Tuesday, 21 October 2008
Financial Resolution No. 15: (General) Resumed
When this House adjourned last week we anticipated some speculation over the weekend but I am sure that neither the Ceann Comhairle nor I, nor the House in general, fully anticipated and appreciated the extent of that speculation and to where it would lead.
As we sat in this Chamber last Thursday evening, when poor Deputy McGrath and others were wondering what their next move might be, Deputy Behan made his move and decided to set them all offside. The offside flag went up and it was too late at that stage for anybody else to move. I am sorry they were consigned to dry dock in such a way. After all, it is only a few short days since all the Government backbenchers and supporters on the benches opposite stood up with one accord and applauded the budget. It was an extraordinary performance.
A standing ovation that lasted for seven minutes. I wondered what all the cheering was about because there was nothing in the budget about which to cheer. There was nothing in it that was reassuring and nothing for elderly people who were about to have their medical cards withdrawn. There was nothing to cheer about so I do not know why the people across the House were cheering. There was nothing for the younger people because a levy was imposed across the board, right down to those on a basic minimum wage. What prompted the backbenchers to react in that hysterical fashion in the course of the budget debate?
I believe this was the first time such a thing happened. The Ceann Comhairle, who is an experienced Member of this House, will appreciate that more than anybody else. Turkeys have been known to approach Christmas with a certain amount of trepidation in the past but on this occasion there was none of that. Children and the mothers of children——
It would not be a good idea to try to have an interview with them, in any event.
Let us examine the other reasons the Government backbenchers might have cheered. What about the mothers of children who are to have their child benefit removed when their children reach 18 years of age? This is at a time when education is under pressure and, although higher education grants remain the same, registration fees have gone up. Income thresholds have not been lifted sufficiently to cater for the situations that now arise. Therefore, it could not have been the mothers of children or the children on whose behalf the Government backbenchers reacted with such enthusiasm.
I was amazed, and I could see the incredulity on the face of the Ceann Comhairle because I am sure he, too, never saw anything like that in his time in the House. It was definitely the first time. As was said long ago in a poem: "Even the ranks of Tuscany could scarce forbear to cheer". I just do not know why they cheered. All I can conclude is that the Government backbenchers were delirious at the time. They were completely taken over by a kind of euphoria, an upsurge and a welling up in their hearts and minds, because it was a great day.
However, nothing could have been further from the truth. As I said the other evening, these events did not start during the past week, month, six months or the past two or three years. They began during the past eight years. Do we remember all the things that were said to us and about us? We were told the fundamentals were good and if anybody suggested that the economy was going wrong, that person was wrong, hysterical and scaremongering. That person was unpatriotic and talking down the economy.
What was happening across the floor of the House? Why did somebody on that side not ask the obvious question about whether everything was really going all right? Was it right to have 120% and 130% mortgages for first-time buyers or for any buyer? Was it right to have the degree of investment and speculation in the construction industry that was clearly taking place? Why was benchmarking introduced all those years ago? The answer is simple — the pay agreement entered into a year or 18 months before had gone done the tubes. The cost of living had caught up with everybody and the only thing to do was to find some way of getting some money to assuage the general unease in the minds and hearts of the public at that particular time. It was an appalling decision but it was not the decision itself that was wrong, but the reasons for which it had to be taken. Those reasons should have been questioned at that time but were not.
Members on the Opposition benches raised those issues but were told that we were scaremongering, that we had no imagination, that this was a new type of economic thinking and that all was bound to be fine. Were we not the strongest and richest country in the world and one of the most influential? What a load of rubbish that was. Surely we can cop ourselves on and not go on with this type of delusional nonsense in the future.
As to those Government backbenchers who rose up last week, as if in rebellion, and applauded and stomped their feet loudly to the tune of the conclusion of the budget speech, I presume they were not taking responsibility for what had happened. However, somebody, somewhere, must take that responsibility. It is important in the country's interests that somebody takes that responsibility and does so soon. It is no good if the Government barracks the Opposition and complains that its members are not realistic, or if it suggests that the Opposition has been at fault in some way. The Opposition's job is, as always, to challenge the Government, to prosecute it and to make sure that we stand up for the people outside the House and raise their concerns and questions even before they are raised in the public arena. That is the important thing, as the Ceann Comhairle will know well.
