Thursday, 25 September 2008
Irish Economy: Motion (Resumed)
I welcome the opportunity of speaking in support of the amendment tabled by my colleague, the Labour Party spokesperson on finance, Deputy Burton. I agree with the request from Fine Gael and the Labour Party for a more substantial debate on the economy. As I have only a short period of time available to me, I wish to concentrate on three aspects of the matter.
The debate on the economy is totally inadequate. It is flimsy and it does not deal with the fundamental issues. I say this for two basic reasons. The first is because the Minister for Finance is describing the external conditions, such as what he calls "the credit crunch" as a kind of international flu. I wish to state immediately that those who want to look at the different models of international finance must conclude that a debate is taking place at present in Washington about how one should respond to the failure and collapse of the neoliberal model of non-regulation. It is also interesting that the media, the members of which are not in the Press Gallery at present, came to accept a single model of the economy as the only model. Like others, I have had the privilege of working in a university where different versions of the economy were in fashion at different times. After the Second World War, for example, this moved through Fordism and Keynesianism to the arrival of the Washington consensus.
I challenge the Government to state where it stands on the Washington consensus, which was created through collusion with the media and the control of universities. That is why, for example, it is proposed to create the Friedman tower at the University of Chicago and the reason discrimination exists against academics within the United States system who hold different views. Lest people say I am simply being anti-American, there is an absence internationally of any analysis of the different forms of capitalist structure. There are differences between Asian capitalism, the kind of rentier capitalism practised in oil producing countries and the hegemonic capitalism which was driven by the Washington consensus.
I have great respect for the Minister of State at the Department of Finance but I ask him not to mount a defence of the kind of illiterate economics and anti-intellectualism that would describe the international situation in which we find ourselves as some kind of flu or say that things have gotten very bad abroad.
There are matters for which the Government has explicit responsibility. One cannot blame the relationship between the Fianna Fáil-led Government and the speculative component of the building industry on the Washington consensus. From 2006 there has been a crisis of management in the Irish economy which is not connected with waste but with economic structures, the fundamentals of which are available even to first-year students of economics. In 2006 we imported more than we exported. Between 1995 and 2000 the Irish growth rate was sustained by an export performance but exports flattened and in 2006 imports exceeded exports and there was a change in our balance of payments. Nevertheless the growth rate stayed high. That was because of little less than a property revaluation. As property prices peaked in January 2007 there was a mad, wild speculative capitalism in the housing market, for which the Government has responsibility in the form of its endless sustenance and expansion of property-driven tax breaks for those who are not interested in housing but in speculative investment. The insatiable demand for that expansion led to €8.5 billion being invested by Irish people in property abroad.
At the macro-economic level there is an international crisis of regulation. There is a contradiction in the debate between Republicans and Democrats in the United States. The Republican Party, in paper after paper from its research institutes such as the Cato Institute, with which the Minister of State will be familiar, set its face against even the Bretton Woods institutions, arguing that market competition between bad and good money, involving the yen, the dollar and the euro, would save us. I challenge the Fianna Fáil-led Government to say where it stands. Does it stand with the right-wing enterprise institutes in the United States on the international side of the crisis? Is that crisis engendering an inchoate slash-and-burn response in this country, which sanctions cutbacks in public services, irrespective of whom they might affect? What floor is being established whereby the most basic minimal rights in health, education, the environment and housing will be protected? Having irresponsibly created a bubble the suggestion is that the Government can now contract that bubble without considering the impact of its public expenditure proposals in each of the categories that are responsible.
I find it particularly depressing to witness the way the public is being softened up for some hard medicine. It is as if there is an international flu and we have caught it. The Government will have to dish out tough medicine and we will all have to put up with it. If we live for two or three years we might survive but that is not good enough. It is not good enough from the media, the Government or any political party.
Let us ask tough questions and let the Minister reply. Is he happy with the role of the Central Bank, which I explicitly contend is responsible for the disastrous abuse that took place in the area of housing? Where were the warnings from the Central Bank? In which particular quarterly report were they made? When the Central Bank expressed concern did it seek legislative power from Government? Did the Government read the quarterly report in question and decide it needed more accountability?
We in Parliament are often criticised for the level of our wages and our expenses but what about those at the top of the Irish banks who awarded themselves hundreds of thousands of euro for creating a crisis by firing money indiscriminately at borrowers and increasing the mortgage ratio from between 3.5% and 4% of income, as it was for most of our lives, to between 15% and 20%? That is a scandal and there is a dead silence on the matter as if this is an international virus which cannot be understood. It can be understood. The banking sector, in seeking to contract the false bubble it created in housing sustained by a larger artificial structure of credit, now says it wants all its money back in a hurry.
How did this come to be? What is the role of the Government and what should be done now? Who should be protected during the disastrous policy of responding in the knee-jerk way I describe as "slash and burn"? That would destroy more jobs, of which 73,000 have been lost since the beginning of this year. The response must be economically literate, it must be principled and it must defend, internationally, the right of different models encompassing the economy, politics and society. It must be truthful and must protect the weakest. It must not be general in its ill-effect and one cannot use scapegoats. Below the level of principal officer in the public services tens of thousands of civil and public servants draw family income supplement. That amounts to a whole army of public servants.
When the Minister of State at the Department of Enterprise, Trade and Employment, Deputy McGuinness, looks around for a scapegoat I suggest he look to the advisers who gave him not just illiterate economics but bad economics. He should have the courage to change course. He may look to the international situation for what must happen in the area of regulation. At home, however, he should encourage people to understand how important it is in a Republic that citizens who are most vulnerable should be insulated against the outrageous mistakes of those who gave themselves hundreds of thousands of euro.
I wish to share time with Deputies Michael Ahern, Chris Andrews and Michael McGrath.
The sight, overnight, of an unusually humble President Bush addressing the American people on the parlous state of their economy is a vivid testimony to the extraordinary economic times in which we find ourselves. They are extraordinary times in which pillars of world commerce, such as Lehman Brothers and AIG Insurance, fail and in which the foundations of the US home loan sector are crumbling and the availability of credit worldwide has virtually come to a halt. Household banking names such as Halifax Bank of Scotland are being taken over within hours as normal rules of competition law are suspended to save the foundations of the system. Ireland cannot be immune from these extraordinary times but, through Government policy and action in the past ten years, we have foundations in place to help us face into them.
Our pension reserve fund, valued at €19.5 billion, affords huge protection against the pension challenge we face in the future and is a protection many other countries do not have. An ongoing public infrastructure programme, worth €30 billion, is transforming roads and schools around the country. Despite the serious challenges in the area of unemployment there remain more than 2 million people at work in the economy, with 700,000 new jobs having been created. There have been job losses recently but there is job creation every week right across the country, a point which is being lost amid the news of losses.
We have a very generous welfare system and State pensions have been transformed in the past ten years, now standing at a level of €208 per week and increasing. We have a highly educated, young and motivated workforce who, through their own efforts and intelligence and backed up by good staff and serious investment in third and fourth level education, are among the best in the world.
It is important to reiterate these facts over and over because there are many who wish to discount them, ignore them and belittle the achievements of the past ten years. There are many who, in the words of the motion, dismiss them as reckless budgetary policies while ignoring the many tangible benefits they have brought. The forthcoming budget, on 14 October, will be tough and the Minister and the Taoiseach are not softening people up but telling it as it is. It will be a budgetary response to the extraordinary times to which I have referred. We cannot take for granted the changes and improvements in our country during the past 20 years. We cannot presume, as many do, that the good economic times will always be with us. The Fianna Fáil Party will be four-square behind the Minister for Finance on 14 October in regard to whatever decisions are made.
