Dáil debates
Tuesday, 24 June 2008
Leaders' Questions
4:00 pm
Enda Kenny (Mayo, Fine Gael)
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There are no prizes for knowing what the question will be today. The Taoiseach said in this House six months ago that the economy would grow by 3% in 2008, that over 24,000 new jobs would be created and that inflation would be held to 2.4%. He was wrong on the first, second and third counts. The economy will shrink this year, we are losing hundreds of jobs every day, there are an extra 40,000 people on the dole since last Christmas and prices are now rising by 4.5%. The Minister for Finance is astonished at the mess he has been left to clean up. We are now hearing talk about prudent action, resoluteness, comprehension and detailed activity from the Government to sort out this problem.
In advance of using all the rhetoric, it would help if the Taoiseach actually identified what the problem is. In that regard, can I ask him a straight question? Are we in a recession?
Brian Cowen (Laois-Offaly, Fianna Fail)
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The ESRI believes there will be negative growth of 0.4% this year. That would be the most negative forecast we have heard in recent times. The consensus is that we will have some growth. Obviously, we will be providing our half yearly figures from the Department of Finance next week and will make an assessment based on the most up-to-date data we have. By their nature, forecasts are essentially just that — forecasts.
Six months ago, I set out the possibility of 3% growth in the economy but I also set out various downsides and risks that will affect that forecast, all of which have now materialised. Twelve months ago, Deputy Kenny suggested the economy might grow by 4%. Forecasts are forecasts based on various assumptions. Since then, we have had a change in the global economic environment that affects Ireland in the same way as it affects everyone else. Allied to that has been a correction in the domestic housing market in addition to an increase in commodity and oil prices. All of this has an effect and drag on growth. The ESRI has made its prediction that there may be negative growth this year. There are other economists who are not quite as pessimistic. One thing we can be sure of is that now the downside risks have materialised, we will not have the sort of growth in the economy we were entitled to predict earlier in the year and last year. We, as Government, must address that situation. We must work within the budgetary parameters we have set out and set a course for a budgetary strategy that will be sustainable.
Enda Kenny (Mayo, Fine Gael)
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I remember a time when the Taoiseach used to come into the House and was the ultimate straight talker. He would answer a question like the one he has been asked by saying "Yes, we are in a recession" or "No, we are not in a recession". Now we have Department of Finance figures of speech surrounding his responses.
The Taoiseach said a number of months ago that it was wrong to talk ourselves down into a depressionary or recessionary cycle and that this was inappropriate because the economy was still performing strongly. It is untrue to say that what is happening is all due to international circumstances. There have been warning signs, which were pointed out by Deputy Bruton over the past two years and by others, but the Taoiseach did not take cognisance of those when Minister for Finance. We are now in a position where the former straight talking Minister, the Brian Cowen of old, is no longer present in the Chamber. He is now a Taoiseach constrained by the current circumstances. I go so far as to say that he has demonstrated and proven over the past number of years, in his capacity as Minister for Finance, that he was neither qualified nor able to run the economy in the way people expected.
Thomas Byrne (Meath East, Fianna Fail)
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Deputy Kenny cannot even run a party.
Enda Kenny (Mayo, Fine Gael)
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It is not just I who say this. The ESRI has said that the Government blew the finances from a boom everybody knew would be temporary. It is now in a position where it has gone from boom to bust in a short period and has turned a substantial surplus into a €7 billion or €8 billion deficit.
The Taoiseach is in denial and a delusion has been perpetrated on the electorate that all is well and rosy with the economy. However, the people on the street are not deluded. They can see frontline services being cut back, see and feel cost of living increases and feel economic pressures from a whole range of areas. The 580 blue chip jobs which were announced yesterday as being lost to India are the very kind of jobs that we heard Minister after Minister blowing trumpets about and rightly putting abroad as being the mainstay of our economy. However, it was left to the hapless Minister for Enterprise, Trade and Employment, the Tánaiste, to respond to this loss. She said she offered her regrets to the 580 people whose jobs are being transferred to India.
Will regret put anything on the tables of those 580 people? Is regret all the Government has to offer when 580 blue chip jobs are transferred to India? Is regret all it can offer when many of those families are mortgaged to the hilt? In view of the fact that we are getting devastating news following devastating news, will the Taoiseach admit that there is only delusion coming from Government in respect of the real economic situation? What else has the Government to offer our hundreds of thousands of workers in these uncertain times and circumstances other than regret?