It was very sad that nobody wanted to take responsibility. Everything in the garden was rosy and there was nothing but the smell of roses in the air as the Government and the country careered in a particular direction. From my knowledge, and from my time in this House, I cannot believe that we have got to where we are nor the means by which we got here without any recognition on the other side of the House as to what was happening. The problem is of so great a magnitude.
The other thing that annoys me, as I am sure it annoys the Ceann Comhairle and other Members of the House, is the suggestion that the problem was imported, that international currency fluctuations caused it all. This is not the case because 95% of the problem originated in this country and was within the ambit of Government, the Financial Regulator, the banking system and the Central Bank to control. It was well within their reach had they wished to control it, but nobody wanted to. It was as if there would be no tomorrow, as if everybody said: "This is great, we are going to have a really great time." The feel good factor began to break out all over, but that did not last.
At this juncture, as we review the likely impact of this budget on the economy and as Deputies Enda Kenny, Richard Bruton, Eamon Gilmore and others suggest, it looks as if this is only a temporary bandage put on the economy to stop it from rolling over the cliff. All the impositions on the public are there merely to punish the people but the question is, for what are they being punished? They were not responsible for what has happened but they are about to be punished. Unfortunately, ordinary members of the public are about to be punished left, right and centre for the actions of the Government and the banking system. Despite having had no hand, act or part in the fiasco, they will carry responsibility for wrongdoing in the banking sector.
It is a good job the tent at Ballybrit has been closed because it would have been great fun if it had been open this week.
It is grossly unfair that children, people aged over 70 years and those on hospital waiting lists will be punished. On the issue of hospitals and the delivery of health services, I am sick to the back teeth of listening to the Minister for Health and Children tell us that it is economically preferable to take this or that approach. I am also sick of hearing about centres of excellence and long waiting times for services. What has gone wrong with the delivery of health services for members of the public? In recent weeks, I had occasion to speak to a 95 year old man who had to sit on a chair for 24 hours before receiving attention in a well known Dublin hospital. That is how good health services are being delivered.
We do not need rocket science but simply someone to get a grip and do something to address the glaring faults in the system. When the Government decides to address the problem in our health services it must take a meaningful, humane approach which recognises the need to provide services for people when they are vulnerable. We do not need a conveyor belt system under which people receive treatment having waited for up to four years.
I never understood the reason the issue of public housing was included in partnership negotiations seven, eight or ten years ago. Housing has nothing to do with partnership and should not have been dragged from the public arena into the partnership process where those involved are not accustomed to dealing with the issue. A range of ideas was trotted out concerning the way in which the housing sector would develop. We were told, for example, the Irish tradition of home ownership was a whimsical notion about which we should not be concerned as people all over the world were happy to rent their homes. Moreover, everybody would have access to housing through the rental system. As I predicted at the time, renting soon became as expensive as buying and those who were renting were paying the equivalent of a mortgage in any event. I could not understand the logic of the original argument put forward by some of those involved in the property sector, members of the Government and others who should have known better.
It is appalling that a generation of young people has been consigned to renting property in a market which is being artificially propped up. These young people are destined to remain in this market until such time as prices fall and come within their reach. If some people have their way, however, prices will not fall and they will swing in the market for another five or six years. The Government failed the younger generation by completely ignoring their housing needs. To fund their housing needs people found it necessary to borrow sums for 45 and 50 years or secure loans of 120% of the price of the property. Agencies will deny such loans were provided even though 150% loans were provided in some cases, as becomes clear when one considers that on some sites property prices increased by up to €50,000 within a 12-hour period. The Government stands indicted of failing to attempt to deliver to this sector.
In recent years, Government Deputies have loudly boasted about the large increases in social welfare payments awarded in budgets. They scathingly refer to the last Social Welfare Act introduced by the former Minister for Social Welfare, Mr. Proinsias De Rossa.
I am glad Deputy Kennedy has piped up. After ten years of what is alleged to have been the greatest era of development in the history of the State, the Government has awarded a 3% increase in social welfare payments, which is equivalent to the rate of increase introduced by Mr. De Rossa in 1997 when there was good reason to limit it. Government Deputies who in recent years boasted that the Government was acting like Santa Claus should have known this day was approaching because the relevant information was available to them.