Other parties challenge the Minister and accuse him of doing nothing in response to the crisis. I challenge them to provide us with an alternative budget, to set out their stall so that they can be judged rather than offering cheap soundbites to journalists when present in the House or to the national newspapers. I challenge further those who are calling for reform and criticising the Government for inaction not to spend the next 12 months running around the country criticising cutbacks while calling for more cutbacks in this Chamber without offering specifics.
I welcome the plans for public service reform initiated by the Taoiseach when Minister for Finance and to be implemented via the OECD implementation report. Again, Members opposite are great at calling for public service reform but they do not offer any specifics in this regard. They keep telling us about quangos and the bloated system but they will not lay down specifics in terms of where they would take action or introduce cuts.
I welcome the call by the Minister for Finance last night for a wider redundancy programme across the public service. This is not a threat and should not be seen as one. Redundancy programmes are modern management techniques in any workforce. I appreciate the remarks made by Deputy Michael D. Higgins. It is unfortunate members of the media were not in the Press Gallery to hear them. Redundancy programmes are available everywhere. In my view, many in the public service will use the opportunity to get out of it and apply their talents elsewhere.
There are other issues which I would like the Minister to consider in the current economic situation. The issue of prequalification for public contracts denies many small businesses access to them. For example, in the construction sector many ably qualified builders cannot, for reasons relating to turnover, apply for jobs in schools and public building refurbishment contracts. This turnover has nothing to do with their capacity to build or respond to a specific tender. Turnover can be achieved in many ways. The current system excludes small qualified contractors accessing public funds. I fear it is also preventing us getting value for taxpayers' money as these small contractors can do the job cheaper.
Another issue requiring urgent attention is the importation of motor vehicles from Northern Ireland and, in particular, the UK. I ask that the Minister ensure that the Revenue Commissioners allocate extra staff to ensure all imported vehicles comply with the law, revenue laws in particular, and are registered with the Revenue Commissioners in due time. There is much evidence to suggest this is not what is happening. This practice is undermining employment opportunities in the motor industry which is already under severe pressure.
I referred at the outset to the extraordinary times in which we find ourselves. An article in this morning's The Irish Times is testament to the worst excesses of the systems outlined by Deputy Michael D. Higgins. Hedge funds are betting hundreds of millions of euros that share values in Irish banks will fall. They are effectively treating as pawns on a game board the people who work in the banks, customers and those whose lives are entwined with the banks through mortgages and savings.
Those same speculators were also responsible in driving food and commodity prices.
The decision by the Financial Regulator to suspend short-term selling is welcome and must be maintained for as long as possible. However, the Minister for Finance, Deputy Brian Lenihan, should spend time, internationally, addressing these issues and should also address through the EU and UN, if possible, these excesses of capitalism. I find myself agreeing with Deputy Higgins on that issue.
I have full confidence that the Government can deal with the challenges ahead. Tough decisions will be made and are required to maintain the huge progress we, as an economy, have made in the past 20 years in particular.
If the Opposition and, in particular, the main Opposition party, is interested in economic reform and public service reform, as it tells every journalist it is, it is time it set out its stall, laid down specific proposals in this regard and stopped running away from them when under a bit of pressure.
It would be also interesting to hear if Fine Gael as a party has proposals rather than hearing from specific Deputies who are running off flying individual kites. I support the Government amendment to the motion tabled by the Opposition. I have full faith in the Minister for Finance and the Taoiseach to address the challenges ahead. I look forward to 14 October and to hearing Members opposite and, in particular, Deputy Varadkar, setting out their stall.
I thank Deputy Calleary for sharing time with me. I am delighted to have an opportunity to contribute to this important debate.
It is important to state at the outset that Ireland is part of a globalised economy. Everybody, including the dogs in the streets, know this. Our position in that world is affected by what happens in the United States of America. The only people who do not appear to be aware Ireland is part of a global economy are Members of the Fine Gael Party. The motion before the House makes no mention of the fact that Ireland is part of a globalised economy.
Clearly, Fine Gael is trying to blinker the public into believing that we in Ireland will be only affected by events in Ireland; that we alone can deal with them and that the meltdown in the US financial markets will have no impact on Ireland. This is not the case. There is an acceptance that savings must be made. There is also an acceptance that we cannot return to the situation that prevailed in the 1980s. Deputy Calleary stated that we are in a much better position now than we were in the 1980s and prior to that. We now have more than 2 million people in work, a substantial pension fund and our best asset is our educated young workforce.
The financial markets of any country depend on confidence in the system. That lack of confidence did not originate in Ireland rather, it originated in the US. Despite what Deputy Michael D. Higgins said, it has spread like a virus. The financial markets are so delicately balanced that confidence has a significant impact on them.
A lack of confidence in the US market has undermined confidence in Ireland and the wider economy. One has to look no further than the situation that arose with Northern Rock, which was well capitalised, to see the real impact of a lack of confidence in the market. Customers lost confidence in that bank and the rest is history.
Some commentators and members of the Opposition speak about the economy and the financial markets in negative terms. No one is suggesting there are not serious challenges ahead for the banks or the economy. Everybody recognises this is the case. It is the reason the budget has been brought forward to 14 October and I welcome that.
The use of words such as "we are facing a meltdown" and commentators suggesting they are being muzzled is, in my opinion, completely irresponsible. I do not believe this is in anyone's interest except perhaps those making the claims. The banking model used in Ireland is different from that used in the US.
Earlier this year members of the finance committee met with various stakeholders in New York and Washington and noted a clear absence of regulatory structures in the financial markets there. What happened in America was that, from the hopeful homeowner to the brokers and right up to Wall Street, there was no one there to shout stop. It was in nobody's interest to do so. This is the outcome. While we were on our visit to America, Henry Paulson announced that he intended to introduce plans for regulation, but it was said that it would not happen until after the November election. Clearly, self-regulation does not work. Even the Republicans appear, reluctantly, to be accepting that now.
In Ireland, the model is very different. We have a much more robust regulatory framework overseeing the financial markets. We have the Financial Regulator and the Central Bank, the chairman of which appeared before the Joint Committee on Finance and the Public Service earlier this year.
We also have the ECB, and the Department of Finance oversees matters. Clearly, the Irish model is significantly different from the American model. I read recently that 24% of mortgages in the US are sub-prime in nature, while in Ireland it is less than 3%. Ireland's difficulties are not the same as those of the US, but the lack of confidence has had a major impact on us. Years ago it used to be said that when Britain sneezed, Ireland got a cold. Now, the US has pneumonia and Ireland will have to take its medicine. People expect us to take that medicine.
The OECD, in an economic survey earlier this year, stated that Irish banks were well capitalised and that their past large profits had given them a buffer to get them through the current difficulties. That is the reality, despite what people like to say. If there is any more volatility in the financial markets, it is unlikely some commentators will make it to Christmas without having a nervous breakdown. The partnership deal reached a number of weeks ago was the result of much negotiation and compromise. It is easy to say that one side did not go far enough or that the Government should have imposed X, Y or Z. However, those who say that forget that it is about partnership and agreement. It is a good compromise and I believe it will be one of the cornerstones on which the new and stronger economy will be built.
The Opposition appears to want to have it every way. As Deputy Calleary said, they use nice generalisations such as "hunting down waste". We all know the devil is in the detail. It would be nice to hear them spell out which Ministers of State they feel are not needed any more. Do they believe we should get rid of the Minister of State with responsibility for integration, or the Minister of State with responsibility for older people? Are older people now somehow expendable in the Fine Gael ideology? At a time when we need to maintain a cool head and steady nerves, I am delighted that we have a Minister for Finance who has the calmness, foresight and vision to get the economy into shape so that when the global economic upturn comes we will be in a position to benefit. I support the amendment.
