Wednesday, 15 October 2008
Financial Resolution No. 15: (General) Resumed
Táimid ag dul trí cheann de na tréimhsí is deacra agus is neamhchinnte i gcuimhne go leor daoine. Dá bhrí sin, tá plean a leagan amach sa bhuiséad chun déileála leis na himeachtaí mífhabhracha atá linn faoi láthair. Tá sé mar aidhm againn ord agus muinín a athbhunú in ár n-airgeadas poiblí chun táirgiúlacht a mhéadú agus cosaint a thabhairt do na daoine is mó a theastaíonn sin uathu. Tá roghanna deacra amach romhainn. Caithfimid a bheith cothrom agus buanseasmhach agus muid ag déanamh sin. Thapaigh an Rialtas deis agus thug muid ceannaireacht ó thaobh na polaitíochta de nuair a shocraíomar ar an bhuiséad a thabhairt chun cinn de bhrí go raibh athrú tagtha ar shaol na heacnamaíochta.
I m'óráid bhuiséid i mí na Nollag seo caite, rinne mé tagairt don neamhchinnteacht a bhí ag baint le cúrsaí eacnamaíochta idirnáisiúnta, chomh maith leis an gcúlú a bhí ag tárlu inár dtionscal tógála. Ní léir d'éinne ag an am cé chomh tapa is a thiocfadh an meath domhanda agus baile atá linn anois. Tá córas airgeadais an domhain ina chíorthuathail le cúpla blian anuas. Ós rud é gur geilleagar beag oscailte atá againn sa tír seo, bíonn tionchar níos mó ag droch-chursaí eacnamaíochta domhanda orainn. Tá an cúlú san earnáil tógála níos measa mar gheall ar an ngéarchéim i gcursaí creidmheasa. Tá lagmhisneach ar dhaoine de bharr sin. Ní raibh súil ag aon daoine, fiú na tráchtairí is éadóchasaí, cé chomh tapa agus chomh tromchúiseach is a bheadh an cúlú seo. Mar sin féin, caithfimid smaoineamh go bhfuil Éire ag leanúint ar aghaidh ag mealladh infheistíochta le linn an chúlú domhanda seo. Tá an Rialtas ag cinntiú go leanfar ag cur lena clú mar gheilleagar atá fábhrach do fhiontraíocht agus mar áit tharraingteach d'infheistíocht dhíreach. Is é an rud is tábhachtaí anois ná ár n-airgeadas poiblí a dhaingniú. Níor theip ar an Rialtas seo riamh cinneadh deacair a dhéanamh ar son na tíre, caiteachas a laghdú agus geilleagar na hÉireann a chosaint.
The objectives of budget 2009 are clear. They are to steer Ireland through the global recession brought about by the international crisis on a scale last seen in the 1930s.
It is about protecting to the greatest extent possible the progress that Ireland has made over the past decade. It is about ensuring that Ireland has a solid basis for economic recovery when world economic conditions improve. Every Deputy in the House, stepping outside the confines of adversarial party politics, recognises that we are in extraordinary economic circumstances. The global economic and financial climate means we face stark choices. If we do not make the right choices there will be catastrophic consequences for the future prospects of the economy and we will threaten the livelihood of current and future generations of people.
The turmoil in international financial markets provides the backdrop against which this budget has been framed. No one yet knows the full extent of these adverse developments or how quickly stability can be restored. It is not credible to suggest that any government could ensure the winds of global recession which are battering at the door of every other nation would by-pass this country. We must deal with realities as they are, not as we might like them to be. Ireland is an open economy and we depend on exports as a major driver of our economic success. In good times we benefited more than proportionally from the benign world conditions. In these difficult times we are being severely impacted by these stormy international conditions. The first requirement, therefore, is to seek to stabilise the current situation and chart a pathway back to economic recovery in the coming years.
Unprecedented times call for unprecedented measures. The first such measure was to bring the budget forward from the usual December date to yesterday. Fiscal stability has been central to Ireland's economic success of recent years. It has been the firm foundation for building an enterprising economy which rewards hard work but also has a strong social provision. The second major decision was to take decisive action to secure our banking system. We need a strong banking system to support our economy and to support hard-pressed families and businesses.
Up to this year, the economy was growing year on year and hundreds of thousands of jobs were created, which brought in increased tax. We used that money to reform our income tax system and reduce tax on workers and businesses and invested heavily to address the underinvestment of the past by providing better public services in health, education, social welfare and other areas, and investing in capital infrastructure to build up the country and meet the demands of a growing country. While doing all this, we put more than €20 billion into the National Pensions Reserve Fund to help provide for the future and we halved the national debt in a decade. That decade is now over and those improvements are there for all to see. We made sure that more working families retained a greater part of their income than was ever the case before.
This year, the rapid slowdown in the global economy and the downturn in the housing market have dramatically reduced the revenue available to run public services. The 2009 budget is the most crucial budget in modern times. Our tax revenues this year were significantly less than budgeted for because of the sharp slowdown in economic activity. In 2007, we achieved 6% growth and this year growth has contracted by approximately 1.5%. To deal with this sharp deterioration in public finances as a result of that reduced activity, we have chosen a direction based not on soft options, quick fixes or political expediency. Sound and stable public finances are a prerequisite to the delivery of long-term economic and social improvements.
The approach has to be sufficient to restore stability, yet measured such that it does not accelerate the economic slowdown. The budget arithmetic achieves this balance through a combination of targeted reductions in spending and measured approaches to increasing revenue. It addresses the budgetary challenge in 2009 and, importantly, paves the way for healthier and more sustainable fiscal outturns in the years ahead.
We are raising tax revenue by close on €2 billion in net terms to keep within our financial targets and we are cutting expenditure. Significantly, we will have to continue to work to reduce the current budget deficit which will stand at more than €4.7 billion even after the budget changes.
On the capital side we are still investing heavily in Ireland's future. The priorities of the national development plan have been maintained. The pace of improvement, evident in recent years, will continue. Taking direct Exchequer funding of €8.2 billion and a public private partnership contribution of somewhat less than €1 billion, total capital investment next year will be €9.2 billion or 5.4% of gross national product. This is in keeping with our commitment in the national development plan to keep capital spending during these years at between 5% and 6% of gross national product. In the past, all our capital spending came out of cash surpluses. Now we have to borrow, but that is totally defensible because of the economic rate of return we receive from the investment we envisage in the next year on capital. This is prioritising the spend on areas where there is an economic return in the short term on transport and environmental infrastructure and in the longer term in respect of education and research and development investment. This significant investment in transport, research and development, environmental services and communications will enhance the competitiveness of our economy and drive future economic progress.
Given the very rapid increase in expenditure on services in the past ten years, it is not unreasonable that we should reduce the pace of growth in the short term, when this is clearly in our long-term interest. In this period of global economic crisis, it is easy to lose sight of what Ireland has achieved. We must consolidate that now and build for the future by continuing to invest so that we can increase productivity and be more competitive.
When times were good, we invested wisely in schools, roads, public transport——
——communications and housing, giving us one of the highest rates of public investment in Europe. We dramatically increased the State pension for our elderly and child benefit for our working families. We increased the number of gardaí, teachers, doctors, nurses and people helping our special children in education and health.
The average industrial wage has also risen substantially. There are now more than 2 million people working in the country despite rises in unemployment during the past year, and, unfortunately, further rises in unemployment are predicted next year. Our completion rates for second and third level education are among the highest in the European Union. It is a key priority to protect this solid base of achievement to the greatest extent we possibly can in these circumstances.
We are determined to keep our focus on making sure that we come out of these difficult times as quickly and strongly as we can.
If there is one thing we should all learn from the past, it is that the worst policy of all and the one which causes the most damage to people is to pretend that tough action can be taken without people feeling the impact.
The only way to provide quality public services and to maximise support for the less well off is to get us back to strong public finances as quickly as feasible and take the actions required to achieve that objective. With revenues down €6.5 billion this year, it would simply not be responsible if we did not adapt the level of public services being provided. Policy changes had to be considered and had to take account of the fact that the Government will have less revenue next year than was anticipated before the international downturn hit us.
We must take a balanced approach, significantly reducing the rate of expenditure on current day-to-day spending from 10% this year to 3.8% next year, by deferring discretionary capital spending, including holding off on further land acquisition and building on the decentralisation programme until the 6,000 public servants who are ready to relocate are in place in the next couple of years. We also had to consider and make decisions on raising taxes by €2 billion in net terms to end up with a general government deficit which is still high at 6.5% of gross domestic product.
The Fine Gael finance spokesman said last night that Fine Gael would not raise taxes but would bring in a budget with a 5.5% deficit. That can only mean it is in favour of further expenditure cuts totalling more than €4 billion because to reduce the deficit from 6.5% to 5.5% would cost more than €2 billion and Deputy Bruton disagrees with our tax raising measures which cost another €2 billion.
——and would involve making political decisions at this time which would simply be untenable. I agree we must move to eliminate the current budget deficit to finally establish a long-term sustainable path, whereby day-to-day expenditure corresponds to tax receipts. As tax revenues are 10% less than expected for this year, with little improvement in that position assumed for next year, that can only be done progressively over time.
I wish to comment further on the matter raised by Deputy Gilmore during Leaders' Questions. I am conscious of the sacrifices people will make as a result of yesterday's budget. If we begin a process of correction now and stick with it in the years ahead, we will provide the best means of protecting our prosperity and supporting the vulnerable in the years to come. We have done our utmost to adhere to the principle of fairness in making our budgetary decisions. When money is less plentiful, we must divert it to those who are most in need. The contributions people make to the cost of public services must be structured in line with their ability to pay.
We have increased the income tax band to ensure that workers on modest incomes do not pay tax at the higher rate as a result of standard pay increases. We have structured the necessary income levy to ensure that those on higher incomes will pay more. We have capped the tax benefits of pension contributions at a significantly reduced level of earnings. In that way, we will ensure we do not provide subsidies to those who are not in need. People on modest incomes are sheltered from the necessary increases in charges. The criticisms of the income levy from Opposition Deputies ring hollow when one considers that when they were in office——
Conor Lenihan (Minister of State, Department of Community, Rural and Gaeltacht Affairs; Minister of State, Department of Justice, Equality and Law Reform; Minister of State, Department of Education and Science; Dublin South West, Fianna Fail)
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Deputy Durkan is the old guy up in the corner.
The Opposition parties imposed a 26% charge when they were in government, whereas we are asking for a 1% levy at these difficult times. The system we propose will ensure that those on high incomes will pay the levy on their gross income and cannot shelter that income from the levy. That is progressive — as one earns more, one pays more. If we were to increase tax rates, for example, by adding 1% to the standard band and 2% to the higher band, we would not accrue the volume of money required, or achieve the outcome the levy will achieve.
We are providing a package of over €515 million to protect pensioners and other social welfare recipients from the effects of inflation. There is a widespread acceptance that expenditure on child benefit does not achieve an appropriate degree of balance. Therefore, it is right to signal the phasing out of child benefit in respect of 18 year olds in full-time education. Young people from families that depend on social welfare are specifically taken into account in the compensatory measures announced by the Minister, however. Similarly, the changes announced in respect of the medical card for people over the age of 70 are not unreasonable. The entire older population, with the exception of 5% of them who have the highest incomes, will continue to have access to a medical card, a doctor-only card or a grant towards GP expenses. Of every 100 older people, 94 will get a medical card, a doctor's card or the €400 grant. The rest of them will not qualify because they have a pension of more than €650 per week. The contributory State pension is €230.30 per week and the non-contributory pension is €219 per week.
The Government will enable progress to be continued in developing all levels of the education system in an appropriate manner. It will increase capitation grants, expenditure on research and development capacity at third level and specific supports for children at school with disabilities. The budget also delivers on our commitment to use fiscal mechanisms to encourage environmental improvement. The credibility and success of the Government's budgetary strategy is increased when the behaviour of people across the economy reflects and reinforces the underlying approach to budgetary choices. The budget is compatible with the social partnership process and the draft agreement. It secures stability in the public finances, defends those who are most vulnerable and distributes the burden of adjustment as fairly as possible. I ask for the support of the social partners in navigating through this difficult time for their members and the rest of the country.
The decisions announced yesterday will have specific implications for the public service. It has been suggested that there has been an unreasonable and excessive explosion in public service numbers, but the facts suggest otherwise. While Ireland compares well to other OECD countries in this regard, present circumstances require that we achieve more for less. We are not interested in merely being in line with OECD averages in terms of staffing levels and performance. We must move from average to best. We must display the highest rates of productivity increase, the strongest indicators of quality outcomes, the smartest application of new technologies and the closest attention to the diverse needs of our citizens. At a time of severe economic and fiscal challenge, the efficiency and effectiveness with which public services are organised and delivered is critically important. The budget reflects the decisions the Government has already taken to focus spending on areas of greatest priority and to reduce sharply activities which are not essential in the present circumstances. We intend to reduce significantly expenditure on consultancies and to curtail severely expenditure on advertising and other support activities. Measures to transform the management of procurement across the public service are also in train and will yield significant savings.
There is clear and overwhelming evidence that our public servants deeply resent the fact that under-performance is tolerated and protected. They are frustrated, as others are, when their practical experience of service delivery is not reflected in the development of policy. There is great talent and an impatience for reform in many quarters of the public service. We need to liberate that talent and fast-track the process of reform. Pressure of resources can contribute to the creative solution to these challenges. The budget provides for a 4% reduction in the public service payroll, relative to 2008. This challenging target will be built on with targets for further efficiency gains over subsequent years. Our public servants are relatively well paid. In return, they must accept the need for openness to change and innovation on a par with the most competitive aspects of the private sector. They must show flexibility and be willing to meet the rigours of performance management and external accountability. In their deployment and activity, they must focus on the service of the citizen, which is what matters the most.
The modernisation of the public service and the drive for greater efficiency and effectiveness were the Government's central requirements during the recent negotiations on a new public service pay agreement. The full and comprehensive delivery of that agenda is central to the policies and priorities of this Administration. The public service and its trade unions recognise that the public deserves and demands nothing less than a full and transparent renewal of the public service, at all levels and in all sectors. In the weeks to come, the Minister for Finance and I will announce specific measures arising from the work of the task force on public sector reform. There will be a rigorous appraisal of staffing levels, underpinned by external expertise, so that public service managers are supported in their efforts to ensure that available resources are appropriately aligned with priority needs. This can be achieved in partnership by applying the terms of the draft agreement that was negotiated recently. In any event, such changes are essential and will be pursued vigorously by the Government. The decision by the members of the Government and the Secretaries General of the various Departments to waive voluntarily 10% of their income was a symbolic move rather than a gimmick.
Symbolic gestures are important in a community of citizens. We build our civic culture through actions which underline our intentions and our meaning. In this instance, our intention was to show our appreciation of the difficult times many of our citizens will experience in the period ahead. The gesture is an acknowledgement that, in a small society, we depend on each other. Each of us depends on the efforts and supports of others. I refer to people in the public and private sectors; workers and employers; and people who have recently arrived in this country and those who are rooted in a strong local Irish identity. The impact of change and challenge in the months to come will depend on how well we can reflect the common good in our actions and decisions. One thing that is certain, as we face the most serious global economic circumstances for almost a century, is that these times will pass.
This Government will show leadership by managing the economy through this international downturn and on to a path to economic recovery. A time of serious adversity can be a time of great opportunity. In the cycle of any economy, there is a time for renewal and change. The basis for this economic renewal will be the achievements of the past ten years. Yet during difficult times it is tempting to batten down the hatches and wait until the storm is over before figuring out where to go next. However, we must not and we will not have our attention diverted from putting in place the necessary building blocks so that Ireland can take advantage of the inevitable upswing in the global economy.
In the current challenging circumstances, the Government is acutely aware of the key role of business in driving economic growth and providing secure, quality employment. Ireland has enjoyed extraordinary economic success, in part as a result of providing a highly favourable business environment. The latest World Doing Business report ranks us seventh out of 182 countries as a place to do business, the fifth easiest place to establish a business and the third cheapest location for business start-up regulation.
Nevertheless, the Government is absolutely committed to measures to build on this success.
One of the important messages of this budget is that Ireland is very much open for business. Despite the severe financial and economic difficulties emerging across the global economy, there is still a strong enterprise sector which is world-class in its capacity and performance. It is underpinned by the rapidly-evolving scientific, technological and innovation base that is at the heart of our enterprise policy. With access to a highly-skilled and flexible labour force, this enterprise economy is well placed for further growth and development. For that reason, it is essential that we maintain an attractive environment for overseas investment, especially in the more innovative and higher value-added sectors of the global economy.