When the Taoiseach informed the House that the Opposition promised A, B and C during the most recent general election campaign, he failed to mention that the Government had all the facts and figures at its disposal. It had inside information whereas the Opposition had second-hand information. The Government's intention was clearly to get past the general election and it succeeded using a stroke of genius. The figures available at the time were misleading and continued to be misleading until a couple of weeks ago. Even today, the Opposition cannot be certain that the information it receives is accurate. The Minister for Finance was unable to assure the House about the veracity of information on the banking system and is unlikely to be able to do so in the next couple of weeks. However, that information will emerge in time.
Is it not appalling that after the so-called Celtic tiger era our schools continue to have prefabricated structures in which, in some cases, the parents and grandparents of the current generation of school children were educated. After ten years of the Celtic tiger roaring in the concrete jungle, the Government has nothing more to offer young children than the same prefabricated structures and overcrowded classes. This is in direct conflict with the promises made by Government parties during and in the aftermath of the general election campaign.
Unfortunately, for reasons of time I am unable to discuss the motions as they relate to other Departments.
Ba mhaith liom labhairt ar an mbuiséad tábhachtach seo. I thank the Ceann Comhairle for giving me the opportunity to speak on this important budget at a critical time for the country's finances. We all know the budget was introduced in the context of a severe economic downturn, with income tax revenues down €6.5 billion in the current year. We must take cognisance of this fact.
While my colleagues and I agree that last week was difficult for backbench Deputies, I am greatly relieved by this morning's decision to change the budget measures on medical cards.
Under the measures that have been announced, more than 95% of deserving people will retain their medical cards. The new income thresholds widen the net enormously to take into account the huge proportion of our elderly who deserve our support and have always got it. Under the new arrangements, single people can now earn up to €700 a week, equating to €36,500 in a year. That excludes any savings they may have, and they still retain their medical card. Married couples can now earn up to €1,400 per week, equivalent to €73,000 per annum, again excluding their savings. For those who might not qualify under those income limits, there is the discretionary scheme, which has always been in place for those with severe medical needs and costs.
The newly announced system is more straightforward, in my view, and I sincerely hope today's developments will reduce the anxiety felt by members of the public in the past week.
Fianna Fáil has long looked after the interests of the elderly, more than any other party in this House. I thought it interesting that our Fine Gael colleague from Kildare was talking about the derisory figure of £1.40 that the revered MEP, Mr. Proinsias de Rossa, gave when he was Minister for Social Welfare. That was a severe embarrassment to Fine Gael and the Labour Party and the less said from that side of the House, the better.
I remind our colleagues in Opposition that not alone has the Minister increased the figure by €7 this year, but it is now €230 per week on top of all the other free items senior citizens are given. We should recognise that Fianna Fáil, in successive Governments over the last number of years, has substantially increased the benefits to our senior citizens. I challenge anybody from Fine Gael and Labour to dispute that fact.
In lobbying hard last week for the changes to the medical card, I was conscious of the enormous number of views being expressed to me and, indeed, to all Deputies. As a Fianna Fáil backbencher I broadly welcome the changes now made to the medical card.
I certainly made my views known on the matter and believe that today's announcement has resolved the concerns of the vast majority of the people. We now have a much more equitable solution. As a Fianna Fáil Deputy and a life-long supporter of my party, it is my duty to represent the views of close to 11,000 people who gave me their first preferences in the general election of May 2007. I thank them for that and had no compunction in expressing their concerns to the Taoiseach, the Minister for Finance and the Minister for Health and Children. I am relieved that my representations and those of my backbench colleagues have helped to resolve the situation. The measures announced this morning are fair and equitable and will achieve what the Government was attempting to do, in the first place, that is, to save the State a substantial amount of money.
I am delighted that the Government is to take this issue to the GPs. I mentioned this last week, and as we know Deputy Reilly went berserk when I suggested that the IMO had a role to play. I certainly believe that was always the way we should go to get better value on behalf of the taxpayers of this State, from the IMO. Quite clearly, the figures were very much in its members' favour. It was good to hear a doctor on last night's "Questions and Answers" agree that the average number of visits per patient is six, when they are getting paid for up to 13 visits per year. A 50% saving is badly needed there and the Government is to be congratulated on those negotiations. I look forward to the result of this consultation and I have faith in the Government to make the required savings by addressing the deal with the GPs.