I am delighted to have the opportunity to say a few words in this debate. The greatest challenge facing us and the Government is to manage the economy through the international downturn we are experiencing, which is likely to continue for a considerable period. There has been a rapid slowdown in the global economy arising from turbulence in the global financial markets, the credit squeeze, exchange rate shifts and the sharp rise in oil prices. No one knows how quickly stability can be restored to the financial and equity markets worldwide. As a small open economy we depend on exports, which represent up to 85% of our GDP. Exports are the major driver of our economic success. This means we are more exposed to those international factors than many other countries. In conjunction with the dramatic slowdown in the housing market, this has had a dramatic effect on tax revenues, which leaves the Government with considerably less to spend.
It is important to set the record straight on what has been achieved over the past 20 years or so. The people have, through their application, talent and flair, established an economic platform that was unimaginable back then. There has been an average growth rate of 5.5% over the past five years. Government debt has fallen from 32% to 23% of GNP and €19.5 billion is now invested in the National Pension Reserve Fund. An investment of more than €30 billion in the biggest infrastructure programme per capita in Europe has been commenced. Money was invested in schools, roads, public transport, communications, housing and the health service. We have also dramatically increased the State pension for our elderly and child benefit for families with young children and we have significantly reduced the tax burden, particularly for the lower paid and those on average incomes. We have increased the number of gardaí, teachers, doctors, nurses and special needs assistants, and increased investment significantly for those with disabilities. As the Minister, Deputy Lenihan, said yesterday, this is the record that has been described as representing reckless budgetary policies. I ask the Opposition speakers to tell us what areas should not have received increased funding and where they would cut back expenditure.
Deputy Bruton has consistently argued for restraint in public expenditure, but at his side and at his back, and in councils throughout the country, his colleagues have been shouting loudly for more and more expenditure in all areas. Which is the real Fine Gael policy? Is it Deputy Bruton's or is it that of the rest of the pack?
The challenge facing the Government is not an easy one to overcome, as any fair-minded person will acknowledge, in view of what has happened in the US, across Europe and in international markets. However, I have faith in Irish entrepreneurs, having been privileged, as Minister of State with responsibility for trade over five years or so, to see at first hand on many trade missions across the world how these men and women, in many diverse businesses, are capable of taking on the best any country can produce and succeeding. These people were products of our excellent education system and we must ensure the system continues to receive the funding necessary to produce more and more highly qualified people to drive on the economy in the years ahead.
As has been mentioned many times, regulation is important to ensure confidence and certainty in any system. As was recognised by our Government in the last number of years, over-regulation was putting an excessive burden on many businesses and the Better Regulation report charted to way to reducing excessive regulation. This must be continued in order to improve the competitiveness of Irish companies, but regulation is vital and it must not be thrown out. As has been mentioned by previous speakers, lack of regulation in the US has led to the mess we are in today.
I spent five years working in the building industry in the 1970s and early 1980s, at which time there was a downturn in the industry. It was mainly due to high interest rates, high inflation, high unemployment and mass emigration. The difficulties we are experiencing now are the results of different factors, one of which is the price of land. There should be control over the price of land as it affects not only the price of houses, but also the price of agricultural land, public housing and many other things. People with too much cash drive prices up to a level that is uneconomic for many industries. This should be examined for the future. We are in a cyclical world and these things will come around again.
Exactly. I agree with the Deputy.
What also happened back in the 1970s and early 1980s was that there was a pull-back of funding for apprenticeships. When we came out of that downturn, there was a lack of skilled craftspeople. That must not be allowed to happen now. Inflation has also been mentioned. I have heard some Opposition speakers claim we have a very high rate of inflation compared with the rest of the EU. However, they are comparing apples with oranges. When using the EU harmonised index our inflation rate is approximately 3.2% compared with the EU average of 3.8%. When people are quoting figures they should consider the facts. We would have a better debate if they spoke about facts rather than fiction. I accept the Opposition has a job to question the Government but it should speak factually. I have confidence that my colleagues in government have the ability and courage to take the right decisions to protect the country's achievements to date and to chart the way forward through the troubled waters we are now in.
I welcome the opportunity to speak in favour of the Government amendment to the motion before us. We are now in a changed economic world. What has happened in global financial markets in recent weeks is without precedent in modern history. The proposed $700 billion rescue package for the financial institutions in the US is ten times what our public expenditure, current and capital, is likely to be in 2008. The state of health of the global financial markets is directly linked to the strength of the US financial institutions, so it is in all of our interests that stability is restored to these institutions as quickly as possible.
As a small open economy, the fortunes of the Irish economy are inextricably linked to the global economy. When I was studying economics in college, companies like Lehman Brothers, Merrill Lynch, Bear Stearns and AIG, were world leaders in their field. Today, Lehman Brothers is no more, AIG has been rescued by the US Government, Bank of America has taken over Merrill Lynch and Bear Stearns has merged with JP Morgan. Events such as these would have been unthinkable just a few short months ago. The bottom line is that there are no certainties anymore either for the global economy or for the Irish economy.
However, unlike many of our European neighbours, we have entered this so-called "economic perfect storm" in a comparatively good position. As a country, we have come through a period of remarkable economic growth. No one can question that as a country we have made tremendous strides on the back of the economic boom of the past decade or so. The Ireland of 2008 bears no resemblance to the Ireland of the 1980s, despite what some commentators and even politicians might wish to portray. Contrary to the Opposition motion before us today, it is clear that fruits of this boom have been put to good use.
We have seen a dramatic reduction in the national debt as a percentage of our economic output. The Government has established a pensions reserve fund to provide for future pension liabilities. We significantly increased investment in public services with more gardaí, teachers, and health professionals than ever in the country's history. In addition, we have rolled out an enormous programme of capital investment to improve the country's infrastructure. However, that is not to underestimate the challenge before us, which is immense. We can exercise no influence over some of the determinants of our economic performance. Exchange rates which have been unfavourable for exports with the weak sterling and US dollar, interest rates now set by the ECB, and oil and commodity prices, to name but a few, are all important instruments outside our control.
At a time when all the external factors are unfavourable, it is even more important that we manage well those factors under our control. Public sector pay and private sector pay to a lesser extent must be kept under control. I congratulate the Government and social partners on achieving a draft national wage agreement in recent weeks. I hope the various unions will support the draft agreement so that it can be implemented. We can control our taxation policy and the parameters of public expenditure. I welcome the Minister's commitment, which he reiterated last night, to weed out any examples of inefficient spending and poor value for money in the public sector. The recently published report of the Comptroller and Auditor General highlighted a number of such incidents that must be addressed urgently. It is important that we also continue to pursue a strategy of managing inflationary pressures in our economy.
The Government has taken control of the situation and has made a number of important decisions in recent weeks. Savings of €440 million are being implemented up to the end of this year, which only represents a start. The deposit guarantee scheme has been increased to 100% up to a value of €100,000 to restore confidence in the banking sector. This decision was essential in recent days when considerable uncertainty had emerged in the media regarding the stability of the banks and the Minister acted decisively and underlined the strong capital base and liquidity of the Irish banking system which is quite distinct from the US system in terms of the retail banks here. Most important of all, budget day has been brought forward to 14 October.