With that in mind, I will be travelling to China next week as part of our overall efforts to sustain and develop new market opportunities for Ireland and Irish companies. China is increasingly becoming one of the most significant markets globally, and appears to be better positioned than many to see out the current economic difficulties. I will have a bilateral meeting with Chinese Prime Minister Wen Jiabao and I expect to discuss the continued development of bilateral relations between our two countries. I will lead a trade development mission of over 100 Irish companies, all of whom are expanding their trading opportunities in China. We will also be exploring opportunities for greater Chinese investment in Ireland.
Of equal importance to foreign direct investment is the stimulation of business start-ups and the expansion of indigenous enterprise. A particular priority is development which captures the full economic benefit of the knowledge and innovation created with the support of public investment in education and research and development.
In looking to the future, we can take confidence from the past. The basis of Ireland's past economic growth is also that which will fuel our future recovery, namely, the talent of our own people. Our people will always be the most critical ingredient in our performance. We have one of the youngest and best educated workforces in Europe. It is their ingenuity and creativity which will drive the next phase of Ireland's economic development. That is the Irish advantage, and we must never lose it. Building the stock of knowledge and know-how is critical. The budget's increased support for investment in research and development through the corporate tax system, as well as the incentives for companies in their early years to retain profits to invest in development, are strategically important. Combined with our commitment to the continuing rapid development of a competitive infrastructure, it is clear that the Government remains strongly pro-enterprise and that this is a pro-enterprise budget.
We will continue to consider measures to encourage further research and development, as well as innovation and commercialisation by private enterprise. This will enable Ireland to move up the value chain so that we assert ourselves not only as an open enterprise economy, but also an open entrepreneurial economy. This is a crucial basis for our future economic and social development. A great lesson from the last century of Irish history is that self-sufficiency and protectionism are outmoded economic ideologies. This country, as a small island, must face outwards. For our people to prosper, we need international markets, foreign investment and strong trading links.
It would be wrong of me, in the context of the current difficult economic times, not to mention my strongly held view that our prospects are absolutely interwoven with our membership of and participation in the European Union. Our membership of the euro has facilitated a diversification of trade, a reduction in the costs of business transactions, and a stable interest rate and currency environment. The European Central Bank is playing a vital role in supporting banks through measures such as the provision of credit and the recent interest rate reduction. On Sunday, the euro zone countries agreed on a comprehensive suite of measures to enable each of them to take action in a co-ordinated manner, but tailored to suit their specific circumstances.
I firmly believe that Ireland must remain at the heart of Europe. We advance our interests not by going solo, but by working with like-minded others on problems, challenges and opportunities that can only be dealt with effectively by working across national borders. Pooling our sovereignty with others is not the same as giving it away, but in any relationship of mutual interdependence, there must be give and take. We should not place ourselves in a position where our European partners view us as obstructing the progress they might wish to see for themselves, without properly assessing the consequences for us. Unfortunately, the result of our referendum on the Lisbon treaty has the potential to do just that. I will resolutely lead our efforts to address the concerns expressed during the referendum not just for Europe, but for Ireland within Europe. I am convinced that our economic and social well-being will be better served by such a resolution, especially in the troubled times in which we find ourselves.
We must learn from our past experiences during difficult economic times. The business of government is about making choices. I have great confidence in the wisdom of the Irish people to take the long-term view and understand why we have made the difficult choices that we have made. The alternatives were more unpalatable. The future prosperity of our people is the Government's primary concern. Ireland has a good economic future beyond the current difficulties. Our actions this week and in the coming weeks and months will provide the basis for Ireland's economic recovery from this recession. The Irish people have faced considerable adversity in the past and yet our creativity, ingenuity, patriotism and sense of purpose have delivered great success, and will deliver it again.
I wish to state clearly that the Government has chosen its course. No matter how difficult the decisions, we will not waiver from acting in the long-term interests of current and future generations. I believe that the budget presented by the Minister for Finance provides a clear policy direction, a set of specific measures, and a framework of principles to guide us in the period ahead. I ask the Irish people to stay the course, and with hard work and determination, we will get through these difficult times and onto a path towards economic recovery and renewal.
Yes, I wish to share time with Deputy Hayes. I recall the first time I had to go abroad as a Minister of State representing the country. I found it strange to have all this paraphernalia surrounding Ministers, where they had people carrying bags and doing all sorts of things as if some super personalities had arrived on the scene.
After ten years of that, the crowd over there have become so stale, so immune, so comfortable to the trappings of office that they have lost all reality with what they have done in this budget.
The Minister for Justice, Equality and Law and Reform is the only Minister that I know of who gave a clean bill of health to a public representative who was deemed guilty of taking corrupt payments. He is the last person to make a comment in this House on such issues.
Nobody has answered the fundamental question here. Two years ago, this country was €6 billion in surplus. It is now €15 billion in debt. I accept that there have been improvements in infrastructure and so on, but the people on that side of the House did not take into account the warning signs that were there for many years of what could happen if provision was not made for a crash that might follow a period of boom.
It is fair to say that the workers of Ireland built the Celtic tiger. It was built through exports, trade and manufacturing, but it got diverted down the road of property-based wealth, driven by Fianna Fáil in particular.
Yesterday's budget has come against the background of a move from a €6 billion surplus to a €15 billion deficit in the space of two years. That is unprecedented anywhere in Europe. It was done because the Government allowed the competitiveness of the country to slip seriously over the last few years. We lost export share as we put all our hopes in the creation of wealth through the property bubble and ended up with the most exposed financial sector in Europe. The Taoiseach came into the House yesterday and had the Minister for Finance read out a Budget Statement that makes every person in the country pay for the Government's mistakes and pay for its waste. There is nowhere anybody can turn now but they face down the barrel of some tax or other. The Taoiseach funked it yesterday when he had an opportunity to lay out his plans based on the OECD report or based on what he intended to do for public sector reform. This budget did not mention the detail of how that will be applied.
Yesterday's budget was disgraceful in what it contained and it was deplorable in what it did not contain. The response it elicited was quite fascinating. Never before have I seen such a universal rejection of a budget. One by one the statements came out. Groups such as IBEC, ISME, ICTU, SIPTU, Aer Lingus, Ryanair, ASH, hospital personnel, the Irish Hotels Federation, Focus Ireland, Barnardos, all criticised this budget. Companies, trade unions and interest groups who have never before agreed, found themselves unified in universal and total rejection of the budget. I could not believe that not one single agency, organisation, company or union had anything positive to say. Then late in the evening, just one positive and enthusiastic response appeared. One single, solitary organisation welcomed the budget and that was the Construction Industry Federation.
It is good to see that the Government is at least consistent. In good times and bad it keeps things constant; it may disappoint the nation, but it never disappoints the construction industry.
I also put forward the view that there should not be any cut in the capital programme and workers, tradespeople and craftsmen could be transferred from the collapsed residential housing sector into other areas of the construction industry such as schools, roads and other infrastructure projects. The problem is that the major party in Government, Fianna Fáil, has been in office for more than ten years. It has claimed credit on every occasion that the sun shone. However, the Government fell asleep in that comfort zone and became immune to the realities of what is happening on the street. It ignored the warning signs that were put up in flares for long enough on a range of issues. The Government has been too lazy, too stale, too arrogant, too out of touch with the pressured lives of the mortgaged poor.
Yesterday, the Minister for Finance, having already likened himself to the American President who dragged his nation out of a depression, went even further in his presumption, in his out of touch impertinence; he called for patriotism when the Government expects every person to pay for its wanton waste and its playing free and easy and reckless with the economy and the taxes of the people. Instead of spending the next few days spinning this disaster to the media, the Taoiseach should try meeting some of the people who are now impoverished, whose standard of living will drop, who are being punished. He should try telling these exhausted men and women about the patriotic action they are taking today in paying for the Government's outrageous and reckless mistakes.
I can promise the Taoiseach if he does this, he will get a short, two-word answer from them. It is very easy for a Government that stopped listening to reality a long time ago to talk about patriotism. However, if it matches its high-flown words to the real world outside this House it will quickly find that brand of patriotism rejected with heavy losses. The people know how badly they have been served. They know the Taoiseach and the Government he struggles to lead have achieved the unbelievable; they have produced disaster out of success. They have turned a surplus of €6 billion into a €15 billion deficit. For the first time in the history of the State they have reversed progress and condemned hard working people and families to a lower living standard than their parents and in some cases, their grandparents enjoyed. The Government has reversed the standard of living and the quality of life for hundreds of thousands of families. That is some achievement by the Taoiseach and the Minister for Finance in a short time. They have switched this country from a position of surplus to massive deficit.
The Taoiseach shmoozed his way through the last four budgets, dispensing gifts of government expenditure to all and sundry, without any regard to the consequences. Everything was sound. Anybody who mentioned any difficulties with this economy was guilty of national sabotage and talking down our country. Last May, when the Taoiseach was still claiming that the fundamentals of the economy were sound, what planet was this Government living on? The Taoiseach was asked at the time to explain his economic rescue plan. He knew we were facing financial difficulties of the most serious type. There was no response from the Taoiseach. Yesterday's budget did not reveal any plan. It is a series of tax levies and tax takes on every taxpayer and worker. Yesterday's budget fixed no fundamental problems and it ensured no future. It is without hope, without aspiration or without inspiration and it does not offer any enthusiasm to anybody with any initiative. It is a pick-and-mix punishment to a hardworking nation. One of the headlines in a newspaper today states: "All pain but no gain". It is a desperate budget introduced by a desperate Government. This is panic, not policy; it is denial, not direction.
The Government has tried to hide its miserable performance behind the international banking crisis. Every time a television is turned on, the excuse is that it is America, Japan, China or Europe. People have become blurred with the trillions and billions and the economic statistics. We all know the difficulties that are so complex for so many countries as a result of the international banking and global situation. We know the Government did not cause this crisis and it is not responsible for the sub-prime sector in the United States which is another word for reckless spending but it is responsible for the reckless spending in this economy. The Taoiseach should not try to tell the House that the international global financial position is responsible for the costs associated with doing business here, for the fact the Government has never opened up competition, from Dublin Bus to the provision of broadband, to the provision of energy, to the regulation in all this area. The Government has allowed a situation to apply where it is now one of the costliest countries in the eurozone in which to do business, despite the references in the Taoiseach's speech to easy setting up costs for companies. The Taoiseach has allowed a situation to come about where it is virtually impossible to do business, between regulation, cost and the beating down of small businesses. Before this time next year, there will be hundreds of retail outlets closed down because they cannot pay the commercial water charges, never mind meet the commercial rates being applied by local authorities. The answer from the Minister for the Environment, Heritage and Local Government has been to change the light bulbs and give people bicycles.
A total of 50,000 people joined the dole queues this year, the first year of the Taoiseach's leadership and 100,000 more will join those dismal queues next year. The social welfare bill will rise by approximately €10,000 a month. Businesses the length and breadth of this country are fighting for survival and as the foreclosure figures this week proved many of them are not succeeding. Couples whose dream was to own their own home are now paying more for a home worth hundreds of thousands less than they paid for it and in many cases they were seduced into buying by a market controlled by profligate lending institutions. What did the Government do for these families and young people?
The Minister slapped a 1% levy on their shrinking incomes. He raised VAT rates and these will apply in every household. He increased the price of petrol so that last night lines of cars were drawn up outside every garage as hard-pressed workers tried to fill the tanks of their cars before that extra cost came in. The Minister raised their motor tax, cut what they could reclaim on their medical expenses and added €10 to every air flight they take. The 16 people who left my town for Australia would have paid that were they here today. The other young people leaving this country on the emigrant aeroplane to seek work in countries where it is available will be taxed for flying out of Ireland. The Minister hiked hospital charges to make it more difficult for people to bring their sick children to accident and emergency departments. He reduced their mortgage relief and the relief on money they are trying to put into their pensions. He slapped €300 extra on secondary school bus tickets and €600 on third level registration fees and reduced child benefit on over 18s by 50%, which is despicable given that the mothers of Ireland in the main have raised their children to that point.
That is what the Minister did yesterday to middle income families. Everywhere they turn there is a tax or levy. They are faced with increased taxation by Fianna Fáil in government. This is a declaration of war on the middle classes. It is also a war on the future. The Minister has driven a stake through the heart of education. The Government went around the country last year holding public meetings where thousands of people turned up. To these meetings it sent Ministers' representatives and letters, pledging to reduce class sizes because it believed in giving parents, teachers and children the best opportunity to provide for the future. The Government has driven a stake through that and its collapse of its commitment to decrease class sizes at a time of pressure like this is contradictory to what has just been said, that the Government wants to build a knowledge future with well qualified, confident young people who are able to stand on their own feet against their peers from around the world. That cannot be done with increasing class sizes and the withdrawal of teachers of English in classes where many students have no English, which Deputy Hanafin was forced to pledge when she was Minister for Education and Science. The Government has made it harder on middle-income and lower-income families and on children in the primary sector, who will struggle even more as they go through secondary school and up to when they must compete internationally.
The claims that the Government wants to build a knowledge economy are not worth the paper they are written on. They are like most other Fianna Fáil promises, broken promises. It was an election winner to say we wanted to become a knowledge economy. The Ministers should go around the country — as many of them do, or are driven around the country — and look at the lack of broadband and communications capacity to do business. They should examine the structure of IT facilities in schools and the reneging on the €252 million in the programme for Government that was to be spent on that. They should look at the divergence of capacity and skill level across the educational spectrum. If the Government bothered to look, it would see that we struggle and yesterday's decision will make it even worse.
Yesterday, my colleague, Deputy Bruton, described the budget as hitting "any family and every family, any business and every business". He is right, just as he was right in recent years when he highlighted the failure to manage soaring Government expenditure, the failure to reform the public sector when the need for reform was clear, the danger of building spending programmes on the back of temporary tax windfalls from an overheating property market and the failure to take hard decisions. Deputy Bruton pointed those out. Yesterday I read his critique of the 2002 budget. It is very similar to the present position, except this situation is even worse. Similar warnings came from the IMF, the OECD, the ESRI and the Central Bank. Anybody could have seen these warning signs. Ten years ago in County Clare a young economist, Mr. David McWilliams, predicted seven years of plenty followed by a period of bust when five principal elements would apply, such as breaking the growth and stability pact, the destruction of the housing sector and the collapse of the banks. The Government and the Taoiseach did nothing about it. The Taoiseach did laps of honour when his predecessor left and he was entitled to some lap of honour on taking up office. He took the ball from European business and his speech here about being at the heart of Europe is very far from Fianna Fáil's effort in that campaign last summer.
The result of yesterday's efforts is that taxpayers are punch drunk. Everywhere they go they will have to pay. The Government is making every person pay for what has happened. This should have been stopped before now. The recent Comptroller and Auditor General's report highlighted the ludicrous extent of waste in the HSE, the Department of Justice, Equality and Law Reform and a range of other Departments, but the Government did nothing about that. Yesterday's response regarding the HSE and the public service is merely that there will be a redundancy programme.
The Government has parked decentralisation. We believe in well managed and planned decentralisation, but the plan to move 10,000 public servants to 53 locations within three years was turned into a shambles. The Government has made a list of places that are in limbo until 2011. It is funny that it should be 2011, a year before a general election. I suppose the Government will throw up that flare again and expect people to believe it, as on this occasion. Last week Deputy Mitchell asked questions on arts, sport and tourism. Two decentralised officials left Killarney at 7 a.m. to get here to assist the Minister to provide answers to Deputy Mitchell's questions. The train to Mallow broke down, then the second train broke down. They were on mobile telephones and because of the lack of capacity they could not be heard in Dublin. It is the tale of the disappeared. They never arrived to provide solace and comfort to the Minister for Arts, Sport and Tourism who was here trying to answer pertinent questions from Deputy Mitchell last week.
That is what happens when one has an unplanned decentralised system. If Departments were decentralised all over the country when the banking crisis erupted, there would have been chaos. A number of years ago we pointed out how decentralisation should have been implemented. Where decentralisation was planned in Donegal, Tullamore and other places around the country it has worked very well. Parking it in limbo until 2011 is obviously a political ploy to reactivate it at some stage.
The simple measure of the Government's performance yesterday is that we are demonstrably in a far worse position than any of our European neighbours. No country has been immune to the banking crisis, but when the international financial tsunami hit they were in a far better position to withstand it. No country has been as apathetic, lazy or smug in its response to this crisis. We saw what happened in Spain. In our recession, into which the Taoiseach has led us, yesterday's budget offered no light at the end of the tunnel. People know they are poorer now. They are worse off in that they will have to pay more. In terms of taking the major decisions, the Government funked this. In the Government's war on the middle classes an ordinary PAYE worker taking home €50,000 loses €1,000 of his or her income directly and then faces a series of extra costs and stealth charges, draining away that income, if he or she is lucky enough to be able to keep his or her job.