I want to take a moment to acknowledge the contribution of my constituency colleague, Deputy James Reilly who, as a revered former section head of the IMO, was responsible for the medical gold card scheme, which is now emerging as a major expense to the Government. I ask, specifically, as I did last week, whether he will give his blessing to his former GP colleagues in the IMO voluntarily reducing the costs to the Government of treating these elderly medical card holders. We should recall Deputy Reilly's comments as regards the universality of the scheme when it was originally announced. I shall quote from some of his comments when he was chairman of the GP section of the IMO. He said he "would not like to see cards given out to those who could afford golf clubs". I assume he was talking about higher subscription golf clubs. In 2001 he said he "would not like to see [medical] cards given out to senior civil servants, retired or otherwise, judges, Ministers, high-powered property tycoons, hospital consultants...". Equally, I want to remind him of an article, dated 16 December 2007, in The Sunday Business Post, at which stage he was a Dáil Deputy and not acting under his previous guise as a chairman of the IMO's GP section. In the second last paragraph of the article written by Aileen O'Meara, Deputy Reilly is quoted as saying he "does not want millionaire over-70s to be given cards". I regard his attitude and that of Fine Gael on the issue of giving medical cards to millionaire over-70s to be absolutely hypocritical. It is disgusting how someone such as Deputy Reilly can somersault in his attitudes for the sake of sheer naked political opportunism. I hope he will address the issue and allude to that fact when he speaks tonight, as I presume he will, as spokesman for Fine Gael, on the Private Members' Bill. I should like to hear his justification as regards what he believes in 2008, when this country has severe financial constraints compared to 2001-02 when it was trading well and garnering a good deal of taxable income. I want him to answer those queries because I believe that he, and his colleagues in Fine Gael, have been hypocritical. Moving on——
We have to deal with measures to bridge the gap between the State's current income and expected revenue. Some €3 billion is needed to run the country for the next year, and there is no point in denying it or rewriting history. No more than previous Fianna Fáil-led Administrations, Fine Gael-Labour Governments were equally bad in terms of increasing the national debt and creating problems. We need money now and the general public recognises the next two or three years will be difficult and is willing to make its contribution. However, matters are not helped when people on the other side say that extra taxation is not needed. I do not pretend that I am an economist, but I have been a businessman and so know something about it. Eminent economists argue that if the Fine Gael proposals were implemented, we should be borrowing an extra €4 billion on top of what the Government is planning. We should recognise that our GDP will decline by 1.5% next year and a further decline is on the cards for the following year. We know that €2 billion of this money will come from taxation measures and a further €1 billion will be garnered from savings on public spending. Everyone in the House expects savings across the public service. We have all had difficulties, whether with the HSE or other bodies. I welcome the fact the Government will tackle this problem.
Income from taxation will primarily come from the 1% income levy. That levy is fair and equitable. However, I welcome today's confirmation by the Taoiseach that those on lower incomes will be excluded from this. Higher earners, those earning over €250,000 per annum, should pay a higher figure than the 2%. I suggest 2.5% or 3%. I hope when the Minister brings forward the Finance Bill, he might incorporate that because higher earners have done well out of this country, they are not afraid to pay up and they are willing to make their contribution.
I mentioned old age pensioners earlier. The €7 increase, bringing the pension to €230 per week, is important. Most of the people I have met over the past number of years recognise that they have been well treated. They are quite happy with the increases they have been getting year on year. From my discussions with people, I believe they are happy they are getting an extra €7 in the coming year considering the state of the public finances. They recognise that as much as the rest of us do.
The levies will certainly pay for the 5% increase in the mortgage interest relief for first-time buyers. That is a very important facet. These people need help in these difficult times and it will allow them to claim up to €416 per month which is significant.