The next three weeks provide the Opposition with a glorious opportunity to present a full budget as an alternative to the Government's. It should flesh out the details and show us its proposed expenditure, the areas it would cut and the areas it would prioritise. The budget next month will undoubtedly prove to be one of the most difficult that any Government has had to introduce in recent years. Difficult decisions will need to be made and we cannot be all things to all people. Public expenditure will need to be seriously restrained. While we have a low debt to GDP ratio that allows us to borrow for capital purposes, it is an unsustainable position for any Government to borrow to cover current expenditure. I am sure the Minister will ensure we do not pursue such a course of action. I am sure there will be a number of initiatives to stimulate the economy.
Agencies that are not performing or whose functions are unclear or overlap with others should be sacrificed. It is my view that much of the work performed by agencies should be brought back into Departments under direct ministerial control. The primacy of Government and the elected Member should be restored in our democracy, and this is the time to do it. The public now have an appetite for reform. They know that unpalatable decisions will be taken and sacrifices will need to be made, and I believe they will support the Government in the steps that will need to be taken.
We need to place even more emphasis on entrepreneurs and start-up businesses, with the formation of a specific business start-up incentive package. The types of incentives could include an exemption from local authority rates for a two-year period, a discount on electricity and energy supply for a defined period, and greater assistance in achieving compliance with revenue and regulatory requirements.
It is important that the State would treat people who have lost their jobs in recent weeks compassionately and that every arm of the State would make every possible effort to support them in their hour of need. I have full confidence that the Minister, Deputy Brian Lenihan, has the ability and the courage to introduce the measures required in the next budget. On this side of the House, he will have our full support.
Last night the Minister for Finance told us he welcomed a debate on the economy and asked us not to engage in dishonesty or misrepresentation. I agree with those sentiments and it is in that spirit that I will make my contribution today. The economic crisis Ireland is facing has two features, first, the recession; and, second, the precipitous deterioration in our public finances. I will deal with the recession first. This year we will have the first year of negative growth after 23 years of growth, some of which have had major growth and others had small amounts of growth. For the first time in 23 years we are in recession; the economy is shrinking and will do so again next year. We have also seen the precipitous deterioration in the public finances with the worst turnaround in the history of the State going from a budget surplus to a massive deficit and a very likely public sector borrowing requirement of €10 billion this year.
Regarding the recession the Government's narrative seems to be simple — it is all down to international factors as we have heard again today. They say that commodity prices are increasing, the credit crunch is affecting borrowing and the financial markets are in turmoil. From the way they speak one would believe the banks collapsed last year rather than last week. While international factors are at play, Ireland is not the only country affected by international factors. The fair and reasonable question to ask is why Ireland is faring much worse in this scenario. Why is Ireland the only eurozone country that will breach the 3% borrowing limit this year? Why is it, according to the intelligence unit of The Economist, that out of the 56 largest economies in the world Ireland is one of only two that will be in recession this year? Why is Ireland the only economy that will be in recession next year? Why do the USA, Japan, United Kingdom, Germany and France still have moderate growth this year? Why did China and India still grow at 10%, Russia at 7%, Africa at 6%, and South America at 7%? Why will the world economy still grow by 4% this year? Why are the international factors affecting Ireland so differently? Why is unemployment increasing in Ireland when, according to Eurostat last month, it is decreasing in the EU? Why has Ireland overtaken the US, United Kingdom, Japan, Britain, Austria, Netherlands, Denmark, Norway, Czech Republic, Sweden, Malaysia, Singapore, New Zealand and Israel in terms of unemployment? Why will Ireland overtake the EU average in unemployment in the coming year? The question that has to be asked is simple. Why is Ireland, a country that boasted about outperforming the international economy for the past ten years, the dunce in the class and the economy that is faring worst? The answer is simple, it is domestic factors. In his contribution, Deputy Michael Ahern told us that Deputies should have regard to the facts when quoting figures, and I agree. Let us examine the facts.
Last year the economy grew by 6%, this year it will not grow at all. For every 10,000 houses built, that is 1% of GDP. Some 85,000 houses were built last year and 45,000 were built this year. Therefore, four out of the six points we have lost in growth are due to the housing bubble that was not created by Merrill Lynch or Lehman Brothers but by Fianna Fáil. It was done by allowing 100% mortgages, 40 year mortgages and tinkering with stamp duty.
In his contribution, the Minister for Finance, Deputy Brian Lenihan, told the House that Fine Gael destabilised the market through half-baked ill-conceived proposals to reform stamp duty. We did not destabilise the market. The Government destabilised the market. Mr. Michael McDowell said we did not need stamp duty. The Taoiseach, Deputy Cowen, said we would not have any reform. Then he introduced reform after the general election and another reform, which was more or less what we proposed, six months later. The Government destabilised the market not Fine Gael. The Government gave tax breaks to developers at a time when it should have been trying to rein in construction, poured cash into an economy which was already overheating and increased mortgage interest relief tax credits, which is essentially a mortgage subsidy. The Government did this and should be honest about it and accept it. It ignored all the warnings from Deputy Richard Bruton, Deputy Joan Burton, the IMF and the Central Bank. If there is blame to be had in this crisis, 20% may be due to international factors and 80% is due to Fianna Fáil. The Government took a Celtic tiger that was based on competitiveness and export driven growth after five years and replaced it, after 2002, with a septic tiger, based on cheap credit and borrowed money. That is the reason we are in this mess. I accept there are international factors at play and that next year the US, United Kingdom and Japan may go into recession. Next year we will feel the bite of those international factors and it will get much worse, thanks to the Government.
The public finances need to be examined. Why have we seen the worst turnaround in the history of the State? Why will the Government borrow €10 billion this year? Deputy Thomas Byrne and some of the other Deputies opposite mentioned that as a proportion of national debt the percentage of GDP has fallen to 23%. That is a good thing and a genuine achievement. The reality is that the Government will borrow €10 billion this year, probably €10 billion next year, perhaps €7 billion the year after and €6 billion the year after. That is if we are lucky.
The Minister for Finance, Deputy Brian Lenihan, will double the national debt. Where has one heard that before? When the Minister is sitting on the Opposition benches in 2011, as Leader of the Opposition, we will remind him that he was the second Minister for Finance in a generation to double the national debt. I will enjoy doing that.
This year the Government will issue bonds and borrow €10 billion. That money will come from China and Arab cashflows. Essentially we will borrow €10 billion this year to pay teachers, nurses and gardaí. What is worse is that we will borrow that Chinese and Arab money to buy back from them their oil and cheap toys for Christmas.
International factors have not caused the deficit. The two reasons for the deficit are that the Government used unsustainable tax revenues from the housing bubble to fund the economy for years and its reckless spending whereby the Taoiseach, Deputy Cowen, increased spending at twice the rate of growth in the economy for five years. Anyone, whether they have studied economics, knows that is not a sustainable economic policy. It is reckless. Let us take the contrast of Spain. Spain is also an open economy, it is globalised and is affected by international factors and it also had a housing bubble but it will not go into recession this year because it has a competent government that prepared for the downturn. Our Government did not prepare for the downturn. It should have built up a surplus but did not, hence the reason for the mess. It should have invested in the future and in infrastructure. It had no plan whatsoever. When things started to go wrong, instead of having a plan, it got angry and blamed other people, for example, David McWilliams, Joe Duffy and whoever it could find. After that it was in denial and said nothing was wrong, that the fundamentals of the economy were sound. It was going on holidays, everything was fine but now it has come back and there is panic.
Some of the contributions last night by speakers opposite deserve a response. The Minister for Finance accused Fine Gael of making political hay from the current economic crisis. That argument would have had more credibility if Fianna Fáil and Members opposite had not used the international boom of the past ten years as political hay and claimed credit for everything good that happened, whether it was of its creation or not. It appears the Ministers and Members opposite speak with two faces. They look back on the past ten years and claim credit for everything good that happened and look at the present and then forward to the next few years and absolve themselves of any responsibility.