As the Taoiseach rightly pointed out, the people have endless courage and an unequalled capacity for work, but this morning they will read that the consequences of this budget will be a serious lowering of their standard of living. Many of them will be tipped into poverty. Nothing corrodes a family like poverty which is brought about by circumstances it cannot control. The new income levies are precisely that. They are crude in design and impact. In the past when we had major problems we levied the banks. Now that the banks have caused us enormous problems the Government has not levied them but slapped a levy on the mortgagedpoor.
I note the Minister for Finance yesterday judiciously leaked the fact the Government intends to reduce wages in the banking sector, as a diversion to what is happening today. The spin machine is in full flight, particularly in the Department of Social and Family Affairs. We were told last July there would be no cutbacks in education, health or social welfare and that the poor and vulnerable would be protected. We know what the spin is but the reality is very different.
Pensioners who are to get an extra euro per day will see the value of that increase go down the tubes when their medical card is means tested. The Government does not seem to appreciate the mentality of elderly people who were awarded a medical card by the State. The Taoiseach has said that some of them will receive a €400 grant towards their medical expenses but the vast majority of such people have respiratory illnesses and will not use the €400 grant because they are afraid to go to the doctor in the first place. They will end up in hospital beds, which would not happen had they gone to their doctor in the first place.
The Government set up a system to award medical cards to all those over 70 and the recipients were comfortable with that. Had the Government said in the beginning that it intended to give medical cards to those over 70, subject to a particularly flexible means test, those who are well off and over 70 would have accepted that. Instead, the Government introduced a universal scheme, which those over 70 accepted and with which they were very comfortable. Many elderly people will not use a GP-visit card or the €400 grant because they are afraid to go to the doctor in the first place. They will get so ill that they will end up in hospital and on trolleys, as the Minister for Health and Children knows only too well. The Government's actions in respect of these medical cards is deplorable and despicable.
This budget is all about taking back from diligent people who carry no responsibility for the disaster that this Government has failed to avert. There are cutbacks in medical care provision and increases in accident and emergency charges. The Taoiseach clarified the position this morning regarding nursing homes, raised by Deputy Michael Noonan yesterday, although we do not yet know the final shape of the fair deal legislation..
This nation faces a cut in direct front line services in education and increases in class sizes. Does anyone remember the promises made by the former Ministers for Education and Science, Deputies Micheál Martin and Noel Dempsey? It is a case of give a thing, take it back.
For families, this budget is a double-edged sword. The pain starts here and now but the real suffering will begin in six months' time. If the Department of Finance has got its figures wrong, in terms of the international projections, then God help Ireland next year. The Government has fleeced us through taxes on petrol, travel, capital gains and so forth, with the prospect of more to come for every citizen next year.
The Department of Finance got all its figures wrong in recent years. It got all the figures wrong for this year and yet it can predict what the international situation will be next year and the year after. Fianna Fáil in Government has suddenly found the crystal ball and the path back to budgetary efficiency, a strong economy and competitiveness. It will achieve these by taxing every person to pay for its wanton mistakes and its fast and reckless use of taxpayers' money.
The Government has distanced itself from its own responsibilities.
The Government set up the National Competitiveness Council and then ignored all of its reports and recommendations. It has mired businesses in red tape and regulation. I urge the Government to talk to shop owners and small business people. They are spending half a day a week filling in forms for the Government and now they will have to do more. The employer of the 16 year old who works for a few hours on a Saturday in a sweet shop or a coffee shop will now have to fill in more forms for the Government to pay the 1% income levy. The same is true for all of those in the minimum wage sector.
The banking sector which in many ways was responsible for so much angst is now in a bizarre relationship with the Government. We do not yet know the extent of the bad debt or rolled up interest in that sector. I hope that when the Government publishes its scheme tomorrow, all of that detail will be made available so that we will know to what we are signing up.
This Government continues to take money out of the economy rather than getting better value for the money it spends. It commits us to massive borrowing each and every day, with more to follow next year, up to €13.5 billion. It is horrifyingly over-optimistic for next year. This budget is disastrous.
The so-called plans that were set out yesterday are not plans. There was no detail or forecast and no clear method for reforming the public sector spelled out. Some of the best people I have met in my life work in the public sector. The Government will make the taxpayer pay for many of them to become redundant because it says they should not have been employed in the first place. The former Minister for Finance, former Deputy Charlie McCreevy, increased current spending and the Government hired 30,000 more public servants, most of them in administration. The Government now tells the taxpayer that it plans to get rid of those staff because they should not have been employed in the first place but it provides no detail as to how this will be achieved. This process will drift and drift, as the Taoiseach knows.
The reality is that for an easy political ride, this Government mortgaged the country to the builders, developers and speculators. It created a new elite, which is now demanding that the taxpayer bails it out. The Minister for Finance has a name for this. It is called patriotism. The new definition of Fianna Fáil patriotism is war on the middle classes and businesses and a failure to protect the vulnerable. This is a disastrous budget, for which the Government will pay the price.
The net effect of yesterday's statement by the Minister for Finance to the House, in terms of the education budget, is that children will pay the price for Fianna Fáil's incompetence over the past five years. The children in primary and post-primary schools must pay the price for the Government's incompetence, waste and wanton disregard for financial stability.
The Taoiseach lectured the House this morning about honesty in this debate. Let us have that honesty from the other side of the House. When the Minister for Finance gave his statement to the House yesterday, he did not refer to cutbacks in education. Yet, within a matter of two hours, the Minister for Education and Science, who appears to have done a runner today and is not about the place at all, produced a list of cutbacks which runs to 32 in total. There are 32 cutbacks in the Education and Science Vote planned for 2009 but the Minister for Finance in the House did not refer to this yesterday. If we are to take patronising lectures about honesty in this debate, let us put all the information out there and stop spinning, as this Government has done for the past 11 years or so. Let us call it as it is — we are asking children to pay the price for the Government's incompetence. That is the reality that faces teachers, parents and students today.
The education budget here has historically been smaller than education budgets in other European countries because the religious orders provided free education for many years, although that has now changed. We spend approximately 4.6% of our GDP on education, which is the second lowest in the European Union. Another problem is that we have a very high number of students in the age cohort for formal, full-time education. We do not spend enough on education and we spread the money so thinly, throughout the sectors, as to make no real difference. The situation will get much more difficult next year throughout all sectors of education. I want to make one proposal to the Minister for Education and Science when he finally manages to get to his seat today and if he does speak in public on this issue. He needs to publish a revised programme for Government in the education area and stop this wish list and phantom list currently in place to which the Government has allegedly signed up.
I also want to hear from the Green Party. When the deal was done last year, Deputy Trevor Sargent was a bit like Neville Chamberlain with "peace in our time" when he promised €350 million extra in services each year for the next five years. He also promised a reduction in class size and I will come to that. The Green Party has a responsibility to come to the plinth and tell us exactly how it has all gone so wrong. Why has it lost the debate within Government when it comes to the education vote? I never thought I would state this, but even at this stage Deputy Mary Hanafin should return — all is forgiven — as the situation has deteriorated rapidly since her demotion to the Department of Social and Family Affairs only a matter of months ago.
With regard to class size, prior to the general election, 20,000 parents were brought to public halls throughout the country. I call on the same organisation which brought those 20,000 parents into the public domain——
——to recall those meetings and remind them of the blatant lies told by the Members opposite during the course of the election campaign. Let us revisit that campaign because we need to expose those who spoofed the Irish people and parents on this issue.
In 2002, the then Minister, Deputy Mary Hanafin, promised that by 2007 no nine year old or younger would be in a class of 20 or more. As I stand here today, 200,000 of those children are in our primary school system and in classes of more than 20. A blatant lie was told in 2002. The Government went further in 2007.
In terms of the untruth then, in 2007 the Members opposite promised the staffing schedule would go from 27:1 to 24:1 in the first three years of this Government. What has happened? From 1 September next year we will have 400 fewer teachers in our schools. Class size is the second worst in the EU and we are behind a range of eastern European country which went through the communist era. It is some achievement for the republican party opposite.
On 1 September next year we will have the worst class sizes in Europe. We have a responsibility to the young people in the system and to their parents to do the best we can. We cannot do this with a class of more than 30 children where the range of issues which apply must be dealt with. We need clarity from the Government.
When Deputy Mary O'Rourke as Minister for Education in the 1980s introduced the famous circular that led to public demonstrations, it was never enforced.
Will the Government reconsider its proposal to slash the number of teachers in schools? Otherwise, it will feel the wrath of parents between now and 1 September. There is historical precedent for doing a U-turn on this. The then Minister, Deputy Mary O'Rourke, did it in the late 1980s and the Government should do it today.
One of the most cynical cutbacks is with regard to English language support. In the run-up to the 2007 election, following pressure from Deputy Enda Kenny, the leader of Fine Gael, the Government stated it would change the rules on the numbers of English language support teachers in schools with a substantial number of non-English speaking pupils. We are returning to pre-2007 levels. Yesterday, in his private briefing to educational correspondents, the Minister stated it will be two per school. Schools with a large number of immigrant children will get two teachers. Where is Deputy Conor Lenihan now?
His budget is now €6 million. There would be more taken over the meat counter in Tesco in Tallaght over six months than he has to spend in 12 months. Where is the Minister of State with responsibility for integration, Deputy Conor Lenihan?
That was the best news I heard all day.
On the issue of higher education, the new registration fees are effectively fees by the back door. This is the most inequitable unfair stealth tax ever imposed on the PAYE sector. I make no apology for my party's support with the Labour Party for abolishing fees in 1996. We did it for one reason. Whatever about arguments on access, and there is evidence to show more could be done there, we did it to help the PAYE sector who were screwed as the self-employed could cook their books to get the best benefit they could from the system and the wealthy could get support through a covenant.
This budget is a vicious assault on working people and middle income families. The people who work hard, play by the rules and pay for everything have been hit very hard to pay for a decade of greed by high rollers and a decade of incompetence and profligacy by Fianna Fáil.
The budget is full of taxes, charges and levies targeted at middle Ireland, while nothing has been done to ask the high rollers to pay their fair share. This is a budget airline budget. The speech was full of high-minded waffle about patriotic action, but when one looks at the small print, one sees the taxes and charges. My colleague, Deputy Róisín Shortall, has begun to count them and has reached 30. The treacherous 30 cuts. This is where the €1 fare suddenly becomes €100. However, those in first class will not be affected.
This budget is not fair, it is mean. It does not protect the less well off, it attacks them. It gives the meanest possible increase in social welfare, cuts entitlements, and takes medical cards from elderly people. People who worked hard all their lives and paid taxes hand over fist have had the rug pulled from under them by Fianna Fáil. It does nothing to create jobs, in fact it will destroy jobs and it makes absolutely clear that the Government has learned nothing from its mistakes, but remains wedded to the same old failed developer-led economy.
Of course, to learn from its mistakes, the Government would have to admit it made any. That it refuses to do. It took it three months to admit there was any economic problem in the first place and now it claims this whole mess is someone else's fault. Given the turmoil in international financial markets, it is easy for the Government to deflect blame elsewhere. However, if it is all to do with international problems, why is Ireland the first eurozone economy to enter into recession? If it is the fault of the international economy, why is the downturn in the Irish public finances greater than in any other country? If this is all the fault of someone else, why are we seeing the fastest ever rise in the live register, long before the international credit crunch?
The truth is that this is a homegrown domestic recession brought on by failed economic management by a Government which coasted in good times and is bewildered in the new economic circumstances. When it came to office, the Government was handed an economy in excellent condition in the middle of an export boom. From 2001, however, the export boom faded to be replaced by an economy driven by a property bubble.
I cannot recall the number of times I and my Labour Party colleagues called on the Government to tackle rising house prices. Again and again we raised it but the Government refused to act. Anyone who dared question the boom was denounced. When people raised legitimate questions about the economy's direction, particularly about the use of tax breaks to feather-bed property developers, they were denounced by the former Minister for Finance and now EU Commissioner, Charlie McCreevy, as left-wing pinkos and they advised the country to party on. Not to be outdone, the former Taoiseach, Deputy Bertie Ahern, around the same time, denounced anyone who questioned his Government's economic strategy as a creeping Jesus. As recently as July 2007, Deputy Bertie Ahern, in an address to the ICTU conference in Bundoran, said he did not know why people who engaged in cribbing and moaning about the economy did not commit suicide.
Fianna Fáil did nothing to limit the growth in house prices. It refused to curtail speculation, to implement the Kenny report, which would have controlled the price of building lands and it remained addicted to property-based tax incentives. That is why we have a recession and why people on low and middle-incomes are being asked to pick up the tab.
There is a bailout for the banks and property speculators. There is none, however, for a young couple who took out one of those 100% mortgages now faced with higher mortgage repayments, job insecurity and being hit with a series of further tax hikes.
The only place a person in those circumstances can go for help and advice when the banks and building societies are descending on them to repay the mortgage is the Money Advice and Budgeting Service, MABS. It is interesting it is one of the State agencies to be emasculated under the guise of rationalisation. MABS will be amalgamated with the Citizens Information Board instead of being allowed to continue providing valuable, professional and independent services to people in money trouble.
It is also remarkable the Combat Poverty Agency will be hauled back into the social inclusion unit in the Department of Social and Family Affairs, the unit which gave this budget a clear bill of health yesterday. This is a case of the watchdog being withdrawn to the kennels. The Government does not want any independent voice examining how it is dealing with the plight of poor people.
When economies get into trouble, there is always a hunger for fiscal austerity. No matter where the recession starts, the first course of action is always to cut public services. The cry goes up, "Let there be pain". Pain for whom? It will not be the stockbrokers or the bankers but the patients on trolleys in Drogheda and every other accident and emergency department. We are told the economy needs tough medicine and people are advised to take it. People on an accident and emergency trolley would happily take their medicine if they could only get seen by a doctor. We are told it is time for tough decisions, but tough for whom? It will be tough for people losing their jobs and having their entitlements cut. They are the people who will have it tough.
Ministers give lectures on the need to be responsible. The cost of their failures will fall on the hard-working women and men, already experts on responsibility because they shoulder it every day. The people who work hard, nurture others, pay for everything and play by the rules are the ones who will carry the responsibility in this budget.
A family on a modest income will easily pay €2,000 more in tax as a result of this budget. A family on €60,000 will pay €734 extra in tax. A family with a child going to college will pay €600 more in fees. The Government seems not to know that the transition year exists and means many children do the leaving certificate at 18 yet child benefit for them has been abolished. If a family has a five year old, child care payment will be cut by €550. A family with medical expenses of any kind — it is not unusual for families to pay €2,000 or more in medical costs for someone who needs special care — will have its tax refund cut in half.
A family that must drive to work will pay €200 to park the car at work or pay €400 to use the park-and-ride facility at the train station. We still have to hear how this new car parking tax will be applied. Will this involve everyone who has a car parking space?
Will this apply to those who have temporary use of facilities and drive to work some days but not on others? Will they have to pay the full amount? This is an example of finding every possible means to inflict additional taxes on working people.
These same families will pay more in so-called voluntary contributions in schools because school funding has been frozen while school expenses have rocketed. They will pay more for petrol to go to work. They will pay more to visit an accident and emergency department if, by some chance, they happen to have an accident or an emergency and cannot pop into the GP on the way. They will pay 0.5% more on VAT on everything else they spend.
As they munch on their breakfast rolls this morning, the people in the commuter belt who voted Fianna Fáil back into office in large numbers have been betrayed. They will carry the can. Perhaps the best expression of the Government's philosophy came, not from any Minister but from its devoted friend and champion, the chairman of Anglo-Irish Bank. Safely protected from the consequences of his failures by the Government guarantee and having pocketed the largest welfare cheque ever written, he was prominent in his call for pain.
In Mr. Fitzpatrick's world, which is also the world of Fianna Fáil, the Progressive Democrats and the Green Party, children and old people come last in the budget. Class sizes are getting larger. Cuts are being implemented for language support teachers, the early school leavers programme, the school books scheme, grants for youth services, while in-service development and school transport charges are being increased. After all the years of prosperity, we still do not have a preschool education programme and the early years subsidy has been cut.
Mr. Fitzpatrick must be one happy banker this morning with what has happened to the old. Pensions will increase by a mere €7 while medical cards have been removed from the over 70s. Rather than confront the vested interests in the medical profession, which made the scheme so expensive, the Government has targeted the over 70s. This move will cause untold distress and anxiety for older people.