I am particularly pleased with the transportation issues. Deputy Broughan will agree with me in regard to metro north which will benefit his constituency, even though it does not run through it. The area north of the Liffey, including Meath and south Louth, needs a public transportation system comparable to the Luas on the southside. We need an efficient and cost-effective method of public transport. Every morning the M1 motorway coming into Dublin city is clogged up. We need to take those 20,000 cars off the road for future sustainability, to reduce CO2 emissions, etc. All the sceptics, including Deputy Broughan, were half hoping that metro north would not be in this year's programme. Deputy Broughan could have——
——blamed the Government even though his constituents, whether they vote for Fianna Fáil, Fine Gael, the Labour Party, etc., were clearly telling him they wanted the metro. No project has ever been so widely welcomed by the public——
I am only stating the facts. Deputy Broughan and his colleagues would have berated the Minister if he had excluded metro north. It is in this programme. I hope those opposite will acknowledge that because when I read the Northside People and see Deputy Broughan's comments about metro north, sometimes I want to cringe and tell the people what he says at the Joint Oireachtas Committee on Transport.
Metro west will follow. Let us get metro north to the airport so that metro west can come about. Metro west will happen when public finances allow. Again, it is badly needed. Deputy Broughan knows Transport 21 is a substantial €34 billion programme. Most of it is intact. Many of the items in Transport 21 have been delivered.
I refer to our new roadway structure. One can drive from Dublin to Cork, from Dublin to Galway and from Dublin to Sligo.
Deputy Barrett should look at the record. I am talking about recent projects coming in ahead of budget and ahead of schedule. That is a fact. If he doubts it, the Deputy should look at the record. The NRA will confirm that and I am sure Deputy Broughan will do so too because he asked the NRA quite recently about its programmes.
I travel on as many roads as Deputy Broughan. I had the pleasure of driving from Galway to Dublin recently in two and a half hours and it did not involve breaking the speed limit. That is indicative of the progress we are making.
In regard to education issues, we all regret an increase in the pupil-teacher ratio but we must live with the reality of the financial constraints. I listened to the Fine Gael Deputy from Kildare North talk about education.
He never mentioned the 19,000 extra teachers and special needs assistants who have been put into our schools in the past three to four years. He did not even have the guts to admit that there has been a substantial building programme, including in Deputy Broughan's constituency and in my constituency of Dublin North. Major news schools have been announced and, more important, built in the past number of years. Does Deputy Broughan want me to name them? There are extra schools in Balbriggan, Skerries, Rush, Lusk, Swords and Donabate. Does Deputy Broughan want me to name the schools in Dublin North-East?
I will leave Deputy Broughan to deal with Dublin North-East. There has been a substantial programme. One must be realistic in terms of what we can do at this point.
In regard to class sizes, there are exceptions to every rule and I will focus, in particular, on schools with large numbers of foreign national pupils in their midst whose command of English is not too good. We need to put extra language teachers into those schools and I will ask the Minister to deal with that issue in a very flexible and considerate manner.
We want to reduce numbers going forward and as money permits. We have good school buildings and a teacher-pupil ratio of 28:1. Most of us in this House went to schools with a pupil-teacher ratio of 35:1 or 40:1, or at least I certainly did and it did not do me any harm. There were 35 pupils in my children's classes and they all went to college and got degrees, masters' degrees, etc., which I did not.
I do not believe the pupil-teacher ratio is a major problem. We have quality teachers and I trust them to deliver a good education, as they have done over the years. That is our hope. The odd school will have problems and I recognise that it should be helped. However, for the next couple of years, we will live with a pupil-teacher ratio of 28:1. I do not believe there should be any arguments in that regard.
As a Deputy for Dublin North, one of the emerging locations for new business and research and development, I welcome the tax credits which the Minister has introduced in the budget. A sum of €335 million has been provided for research and development. That makes Ireland competitive in the global knowledge economy and it is an increase of 3% on last year, which is very welcome. When one considers that the current budget is nine times the investment we made in 2000, it is substantial and recognises the role the Government sees for business. I wish the Taoiseach and the business delegation travelling to China well in their efforts to bring business and badly needed jobs to our country. We need to encourage as many overseas companies as possible to set up research facilities on these shores.
I realise Deputy Broughan suffers slight embarrassment at the progress the country has made under Fianna Fáil Governments. I will not give out to him for barracking, because that is all he can do. I am sure he will not have too much to say.
I will continue with my speech if the Deputy does not mind, but if I have time, I will revert to that later.