Last night the Minister for Finance told the House that loose lips sink ships and that in current economic times loose lips may sink a bank. That may be credible but it came from a Minister who stood at a meeting of international investors and international developers and told them he had the misfortune to be the Minister for Finance. He told them that our economy was coming to a shuddering halt. The arrogance and the hypocrisy is hard to understand. This was the same Minister for Finance who last night suggested Deputy Bruton should rein in some members of Fine Gael. He appealed to Deputy Bruton to rein in the worst excesses of those in the party who in the pursuit of political advantage are undermining confidence in the economy. He was probably referring to somebody like me in that regard. Yet what has he to say about the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, who in July told the House we were facing an economic crisis, the likes of which we have not seen in 20 years? That came from a Minister in the Government.
What about the different messages being sent out on the economy. On "Morning Ireland", the Tánaiste, Deputy Mary Coughlan, said the Government would intervene in the housing market to help out first-time buyers. That afternoon, the Minister for Finance said it would not. Mr. Michael McDowell said we did not need stamp duty. The Taoiseach, Deputy Cowen, said there would be no reform but there was reform. There were also the mixed messages from the Minister of State, Deputy John McGuinness, the Taoiseach and Tánaiste in regard to public sector reform.
I reiterate the calls for honesty and accurate presentations from the Minister for Finance. Let us have truth from the Government. If it is truthful it will get more respect for it in the long run. This is not a downturn, it is a recession and one that will turn into a slump. The medium-term prospects are not good, they are uncertain. The problems that occur in the economy are caused by international and domestic factors. Primarily they are caused by domestic factors and the international factors have yet to kick in.
The fundamentals of the economy are not sound. Unemployment, inflation and competitiveness are all bad. The only thing that is good is the national debt and the Government intends to double it. There is no silver bullet to solve the economic crisis, what is needed is recovery through reform. I draw the attention of Members opposite, Deputy Calleary in particular, who clearly is very ignorant, to the three policy documents on our website, streamlining Government, recovery through reform and our VAT reforms.
I commend the motion to the House.
What is taking place in the House this week is very important. It has illustrated in a very stark way the extent to which the Government is out of touch. It is extraordinary after a recess of three months that we return to the House in the midst of the greatest economic crisis since the 1930s to discover a Government that gives priority on the agenda of this House to two issues. They are a double taxation agreement between the Isle of Man, Macedonia, Vietnam and this State, a matter of no great urgency, and legislation on the constituency boundaries with the intent that Members ignore the economic crisis and engage in political naval gazing. We have an arrogant, self-centred, incompetent Government, bereft of any notion of the impact of what is happening on people outside this House and incapable of understanding democratic accountability. On occasion, it calls for a bipartisan approach. How can one have bipartisanship on economic issues, in circumstances where the Government cannot agree to set aside reasonable time for debate on the economy? The truth is that if there was no Fine Gael motion in Private Members' time on the economy, after a three month recess the economic crisis with which we are confronted would not have been discussed at all. The Government's call for bipartisanship is nothing more than political grandstanding and old style cute hoor Fianna Fáil politics. Its concept of bipartisanship is that the Opposition should endorse without criticism whatever unilateral decisions the Government makes. This is not about the public good or democratic principle, this is a call for loyalty and obedience to the Fianna Fáil Party in government and the Green Party-Progressive Democrats slipstream in its wake. There is a whiff of cordite implicit in the call because it involves a threat, namely: "If you do not support what we say we will accuse you of being responsible for what we have done." This is the Sopranos approach to politics.
There are people outside this House who have not experienced recession during their adult lives while there are others who lived through the recession created by the unprecedented irresponsible level of public expenditure by a Fianna Fáil government in the second half of the 1970s. There are people outside this House today who are hurting as they face unprecedented job losses, while those in jobs lack security. Multinational companies have established here but it is uncertain whether they will go or stay. Hundreds, if not thousands of homeowners are experiencing negative equity. There are more foreclosures than we have known in three decades, with at least one house per week being repossessed through the courts, and it is inevitable that there will be further foreclosures in the coming months.
The scale of claims for unemployment benefit are so high that the Department of Social and Family Affairs which administers the scheme cannot cope with the pressures. A lack of liquidity in markets places at risk viable successful businesses that need to access funds within a reasonable time but cannot do so. A stock market collapse impacts not only on the super rich but on the small investor. It has decimated pension funds and has created a real problem for large firms and some State bodies with defined benefit schemes. These will only have the capacity to pay pensions if the stock markets and the value of pension funds recover. There are such funds today worth 20% less than they were worth this time last year.
On their own all these issues demanded that the Government should order time to debate the economy. Within a few days of this Dáil reconvening we have had, in addition, the social partnership agreement. Serious questions arise about that agreement. Can we afford a 5.5% increase in public sector pay in the final ten months of this 21-month agreement? Can private industry and the retail sector now afford a 3.5% increase in wages? Should wages across the public and private sectors, except for those on low pay, not have been frozen for a period of 12 or 18 months? The social partners might then have reconvened after the fog had lifted and there was a clear perspective of where the economy was heading. Should job security not have been a priority instead of wage increases? All these issues demanded that the Government order time for debate.
My colleague, Deputy Varadkar, eloquently illustrated that the difficulties we confront are not of a global nature alone but are domestically created. The four budgets which the Taoiseach, Deputy Brian Cowen, presented as Minister for Finance and the huge unsustainable increase in current expenditure authorised under his stewardship will in years to come be seen as an ill-advised unmitigated disaster. The disaster is compounded by the bizarre paralysis and indecision that descended on the Government during the four months since Deputy Cowen assumed the office of Taoiseach. Under the stewardship of Deputy Cowen, as Minister for Finance and as Taoiseach, the Government has clung to bad policies the way Mr. Magoo might cling to a lamp post, not to see clearly but to keep himself on his feet as he blindly staggers into an open manhole.
The baton of financial incompetence is now held by the Minister for Finance, Deputy Brian Lenihan. The Taoiseach and the Government fail to recognise and acknowledge that decisions they have taken have dramatically contributed to this State's economic downturn. If they cling to the delusion that global factors are the only reason for our difficulties, we are in even greater trouble. The foolish and ill-advised speech of the Minister for Finance, Deputy Brian Lenihan, last night gives no cause for confidence. It clearly illustrates, however, the Government's unsuitability for office. The Minister said the rapid deterioration in our economy and the speed with which international factors have impacted on us have taken everybody by surprise. The credit crunch has existed for over a year. The crisis arising from sub-prime borrowing in the United States has been whistling through the banking sector for approximately 15 months. The collapse of property markets in the United States, whose property bubble was a mirror image of ours, commenced two years ago. The strengthening of the euro against the dollar started four years ago. The fact that it continued so was inevitable in the context of the insane economic policies of the Bush Administration and the dramatic growth in US budget deficits.
The Government, however, ignored all the signs and ploughed on regardless, with unprecedented levels of spending, a total failure to reform the public sector and massive wastage of public funds, ably and annually illustrated by the Comptroller and Auditor General. It retained a commitment and dedication to pork barrel politics. A particular example of this is the politically inspired, ill thought out decentralisation programme whose principal objective was to move State agencies and Departments from Dublin to ministerial constituencies in the hope of shoring up and increasing ministerial votes.