Brian Cowen (Laois-Offaly, Fianna Fail)
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The delusion is very much on the part of the Fine Gael spokesperson on enterprise and employment who suggested that the changes we see in the economy currently mean we are back into the 1980s and worse. The ESRI does not say that. It says, that despite the negative short-term forecast, the economy is better placed to emerge from the current difficulties than it was in the past. The ESRI's medium-term assessment of the economy is that it has the capacity to grow at an average annual rate of approximately 4% if we take the right decisions now. That is what we intend to do.
Brian Cowen (Laois-Offaly, Fianna Fail)
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To portray the difficulties we have as a repeat of the 1980s is delusional on the Deputy's part.
Enda Kenny (Mayo, Fine Gael)
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The Government blew the finances.
Paul Kehoe (Wexford, Fine Gael)
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The Government caused the recession.
Brian Cowen (Laois-Offaly, Fianna Fail)
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Do the Deputies want to hear the answer? I listened in silence to what Deputy Kenny had to say, although there was not much content to it, but I will answer it.
Bernard Durkan (Kildare North, Fine Gael)
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There is not a whole lot of content in what the Taoiseach has to say.
Paul Kehoe (Wexford, Fine Gael)
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The recession was caused by the Government.
Brian Cowen (Laois-Offaly, Fianna Fail)
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With regard to our budgetary policy, in good times we have surpluses and in more difficult and stringent times we have deficits. That is what is called a counter cyclical budgetary policy. That is how one is supposed to run the economy. As a result of running our economy in that way over the past decade, we have created hundreds of thousands of jobs.
There is a challenge for the economy today and we must work within sustainable budgetary macro-economic policy. We will do that. Fine Gael fought the last election on the basis it and Labour would spend more than we said we would. We said we would moderate the rate of current expenditure in the coming years on the basis of a more benign economic scenario, which was shared by the Opposition. Now that we have a global environment which has deteriorated, affecting everybody including us, we will take whatever corrective measures are necessary to ensure we have a sustainable budgetary policy. The question I have for the Opposition is: Will it support the corrective measures that are necessary to maintain macro-economic stability?
Eamon Gilmore (Dún Laoghaire, Labour)
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The Taoiseach talks about managing the economy, yet he has been managing the economy as Minister for Finance since 2004. He has just led the country into a recession. What we need to establish now is what he proposes to do to lead us back out of that recession. There is no point saying it is due to global circumstances. Of all the OECD countries, none of the rest is in a recession, as demonstrated in a survey this month.
The Taoiseach spoke about a correction in the housing market. That was caused by him directly. He was the Minister who made the mess of the stamp duty issue, which changed the slowdown that was happening in housing construction to what the Minister for Finance described last Friday as a shuddering halt. The Minister for Finance is bemoaning his bad luck at having been appointed to succeed the Taoiseach in the Department of Finance. I wonder how he would feel if he was one of the 580 employees of Hibernian Insurance whose jobs are being relocated to Bangalore.
How would he feel if he was an employee of any other company, looking at what is happening in the economy? They may say they saw what was coming in terms of the slowdown in construction and have some understanding of that. They may say too that they can understand manufacturing jobs being relocated for cost reasons and so on. However, we are now seeing the very jobs we thought would be part of the solution to our economic problems, the financial services end or higher end, being relocated as well.
We are in a serious situation. Recessions do not happen every day or year. The last one was 25 years ago and the previous one was in the 1960s. The situation now is serious. Talking about waiting for other forecasts is a bit like waiting for the weather forecast when it is already raining and the storm is already blowing up. The Minister for Finance was on radio today and said that when the mid-year revenue figures are available next week, he will discuss with his colleagues the decisions needed to be taken. I presume the mid-year revenue figures will not come as an entire shock or surprise to him. I presume he, the Taoiseach and the other Members of the Cabinet have a good idea of what the mid-year revenue figures will show. We need to know what corrective measures the Taoiseach is considering taking.
Is the Taoiseach talking about introducing a mini budget? Will we see a new budgetary statement from the Government? When we raised questions on this last week, the Taoiseach threw cold water on them. We need to know the consequences of these figures and the mid-year revenue figures that will be received. Will the Taoiseach make a statement to the House or the country about the state of the public finances and the economy and give people a sense of confidence? We can go on forever blaming the Taoiseach for this but that will not get us very far. We need to know what the Taoiseach will do to get us out of this and he must tell us. The people need to have a sense of confidence that the Government has a handle on this. We need an assurance that the corrective measures will not be applied to those least able to bear them, the poor and the weak in our society.