At this point in time, it was necessary to have a tough budget. It is in the country's interest that we get our public finances back in order and bring competitiveness back into business. We must use every opportunity to educate the public about the current downturn and to warn them that the high expectations of the past must be tempered and lowered. The public should not be conned into believing that everything is rosy in the garden and that the Opposition would deal with the current situation better. Economists have told us that if the Fine Gael proposals enunciated in recent weeks were adopted, we would need to borrow an extra €4 billion. One can imagine the impact that would have on our economy, on jobs, on taxpayers and our GP cards.
Sacrifice is needed from all sections of society to maintain stability so that we will be in a position, when the global economy improves, to reintegrate our aims into Government policies and future budgets. In 1987, when the country suffered certain financial constraints, the Minister of the day, Ray MacSharry, took tough decisions. At the time, the people felt the measures taken were tough, but hindsight proved the decisions taken to be correct. It was no different in 2004 when once again tough decisions had to be made. Tough decisions were made then in the national interest.
As we discuss this 2009 budget, I believe we need to make tough decisions. We need to tell the public in clear, simple language the difficulties we have with our finances. We are €6.5 billion down this year and expect to be €9 billion down next year. This must be stated clearly so that the public understands why we must take tough decisions in the budget. If we do not, we will find great difficulty in getting ourselves back on track and being ready for the upturn in 2011.
With regard to the current financial situation, it must be recognised that Ireland is not the only country suffering a downturn. The whole world has gone through turmoil. There is a downturn in the global economy. We are aware of the situation with regard to the US banks and sub-prime lending and the difficulties it caused for the US, us, our neighbours in Britain and our European counterparts. We did not bring that upon ourselves. It was foisted upon us. Opposition spokespersons have commented that Ireland brought these troubles on itself, but our banks were not immune from the problem in the United States.
Ireland showed great leadership in bringing forward its bank bail-out legislation. We were the first to step in and say we would guarantee the savings of depositors. That was the right decision. It was done in the interest of stability and we got stability because of taking that decision. It is interesting that our European counterparts, some of whom criticised our decision at the time, have said it was the right way to go.
At least Fine Gael supported the legislation, because it knew there was no alternative. The stance taken by the Labour Party in voting against the legislation was ridiculous. The Labour Party is proud to be anti-national.
It is proud to say it would let our economy sink, but even my salary and that of Deputy Broughan depend on a viable banking institution. Deputy Broughan is proud of the Labour Party stance, but he needs to reconsider his philosophy.
The Labour Party members should hang their heads in shame. They let the country down and said they would not let the legislation come into the House. They wanted to knock it. Even last week, when the Minister's plans came before the House, including provisions for transparency, the Labour Party would not vote for it.
The Labour Party had the opportunity to show how big it is and that it recognised the interests of the small people as well as the big. It failed miserably to take that opportunity. Much as we would all like to have seen the fat cats suffer, we need a banking system. America, Britain and all of Europe need a banking system. When the Labour Party has time to reflect on what it has done, it will regret it. The country needed the Labour Party members to stand up and be counted, but they failed to do that.
The budget is tough, but it is the right budget at this time. I hope that in a couple of years, when the global economy picks up, we will be ready to get back on the fast track, create jobs, create wealth, give extra money to our old pensioners and provide good jobs at low tax rates to our citizens.
I welcome the opportunity to say a few words on this budget. The budget should be judged in terms of its effects in a particular context. It was brought forward for a particular reason, to respond to international economic circumstances which had changed. While those who prepared the budget have used these external circumstances as a kind of apologia for their actions, there is no doubt but that there has been a crisis in fiscal terms here since 2006.
The reason I say the crisis has been with us since 2006 is because I want to talk about real economics. In 2006, our imports exceeded exports. Without being partisan about it, between 1995 and 2000 the economy performed well in terms of growth, which was sustained by export growth. Exports then flattened out and dipped in 2006 after which imports exceeded exports resulting in a serious balance of payments problem. It is not accidental that in approximately January 2007 property prices reached their peak. There was an international bubble and within that a home-grown bubble based particularly on property speculation and also fed by a series of instruments that could be regarded as virtual financial products. Some people suggest these were invented in the United States and sub-prime lending spread through the international system and made its way into the Irish banks. I do not accept that excuse. There were serious failings in regulation by the Financial Regulator and the Central Bank.