The biggest scandal of all is the Government's failure to act to deal with the housing bubble. Instead of popping it at an early stage the Government allowed the bubble to attain its full spherical shimmer. This was not negligence but reckless governmental policy and fraudulent political trading. The Government's vested interest in allowing the bubble to grow was evidenced by Ministers accusing anyone who spoke about the property bubble of national treachery. The property bubble was allowed to grow because it increased house prices and the Government had its snout in the trough of stamp duty. This situation facilitated the Government in making easy decisions to spend whatever money came to hand, whenever it suited, without having to display any level of political responsibility.
Last night the Minister for Finance, Deputy Brian Lenihan, spoke of a sharp correction in the housing market and corresponding processes of adjustment. The reality is the Government should have called in the banks four years ago and stopped them providing 100% loans or repayment terms of 40 years. It should have brought spiralling land prices under control because it had a duty in that regard. The Central Bank, as a regulatory authority, also had that duty. The Government and the Central Bank abdicated that responsibility because of the benefits gained from stamp duty expenditure.
Last night the Minister spoke of those who criticise Government policy as undermining confidence in the economy. It is the Government's incompetence, paralysis and ineptitude that are doing this damage. The last refuge of a political scoundrel, bereft of ideas, is to label his critics and political opponents as unpatriotic. Last night the Minister attempted to wrap the green flag around himself and accuse critics of political treachery. The truth is the Government wanted no debate on the economy because it has no economic policy. The party that proclaimed to the electorate that it had a safe pair of economic hands is now, like the emperor of fable, exposed and seen to have no clothing. For the past four months it has played a game of economic roulette, hoping that one last spin of the political wheel would extricate it from its plight and remove this country from the malaise created by Government policy. The tragedy is that each day the Government dithers, hundreds of jobs are lost and the perils which confront us continue to grow.
For the past decade we have been led by a dishonest Government whose only real triumph has been the triumph of perception over substance. The Minister for Justice, Equality and Law Reform, Deputy Ahern, yesterday wailed and moaned about not being able to attend a Council of Ministers meeting in Brussels. However, as Minister for Foreign Affairs, he did not attend the last Council of Ministers meeting before the Lisbon treaty referendum, which he should have attended. In fact, no politician from that Department attended the meeting. Ireland was the only country in the European Union that did not send a politician from the Department of Foreign Affairs. I understand that he has not attended the last two Council of Ministers meetings in Brussels and he may wish to share his reasons for failing to do so with the House, in view of the new found interest he espoused yesterday.
We are used to the term "as safe as the Bank of England" but that term is no longer with us. We may examine our own lives for tangible evidence of the economic slump in Ireland and I found it yesterday when I left home at 6.30 a.m. I would normally arrive in Dublin at around 8.15 a.m. but I was here by 7.40 a.m., some 35 minutes earlier than usual. Why was this the case? It was because there were no trucks on the road and very little traffic. It was not because this Government has come up with a great new public transport system — if anything public transport has deteriorated. It was because economic activity has come to a standstill on this Government's watch. Like the trout in the bucket of milk, it is not a case of "we are where we are", but rather "how did we get here and how will we fix the situation".
If this Government was on Wall Street it would be in liquidation by now — it is bankrupt in everything but name. FF stands for Freddie Mac and Fanny Mae, Fianna Fáil and freefall. This economy has been in freefall for some years thanks to this Fianna Fáil-led Government. For a political generation the Government surfed the construction boom and the global economy, spent money like a drunken sailor and carried out no reforms. The Government watched as our competitiveness tumbled and no thought went into expenditure. The Minister for Finance, Deputy Brian Lenihan, last night spoke of the €30 billion that has been spent on public infrastructure over this period but I guarantee that in the next decade many bestsellers will be based on that €30 billion and I look forward to their publication. The situation is epitomised by the kiosk on the front lawn of Leinster House. The Minister of State at the Department of Finance, Deputy Martin Mansergh, represents the Department responsible for this and I hope he will initiate an investigation into how the glass box kiosk cost over €1 million. It defies logic and it has happened in front of the Minister of State's eyes. I sincerely hope that one of the first things the Minister of State will do is look into how the money was spent.
It is not as though the Government was not warned about all of this:
There is a worrying complacency in Government about our enterprise sector. In the last four years employment in the exposed sector of our economy has been in decline. The rate of job loss has been more than double the rate of the mid 90s. Dramatic acceleration in the growth of public service employment and payroll costs has forced up taxation. Meanwhile the average price of exports since May 2002 has fallen by 15%. It is not enough to live off past successes and ignore the emerging challenges.
Those words were spoken in December 2004 by Deputy Richard Bruton during his budget speech. Where were the members of the Government parties at that point? They were in the Dáil bar and on the plinth, slapping one another on their backs for the great job they were doing on the back of the construction boom and the global economy. However, now the Government claims it is not responsible for the downturn — it takes credit but not flak. The things the Government can do have been outlined in the document "Recovery through Reform" and Deputy Varadkar has outlined how this can be accessed.
The Government must publish the unedited version of the Organisation for Economic Co-operation and Development report on the reform of public transport. It has been quoted to support certain policies but people do not have confidence in it and want to see the unedited version. Indeed, people do not have confidence in this Government. We need a comprehensive analysis of proposals, not a fire brigade approach. I commend this motion to the House.
I have heard, during this debate, the opening statements of many speakers mention that we are in the midst of an international crisis. The global downturn has been cited as the reason for this economy suffering so badly at the moment. It is true that we are in the midst of an international crisis but that crisis did not exist last year or the year before. In 2006 the Exchequer had a €2 billion surplus but by 2007 that had become a €1.6 billion deficit and this demonstrates how much of this downturn or recession is of the Government's making.
People in Ireland are suffering today due to the serious financial situation we are in. It is expected that 200 Tyco workers in Cork will be let go today and yesterday 150 lost their jobs. Pfizer is letting go 180 workers and Harmon Electronics has let go 140 people in recent of months. I do not mean to belittle these statistics because they are important to the individuals affected. This morning ISME stated that small companies throughout the country are letting people go and we know this already. There has been a huge downturn in the construction sector and it has had a serious effect on unemployment. We all know stories relating to this difficult and uncertain situation which affects many people who look to the Government for direction. However, the Government is not giving direction — it packed its bags at the end of July and went on holidays and then decided to hold the budget in the middle of October. We are still waiting for direction from the Government and we still seek leadership on this matter.
Last night Deputies Varadkar and Bruton outlined how Spain got its house in order, despite the fact that before the summer it would have been seen as vulnerable and heading for a recession, like Ireland, due to an over reliance on the property sector. The Prime Minister of Spain called the Government back and asked its members to submit proposals to deal with the difficult economic situation. It is now apparent that Spain is moving out of recession, but Ireland's Taoiseach, Tánaiste and Minister for Finance are still caught, like rabbits in headlights, without a plan and with no direction for the economy.
Fine Gael has put forward many proposals and I suggest that we seriously try to tackle the issue of Ireland's competitiveness. This is a very expensive place to do business and I suspect this is why Tyco made its announcement today. Ireland is expensive in terms of labour costs and energy costs — there is no competition in the energy sector. This is an expensive country in terms of local authority charges, Government charges and the red tape with which companies must deal. These are all excesses that create difficulties for companies that want to do business here. Ireland is an expensive place to operate and its economy must become leaner and fitter. The Government must provide direction and leadership on this issue.
Martin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
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I strongly support the counter-motion put forward by the Government. Our economic difficulties may have specific domestic characteristics, but they do not exist in isolation. As a small, open economy external developments have a major impact and the global rise in commodity prices has contributed to an erosion of consumer spending power. The appreciation in the exchange rate has also contributed to rising competitive pressures for our export sector, particularly in the context of sluggish demand in several of our major trading partners.