As I have repeatedly said, the problem in the public finances has been caused by the recession, not the other way around. What we needed, therefore, was a budget that would stimulate economic activity and get people back to work. Instead, we got the opposite. This is a deflationary budget, which will suck money out of the economy and reduce purchasing power. The knock-on effect will result in job losses.
This is just year one of a three-year strategy to cut the deficit by 5% of GDP. That is a severe fiscal contraction by any standards. Corrective action is necessary, but we are in the middle of an unprecedented banking crisis, which has already led to a major tightening of credit conditions in the economy. At the same time, we are facing a major international recession and downturn in international trade, which will limit exports as a source of demand. For the Government to further curtail demand will cost jobs.
One cannot compare Ireland now to the country it was in the 1980s and say that fiscal contraction is good. In the 1980s, Ireland had its own currency, whereas it is now part of the euro zone. That fact fundamentally changes the equation for budgetary policy. Our Government deficit will not affect interest rates or inflation. Given our low debt-income ratio, the macro-economic risks of Government deficits are limited. That is not to say that we can run large deficits indefinitely. I am not suggesting that, or that difficult decisions are not required, but taking 5% of GDP out of the economy over three years is very risky indeed. What is the objective? To get back to a position, by 2011, where we will once again be funding capital spending out of current income, at the expense of jobs?
This is not the time to destroy jobs, it is the time to create them, but where are the initiatives in this budget to create jobs? What is being done to find alternative employment for people who are losing their jobs? Where is the major programme of re-skilling and retraining that is needed for those 80,000 people who have joined the dole queues in the past year?
The expert group on future skills needs says that at least 500,000 people must improve their qualification levels over the next decade. Why not start now with those who are losing their jobs? Thousands of people are losing their jobs in the house building sector. They could have been put to work building schools, social housing, urban regeneration schemes or house insulation, but what did we get? The Exchequer allocation for school buildings is being cut and the insulation scheme amounts to €20 for each house that needs retro-fitting. Can nobody in the Government effectively champion the need for energy conservation? Instead of a major retraining programme being launched, the back-to-education initiative is being cut.
Two weeks ago, this Fianna Fáil-led Government wrote the biggest welfare cheque in the history of the State. Not a social welfare cheque, but a society welfare cheque. It was worth tens of billions of euro and was made payable to some of the richest people in our country — the bankers. We were told it was necessary because those same bankers lent out untold fortunes to property developers, the friends of Fianna Fáil. They are the people who pay for expensive advertising campaigns which tell voters that only Fianna Fáil can manage the economy.
The Government has been spinning hard that this budget will protect the vulnerable at the expense of the better off, but it will do nothing of the sort. Social welfare incomes have been increased by the bare minimum of 3%, in a year when the price of bread is up 17%, flour by 34%, milk by 25% and bottled gas by 15%. That is why the Society of St. Vincent de Paul called for a €15-per week increase in welfare rates. Instead, however, they got a pathetic €6.50. If somebody on social welfare is also on a rent allowance, €5 of that €6.50 will be clawed back by an increase in the minimum contribution that social welfare recipients on rent allowance are required to make to their rent payment.
Increases in the fuel allowance are paltry and progress on all other social welfare areas has been stalled. The living alone allowance, a particular concern of Age Action, has been left untouched. A set of mean-spirited, unfair, harsh and unwarranted restrictions has been placed on people who have just lost their jobs and have recently signed on. These are the people who had a contract with the Government; they paid their PRSI and never expected to have to collect benefits, but now their entitlement to claim benefit has been severely restricted.
We were told that top earners would pay most, but that is simply not so. In fact, the budget booklet shows that a couple on €120,000 will pay the same, in percentage terms, as a person on €60,000. The low paid are now effectively in the tax net, wiping out the additional increase they were supposed to receive under the social partnership agreement.
The spin from the Government this morning was that Labour had introduced the same type of levy in 1993. We did so, but made sure to exempt people earning less that £170 per week, which is the equivalent of €416 today. Moreover, anyone on a medical card was exempt from the levy.
I will quote from the budget speech of the then Minister for Finance, Deputy Bertie Ahern. He may not have been socialist himself, but at that time he was surrounded by a few socialists.
The then Minister for Finance said:
The new levy will be at a rate of 1%, but with an income exemption in order to protect the lower paid. In the case of the self-employed, the exemption will apply where income for the year is not greater than £9,000. In the case of employees, the levy will not be payable in any week where the income is not greater than £173. In setting the income threshold at this level, rather than at the general tax exemption limits, the potential full-year yield for the levy is diminished by some £20 million. However, in doing so, I have ensured that a further 217,000 taxpayers will not be affected by the levy, over and above the 290,000 who are exempted from income tax.
If that same principle was applied today, it would mean that somebody on an income of approximately €30,000 a year would be exempt from the levy that was introduced here yesterday, which is of course a new form of taxation.
Once again, however, the big tax breaks and tax avoidance measures have been left untouched. Tax relief on mortgage interest for landlords remains at a cost of €572 million. Tax relief for super-private clinics, so favoured by the Minister for Health and Children, remains at a cost of €1 billion. The loophole that allows developers to avoid stamp duty on commercial property is not touched. The great tax–break for the rich in small, self-administered pension schemes remains in place.
We still have the bank bail-out, including, without any explanation, dated subordinated debt. Who holds that debt and why are they covered by the bank bail-out scheme and guarantee when no other European country has covered it? Last weekend, the Paris communiqué explicitly referred only to the coverage and protection of senior debt.
We still do not know what the great bail-out will bring to the Exchequer or what conditionality will apply. On Monday, four of the most senior bankers in the United Kingdom went to Downing street with jobs and left sacked. The only person who was sacked here last Monday was the unfortunate manager of the Galway hurling team.
It is not just Ireland's poor who will suffer. Once again, as a country, we are reneging on our commitment to the world's poor by cutting overseas development aid. When the economy is growing, we are told that ODA cannot keep up. When the economy is not growing, we are told we cannot afford to keep our promise. If that is patriotism, then it is a pretty sad form of it.
Government Ministers are saying that cuts will not affect health, education or social welfare, but that is patently untrue. Hospital budgets are being squeezed, there is a long list of miserable cuts in education and there are severe restrictions in entitlement to social insurance. Making the poor pay is not just unfair, it is also unwise.
If one wants to take a lesson from the history of Irish social partnership, it is this: we have done best as a nation when we combined a strategy for economic growth with a determination to protect the vulnerable and share gains. However imperfect, social partnership was based on that formula. It did not go as far as many of us would have wished, but it was a powerful dynamic nonetheless.
If one looked across Europe after the oil shocks of the 1970s, it was the countries which were able to share the cost of economic downturn fairly that emerged most strongly. This budget has no strategy for growth, and contains no ethic of social solidarity. It contains a series of spending cuts, some stupid and some just simply cruel.
This is a budget from an era that is past. In recent weeks, the failings of neo-liberalism and the Washington consensus have been shown up in glorious technicolour. For years, those who have argued for equality and solidarity in our society have been confronted by a rigid right-wing orthodoxy. The simple and simplistic view of history was that there was no more left and right, there was only right; that regulation should be light, or better avoided altogether; that the market was the only system that could efficiently deliver any economic or social need; that financial markets were the ultimate expression of market efficiency; that greed was good; that a small, and ever shrinking state was the only road map for future prosperity; that European civilisation, with its regulated market and strong social spending was a fossil from another era; and that global capitalism was incompatible with social solidarity and inequality.
It turns out that the conservative, monetarist orthodoxy is spectacularly wrong. Those assumptions have been turned on their head. Deregulation, it turns out, can be a recipe for risky, and sometimes down-right dishonest practices which can put jobs, business and homes at risk. Markets, particularly financial markets, are often irrational, and unregulated financial markets can bring the world to the brink of economic meltdown. Greed, in the form of a hedge fund, can bring down a bank and destroy jobs in the real economy. Government, it turns out, has a role to play after all. If the neo-liberals had their way, there would not have been enough Government left to organise the bailout. The European social model, though requiring reform, provides a basis for stable sustainable growth, coupled with equality.
For years, when the left argued that executive pay was grossly out of control, we were scoffed at. One could not possibly restrict the pay of these masters of the Universe or the world would come crashing down around our ears. Guess what, the world very nearly came crashing down around our ears, and it may not be over yet.
Where now are all those people who told us that inequality was a good thing, that it provided the right incentives in the economy? Inequality is at the heart of the sub-prime crisis that gave rise to the economic difficulties in the first place. When the investment bankers ran out of developing countries to which to lend money, they found a Third World country in the heart of the world's greatest economic power, in the United States. Working-class America had seen its income stagnate since the 1980s of Reagan, and they were the ideal target for sub-prime lending. The international economic crisis had its roots in income inequality.
Political economy is back. Equality is not an optional extra or a drain on growth. It is a basic requirement of a civilised society and of economic progress. The decisions made in this budget matter to real people in the here and now. In the run-up to this budget, there has been a clamour for hair-shirts, so long as someone else wears them. The Government, it is argued, must manage its affairs like a family or a business, and balance its budget. That, too, was the philosophy that informed Government responses to the Great Depression of the 1930s. It was that same conservative view that pushed the world into depression — bail out the bankers, and hammer those who pay their taxes and play by the rules.
On Sunday last, the Minister for Finance quoted President Franklin Delano Roosevelt, when he said that the only thing we have to fear is fear itself. Like all quotations used out of context, it can be used to justify anything but what the author had originally intended. It is worth me finishing by reminding the House of some of the rest of that same speech, FDR's inaugural. It is worth remembering because it shows how the struggle for decency is always with us. President Roosevelt stated:
. . . let me assert my firm belief that the only thing we have to fear, is fear itself — nameless, unreasoning, unjustified terror which paralyses needed efforts to convert retreat into advance.
. . . Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence,
. . . Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected in the hearts and minds of men.
. . . They know only the rules of a generation of self-seekers. They have no vision, and where there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilisation. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Let me repeat:
The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
I repeat that sentence because it underlines the approach the Labour Party in Ireland is taking to our present economic circumstances, just as it underlines the approach being taken by FDR's successor, Senator Obama across the Atlantic.
President Roosevelt further stated:
Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. . . .
There was no New Deal in this budget. There was no attempt to create jobs. Instead, there was an attack on old people, on poor people, and a vicious assault on working and middle income families.
I challenge the Government to put this budget to the test of the people. There is a vacancy in this House. There is a by-election due in the constituency of Dublin South. I challenge the Government to move the writ for that by-election to hold it now so that at least the people of that constituency can give their verdict on what the Government is doing and on the lies the Government told the people just over 12 months ago when they were re-elected to office.
I am glad to have the opportunity to speak on Budget 2009, and to outline, in particular, how the transport agenda is being advanced by this budget and how the money allocated to the Department of Transport will be spent in 2009.
In general terms, the gross expenditure provision for the Department in 2009 is €3.6 billion, that is, €2.8 billion for capital projects and €725 million for current spending.
The total Exchequer provision for Transport 21 in 2009 is almost €2.4 billion. This year we will allocate: €1.27 billion for public transport, €2.1 billion on roads, €35 million for the aviation sector and regional airports, and €40 million on road safety. Those are the major expenditure headings of the Department. In addition, some €607 million will be spent on improvement and maintenance of regional and local roads around the country.
I make it clear that provisions have been made to continue work on the critical public transport projects of metro north and the DART interconnector. Despite our more constrained economic circumstances we cannot and will not stop planning and providing future public transport solutions. In this budget, the advanced works plus the planning for metro north and for the DART interconnector continue.
When we launched Transport 21 in 2005 we detailed an ambitious investment programme in our transport infrastructure. The individual projects listed under Transport 21 were excellent projects in 2005. They are still excellent projects today and they will be excellent projects in a few years from now. There is no question of cancelling any of the projects despite the more constrained economic circumstances in which we find ourselves today. However, as our economy has not grown this year in line with our expectations, or indeed anything like it, some of the projects, mainly in the roads area, will have to be rolled out at a slower pace than we had originally intended. That is not ideal and not what we wished. However, it is inevitable in the current difficult economic environment.
In these more difficult times it is important to look at how far we have come in recent years. When we took office in 1997 the total capital provision for national roads and public transport, the equivalent to Transport 21, was €306 million, as opposed to the €2.5 billion now. Just €12 million was being spent by the Exchequer on public transport investment, whereas today we are spending just over €900 million.
That money has been well spent. A great deal has been achieved in the intervening period. We are on track to complete the five major inter-urban motorways by the end of 2010. This involves the construction of almost 750 km of new road, approximately 390 km of which is already open to traffic and the remaining 360 km is at construction. One tangible example of the progress we have made is that it is now possible to travel on continuous motorway from Dundalk to Portlaoise. We have revitalised the railways and rescued them from a slow decline over previous decades. Under the railway safety programme we have renewed the physical infrastructure and strengthened the management of safety. We now have one of the youngest inter-city rail fleets in Europe. We also have one of the fastest growing rail facilities in Europe. As services have improved, the public has responded and passenger numbers have grown substantially. Despite the economic downturn, those figures are remaining static at present. There has been no loss to the railways.
There has been major investment in the Dublin suburban rail network. The capacity of the DART system has almost doubled, the original rolling stock has been refurbished, station platforms have been lengthened and much of the infrastructure has been renewed. There has also been a huge investment in new outer suburban rail stock and an expansion in services. The Luas network has proven exceptionally popular with the travelling public and now carries over 28 million passengers each year.
We have made a large investment in bus services. The fleet has been renewed and Dublin Bus capacity has expanded by over a quarter.
The Labour Party should accept that we should not waste public expenditure in good or bad times.
We have made huge strides on improving the accessibility of our public transport system for persons with disabilities. Some 80% of the Dublin Bus fleet will be accessible by the end of this year and approximately one third of bus stops in the greater Dublin area will have been upgraded by then. All of the city bus fleet in the regional cities is 100% low floor and accessible for people with disabilities.
Despite the economic downturn, it is clear that 2009 will be another huge year for transport projects. My aim is to deliver increased public transport passenger capacity. I will ensure that project planning continues to ensure that sufficient projects are ready to start as soon as funding becomes available.
The Deputy should listen until I conclude my contribution. I will put him right on a number of matters.
I have endeavoured to continue the planning for all the public transport projects in Transport 21 and bring them to tender stage. None of them that was due to start next year is being postponed. The projects will continue to be planned and designed, and public consultation will continue to take place. They will be brought to tender stage as quickly as possible. I wish to ensure that the five major inter-urban routes are on target for completion by 2010. The €1.27 billion provision this year for public transport will maintain the momentum of our investment programme to date.
In addition, a number of important projects in public transport will be completed next year. Construction of the Luas extension from Connolly Station to Docklands will finish towards the end of the year. Phase one of the western rail corridor from Ennis to Athenry will be completed, allowing for the introduction of an inter-city service from Limerick to Galway and a commuter service from Athenry to Galway and the Cork-Midleton line will reopen, leading to a major extension of commuter rail services in Cork.
The Minister said "allowing for the introduction of an inter-city service from Limerick to Galway". With regard to the service from Athenry to Galway, will that be by rail sometime in the future?
What we are doing in phase one of the western rail corridor will allow for a commuter service from Athenry to Galway from next year, once it is completed. The western rail corridor is obviously for inter-city services but it will also try to enhance commuter services, such as the existing Ennis-Limerick commuter service.
Investment in bus priority in Dublin and the regional cities will be increased in 2009. I have asked the Dublin local authorities to give particular attention to the elimination of pinch points on the bus network. There are approximately 43 pinch points on the quality bus corridors in Dublin. These have been mapped at my request and a plan is in place to remove them within a two year period. The one thing on which Deputy Broughan and I agree is that efficient and effective bus services will be needed in the short and medium term as work continues on the metro. I am anxious to secure quality bus corridors that actually work and that make it attractive for people to use bus services.
There are sufficient buses to run the services we have at present. In fact, the indications are that they could be run a good deal more efficiently so we could get more bang for our buck. It is not a question, as we have so often been accused of doing by the Opposition, of throwing money, or in this case buses, at the problem.
A number of things must be done including, which I hope the Deputy will support, changed work practices and using the buses we have at present to their full potential. I look forward to the Deputy's support as we move on that in the next six to 12 months.
Construction of phase one of the Navan rail line and the Citywest Luas extension will get underway shortly, despite the doom and gloom preached in the House last night by Deputy Burton. In 2009 we will continue to work on the Luas extension from Sandyford to Cherrywood; the four-tracking of the Kildare rail line from Cherry Orchard to Hazelhatch, allowing the trebling of passenger capacity on that corridor; the roll-out of the 183 new intercity railcars; and the city centre resignalling project. The latter is vital to the provision of adequate services within the greater Dublin area. Expenditure will continue on a number of ongoing programmes, including the railway safety and accessibility programmes.