Those responsible for economic policy promoted the kind of property speculation we had. In time, people will look back at the McCreevy budgets as the most irresponsible of all time in being totally indiscriminate in the consequences created by tax breaks. While there was an international atmosphere, there is also that for which we have responsibility. This was brought home to me very dramatically when I was in Westland Row church this morning looking at frail elderly people coming up to stand behind a microphone to state they had worked all their lives. In some cases, women said they had retired from the Civil Service and were, therefore, in a particularly vulnerable pension position. They might have got a lump sum and reared their children. How are they now to purchase on a private market the health security people want?
I have been thinking about what is at stake here. It is the loss of citizenship by the Government action. The previous Taoiseach announced some kind of campaign which was supposed to be about citizenship, but turned into a lacklustre appeal for more volunteerism. It was not citizenship in any sense. Citizenship is about inclusion. Amartya Sen, the Nobel laureate in economics, once said that the purpose of economics was "the ability to appear in public without shame". Genuine citizenship is about inclusion and that is the debate about universalism. We make universal provision for those who want to come in and out of citizen participation in their society. This is why we should have universal provision for children in education, etc., in order to give all citizens a chance to be able to participate in society without shame and to be able to earn a living. There is a debate in philosophy that I cannot deal with in 15 minutes as to whether this should be based on capabilities.
At the other end, people want security. Having spent their lives working, they want to be assured. While they are not looking for material benefits, they want to know, if they have need or are ill, that they would be able to have access. Those who came to Westland Row this morning wanted to be secure in regard to health needs. Apart from everything else, this makes practical sense. On average, a person lives for three years after going into a nursing home. I was a sociologist in another life. The proportion of people who want to spend their final years in their own home has never sunk below 80% in any survey. People want to be at home. While some of people never used them, the knowledge that if they felt unwell they could use their medical cards and go to a pharmacy with which they had a relationship served as a kind of instrument of security.
These two ends of the spectrum are represented by the elderly and children in education. It is a pity that the previous speaker is not here. A woman spoke about the school in which she works in Tallaght. That school, in which almost 50% of the children have difficulty with English, is losing two language teachers. Nobody wants that to happen and it should not happen. However, there is a great laziness about this budget. When I was a Minister, the message would come from the Department of Finance that I needed to prepare my budget on a no-change basis. The Department of Finance would always come back for the second round in which it suggested it needed a cut of a particular percentage. This has all the marks of that lazy indiscriminate thinking with no flexibility or discretion for, for example, the school that with half its pupils——
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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With respect, there is flexibility if the Deputy reads the announcement.
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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In the example the Deputy cited there is flexibility.
I will return to it. If there is flexibility in that case, I welcome it. However, how can it be progressive to increase class sizes? One might say that this is what we can afford. The Minister of State can disagree with me if he wishes, but I want to be practical about the matter. If the Government wanted to have some kind of citizenship that would be positive, it would have put a rights ring around certain categories of the population — children in education and the elderly. It would have used education for this reason. If I accepted the Minister of State's logic, young people are going into an economic space where it will be far more difficult to get employment. It will be more insecure employment and they will change jobs far more often during their lives. Therefore, they will need more personal, social and professional skills. It makes sense to invest in education. For those who are losing their jobs, it makes sense to reduce the obstacles on the social welfare side to enable people to get back to education. That did not happen. It also made sense to have upskilling. There is a series of things I could mention. The budget fell indiscriminately on an entire category of people.
It is very interesting to give an example of an uncaring bureaucracy in my limited time. The elderly are not getting a hit for the first time. Regarding the handover of responsibility for the special housing aid for the elderly scheme from the HSE to local authorities, I was informed on 19 September 2008 about the western side of things. Initially the local authorities claimed to be responsible for the physical side of adapting a house, but nothing else to do with elderly care. The HSE letter stated:
During these meetings we outlined the number of staff involved in administering the scheme, methods used by us in assessing the applications? We informed them that we received 468 applications in 2008 of which 100 are for the City? There are 387 applications outstanding. We also explained that our current financial resources have been committed for 2008. Additionally we provided details of our Community Employment schemes. [It wanted to maintain them.]