Brian Cowen (Laois-Offaly, Fianna Fail)
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A correction is taking place in the housing market, as Deputy Gilmore says. That has a drag of about 4% on growth this year, according to the ESRI. I will not go over the history of it but the uncertain tax cuts proposed by the Labour Party over an uncertain period during which we needed to bring buoyancy into the market and bring prices down to affordability levels, by what we subsequently did, is a matter that the people decided upon 12 months ago. I stand over my arguments in respect of that.
The Government intends to proceed with the budget and expenditure programmes in line with its plans for this year. A reduction in our tax revenue is forecast which means that our deficit will be greater this year than we had planned. For 2009 and 2010 we must devise a budgetary strategy to ensure we maintain sustainable services. Our room for manoeuvre is less than would otherwise be the case, but we must make sure we prioritise our expenditure and we will do so in the context of our Estimates campaign. In the meantime, when Deputy Gilmore refers to maintaining confidence, that will not be done if the Opposition critique is that we go back to the 1980s. That is not the critique of the ESRI or anyone else from whom the Deputy is trying to find support for his position. That is not the position and the ESRI does not say that. We are not back to the position in which we were in the 1980s——
Simon Coveney (Cork South Central, Fine Gael)
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We did not say that to the Taoiseach.
Brian Cowen (Laois-Offaly, Fianna Fail)
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——because we are in a much better position to deal with the situation than we were then due to our debt reduction policies in the course of the good times. The contention that windfall revenues were used on current expenditure is not correct. Over 70% of those windfall revenues, above what was projected, went towards debt reduction. Some 80% of our expenditure relates to health, education and social welfare. Will the Opposition detail what pension increases were too high for pensioners and what number of nurses who were put into frontline services was too many for the hospital service?
James Bannon (Longford-Westmeath, Fine Gael)
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What about the money squandered on PPARS?
Brian Cowen (Laois-Offaly, Fianna Fail)
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What number of special needs assistants and extra teachers should we not have put into schools? Those reflect the increases in expenditure. We are also proceeding with a capital programme that is 12% higher than last year and which we would like to maintain. We are confident in increasing the productive capacity of the economy when the upturn comes. An upturn in the world economy will come if not next year, the year after or the following year, and we will be ready for that upturn. In the meantime we must manage the economy and our finances sensibly in a way that maintains and sustains services as we have built them up.
Paul Kehoe (Wexford, Fine Gael)
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The Government should have done that in the past few years.
Brian Cowen (Laois-Offaly, Fianna Fail)
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The Opposition cannot have it every way. It suggests that the Government should not run a deficit in bad times, which, I understood, is the reason that one should run a deficit, having run surpluses in 11 of the past 12 budgets during good times. If it should not run a deficit, what areas of policy does the Opposition want me to cut?
James Bannon (Longford-Westmeath, Fine Gael)
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The Government wasted billions of taxpayers' money.
Brian Cowen (Laois-Offaly, Fianna Fail)
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The Granard school of economics has just spoken.
Charles Flanagan (Laois-Offaly, Fine Gael)
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The Clara school is not much better.
Brian Cowen (Laois-Offaly, Fianna Fail)
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The basic point is that we are facing challenges.
Paul Kehoe (Wexford, Fine Gael)
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He would have done a better job than the Taoiseach.
Brian Cowen (Laois-Offaly, Fianna Fail)
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Obviously he did not, he was not in government at the time. The challenges remain the same. I stand over my budgetary policy in respect of providing a fiscal impetus this year to the tune of 1.5%, which was the right thing to do. In terms of current expenditure I refused to put the brakes on completely, which was accepted by most economists as the right thing to do. We will continue to moderate the increase in public expenditure. It will be more significant as a result of reduced growth rates this year compared to what was predicted and hoped for. We cannot be immune from global developments. We must carry on responsibly and prudently and we will do that.
Eamon Gilmore (Dún Laoghaire, Labour)
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The ESRI did not say that we are going back to the 1980s and nobody wants to do so. As a country we have come a long way from the 1980s. We must move forward and out of the difficulty we are in now. The ESRI has stated that we can get out of this recessionary period but it is down to the Government. The report is clear that this is Government responsibility, as it is Government responsibility for having landed us in the sand in the first place. One of the ESRI suggestions relates to a public sector pay freeze, which is obviously a matter the Taoiseach will discuss with the social partners. Will the Taoiseach repudiate the ministerial pay rise the Cabinet got last year? It would not add a lot to the overall state of the public finances but it would be a signal of where the Taoiseach intends to go.