Increasing public transport capacity is one of my key priorities. Metro north and the DART interconnector are critical components of the strategy, set out in Transport 21, to transform the public transport system in the greater Dublin area. They will also provide for a great increase in public transport capacity. Metro north is expected to carry 34 million passengers per annum when it opens and will be able to carry more than 200 million passengers per year in the longer term as development occurs along the route. The interconnector will remove a major bottleneck in the Dublin rail system. When it is completed it will facilitate trebling of the passenger capacity of the suburban rail network to more than 100 million passengers per annum.
The Railway Procurement Agency, which is responsible for the project, applied last month to An Bord Pleanála for a railway order for metro north. The application clearly sets out the route alignment, underground and surface sections and station locations. The public private partnership tenders are due to be submitted to the Railway Procurement Agency in early February. Once the procurement and the statutory approval processes are complete, the Government will take a final decision on the project, based on a capital appraisal. This is a long-standing requirement for all very large projects under Transport 21. Once the railway order is in force, the Railway Procurement Agency will be in a position to commence enabling works for the public private partnership project, such as the relocation of utilities. The 2009 Estimates include substantial funding provision for these works.
A number of enabling works must take place, including the purchase of land. Some of these works are under way. The design cost must continue to be considered.
There was much speculation on whether metro north was to proceed. Deputy Broughan and I had discussions on it in the House and I acknowledged his acceptance of my advice not to raise issues about whether it would go ahead. I thank him for this. However, I have heard much ignorant comment about metro north and questions as to why we do not acquire buses. To do what we want with metro north, that is, to move approximately 20,000 passengers in each direction during peak travel times, we would have to invest in approximately 400 to 500 buses. There would not be sufficient road space to do so. If one were to opt for a Luas solution, as some are advocating, the maximum number of passengers one could accommodate would be approximately 8,000 per hour at peak time. Given that the population is to grow to approximately 500,000 to 600,000 by 2015-16, a Luas or totally bus-based system of public transport in the north County Dublin area is a nonsensical proposition.
If we could do nothing but carry out the metro north and interconnector projects over the next four or five years, we would lay the foundation for a really good public transport system. The investment involved in metro north should not be considered in light of the 30-year period during which we will pay for it under the public private partnership but in light of the fact that the system will serve the needs of the people for 50 or 100 years. This is why I am so committed to making progress.
Planning for the DART interconnector is also continuing and good progress is being made. I have made it clear to CIE that I want to see this progress maintained and, where possible, accelerated. In deference to people in business, particularly in the city centre, I want to minimise the period of disruption and work on both projects together. Deputy Broughan and other Members have raised this with me in the House. CIE is aware of the issue and is making a considerable effort to address it. There are certain areas in which works must be carried out sequentially but others in which they can be carried out simultaneously.
The target is to be ready to submit a railway order application to An Bord Pleanála towards the end of 2009.
The interconnector project only facilitates the expansion of the capacity of the suburban rail network. Other measures are required to deliver that capacity, most particularly the electrification of the wider suburban network and the purchase of new electric rolling stock. Planning for these projects is ongoing. Electrification must be completed before the interconnector is in place and we are committed to achieving this. The 2009 Estimates include a substantial provision for the continuing planning work needed for the railway order application and for the commencement of electrification work.
Buses are another key component of my strategy to increase capacity. I ordered a cost and efficiency review of Dublin Bus and Bus Éireann. When that study has been completed and I have considered its findings, I will decide on future bus investment strategy.
It is clear from the commitment to the many public transport projects to which I have referred that there is now a significant shift to more sustainable transport in the Government's national development plan. This should not come as a surprise to anyone because, when I launched a public consultation document earlier this year, I outlined the Government's vision of having a sustainable transport system by 2020. I also outlined that, if we continue as we are, travel trends in Ireland will be on a totally unsustainable trajectory.
One could argue that the economic down-turn will solve the transport problem on the grounds that less activity will lead to lower population growth, but that is a short-sighted way of looking at the matter. Transport planning must be carried out over the medium to long term and it is both hopelessly pessimistic and unwise to plan for the future based entirely on the immediate economic difficulties. This is probably the trap we all fell into in the 1960s, 1970s and 1980s.
In carrying out the public consultation process on the sustainable travel and transport action plan, I was surprised by the extent of the engagement. Nearly 500 thoughtful submissions were received, a much higher response rate than normal, and the issues raised in the consultation document resonated well with the public. People are concerned about the harmful effects of motorised traffic, they recognise that efficient movement of goods is vital for our economy and they are aware that how they travel in the future is one of the most important influences in the quality of their lives.
I have consistently promised to publish the sustainable travel and transport action plan this year to set out a new policy framework for transport to meet the Government's vision. In setting out the many transport investment projects being delivered in this budget, I reaffirm the priority I and my colleagues attach to getting the new policy framework in place. I intend to bring the draft plan and a proposed national cycle policy before the Government in the coming weeks.
In practical terms, I intend safeguarding the budgets for sustainable travel initiatives in the Vote of my Department. I am maintaining the momentum of the green schools travel initiative, which will target 260,000 school children by 2012 and which will, I hope, result in many of them switching to walking or cycling to get to school. In addition, we have secured €10 million for carbon reduction measures in 2009 related directly to transport. In addition to these sustainable transport initiatives, we have also made provision in this year's budget for the new Marlborough Street public transport bridge, which will facilitate the metro works.
Virtually all the national road Exchequer provision for 2009 is already contractually committed to the delivery of the projects on the major inter-urban routes. The NRA expects that six major projects, totalling 143 km of dual carriageway road, will open to traffic between now and the end of 2009. These are as follows: the N4, Lucan bypass; the N6, Athlone to Ballinasloe; the N7, Nenagh to Limerick; the N8, Cullahill to Cashel; the N8, Fermoy to Mitchelstown; and the N9, Waterford to Knocktopher. Over €2.5 billion worth of work will continue on 18 major road projects next year, including phase 2 of the M50 upgrade, the Limerick tunnel, the Waterford city bypass, the Castletown to Nenagh section of the N7 and the Kilcullen to Carlow and Carlow to Knocktopher sections of the N9.
All these projects are proceeding on time and on budget and some will come in ahead of time. Over 70% of the major inter-urban network should be open to traffic by the end of next year. In the ten years 2000 to 2010, the State will have invested more than €8 billion in this programme. Already, the Dublin to the Border M1 route was opened to traffic in August 2007 and construction is well under way on the remaining major inter-urban projects.
The 2009 Estimates also include sufficient provision to meet contractual commitments on the various regional airport projects and to meet our share of the cost of the City of Derry Airport. Notwithstanding the difficult financial position, the €2.4 billion of Exchequer capital will allow us to make real and tangible progress in 2009 and to maintain our project planning into the future. In addition to the almost €2.4 billion of capital for Transport 21, over €600 million is being provided for the maintenance and improvement of regional and local roads. These roads are a key component of our national infrastructure and play a crucial role in the development of the country and the exploitation of crucial sectors such as tourism. A further €50 million is provided for the maintenance and management of national roads.
I have provided almost €40 million for the Road Safety Authority and the Medical Bureau of Road Safety. The good news about road safety is that what we are doing is working — I acknowledge this is a concern shared across the House.
Today, there are 35 more people alive than this day last year. Road deaths in Ireland dropped by 30% in the period from 1997 to 2007. A total of 472 people lost their lives on our roads in 1997 compared to 339 in 2007. This downward trend, which has thankfully continued this year, was achieved despite the fact that there has been a large increase in the number of drivers and vehicles on our roads.
According to the European road safety performance index programme, the PIN programme, which is run by the European Transport Safety Council, ETSC, Ireland is now ranked in the top ten best performing EU countries for road safety performance. An ETSC report dated 8 October this year found Dublin to be the best performing European capital in reducing road deaths.
On the matter of driving licences and learner drivers, following changes made in the regulations last October, the RSA and I made a commitment that all those on the waiting list on 30 October 2007, estimated to be 122,000 people, would be offered a test by mid-March 2008 and that by the end of June 2008, the waiting time for tests would be down to ten weeks. Both of these commitments were met and every effort will be made to maintain this in 2009.
In response to Deputy Broughan, the RSA budget was more than doubled last year from, I understand, €20 million to €44 million. Some €20 million of this was for new works but €10 million was specifically to clear the backlog. We have cleared the backlog and have managed to maintain this position, and we continue to hold on to a sizeable proportion of the extra funding we got last year for that specific purpose.
Funding for the Coast Guard and maritime administration is being maintained at its 2008 level of almost €44 million. The decision to maintain this level of funding in spite of the financial restrictions reflects the vital nature of the services being provided. These services include the operations of the Coast Guard which entail maintenance of a helicopter marine emergency service at four bases around the country; funding of voluntary services of 55 Coast Guard stations based around the coastline; and a pollution-salvage response programme and related and incidental matters. The Coast Guard maintains a marine radio communications network for marine and inland search and rescue, maritime safety information and vessel communication services.
The Department is the regulatory authority for marine safety and marine environmental protection. The main focus is on accident prevention through an appropriate combination of regulation, a heightening of safety awareness and enforcement. The Department participates at both EU and international level in the development and implementation of safety policies and standards in this area. The Marine Survey Office carries out the initial approval of designs and drawings for new vessels or modifications to existing vessels, and then carries out the necessary surveys.
Provision is also being made for Exchequer grants towards the costs of the Commissioners of Irish Lights under an international agreement with the UK authorities regarding the provision of aids to navigation, the Royal National Lifeboat Institution, the weather buoys network and Ireland's obligations under the International LORAN-C agreement on marine navigation. Funding is also being provided for the Marine Casualty Investigation Board. The allocation for 2009 provides for expenditure of €4 million on the Coast Guard's radio communications for essential upgrading of rescue centre radio communications. Some €27.5 million is being provided for the provision of the search and rescue helicopter services.
The Government is to be commended on its decision to continue to target resources at investment in the country's economic infrastructure. It is clear evidence of the Government's commitment to, among other things, the Transport 21 programme and the delivery of a world-class transport system for Ireland. Pursuit of this policy will leave us well placed to take advantage of a recovery in the world economy.
Yesterday's budget was supposed to be a patriotic call to action, with a "We are all in this together" motto. We are all in this together, not by choice, not because we should be or because the rest of Europe is in the same mire, but because the main party in power got us here. Every citizen is being asked to join hands and share the pain of the Minister, Deputy Brian Lenihan, but he has ignored the fact that some are better equipped to survive that pain than others.
The Minister for Finance told us yesterday it is Government policy "to target resources at those in greatest need". If one takes that at face value, it sounds like a worthwhile policy. The real test of this policy, however, was whether the Minister carried through on what he said, but, of course, he did not.
Many people will ask why it is only now we are hearing about those in greatest need and why it is only now the Minister for Social and Family Affairs, Deputy Hanafin, is worried about people becoming dependent on social welfare. Were there not opportunities in every budget in the past 11 years to develop these concerns and tackle them head on?
Targeting was not the Government approach up to now. The opposite was frequently the case. I will give the House examples of the responses we have received from various Ministers in the past when we discussed targeting payments. For example, the then Minister for Social and Family Affairs, Deputy Cullen, told us not even a year ago that the policy of support for pensioners has been for many years to give priority to increasing the personal rates of pension rather than supplements such as the living alone allowance — no targeting there. The current Minister, Deputy Hanafin, voiced similar sentiments in speaking about the fuel allowance less than four months ago, when she stated:
The income maintenance needs of those on social welfare payments have also been met in recent years through significantly increased primary social welfare rates. Government policy is focused on increasing social welfare rates to ensure that people can meet their basic living costs throughout the year and also achieve an improvement in quality of life.
There is no targeting there. Possibly the best examples are reserved for the Minister, Deputy Brian Lenihan. As Minister with responsibility for children he did nothing to target child benefit towards those who need it most, despite many recommendations about the creation of a second tier. Yet last night on "Prime Time" he lectured us that the big issue in regard to child benefit is that:
"We have very high child poverty levels in this country still [at least he finally admitted it, but whether he will do anything about it is another question] because we insist on having an indiscriminatory untargeted approach to this question. I want to look at all the moneys that are available and see how we can target those who are most in need."
Let us contrast that with his comments of just two years ago when he said "Government makes choices and as Minister for children, I am delighted that this Fianna Fáil-led Government has consistently chosen to increase the level of direct payments to parents". When did this change of heart come about? When did the Minister change from being delighted to being indiscriminatory and untargeted? Was it when he realised his predecessors failed children in the boom? Now, those children will pay for it in a recession. What will the Minister do to target children in poverty? He will wait for a report.
Budget 2009 failed to protect the most vulnerable groups in society, those who are welfare dependent, children, older people and lone parents. The Minister for Finance should define for us what he means by "little people". It is not a phrase I like or use as it is disparaging. If he meant the people I mentioned, he has not helped them, nor has he lived up to the commitments he had outlined. The elderly got several knocks. The withdrawal of the medical card will probably ensure the Health Service Executive will appoint a few more administrators to deal with that, but it will result in some elderly people opting not to attend a doctor. In some parts of the country €400 will not even pay for six visits to a doctor, and that is assuming one does not have to buy any medication or attend an accident and emergency unit. The increase in the payment threshold for the drugs payment scheme by €10 will affect elderly people. One can but wonder at the Fianna Fáil and Green backbenchers, as well as the token Independents, applauding increases in the old age pension that will not even keep pensioners in line with inflation. Pensions should have been increased by at least €10. The €7 increase will be wiped out when one examines the inflationary aspects of the budget. The same pensioners will be hit by the increase in VAT, petrol and accident and emergency charges.
I want to nail the lie about the increase in VAT. My opposite number has been on local radio this morning claiming that it is all right because it is not on clothes or food and will not hurt the vulnerable. That is to ignore the fact that it is on petrol and diesel. Pensioners still drive cars. It is on kettles. Pensioners still like a cup of tea. It is on kitchenware, furniture, washing machines and a host of other products that, believe it or not, pensioners still need to use. Therefore, it hits them and, believe me, it hurts them. The €7 increase is pathetic. If the Government that calls so frequently for Deputy Bruton to produce proposals had actually listened to them, it could have afforded a little bit more and that would have made a huge difference.
In a debate in the House last week on energy poverty, promises galore were made that all problems would be addressed. We know 227,000 households experience energy poverty. From June 2000 to September 2008 electricity prices have increased by 134%. We have among the highest energy prices in the European Union. There was a recent rise of 17.5% in electricity costs and a 20% rise in gas prices. The cost of home heating oil has risen dramatically, and further electricity and gas price increases are expected for January 2009. Higher food and fuel prices are expected to continue to be above the general inflation rate of 4.3%. Anyone listening last week would have thought fuel, insulation, central heating, better windows and doors were all on the way. We were told the Government had a plan, an interdepartmental group had been set up and meetings were taking place.
I received a response to a freedom of information request from the Department of Social and Family Affairs to the effect: "I see there's an FOI request in from Olwyn Enright re contact between our Minister and the Minister for CER re fuel poverty in the last 12 months. The papers re the inter-depart group are all we'd have really". Those papers consist of six pages, including two annexes outlining the current position, but nothing about how to address the issue unless it is all contained in the four lines that are blackened out, which I doubt.
While welcome, the increase in the home energy savings scheme which has been allocated is four times more than the warmer homes scheme. That shows again that those most in need have not been positively targeted. How many houses will realistically be insulated with €5 million? How exactly is it to be supplemented by funds from industry? Why has the Minister for Communications, Energy and Natural Resources, Deputy Ryan, chosen a scheme that targets the vulnerable as the one to be dependent on dig-outs from industry?
People should know about the cynical nature in which energy poverty is being addressed. We all know about the Government's love of press conferences and soft focus interviews. So much so that this ethos now pervades among some officials. E-mails back and forth from Department of Social and Family Affairs officials suggest "a softer ministerial announcement — might take the form of a visit to someone who has had their house insulated etc." That shows the way the issue is being addressed and it reflects poorly on both Ministers. It will probably be difficult to find somebody who has had his or her house insulated, especially in certain parts of the country.
A total of 250,000 people are currently on the live register and the figure is growing. More than 300,000 people are expected to be on the dole by the end of 2009. I suppose there should be some relief that the Minister, Deputy Hanafin, finally realises there is a problem. When the matter was debated in the Dáil only last May she told Opposition Deputies, in particular Deputy Penrose, that the Opposition was being "a little bit dramatic" about the live register figures. It took until now for the Government to accept there is a problem, but no solutions have been offered for the unemployed.