I wish to draw Deputy Varadkar's attention to a report in yesterday's Financial Times that says the eurozone is now in recession. Some have tried to give the impression that only Ireland and one or two other countries are in recession but it is far wider than that. This is all taking place against a backdrop of international financial market instability over the past year, particularly the past few weeks. It is essential that the Government participates fully in global discussions and this is especially the case given the uncertainty created by the "No" vote in the Lisbon treaty referendum. That referendum saw a person, exposed in today's Irish Examiner as a neo-conservative warmonger, hijack a sector of Irish public opinion.
On the domestic front, the ongoing adjustment of the house building sector to more sustainable levels of output is having a negative impact on the economy and employment.
Following a decade and a half of solid expansion, these factors are placing considerable strains on the economy and are having a detrimental impact on the public finances and on employment. At least, however, we are starting from a strong position all round. Certainly, even in a worst-case scenario, the national debt will be nowhere near the level of greater than 100% of GNP that it reached 22 years ago.
Martin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
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The Government has taken four actions recently to address some of the difficulties. First, it is bringing forward the budget to mid-October, following some of the economies announced in July.
Martin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
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This action reflects the Government's commitment to provide clear economic leadership and the need to safeguard the gains our country has made by ensuring responsibility and appropriate action in the management of the public finances. The budget will seek to prioritise expenditure in the light of our changed budgetary position. As such, it will give clarity and confidence to investors, taxpayers and citizens and will provide a sound basis for economic recovery when conditions make that possible.
Second, last weekend the deposit guarantee limit in lending institutions was raised to €100,000 to counter speculative pressures about the stability of those institutions and their effect on public confidence. Third, a social partnership agreement has been concluded, although obviously it has yet to be ratified. It has played a crucial role in the past 20 years in our economic performance. If I may reply to Deputy Higgins, there is nothing neo-liberal about social partnership. Were I to define my own economic philosophy, it would be republican-social democratic. The fourth factor has been the introduction of fixed contracts in State infrastructural projects.
Despite the picture being painted, the previous Minister for Finance and current Taoiseach phased out many property incentive schemes. During and before the last election, many other parties were urging on the Government measures that would try to sustain the property boom which clearly was impossible.
I do not have time to refer to the target of public procurement savings of €50 million on which the Government is working to achieve and rationalise.
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Obviously, improving our competitive position is essential to facilitating a rebalancing of our economy and reviving export growth.
I welcome the opportunity to speak in this debate and commend Deputy Bruton on tabling the motion. Throughout the summer, we were told ad nauseam that a Tallaght strategy was needed in respect of the economy. Last night, however, as Deputy Bruton was speaking in the House, four Ministers of State entered the Chamber during his contribution and three of them left. Not a single representative of the Government was prepared to listen to what Deputy Bruton had to say. This is disappointing because I note the Minister of State referred to the issue of protection for depositors. Deputy Bruton proposed that measure on 1 October 2007. It took almost 12 months for the Government to implement it and it did so when we were on the verge of a run on our banks.
It is about time the Government began to take up a leadership role on the economy and dealt with issues that matter to Irish citizens. Irish businesses are going to the wall at present and Irish people are losing their jobs on a daily basis. Young families, who are mortgaged to the hilt, are feeling the brunt at present and the blame lies firmly with the Government. In 2005, the current Taoiseach and then Minister for Finance was advised privately by economic experts that the explosion in property prices was unsustainable. However, he publically encouraged young people to invest their future in housing. Why was that? One must remember that 35% of the house price ended up in the Government's coffers in taxes and charges of one form or another. That constituted €35,000 of every €100,000 that was owed in mortgage repayments, many of which were mortgaged over a 40-year period.
At present, many ordinary people are trying to make ends meet. They must pay the bank to keep a roof over their heads, pay for cars and child care and must devote most of their income to household spending. At present, many of my peers are going to community welfare officers for assistance with their interest payments because they do not wish to lose their homes, many of them having lost their jobs. What is the Government's answer? Its response is that after three months of idling and doing nothing, it would unveil a plan next month, which would be implemented in four months' time. The cost of living in the economy must be tackled. Vulnerable employees must be upskilled. The economy must be revolutionised by giving real power to the Competition Authority. Competitiveness within the economy must be improved. The economy must be reinvented and new opportunities must be created.
Two years ago, the economy was experiencing a shortage of labour and we needed to try to fill those jobs. There now is a shortage of jobs and we need people to come here to create jobs. One way to do so is to tap into our immigrant communities, who have significant skills that are not being used properly within the economy at present. Three steps could address this issue easily. The first is to ensure that language courses are available for people. Second, many of the individuals concerned have third level qualifications. However, because such qualifications are not recognised in Ireland, they cannot use them. We need to tap into those skills and make them available to the economy. Third, we must deal with the issue of business permission. Many immigrants who have come to Ireland have entrepreneurial skills. However, because the law stipulates that they must invest a minimum of €300,000, many of them do not have the opportunity to establish a business in Ireland. A minor change in the law could facilitate and allow them to so do. While there are many challenges, many solutions exist. The difficulty is that the Government is not prepared to listen or to implement such proposals.
I welcome the participation of Members in this debate. I find it incredible that on the resumption of the Dáil after the summer break, there would be no discussion on the economy or the economic circumstances facing Ireland were it not for the tabling by the Fine Gael Party of this Private Members' motion. It is equally incredible that successive Government speakers have followed the classic Fianna Fáil line of blaming someone else without accepting responsibility for one's own actions or, in this case, inaction. Everyone is aware that the implications of global financial turmoil are under discussion. The Fianna Fáil Party in government in Ireland is not responsible for Merrill Lynch, Lehman Brothers, Bear Stearns or the American sub-prime mortgage catastrophe. However, it is responsible for dealing with affairs of the nation that are within its own control.
Over the past ten years in particular, Fianna Fáil did not heed any of the warning signs that were put up by both the Fine Gael Party and by reputable international financial indicators. No measure was taken into account by Fianna Fáil in government of what could happen. When the division in the road came, having grown out of an export-led economy, in which trade in goods and services became the fundamental catalyst for development in Ireland, the Fianna Fáil Government turned to the tent in Galway and built its economy on the back of property as the new wealth creator. The Minister of State, Deputy Mansergh, might smile but that is the truth, unpalatable as he may find it.
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I was in the Galway tent.
His party's Government built its future and that of the nation on the backs of a construction industry and housing boom which clearly could not last. Successive Government speakers ascribed the current woes in the economy to international factors. They have lost sight of what government should be about. It is about having balanced budgets, efficient governance, value for money, job protection and security and keeping inflation down. The Government has failed on these fundamental issues. We now have the worst Administration in 40 years.
One of the reasons it is the worst Administration in 40 years is that it consists of a Cabinet of individuals. There is no coherence, competence or leadership in Cabinet at the moment. That is the reason for absent Minister after absent Minister speaking about increasing the top rate of income tax and bringing in domestic water charges when 43% of the treated water in the country is flowing away through pipes underground. Ministers float personal musings about introducing third-level fees when the Government has screwed an entire young generation for capital gains tax and stamp duty on their houses. It now expects them to pay for their future also.
This Government has turned into a Cabinet of kite flyers and wasters. It is nothing more or less than the worst Administration in 40 years.
The lack of regulation from the Central Bank and the Financial Regulator when banks were throwing out money prolifically left, right and centre has been pointed out time and again. I have been in houses which young people have built for a fortune and furnished to the gills. On top of the mortgage they throw in the BMW and SUV. We even now have cases where credit cards have been exhausted and transferred on to a mortgage, with a subsequent increase in repayments.
