it. In other areas the budget will have an active and immediate impact, mostly for the worse.

All Ministers have claimed that creating jobs is a core objective of the budget. Unfortunately, that is nonsense. The net effect of the budget will be, unequivocally, the loss of more jobs. A contraction of net employment in 2012 is confirmed in the budget documentation. This is more of what we heard from the Government at the time of announcement of its downgraded jobs budget. The net €250 million the Government took out of the economy this year, especially from pensioners, has cost jobs. In spite of the clear evidence to the contrary, the Taoiseach claimed on Sunday that tens of thousands of jobs had been created when unemployment had grown consistently in the past nine months. The obsession with trying to spin its record to date has led to the ludicrous claim that the jobs initiative has had a big impact on tourism. First, the increase in tourist traffic began well in advance of the announcement of the jobs initiative. Second, a major factor is the absence of an ash cloud this year. The Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, has many talents, but the ability to control Icelandic volcanoes is not one of them.

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