Last week Fine Gael outlined our tough but fair budget proposals that would get the economy back on track. Our proposals addressed the underlying weaknesses in the economy as well as providing scope for positive things to be done for those most in need. For a start, jobseeker's allowance should have been increased by at least €9. The same arguments I made for pensioners apply. The weak and vulnerable have been made scapegoats for Fianna Fáil's failure to manage the public purse. The Minister, Deputy Hanafin, has attempted to disguise her cuts for people on jobseeker's allowance. Let us be perfectly clear that the changes proposed have nothing to do with ending a dependency culture and everything to do with making cuts. It is a reaction to a gaping hole in the public finances and it will savagely alter the lives of many vulnerable people. The Minister hopes people will not sign on the live register because they will fail the means test or do not have enough contributions as that would massage the figures and keep the unemployment figures down. The question she has failed to ask herself, and that she obviously failed to ask the Minister for Finance, is "what is the alternative for these people?" Her heartless, cold, and clearly calculating approach, leaves these people with absolutely zero — no income, no options, probably no home, no bed, nothing. It is not about ending a dependency culture, it is about ending any real type of life for those people. It is offering them a life on the street, or in shelters, effectively offering them nothing.
We have seen no overall plan, just blanket cuts thinly disguised. Where is the plan for lone parents that got the Minister front page headlines last summer? Where is her commitment to supporting family, as she said herself, not just in the more disadvantaged areas, as has been the case in the past, but the family generally? Her statement utterly contradicts what the Minister for Finance, Deputy Brian Lenihan, said yesterday. Either way, she has slashed families.
What if a family relies on illness benefit? A €10 increase in the family income supplement threshold would not be of any help to those people. What about the young person who has left school because of a disability, perhaps because disability made school impossible, or because they could not get the help they needed from the Department of Education and Science? The Minister does not want that person depending on her. So she cut €200 per week from them and instead gave their parents €300 per month. She need not worry because the vulnerable know well they cannot depend on her. After yesterday, they know they cannot depend on anybody on that side of the House.
Where is the overall plan? No homework has been done on the Minister's proposals yesterday. That reminds me of the announcement on the over-70s medical card. No homework was done, figures were wrong and now we are rowing back on it. Decentralisation was based on a plan drawn up on the back of an envelope. Again, no homework was done. A total of 53 centres was announced. That programme was slashed yesterday. No homework was done on the early child care supplement that was affected yesterday also. What alternative does the Minister propose for those people?
There are no specific plans to help the unemployed. We will obviously be told again about the famous 50 facilitators who will do God knows what. The 50 facilitators were the subject of two separate press releases last summer. In August each facilitator was to look after 3,600 lone-parent families. By September, the same 50 people were also going to work on a one-to-one basis — this was in a statement — with 235,000 unemployed people. The Minister, Deputy Coughlan, suggested that each facilitator was going to work on a one-to-one basis with 8,000 people, which is impossible. This is the Minister's plan for the unemployed, although she will probably tell us that FÁS will work on the problem as well. However, the numbers assigned to it are insignificant compared to the scale of the problem. Instead, the criteria to qualify for the back-to-education allowance should have been changed. Candidates aspiring to third level education have to be on social welfare for one year. The Minister, Deputy Coughlan, claims she wanted to tackle the problem of people on long-term unemployment becoming dependent on benefit. However, when those people try to stand up for themselves and take the opportunity to go to third level, they are told they must first draw the dole for a year and only then they may be allowed. This is creating a dependency culture and it is an utter contradiction of what the Minister said. We should have specific measures to minimise time for these people so they can get this payment.
The Minister was asked a question on the mortgage interest supplement at a press conference yesterday which she was not able to answer. Every one in the House will be dealing with this problem again and again as people lose their jobs. Many people are unable to make their mortgage repayments and there should have been an increase in the supplement to facilitate such people. The Department of Finance must examine how the scheme is administered as people are being refused credit on the basis that their mortgage is too high and for various other reasons outlined last week. Such people must manage the mortgage they have. This is the troubled position they are in and they need help.
The early childhood supplement, announced in December 2005, was intended to help parents meet the cost of child care in Ireland because it was so expensive. There was no homework done and the Government was unaware of the implications of this measure. The fact that the payment was linked to child benefit meant it was available for children not living in Ireland. Now, every one has a cut of six months, but there will still be money leaving the country to pay for child care in other countries where it is not as expensive. That money probably will not be used for child care. This is another example of poor planning and governance which leads to serious waste.
The blanket 1% levy represents the most inadequate change of all in the budget. It hits every worker in the country. It makes me laugh that the Government boasted, during budget debates in the past few years, about finally getting people on low incomes above the minimum wage. What happened then? The Government side of the House stood up, clapped and gave a standing ovation to the Minister for Finance. Yesterday, the very same people were put back into the tax net. What did those Deputies do? They all stood up, clapped and applauded again. This is the mentality with which we must deal. Every worker in the country is now paying tax again to pay for the mistakes and waste of the Government. It reminds me of the song, "The Wild Rover". The Government enjoyed the good times, spent all the money and is now asking vulnerable people in the country to pay for its recklessness. The Government hopes the people will believe that it will not blow it this time, but the people will not believe it.
Well done. This must be one of the worst budgets in living memory. Not only has the Minister, Deputy Lenihan, left the legacy of the Lenihan levy, but he will be long remembered as the man who, along with the Minister for Health and Children, Deputy Mary Harney, who took the medical card off sick, old, frail and terminally ill pensioners. The stark fact is that 139,000 people qualified for the non-means tested medical card and if the Government has its way, only 14,000 will remain eligible for the medical card in January. This means some 125,000 people stand to lose their medical card. These people are elderly, suffer from chronic illness and are on long-term medication. They have worked all their lives, served the country and this is what the Celtic tiger hands them back.
This comes at a time when the elderly have seen their pensions obliterated by the turmoil in international markets, due, in some part, to the ineptitude of the Government's management of the economy over the past years. It also comes at a time when some 125,000 frail, elderly people in the country who, through the Minister for Health and Children's ineptitude, have no help with long-term nursing home care. Home care packages have been slashed too.
The Minister, Deputy Harney, promised in the Chamber in December 2007 to publish the fair deal legislation before Christmas. She promised again in January that it would be published before Easter. At Easter she promised it before summer, during the summer she promised us it would be published this semester and now we are told it will be published tomorrow. When will it come into law and when will people actually get relief?
People are crucified paying €50,000 per year. Now, to rub salt into the wounds of those families and elderly people, it is the Government's intention to reduce the tax rate from the marginal rate to the standard rate. Heretofore, if one was paying €50,000 per year, one received €20,000 tax back, but now one will only receive €10,000. This is an extraordinary attack on the elderly and makes a mockery of the Taoiseach and the Government's contention that they will protect the vulnerable, the frail and the elderly. We will see to what extent they will do this when examining other aspects of the budget.
The Taoiseach also told us earlier today that the fall in income tax allowance will not really matter because every one will have the fair deal by next year. There are several issues with this claim. Not every one will have access to the fair deal, because it will be capped according to the budget plan. The allocation was set at €110 million last year and it has now been capped at €55 million this year, which is half the original amount. Why is this and how many people will be able to avail of it? The families unable to avail of it will find themselves penalised by the Government from the tax aspects of the budget. Such people will find they are paying more and more. There are several other aspects of the budget which are hitting families struggling at present to mind their elderly, care for their young and disabled and to pay their mortgages.
We are being asked to believe that the fair deal will be introduced next year by a Minister who told us in January 2007 there would be no health cuts. The same Minister, Deputy Harney, later admitted there would be health cuts but claimed these would not affect patients. We have all seen what has happened. Operations have been cancelled throughout the country. The situation in accident and emergency departments is such that there are 20% more people lying on trolleys now than there was this month last year. This is despite the assertion that accident and emergency departments were in crisis and they would be addressed.
The HSE works under the Minister for Health and Children and takes its ethos from her and from the Government. This is the ethos that allowed the HSE in the north east to do nothing until May 2008 about thousands of mis-read X-rays that it knew of in September 2007. There may have been ten or 20 of those people with tumours growing in their lungs since September 2007. It waited eight months. If the mother or brother of the Acting Chairman was such a patient, he would not wait eight months, but the HSE believes it is kosher to do so. This is the same organisation that left 97 files belonging to women in Portlaoise dumped in a corner until it deemed a cohort was reached and it could proceed to deal with people who might have breast cancer. This is the same organisation which takes home care packages off disabled children. This is the same organisation and Minister which takes home help hours off the elderly and which presides over a system where people with cystic fibrosis die ten years earlier in this country than 50 miles north of here.
Yesterday, at a press conference, the Minister for Health and Children mentioned that people over the age of 70 visit the doctor four times a year, on average. I cannot find any evidence to support this proposition. I do not know how the Minister, Deputy Harney, gets her figures. My figures indicate that people over the age of 70 tend to visit the doctor between ten and 12 times a year. Will the means test for the revised medical card scheme be index linked? Will people continue to haemorrhage out of the scheme as they have in past years? The scheme is not keeping pace with the cost of living. It is important to reiterate that 139,000 people over the age of 70 currently have a medical card that is not means tested. The Government's proposal will reduce that number to 14,000. Some 125,000 people, or 90% of the total, will lose their entitlement to a medical card. The Minister told us yesterday that the average cost to the State of an over-70s medical card, when doctors' fees and drugs etc., are taken into account, is €1,650. That is the cost of a whole year's care and drugs. It is also the cost of a single night in hospital. The Government is penny wise and pound foolish. This cut is all the more savage because it is at the expense of the elderly.
I read an article written by a young lady, Ms Orla Tinsey, in yesterday's Irish Times. Ms Tinsey believed the Minister for Health and Children when she said that isolation rooms would be provided at St. Vincent's Hospital and that a new cystic fibrosis unit would be brought into operation. Ms Tinsey is in a ward with many other sick people, as a result of the Minister's breach of her promise, so she is open to all sorts of infection. I have mentioned previously that the HSE takes home care packages from disabled children. I will not go back over that ground. The Minister told us yesterday that pensioners will lose their medical cards from 1 January. The HSE intends to write to 139,000 pensioners to invite them to send details of their income to that organisation. I wonder when the excess managers in the HSE will receive letters inviting them to avail of redundancy packages. There was no clarity on this issue yesterday because the Government's focus is on the soft option of hitting the elderly, rather than tackling the real problem of the bungling bureaucracy known as the HSE.
The office has been inundated today with calls from people in all parts of the country. I will mention one case, that of a 72 year old former civil servant with pulmonary fibrosis who has three years to live. He asked me to mention his name in this Chamber, but I will not do so. He was crying as he told me he wants to enjoy the three years he has left. He is already paying €200 a month for medication that is not covered by the medical card because it is experimental. He will now have to pay an additional €100 a month for medication and a further sum for doctors' fees. Am I supposed to tell the man in question, who is at the end of his tether, that he should be patriotic? This outrageous attack on the elderly will be remembered for a long time. Despite the weasel words to the contrary that we have heard from the Minister, Deputy Harney, and the Taoiseach, I do not doubt that this budget will go down in the annals as one that hurt the most vulnerable people in our society.
The more we examine this budget, the more examples of cynicism we see. Some €10 million has been provided for mental health services. What happened to the €50 million that was promised for such services in A Vision for Change? A further €10 million has been provided for disability services. How far will that go? People with disabilities who are under the age of 18 will now be eligible for domiciliary care allowance, rather than disability allowance. How more cynical can one be? Such people will get just €350 a month under the domiciliary care allowance, whereas they were getting €200 a week under the disability allowance. The families of disabled children will lose €450 a month as a result of this change. Some 125,000 pensioners will now have to pay the health levy. An unexpected consequence of the introduction of the medical card scheme was that such people did not have to pay the health levy, but they will now have to do so. Given that we were told at the time that the cost of the scheme to the Exchequer would be €200 million, how much will this measure cost the elderly now?
The threshold for the drugs payment scheme is to be increased from €90 to €100. The 1.6 million people who are registered under the scheme will be affected by this measure. A new €400 grant has been established as a sop to people over 70 years of age. This proposal mirrors one of the failed policies of the neo-conservative Bush Administration. If people are given inadequate resources, they will be forced to ration their health care services. It is despicable. The €3.5 million that was allocated by the Minister in the 2007 budget for the development of 1,100 day care places was not spent for that purpose. Some €0.5 million has gone missing from the fund. The same thing can be said of home help hours and home care packages. Some 250 paramedical and other allied professionals were supposed to have been recruited in 2007, but that did not happen. The €2.5 million that was allocated for the meals on wheels service in 2006 was not spent on that service. It was used to provide other services to older people. Six elder abuse officer posts remain vacant, despite the fact that money was allocated for them in 2006. It is obvious that the HSE is not serious about dealing with elder abuse.
Some €20 million was assigned to fast-track 860 public long-stay nursing home beds, but just 188 beds have been provided under the scheme. The accident and emergency charge has increased from €66 to €100. Private bed costs have increased by 20% in our public hospitals, with a consequent impact on private health insurance. As many of this country's amputees are over the age of 70, they will be affected by the change in medical card eligibility. They will now have to pay the full cost of their appliances. It will bring more hardship on those least able to deal with it. Has the Minister considered the contractual issues? I refer to patients, rather than to doctors. Many people over the age of 70 have medical cards which say "valid until 2011". They have planned their finances on the basis of having a medical card. There will be legal issues in that regard. In its search for a quick fix, the Government has gone for the poorly thought-out soft option. How can people get back into the VHI system? People who have stopped their VHI payments will have to wait for five or ten years before they can make a claim in respect of a previous illness. What good is that to a man in his mid-70s or 80s? It is no use. Has the Government index linked the means test?
It is clear that Fianna Fáil has forgotten its slogan of some years ago, suggesting that health cuts hurt the old, the sick and the poor. It is noteworthy that the only group to have welcomed this budget is the Construction Industry Federation, led by the Minister for Health and Children's old buddy, Tom Parlon. Families will reflect on this budget as the full extent of the Government's ineptitude dawns slowly on them. College fees — let us call them what they are — are back. Transport costs are increasing. Irish taxpayers are the only people in western Europe who have to pay tax on tax. The Lenihan levy taxes one on one's entire income, even though one has already paid tax on it. It is actually a 3% tax on one's tax, which is extraordinary. We should not muddy the waters by referring to €400 payments — it is clear that 125,000 elderly people who will lose their medical cards.
People will have to pay the 2% health levy, the 1% Lenihan levy, doctors' fees and medicine expenses of €100 a month, or €1,200 a year. They will have to pay €100 each time they go to an accident and emergency department. They have lost their VHI benefits. The nursing home tax break has been reduced from €20,000 to €10,000. They have to pay for chiropody, occupational therapy and physical therapy. This is a Government that cares all right.
The events which we have witnessed over the past few weeks on the international money markets have been characterised by a loss of confidence in financial systems. The scale, depth and impact of this loss of confidence has been unprecedented in our lifetime. Confronted with a challenge of such deep international proportions, the Government was faced with making difficult choices in the budget announced yesterday by the Minister for Finance. However, the choices made were necessary to restore confidence in our economy at national and international level by bringing stability and certainty to the public finances. They were also necessary to protect the most vulnerable in our society and to build a solid base to ensure we are well positioned to benefit when the economic cycle turns around.
In this budget, we have moved to send out a message that Ireland is still open for business, in spite of the current difficulties that are shared worldwide. We have also refocused our spending within the resources available to us to deliver increases in priority areas, including social welfare, health and education.
My Department and its agencies will play a key role in working through the current economic circumstances and in making sure that we are well positioned to reap the opportunities that will undoubtedly arise when the global situation improves. We will do this by continuing to work to attract foreign direct investment, by helping Irish businesses to develop and grow their exports, by continuing to prioritise investment in science, technology and innovation, and by providing supports to small businesses. We will also continue to invest in upskilling the labour force and ensure that adequate retraining and support services are available for those who have recently lost their jobs.
The allocation for my Department in the 2009 Estimates published yesterday amounts to €1.951 billion. This includes €1.569 billion in Exchequer funding and just under €382 million from the national training fund. Like my Government colleagues, I am prioritising spending in a balanced and responsible way to ensure that the economy gets the best return for the level of resources available.
The strategy for science, technology and innovation was launched by the Government in 2006 as a long-term strategic initiative to underpin the future economic prosperity of this country. Capital funding for science, technology and innovation programmes in my Department's Estimate for 2009 will increase by €10.4 million, or 3.5%, compared with 2008. This will bring capital investment in this area of my Department's budget to €309.3 million, reflecting the importance of this priority for the Government. This level of support sends a clear signal to businesses based in Ireland that the Government is continuing to support their efforts to develop new products, to stay competitive and to win new markets.