There is no point in the Taoiseach engaging in great banter here about what the Opposition is suggesting. The Taoiseach is in government and he was the Minister for Finance. The Taoiseach is only giving us generalities in response to the news that there is a recession — sustainable this, moderation that and so on. I want to see the colour of it, I want to know exactly what the Taoiseach is talking about. The Taoiseach is talking about cuts in some public services or reductions or freezes in pay. Perhaps the Taoiseach is talking about taxation measures. I do not know, but we must have it on the table. I ask the Taoiseach how he will handle this. Will he go into conclave for a few months and will we see the measures in the autumn? Will he introduce a mini-budget? Will he make a comprehensive and intelligible statement about the state of the economy and the public finances? The responsibility of the Taoiseach is to restore confidence in the economy.
Eamon Gilmore (Dún Laoghaire, Labour)
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We will not contribute to eroding confidence in the economy. The Opposition did nothing like what the Minister for Finance did last Friday. If we had our own currency last Friday, I wonder where he would have landed it. It is the job of the Taoiseach to restore confidence in the economy and give a steer to where things are going economically. The Taoiseach is responsible for us ending up in a recession. There is not much to be gained by continuing the blame game. People need to know how to take us out of it. To date, the Taoiseach has not given me a sense of where he is going with it, nor confidence that he knows where he is going with it, and the sooner he can give us the steer, confidence and assuredness that, having led us into a recession, he has some handle on how to lead us out of it, the better.
Brian Cowen (Laois-Offaly, Fianna Fail)
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With respect, I have done so and will continue to do so. I accept the acknowledgement that we are not in a 1980s situation. Hopefully other Opposition parties will also do so. At the same time as I provide Deputy Gilmore with a critique as I see it of where we go from here, let the Opposition put its critique on the table, but it must be coherent.
Richard Bruton (Dublin North Central, Fine Gael)
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The Taoiseach is a great man to lecture the Opposition.
Brian Cowen (Laois-Offaly, Fianna Fail)
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That is the first point.
Paul Kehoe (Wexford, Fine Gael)
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He is in government to govern.
Brian Cowen (Laois-Offaly, Fianna Fail)
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The direction of the Government is clear.
Brian Cowen (Laois-Offaly, Fianna Fail)
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If Deputies want to hear the answer, I will tell them. We will work within the budgetary parameters we have set for this year.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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By cutting home help.
Brian Cowen (Laois-Offaly, Fianna Fail)
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We will try to come forward next year with a sustainable budgetary position, which will obviously moderate the level of increase in current expenditure because we are anxious to maintain capital programmes that provide the building blocks and increase the productive capacity of the economy to take the upturn when it comes. That is our basic position and we will do that in a way that ensures sustainable policies in the future. It a challenge, with growth rates lower than expected due to the global economic environment. As we proceed to do that, we will do so on the basis of taking the correct course now, as the ESRI said, to resume growth in the economy as soon as possible thereafter when the upturn comes. This involves making a temporary adjustment now to avoid permanent damage. This will be done by the Government in the context of the upcoming budget, Estimates and our plans for next year. In the meantime, we will not succumb to the panic of some who suggest it is back to the 1980s or others who critique that they want us to cut expenditure and at the same time increase money for programmes. Members of the Opposition cannot have their way all of the time. We will continue to do our job, based——
Ulick BurkeBrian Cowen (Laois-Offaly, Fianna Fail)
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——on the performance of the Government over the past decade which has seen hundreds of thousands of jobs created.
Brian Cowen (Laois-Offaly, Fianna Fail)
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As regards the challenges we face this year, Enterprise Ireland has exceeded its targets in its annual report. The IDA will confirm that more than 114,000 major investments will come to the country this year with a total investment of more than €2.5 billion.
Brian Cowen (Laois-Offaly, Fianna Fail)
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All of this is important. A total of 40% of IDA investment is by companies already situated, located and trading here. This is what we will continue to do and provide a robust analysis of this situation.
To portray that suddenly from being a very successful economy we are an unsuccessful economy is——
Brian Cowen (Laois-Offaly, Fianna Fail)
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——obviously an absurd proposition. The position for us is how do we resume growth as quickly as possible. We can only do so by taking the necessary corrective measures now and this is what we will do.