The level of personal debt in this country will take years to filter through the system. The lack of comprehension that it could not last was fostered by Fianna Fáil with the idea that the good times would never end and the party would last forever. The Government failed absolutely and fundamentally to do its constitutional and political duty by having a country efficiently run with value for money.
Why does it take a recession for Fianna Fáil to indicate it must do something about the public service? It is five years since we were down in Killarney and I stated that if €1 billion extra was to be paid in benchmarking, we should ensure a return in increased efficiency and better service for the people from that money. That choice was never taken up and the Fine Gael Party was scoffed at for issuing these warnings. We repeatedly offered warnings on social partnership and the dangerous trend emerging of the entire economy being built on the back of the property boom.
In government, Fianna Fáil would not listen and we are now expected to row in with the Government on all issues. This example of a bipartisan approach which the Government sought on cancer services and so many other issues was not evident this week when it would not even have a debate on the economic circumstances in which our people now find themselves.
It does not even practise what it preaches and it breaks its word and contract. The programme for Government is in shreds and cannot be implemented in the way the Government said it would.
Behind the economic statistics, there are human factors. Some 300,000 people will shortly be on the live register. Some 23 other EU countries have falling unemployment rates so why is it that Ireland is going in the opposite direction with a serious increase in unemployment and the numbers on the live register? These are the human factors behind the economic statistics and we will find much social pain and disruption in the period ahead. The Government has allowed the country to be built on the back of a property boom that could not last.
We are now over-retailed to the point that many people have moved into large shopping malls with the inducement of two years of free rent. These people are finding the capacity is not there any more because the retail sector has become over-pressurised. We must get back to the fundamental economic issue — that this is an island country which makes money by exporting goods and services but we have lost our competitiveness in that regard.
Money set aside in the programme for Government for opening up next generation broadband has never materialised. There is €200 million in the programme for Government for IT in the schools, where the future generation of engineers, entrepreneurs, businesspeople, housewives etc. will emerge from, but they are put at a distinct disadvantage by taking even that money away.
How in heaven's name does the Government expect this young generation coming through the primary and secondary system to measure up to its peers when the Government has failed to provide the necessary competitive tools, such as broadband and next-generation communication bandwidth, to our schools?
As has been pointed out in recent programmes, many businesses around the country suffer from an inferior capacity with regard to broadband. We cannot do business internationally if we do not get that right.
I would like to see Fianna Fáil for once take heed of Opposition speakers. In July we pointed out through the party's financial spokesman, Deputy Richard Bruton, a series of roadmaps and points on these which the Government could usefully follow to begin to restore this economy to a competitive level, where we can again face the future with some degree of hope and optimism.
I recall being in this House, as the Ceann Comhairle does, in the mid 1980s. He was not just a mild-mannered young Deputy from Kerry in those days because he and his colleagues had a chance in Opposition when Government difficulties were evident to make their points very vociferously. Fine Gael will not shirk its responsibility of holding the Government to account in this House. The elected Government has a responsibility to govern effectively but it is not doing this. It is a Cabinet of kite flyers and wasters.
We will live up to our responsibility to prosecute the Government and its absent Ministers in this House on the programme it is supposed to implement. If the Government carries through issues in the budget on 14 October that have been put forward by the Fine Gael Party, we will support them in the House. The Government belatedly introduced protection for deposits and small savings in banks and we support that. Although it was a belated decision, where credit is due it will be given. On the other hand, if the Government wants a bipartisan approach to dealing with the country, it could at least take on board some of the fundamental economically and socially sound proposals which have come from the Fine Gael Party.
I welcome this debate. It has taken the Fine Gael Party, on this first week after the summer recess, to have an economic discussion. There was much blather from Ministers about disrupting the business of government. If the Government wants a bipartisan approach, it should implement it. It should have had its own debate over two and a half days on the economy so all Deputies could paint the pictures coming from their offices and clinics every week, with unemployment rising and social pressures on so many people.
The Government has failed in its duty but we will not fail in ours to prosecute the Government and put forward our views on how we think this country can be better.
I have great hope for Ireland and the potential of our young people. Public service reform and Government efficiency will not happen without leadership, which is regrettably absent from this Government.
The Minister for Finance did not see fit to be present for the commencement of the debate on this matter. In light of this and the fact that he is not present today, I propose that the vote be taken other than by electronic means.
The Dail Divided:
For the motion: 79 (Dermot Ahern, Michael Ahern, Noel Ahern, Barry Andrews, Chris Andrews, Seán Ardagh, Bobby Aylward, Joe Behan, Niall Blaney, Áine Brady, Cyprian Brady, Johnny Brady, John Browne, Thomas Byrne, Dara Calleary, Pat Carey, Niall Collins, Margaret Conlon, Seán Connick, Mary Coughlan, Ciarán Cuffe, John Curran, Noel Dempsey, Jimmy Devins, Timmy Dooley, Frank Fahey, Michael Finneran, Michael Fitzpatrick, Seán Fleming, Beverley Flynn, Pat Gallagher, Paul Gogarty, John Gormley, Noel Grealish, Mary Hanafin, Mary Harney, Seán Haughey, Jackie Healy-Rae, Máire Hoctor, Billy Kelleher, Peter Kelly, Brendan Kenneally, Michael Kennedy, Tony Killeen, Séamus Kirk, Michael Kitt, Tom Kitt, Brian Lenihan Jnr, Michael Lowry, Martin Mansergh, Jim McDaid, Tom McEllistrim, Finian McGrath, Mattie McGrath, Michael McGrath, John McGuinness, John Moloney, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Darragh O'Brien, Charlie O'Connor, Willie O'Dea, Rory O'Hanlon, Batt O'Keeffe, Ned O'Keeffe, Mary O'Rourke, Christy O'Sullivan, Seán Power, Dick Roche, Eamon Ryan, Trevor Sargent, Eamon Scanlon, Brendan Smith, Noel Treacy, Mary Wallace, Mary White)
Against the motion: 65 (Bernard Allen, Seán Barrett, Pat Breen, Richard Bruton, Ulick Burke, Joan Burton, Catherine Byrne, Deirdre Clune, Paul Connaughton, Noel Coonan, Joe Costello, Simon Coveney, Seymour Crawford, Michael Creed, Lucinda Creighton, Michael D'Arcy, John Deasy, Jimmy Deenihan, Andrew Doyle, Bernard Durkan, Damien English, Olwyn Enright, Frank Feighan, Charles Flanagan, Terence Flanagan, Eamon Gilmore, Brian Hayes, Tom Hayes, Michael D Higgins, Phil Hogan, Brendan Howlin, Paul Kehoe, Enda Kenny, Kathleen Lynch, Pádraic McCormack, Shane McEntee, Dinny McGinley, Joe McHugh, Liz McManus, Olivia Mitchell, Denis Naughten, Dan Neville, Michael Noonan, Caoimhghín Ó Caoláin, Kieran O'Donnell, Fergus O'Dowd, Jim O'Keeffe, John O'Mahony, Brian O'Shea, Jan O'Sullivan, Willie Penrose, John Perry, Pat Rabbitte, James Reilly, Michael Ring, Alan Shatter, Tom Sheahan, Seán Sherlock, Róisín Shortall, Emmet Stagg, David Stanton, Billy Timmins, Joanna Tuffy, Mary Upton, Leo Varadkar)
Tellers: Tá, Deputies Pat Carey and John Cregan; Níl, Deputies Paul Kehoe and Emmet Stagg.
Amendment declared carried.