The strategy for science, technology and innovation is still in its early days, but already we have seen the fruits of our investment in this area. For example, some of the world's leading companies have chosen Ireland as a base for their research activities. This reflects the reputation which Ireland has built as an emerging force in the area of research and development. Forty-five research and development investments were supported by IDA Ireland in 2007, at an overall value of €2.5 billion. Total research and development spending across all sectors of the economy reached €2.33 billion in 2006. It would be short-sighted in the extreme to halt this progress. Science and innovation are the future growth areas on a worldwide scale. The rewards to industry for developing new and innovative products can be immense, with consequent rewards for the economy in terms of employment opportunities and investment. Enterprise Ireland and Science Foundation Ireland will continue to work with industry and academia to promote research further and to ensure that the commercial value of new technology and innovation is realised.
The enhancements to the tax credit scheme for research and development announced by the Minister for Finance yesterday are also a sign of the Government's commitment in this area. The research and development tax credit, which can be offset against a company's corporation tax liability, is being increased from 20% to 25% with effect from 1 January next year. This measure will further enhance our competitiveness as a location for new internationally mobile research-related investment and will also encourage existing overseas and indigenous firms to increase their level of research activity.
I also welcome the Minister's announcement that the Commission on Taxation is to investigate options for incentivising the holding and development of intellectual property. This is an area that has become important globally in recent years and we need to ensure that our tax regime reflects this.
IDA Ireland has been very successful in highlighting the opportunities which Ireland offers to leading edge multi-national companies down through the years. At present, there are over 1,000 IDA Ireland supported companies in Ireland, employing 136,000 people. Over 9,000 new jobs were created by those companies in 2007, 114 new investments were delivered, involving total future capital investment of over €2,3 billion, and IDA Ireland-supported companies yielded €3 billion in corporation tax receipts and contributed €16 billion in direct expenditure in the Irish economy.
Ireland continues to be an attractive location for services, high-tech manufacturing and research and innovation activities. IDA Ireland is now winning higher value foreign direct investment in new and emerging areas such as Internet and media business. In the first half of this year, IDA Ireland announced 22 investments with a capital value of €916 million and a potential to create 1,600 jobs. This compares favourably with figures for 2007. An allocation of €137 million, including staff and administrative costs, has been provided to IDA Ireland in my Department's Estimate for 2009. This will enable the agency to continue its work in attracting companies to Ireland and to enhance its presence overseas. The Exchequer allocation will be supplemented by IDA Ireland's own resource income from grant refunds, deposit interest and the rent and sale of properties.
Enterprise Ireland will continue to support indigenous companies, with an allocation of €56.3 million from its grants to industry programme in 2009. The fundamental objective for Enterprise Ireland in its 2008-10 strategy is to drive export growth in the challenging global environment. Success in overseas markets will generate wealth that will sustain prosperity and employment throughout all parts of this country. There is no doubt that Irish enterprises face difficult challenges in the short to medium term.. However, this makes it all the more important that Enterprise Ireland is in a position to provide all the assistance possible to companies to bolster competitiveness, focus investment and generate innovative solutions. Enterprise Ireland's funding for grants to industry will remain virtually unchanged from 2008.
It is also vitally important that we support small businesses at this time. Small and medium-sized businesses account for over 97% of companies in Ireland and the sector employs in excess of 800,000 people. Supports for small business, through the county and city enterprise boards, will increase next year by almost €3 million, or 9%, to €34.8 million. The enterprise boards have been particularly effective in their ability to respond to the needs of micro-enterprise at local level. Over the past 15 years, they have assisted almost 20,000 projects and helped to support the creation of 35,000 jobs. The increased 2009 allocation recognises the need for access to practical business information and supports for small companies and the importance of continuing to promote entrepreneurship at this time.
The tax relief measures announced by the Minister for Finance for new start-up companies will also help to grow small businesses and promote an entrepreneurial culture. Under the measures announced yesterday by the Minister, new start-up companies which begin trading in 2009 will be exempt from tax, including capital gains tax, in each of their first three years to the extent that their tax liability does not exceed €40,000. With the consolidation of our low corporate tax base and capital allowances for certain energy-efficient equipment, this is a very good budget for businesses of every size.
In spite of the need to introduce a tough budget, the Government has taken care to protect those who are most vulnerable in our society. In particular, we recognise the impact which unemployment has on individuals, their families and their communities. Above all, we must prevent the drift into long-term unemployment and avoid a return to the structural unemployment which we witnessed in the 1980s. It is important that we continue to invest in our people, to upskill those in employment and to provide support services and retraining for those who have lost their job.
Total investment for labour market programmes in my Department's Estimate for 2009 will amount to €1.083 billion, or 56% of my total budget, including the national training fund contribution. Of this, €1.05 billion will be delivered through FÁS. Within the FÁS budget, funding for community employment and job initiative schemes will be increased by 2%, from €439 million to €450 million. This will enable FÁS to continue to support a minimum of 22,500 participants on these programmes next year. Funding for FÁS services to people with disabilities is also being increased by 2% on the projected 2008 outturn. A total of €77.7 million in its 2009 budget is ring-fenced for specific employment and training programmes for people with disabilities. In addition, people with disabilities can avail of mainline FÁS programmes and services. The allocation from the National Training Fund for training the unemployed has been increased by €9.5 million, or 5% in 2009, to €208.3 million. This allocation will help workers who have recently lost their jobs, including redundant apprentices, through training and re-skilling. Every effort will be made to help those apprentices who have been let go by their employers to complete their training or to be retrained for alternative and emerging opportunities.
While labour market programmes have been refocused to assist the unemployed, funding for upskilling those in employment in 2009 will still amount to €168.5 million and will be delivered primarily by FÁS and Skillnets. At workplace level, the National Employment Rights Authority will continue to promote compliance with employment law and will carry out a programme of inspections to ensure that workers' rights are being upheld. The allocation to the National Employment Rights Authority for 2009 is €9.7 million. The Health and Safety Authority will promote, monitor and ensure compliance with workplace safety and has been allocated a budget of €23.7 million for next year.
In addition to the priorities I have outlined, my Department will continue to ensure that markets operate in a fair and regulated way for companies and consumers. The international events of recent weeks have demonstrated how important it is to regulate sectors and the profound impact on an economy and on society if these are left unchecked. Within my Department's remit the Office of the Director of Corporate Enforcement will continue to address its twin objectives of encouraging compliance with company law and bringing to account those who breach their obligations. The Competition Authority and the Irish Auditing and Accounting Supervisory Authority will also continue their roles of promoting compliance with legislation in the areas of competition law and the accountancy profession, respectively.
Yesterday, I announced plans to merge the Competition Authority and the National Consumer Agency. Competition and consumer policies are highly complementary and share a common goal of enhancing consumer welfare. The merger of the Competition Authority and the National Consumer Agency will ensure improved co-ordination of these two policy areas. The Competition Authority and the National Consumer Agency, and its predecessor, the Office of Consumer Affairs, have served the Irish public well for many years. They have protected consumers, ensured fairer competition for businesses and worked with professionalism and commitment in the interests of the public. However, a single body overseeing the areas of competition and consumer protection will allow for a more consistent approach to policy implementation and resource allocation. The synergies resulting from bringing together the Competition Authority and the National Consumer Agency should improve services to the public and should result in a better return for the investment currently being made in two separate bodies.
The road ahead is still somewhat uncertain, given the worldwide scale of the current economic difficulties. However, with the prudent approach to spending announced yesterday, allied to the measures announced by the Minister for Finance to stimulate productive investment, the Government has demonstrated real leadership and has invested in building a confident future for us all.
This budget comes at a critical and defining time for our country. We all know that the international economic climate has altered radically in relatively recent times. The scale of this challenge and the pace at which circumstances have changed have combined to lift this budget out of the routine of economic management to one of critical importance to the future well-being of our country. This is no time for adjustments at the margins. This is a time for strong, firm and decisive leadership. It is a time to put the interests of our country to the fore and sectoral interests firmly on the back-burner. In framing this budget the Government has been very aware of the central role of education to economic progress and social cohesion. This awareness is reflected in an increased allocation for education.
The gross allocation for the education Vote in 2009 is just over €9.6 billion, representing an increase of €302 million and an overall increase of 3.2% on 2008. Education has received unprecedented levels of support from the Government in terms of increases in overall funding over the past ten years with education spending now more than treble what it was in 1997 when overall funding was just €3.1 billion.
The overall capital allocation for 2009 is being increased to €889 million. This represents an increase of nearly 10% compared with 2008. The Government recognises the essential importance of continuing to invest in our future productive capacity during the current economic downturn. This increased allocation will provide for a very significant construction programme and will see major projects under way across the country. This is in addition to the smaller capital projects that will be offered for public tender under the devolved grant schemes. As well as providing employment in the construction sector, it is my firm belief that increasing competition within the sector will provide increased value for money, enabling us to derive maximum benefit from this investment. In the tenders being received in the Department, we have noted a drop of 15% to 20% in the prices being quoted.
The 2009 capital allocation for schools will enable my Department to complete 26 major projects and commence construction on another 62 major projects. It will permit completion of 100 smaller projects on site and allow another 80 projects previously approved to progress to completion. In addition, a further 2,600 primary and post-primary places will be delivered in developing areas under the fast-track programme for September 2009.
As I previously indicated, I will be making some provision for a summer works scheme for 2009. The summer works scheme has been extremely successful in enabling schools to address long-standing infrastructural issues. Since the scheme was introduced in 2004, 3,000 projects, costing €300 million have been completed. Work will also continue on my Department's public private partnership programme, with four post-primary schools due to commence construction before the end of 2008. When completed, these schools will provide 2,700 school places. Procurement has commenced on the second bundle of six schools and work on identifying the third and fourth bundles of schools is well under way. When compared with the level of activity under the schools building programme in 1997, when only 42 large-scale primary and post-primary school projects were under way with a capital allocation of just €92 million, it is clear that the scale of delivery in 2008 is unprecedented and is an exceptional achievement. I am very pleased I will be able to maintain a similar level of activity in 2009.
Turning to higher education, the capital allocation is being increased by over €100 million to €265 million in 2009. This represents an increase of almost 50% compared with the projected outturn for 2008. The 2009 capital allocation is one of the highest annual levels of investment in core higher educational infrastructure over the past ten years and represents an increase of just over 75% when compared with the funding of just €68 million provided for universities and institutes of technology in 1997. The allocation will enable me to continue the programme of investment in upgrading and modernising undergraduate facilities at institutes of technology, universities and other colleges. In addition, it is intended that the first bundle of third level PPP projects will be offered to the market this year, with the second and third bundles following at six-monthly intervals.
On the research side, the increased investment will allow continued progress in delivering previously approved projects under the programme for research in third level institutions. The year 2008 marks the tenth anniversary of the programme for research in third level institutions with total investment under PRTLI to date of €865 million, including €648 million direct Exchequer funding provided by the Government. I will also make an announcement in the coming weeks in relation to PRTLI 5. I will be providing for a further round of funding under the research facilities enhancement scheme for the improvement of research infrastructure. This competitively awarded scheme has been very successful in providing targeted moneys for restoring and updating equipment and facilities where strategic research is ongoing. In the course of the next few weeks and months, I will announce details of specific new projects and programmes that will be funded from this allocation in 2009. Overall, the increased capital allocation for the higher education sector will provide better infrastructure for students, lecturers, researchers and others working in Ireland's higher education sector.
Given the scale of the economic circumstances facing the country, I do not for a moment pretend the allocation for education, enhanced though it is, allows us to avoid tough decisions and choices. The €8.5 billion current expenditure on education is predominantly on frontline services. It is the grossest dishonesty, as the Opposition has done, to peddle trite and simplistic notions that the scale of adjustment required in education can be met by painless and populist measures. Approximately 80% of the current allocation goes on the salaries of front line teachers, SNAs, lecturers and others working across the education sector. A further €500 million goes on school running costs. Other large elements of the budget include areas such as provision for school transport. It is disingenuous to pretend that necessary adjustments required in the national interest can be obtained without having recourse to these areas.
These are strong on criticism and utterly deficient in saying anything that might offend anyone, anywhere. In the Fine Gael document Recovery Through Reform, the reference to a 3% reduction in the budgets of Departments, including Education and Science, is meaningless in the absence of specifics.
Were the Department to be abolished the Deputy's party would still have to find a further 2% savings and some mechanism for paying teachers, SNAs, managing school transport and the building programmes in the absence of any people to do this.
On this occasion, when Deputy Hayes is outlining policy, I suggest he put less emphasis on sound bites and more on substance. It is essential to place the current measures in a proper context. In 2009, taking account of the measures announced today, the net pay bill for teachers' salaries and pensions will increase by almost €300 million as a result of a combination of pay increases and the full year costs of the salaries of teachers appointed this September. The allocation provides for increased enrolment in primary schools and the continued growth in provision for special needs in primary and post-primary schools. In addition, pay costs will rise by some €40 million to cover the full year costs of additional SNAs in the system this September as well as provision for additional posts next September. Earlier this year, the Government specifically shielded teachers and SNAs from the general 3% payroll cuts announced for the public sector.
In making the hard choices required in the current circumstances, the Government has acted in a balanced and measured way. To help limit the growth in public sector pay, it is necessary to increase the number of pupils required for additional classroom appointments in both primary and post-primary schools by one pupil with effect from September 2009.
In the case of fee-paying post-primary schools the number of pupils required will increase by two. This change to the pupil-teacher ratio will increase average class sizes.
It is also necessary to reintroduce a cap of two on the number of language support teachers per school. However, in response to Deputy Hayes's speech, support will be provided to help reduce the impact of the cap on those schools with very large numbers of pupils requiring language support.
With effect from 1 January 2009, substitution cover for uncertified sick leave in all schools and for official school business in post-primary schools is being suspended. I am asking schools to consider carefully the necessity for absences at events outside school which take place during core class contact time.
Substitution cover will still be paid for all other categories of teacher absence currently provided for and the 37 hour scheme of payment to teachers for supervision and substitution will continue.
There will be rationalisation of in-career development courses for teachers in 2009. However, we will continue to provide a wide range of courses to teachers in key areas including special education and language support.
On school funding, improvements are being made to the rates of capitation funding available to schools with a total value of €20 million. I cited here to the Opposition spokesperson on education that it was my desire to increase the levels. Despite the stringent financial circumstances, at primary level the standard rate of capitation grant has increased from €57.14 per pupil in 1997 to €178.58 in 2008.
I have also made provision for an increase of €8 per pupil in equalisation funding provided to voluntary secondary schools. A number of specialist grants have been abolished with the general capitation increases aimed at giving schools maximum flexibility in how they use their grant allocation.
I have also decided to regularise an anomalous situation whereby fee-charging schools under Catholic patronage were not in receipt of certain grants, including the support services grant, that were paid to other fee-charging schools. This measure will see all fee-charging schools treated on the same basis regardless of religious denomination.
The education of students with special educational needs continues to be a key investment priority for Government. This is reflected in the fact that there are now more than 19,000 teaching staff and SNAs working in our schools. The full implementation of the Education for Persons with Special Educational Needs Act by the target date of October 2010 is being deferred. Services will continue to be provided by my Department on a non-statutory basis.
——to providing targeted support for special needs and has allocated additional funding of €20 million for 2009 to continue to enhance front line services for these children. Some €10 million is being provided for my Department and this will complement the additional level of supports to be delivered through the allocation of €10 million to the health service. The additional allocation in my Estimate has enabled me to provide a 33% increase for the Department's psychological service. This will mean more psychologists working directly with children in our schools.
The psychologists will also support school staff in catering for children with special needs in the school setting. Funding will also be provided to the National Council for Special Education to enhance its capacity to co-ordinate the provision of services at local level for children, parents and schools.
We envisage putting in place an additional 50 psychologists so that this year there will be a psychologist available in every area of the country. Up to now, coverage was at 60%——
The Estimates provision for higher education is €1,844 million as compared to €1,887 in 2008. The Estimate allows for an increase in the student registration charge from its current rate of €900 to €1,500 in individual institutions for the academic year 2009-10 and combined, this funding is generally in line with the projected outturn in 2008.
Given the current economic climate, it was not possible to provide an increase in current funding for the sector in 2008. However, the current level of funding must be seen in the context of the substantial increases in funding for the third level sector in recent years, whereby the overall provision to the sector, including capital provision, has increased to some €2 billion in 2008. This is an increase of 33% in the last four years and an increase of 135% since 1997.
