John Halligan (Waterford, Independent) | Oireachtas source

I am sharing time with Deputy Mattie McGrath.

Given the €3.8 billion in budget cuts announced last year, one would expect legislation aimed at achieving a fiscal balance to be superfluous. The Government has already made it clear that it will not stray from the path laid down by the European Union and the International Monetary Fund. Many leading economists share my view that the current approach is steadily eroding all semblance of a caring society. It should also be noted that the IMF receives substantial interest repayments on our loans.

The Bill solidifies rules that are in place, accepted and being fulfilled by the Government. Unlike some members of the Opposition, I acknowledge that our structural primary balances show we have come a long way in making the fiscal adjustments needed to make the budget sustainable in the long run. I do not have a problem with being honest in this regard. I am concerned, however, by the Irish Fiscal Advisory Council's sobering assessment that there is a 40% chance of Irish GDP failing to stabilise by 2015. This is a worrying development because the council which will be a key and permanent player in the reform of our fiscal and budgetary system is held in high regard in financial circles. From speaking to economists, I do not believe its assessment will be far off the mark. This is a dangerous position, one which must be given considerable thought.

The domestic economy is on its knees and unemployment continues to rise. I accept Deputy Arthur Spring's argument that the Government bears little responsibility for many of our current problems. It was dealt a bad hand as a result of the terrible economic policies pursued by previous Fianna Fáil-led Governments. Without a solid deal on our debt sustainability, we face many more years of austerity. We must ask how long people will be able to tolerate further austerity. Irrespective of whether Government Deputies believe they are taking the correct approach to dealing with the economy, if the vast majority of the population come to believe their circumstances are intolerable, we will have a serious problem.

I acknowledge that fiscal responsibility legislation could have certain positive effects on fiscal conduct, for example, in providing for enhanced transparency and guidance in the budget process and ensuring lower risk premia. Unlike several other speakers, I do not have a problem with guidance being provided in the budgetary process. However, numerous international studies, including in the United States and China, have shown that legislation and fiscal watchdogs do not have much effect on deficits. It is also widely acknowledged that improving economic performance has little connection with fiscal responsibility laws. This has been demonstrated across Europe and in North, South and Central America. A 2010 research paper by the IMF, the body which is pressing us to adopt this law, found that fiscal responsibility laws had had little direct impact on fiscal performance in any country. We should study this interesting conclusion very carefully.

The Bill will make the road to recovery long and painful. The noose of banking debt hangs around our necks and will drag down generations of young people. Without increased participation in the labour force, the productive capacity of the economy cannot increase. It is unsustainable for any economy to have one eighth of its workforce unemployed as billions must be spent on unemployment benefits. History has shown that economies with an unemployment rate in excess of 8% and especially above 12% remain in economic trouble for many years.

It has been argued that the so-called golden rule setting out a maximum structural deficit does not correspond with the principle of good fiscal policy. Leading macro-economists such as Professor Karl Whelan have argued that the policies being pursued in Ireland will, over time, lead to debt ratios well above those considered sustainable or moderate. People should read what this top-class economist has written on the issue. He is non-political and I do not know if he is from the left, right or centre, but he is well regarded by economists across Europe.

Put simply, we must avoid a scenario in which we are so busy chasing and meeting targets that we drive the country into even deeper recession. The economy will not return to sustainable economic growth if we do not invest in maintaining and creating jobs. Unwavering support for austerity policies is making matters worse and will continue to do so for many budgets to come. One cannot prosper if one is buried under austerity or unable to buy or sell. The problem in the economy is that external investment and internal spending are much reduced. Any owner of a small shop or business will-----

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