I wish to share time with my colleague, Deputy Kieran O'Donnell and to refer, in the time afforded to me, to matters in the justice area. The importance this Government attaches to justice and crime matters was reflected in the Minister for Finance's speech yesterday. Not once, in a speech which ran to almost 8,000 words, did he refer to the justice budget. This was very surprising given that he recently served as Minister for Justice, Equality and Law Reform and a startling omission given the way crime is thriving in this country and having regard to the grave concerns that families and decent people have about matters of crime and justice.
The Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, has taken the axe to Garda overtime. He has done so in the knowledge that incidents involving bombs and other explosive devices are up over 300% on last year. This year alone we have had 76 incidents involving pipe bombs and other dangerous devices. He has done so in the knowledge that the drugs trade continues to boom. The streets are awash with heroin and cocaine. If the rule of thumb that the Garda successfully intercepts 10% of the drugs that enter the State applies, we are in serious trouble. So far this year, the Garda has seized drugs worth €68 million. The sinister involvement of organisations such as the INLA in the drugs trade should sound a loud warning bell to the State. Organised criminals and criminal gangs cannot be given a free pass, irrespective of the downturn in the economic situation.
Gangland bosses and their associates are uncorking the champagne bottles and toasting the Minister for Justice, Equality and Law Reform for the Garda overtime cuts that we are now facing. The Minister has chosen to cut overtime despite the obvious need for greater resources to rein in gangland criminals. This is obvious not only from the availability of drugs but also by an analysis of the steep rise in the number of shootings taking place year on year. The number of shootings jumped by 54% between 2003 and 2007, from 211 incidents to 325. In the first six months of 2008 there were 116 reported shootings. Estimates suggest there were 19 gangland-related killings in 2005, 21 in 2006,16 in 2007 and 15 so far in 2008. Meanwhile, knife crime has jumped over 300% in four years.
In this morning's newspapers it was reported that the Dublin County Coroner opened inquests into no less than eight violent gun deaths yesterday. Among the eight victims was apprentice plumber Anthony Campbell, an innocent bystander shot dead in a botched gangland attack. Anthony Campbell was in the wrong place at the wrong time and paid the price with his life. How many more gruesome murders must take place before crime becomes relevant enough for a mention by the Minister for Finance, Deputy Lenihan, in his budget speech?
The Minister for Justice, Equality and Law Reform will argue that he has off-set taking a hatchet to the Garda overtime budget by providing more gardaí. Another way to express that argument is that he has given with one hand and taken back with the other. This country needs additional resources to combat crime. Organised crime costs this State a fortune every year in terms of deaths, drugs and prison sentences. Failing to tackle criminals by providing necessary resources is not a money-saving measure, irrespective of how the Government tries to spin it.
Ring fencing money for Operation Anvil is a welcome and sensible step, but it is not enough. Operation Anvil alone cannot address the criminality of gangland bosses. Maintaining and protecting resources for one single Garda operation is a flimsy response to the challenges that organised crime pose to this State.
Another area where the Minister is claiming he is saving money is in the prison sector. This is another false promise because reducing budgets as a short-term measure will cost us dearly in the long run. Let us look for a moment at the current situation in our prisons. The latest figures show that 50% of prisoners re-offend within four years of their release while 27% find themselves back behind bars within a year. The taxpayers of Ireland are spending €91,000 per prisoner per annum to maintain a revolving door prison system.
The Council of Europe anti-torture committee is one of a number of august bodies to express horror at the state of Ireland's prisons. Its most recent report on Irish prisons, published in October 2007, described a scenario where inter-prisoner violence was rife, fuelled by the widespread availability of illegal drugs and the existence of a gang culture within the prison system. Three prisons were singled out as being particularly dangerous in this context, namely, Limerick, Mountjoy and St. Patrick's Institution.
A report in this morning's newspapers detailed a violent attack in the State's most secure prison at Portlaoise. The prison governor was subjected to a series of threats and intimidation, culminating in a physical assault. In May this year it was reported that in Limerick Prison the number of prisoners who have had to be put into isolation for their own safety has trebled over the past two years. We hear about the lack of prison security on a weekly basis. This summer we heard it reported on the court record that a gangland boss continued to engage in his criminal empire building from behind prison bars.
The agreed programme for Government promises to "invest significantly in rehabilitation for prisoners". This is a promise that must be delivered on urgently. Last year 10,000 drugs tests were carried out in Irish prisons, 40% of which were positive. A total of 75% of prisoners in Mountjoy tested positive for drugs. There is widespread agreement that the situation in Mountjoy Prison, in terms of drug use, violence and violations of human rights, is totally unsustainable. Is the situation to be allowed to fester for the next 12 months and perhaps to worsen as a consequence of budget cuts?
Despite the lofty promises contained in the programme for Government, the Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, has already revealed his contempt for rehabilitation services. Before the budget was even agreed he slashed support services for ex-offenders, placing vulnerable men at risk of homelessness and addiction problems. He has withdrawn funding from Harristown House, a counselling and addiction centre at Castlerea, County Roscommon and from the Kazelain project in Sligo which provides accommodation for former offenders and homeless men. The grim consequences of these moves have been predicted by the experts and we are likely to pay the real price in the near future.
Cuts have been made to the prison sector at a time when health experts have called for the reform and expansion of prison psychiatric services following revelations that more than one in ten new male inmates has a psychiatric disorder and one in 20 is in need of transfer to a psychiatric institution.
The Minister may think that what happens within prisons is not a cause for concern to most people. However, it is hard working people and families who are always the victims of crime. It is hard-pressed taxpayers who are footing the bill for the dysfunctional Prison Service that the Minister presides over and I want to know what he proposes to do about it in 2009.
What is the fate of the Thornton Hall prison project, which has already cost the taxpayer almost €37 million? Thornton Hall is a perfect example of how wilful waste makes woeful want. The report of the Comptroller and Auditor General concluded that the State paid "at least twice" the market value for the land when it stumped up €29.9 million to acquire the site.
Prison capital took a 10% cut in 2008, and received no increase in capital for 2009. The Minister of State, Deputy Moloney, recently stated there was no Plan B regarding Thornton Hall. I would like to know what is the status of Plan A. It is important to note that spending on existing prisons fell on the basis that Thornton Hall was proceeding. In the 2008 Estimates, the buildings and equipment budget was reduced by 44%.
The Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, recently announced to great fanfare that he was rolling out the joint policing committees and expanding the programme from 29 to 114 committees throughout the State. Last year, €1 million was provided for the 29 committees. Is there provision for a pro rata increase to fund the additional 85 committees? I would like to hear the Minister's views on this when he addresses the matter later.
What about the Garda station building programme? What about the resources for community policing which is supposed to be a hallmark of Government policy in terms of increasing the visibility of the Garda force on the streets? This budget has shown us that tackling crime is far down the list of priorities for the Government.
The Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern, a master of spin, has attempted to twist the facts to disguise the short-sightedness and mean-spiritedness of his cuts. He has reduced Garda overtime just days after a key survey revealed that people are crying out for greater Garda visibility, with 75% of those surveyed wanting to see an improved Garda service by having more gardaí visible on the streets.
The Minister has cut funding to the Prison Service thereby perpetuating the cycle of crime. He has even cut the budget for the Irish Human Rights Commission, a body established under the Good Friday Agreement. I am sure he will outline in greater detail the particulars for the proposed merger of two bodies and the consequent dilution of power and influence of them both.
The consequences of these cuts will be shown in the fullness of time. I am confident the people will not be fooled. Despite the spin, they have seen this budget for what it is, an attack on decent hard-pressed people and they will see through the spin coming from the Department for Justice, Equality and Law Reform, which is the same as that which we saw from the Minister for Education and Science earlier in the debate. The chickens have come home to roost. The Galway tent school of economics provided us with yesterday's budget which showed the Government has blown the boom in a most extraordinary fashion and the people have been given the bill to pay the price.
This budget is probably the worst and most severe budget for the vulnerable, the lower paid and those on a middle income since I can remember. This budget will hit lower and middle income families and more particularly the old and the infirm.
What is proposed with regard to medical cards for the over 70s is that more than 125,000 of the 139,000 in receipt of medical cards, or 90%, will lose their medical cards. This has implications not only for medical expenses, it also has implications for accident and emergency charges and long-stay beds. It also has an income tax implication with regard to health contributions. The Government has not made this public but any person earning more than €26,000 a year without being in receipt of a medical card will pay a 2% health contribution. This means not only are they caught for the 1% levy on occupational pensions but they are caught for another 2%. This is a 3% Lenihan super-levy on old people.
People who telephoned Joe Duffy's "Liveline" programme today are worried about their elderly parents and the fact they left the VHI because in early 2000 Fianna Fáil gave medical cards to those aged over 70. If they can even get back into the VHI they face a ten year waiting time for the conditions they had prior to leaving the VHI. They must wait two years before any new conditions will be covered.
Is this fair for a return of €100 million? At present, the Government is guaranteeing the banks to the tune of €500 billion. I expect the Government to obtain more than €100 million. It will see €100 million in savings in terms of medical cards but it will also receive money from the 2% levy from many of these people. Shame on the Government. I expect the Fianna Fáil backbenchers to come out in support of this measure. It must be reversed. The Minister of State, Deputy Kelleher, knows it and I have no doubt constituents have contacted him.
Everyone here has elderly parents. When this was introduced people planned for life on the basis of it. They are now facing bills of €1,200 for the drugs refund scheme and paying fees to doctors and hospital charges. A constituent who rang me expects it to cost €2,500 extra per year which the person can ill-afford. These people have paid their dues to society. The Government proposes to introduce a measure which is unfair, crude and defies logic. I expect the Government to reverse the decision. A typical retired person on a €30,000 occupational pension will pay almost €1,000 extra in tax to the Government. He or she does not even know how the Government will use the money because to date it has wasted money and not used it wisely.
The Government states it will save €150 million in terms of nursing home charges and normal medical expenses. Every family with an elderly parent in a nursing home receives tax relief on it, many of them at the higher rate. Typically, it costs approximately €50,000 to keep a person in a nursing home. People will lose €10,000 on this.
Going through all the measures, this budget is absolutely crippling for the elderly with the 1% levy, the 2% super-levy on health contributions, the tax on savings through DIRT increased by 3%, VAT increased by 0.5%, accident and emergency charges increased by 50%, the cost of drugs increased by 11% and they must also pay doctors fees. The old age pension has increased by just over 3%, less than the rate of inflation. The Government talks about being a caring government and looking after the elderly. The budget reverses this.
Last night, the Taoiseach stated the income levy was a fair measure. Over successive budgets, Fianna Fáil boasted that it brought countless thousands of people out of the tax net. In last year's budget it was stated that 878,000 were not in the tax net. This does not apply any more. Everyone is paying tax. The Government has gone for the soft option. Lone parents will not be taxed on social welfare benefit but will be hit by the 1% income levy if they get a job. The Minister of State at the Department for Enterprise, Trade and Employment, Deputy Billy Kelleher, knows small business employers will have to compensate their employees for the levy. It will mean uncompetitiveness and job losses. The budget contains no provisions to arrest the rate of unemployment. The budget's measures will make it worse by adding 1% to the inflation rate and sapping money out of the economy. It will sink us further into recession and eventually a depression.
Fine Gael, on the other hand, proposed no increases in taxes but increases in social welfare to keep pace, and even go above, the rate of inflation. We proposed proper public sector reform, an issue with which Fianna Fáil is incapable of grasping and dealing. The Government ratcheted up public sector expenditure in the past ten years by 150%. Therein lies the issue that needs to be tackled. Instead, the Government, seeking €2 billion, will make it up with the Lenihan levy, some €1 billion, and a raft of other measures which hit low and middle-income families.
The payment of corporation tax has been pulled back by five months to balance the books. Businesses are already under severe pressure with cashflows, yet the big arm of the Government puts more pressure on them with this measure. I am very sure the Government will not be giving businesses much latitude in the payment. Instead of paying it in November, companies will be expected to pay half of it in June. This is to cover up the Government's mistakes and lack of proper reforms.
There have been increases across all taxation areas — income tax, motor tax, capital gains tax and excise duties. Last night, people in Limerick were queuing to fill up their car tanks because of the increase in the price of petrol. People are under enough pressure. Limerick has seen a 53% increase in its live register. The budget has proposed nothing to correct this through proper re-training.
A €10 levy has been introduced on flights out of Shannon Airport.
Many of the flights out of Dublin Airport will only be taxed by €2. The only route on which the €10 tax will not apply to Shannon is the Dublin one. The Government bailed out of the Aer Lingus Shannon-Heathrow route and soon no Aer Lingus cabin crew will be based at the airport. A punitive €10 charge is being imposed on every passenger leaving Shannon Airport. This must be reversed. I put that to the Minister for Defence, Deputy Willie O'Dea, the only Minister in the mid-west. He informed me the Minister for Finance would consider it until March. However, I want the decision reversed with immediate effect.
The Budget Statement did not refer to urban regeneration projects for Limerick city when they got great mention last year. The Minister of State with responsibility for housing, Deputy Finneran, is present and we need a commitment on this matter. The people of Limerick were promised regeneration would be delivered . It must be honoured by the Government. We were informed the Minister for the Environment, Heritage and Local Government, Deputy Gormley, will reaffirm the Government's commitment to the project and outline details on the level of funding and when it will be forthcoming. The project is vital to the revitalisation of Limerick and those living in the proposed regeneration areas. If it is not delivered, it will be a disaster for Limerick and the region. I look forward to hearing what the Minister, Deputy Gormley, has to say about regeneration.
The Government is forever asking what Fine Gael would have done in this budget. We have produced not one, but two policy documents, Recovery Through Reform, published last July, and our budget details last week. We said we would not raise taxes. The Government has done the opposite. We said we would conduct proper public sector reform and cut €1.8 billion from current expenditure. The measures would be very straightforward. There would be a cut in public sector pay for those earning over €50,000 and a ban on all recruitment, apart from frontline services. We wanted reform of the drugs scheme to be based on generic drugs. We wanted €1.5 billion to be sought from the banks for the State guarantee scheme. The budget contained no mention of what charges will be imposed on the banks for the guarantees, yet it is based on taxpayers' money.
The Government is cutting back on the national development plan. Fine Gael proposed to take €1 billion from the National Pensions Reserve Fund to keep the national development plan on course. We proposed a carbon levy on electricity generators to raise €300 million. At least the Government took on board our proposal on capping pension relief, which we welcome.
We proposed putting aside €150 million for benefits for the vulnerable. However, mortgage interest relief is being reduced for people not in their first homes from 20% to 15%. I note no measures to assist people in trouble with mortgage repayments. Fine Gael proposed to set aside €15 million to help people through community welfare officers and MABS to get relief with mortgage repayments. The Government increased the winter fuel allowance by 28% but we believed it should go up by 50% and proposed to set aside €65 million for it as heating fuel costs have risen by 78%.
There is nothing in the budget to deal with the unemployed. Currently, one must be 12 months unemployed and in receipt of jobseeker's allowance to qualify for the back to education allowance. We proposed that this time constraint be done away with for those in receipt of the benefit and the lower paid earning less than €12 per hour. Fine Gael's measures are practical, could stimulate the economy, would not raise taxes or suck the lifeblood out of the economy.
Fine Gael also dealt with two matters the Government has avoided — the fee for the banks for the State guarantee scheme and proper public sector reform. The Government, however, has fudged and not made the hard decisions on these issues.
I note the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, is present. I want him to give me a commitment that he will reverse the decision on medical cards for the over 70s. I presume he is aware that not only will the over 70s end up paying the 1% levy but, if they are receiving more than €26,000 a year through an occupational pension, once their medical card goes, they will be paying another 2% in health contributions. This means they will be paying a superlevy of 3%. Not only is the Minister hitting them through an increase in the drug refund scheme and extra accident and emergency costs, but he is also fleecing them through income tax. A person on an occupational pension of €30,000 will now be hit with nearly €1,000 extra per year in tax, apart from medical expenses. That decision must be reversed. If the Government does not do so, it will show how little it values people who have devoted their lives to building this economy. How does the Minister value such people? This matter is critical in terms of how the Dáil is viewed by the public. Does the Minister care?
Does he care for people aged over 70 who are speaking on the Joe Duffy show and are telephoning us? I have no doubt they are also ringing the Minister. The measure will save a measly €100 million, while the banks have been given a guarantee of €500 billion. This is not on and must be reversed. The Minister should deal with this matter in his reply. When this measure was first introduced in 2001, many elderly people relinquished their VHI cover and may now find it difficult to get cover with the VHI or other health service providers. Even if they do, they will have to wait ten years before reaching the conditions they had before giving up their insurance. The decision must be reversed because it is nothing short of disgraceful.