Both Local Authorities explained that they currently have no funds available to administer the scheme and would not be in a position to accept any of our applications. In fact, Galway County Council asked us to accept 270/280 applications from them. This was refused in view of the current pressures.
At present we have ceased accepting all Applications and are referring applicants to Galway City and County Councils even though we are aware that they do not have the resources available.
The letter is signed by the local HSE representative. What way is that to treat elderly people at the very bottom of the pile? What did these people want? They wanted a downstairs toilet. They wanted to be able to wash themselves — basic requirements. The issue of the medical card was just a symptom of how elderly people are not regarded as a category of citizens that should be ring-fenced in terms of rights for the sake of security for the elderly. The same is true of the other end. Irrespective of the government in power, it should be investing in education not just for the economy, but also to have a kind of citizenship that is caring, has values of inclusion, avoids all of the different attacks we have seen on the social fabric and so forth. The budget missed all that.
I refer to the admissions that have been made. President Sarkozy referred to the necessity for another Bretton Woods Agreement to stabilise international finance. The reality is that what he is not saying is that the old game has failed. Hundreds of economists have written subscribing to the liberal model of the Washington consensus that emanated in the University of Chicago where a tower will be erected shortly to Milton Friedman. That model has brought the world to its knees financially to a point rather like that addressed by John Maynard Keynes in his time. There is need for a new international institution to stand alongside the IMF and the World Bank but it should deal with hot money, speculative money and the drugs money flowing through the system and it should be built on a social model.
The future of politics, which is very interesting, is between those in the Cato Institute who argue that the last thing they want is regulation and those who want regulation to achieve a social economy. The beauty of Europe in its time was that we might have had a region with a set of economies that would advance the social model and stand against the other regions that wanted unregulated labour markets and to drive social protection down, which is important.
Those of us who have been involved in development aid and so on visit and observe countries now and again. At the same time speculation was taking place in the international economy, neat agglomerations were managing to construct conditions of oligopoly and monopoly. I attended the world hunger meeting in the Royal Hospital Kilmainham last week. In the food sector, five companies control 90% of the world's grain trade, six companies control 80% of the world's pesticide market, three companies control 85% of the world's team market, two companies control 50% of the world trade in bananas, three companies control 80% of the confectionery market and, most important, the media have been monopolised. We have, therefore, a bad economic model internationally, which has failed, compliant economists who are stuck with one model and media, which are monopolised such that through Fox Television and Berlusconi one will hear the same failed song all the time.
World poverty will result. When one comes to the quality of the debate about economics domestically, people think it is a casual consequence that there are such things as good times and bad times. Good times mean there is no difference between a time as far back as 2001-02 when the Government was exporting and sustaining an economic growth rate and the current time in which exports have disappeared and become expensive for a number of reasons. The Government continued to claim a growth rate when it was revaluing the property base of the entire country and when, in five budgets in a row, it transferred benefits worth hundreds of millions of euro to people to continue the speculative madness that put housing out of the reach of ordinary people but created vast personal fortunes.
I refer to measures that could have been taken and, in particular, one that has not been mentioned so far. With regard to multiple house ownership, the person who has acquired an additional house will be charged €200 and an employee who is provided with a parking space by his or her employer will be also charged €200. Why not increase the charge for a second house to €400 and make it geometric for the third, fourth and fifth houses until over a five-year period an owner of seven or eight houses would face a penalty of 60% or 70% if necessary? That would release housing units into the market and reduce their price, thereby helping people in the housing market and it would have been a hell of a lot better than saying to those who tore the heart out of the economy on a speculative basis, "Is there anything we can give you now to keep you in business?" While the problem emanated abroad, we had our own problem and it was dealt with disgracefully. We must not allow the old and the young to carry the burden of reconstruction. That must fall on those who created the problem.
Budget 2009 is a watershed, which has shown the true colours of this Fianna Fáil-dominated Government. It is ironic that during the weeks when we bailed out some of the fattest cat bankers, low and middle income families, senior citizens and children were forced to carry the can for the mistakes of Governments over the past 11 years, as my colleague outlined. I echo my party leader's comment that the Government has no mandate to attack senior citizens, children and low income workers in the way it has, given the change in Government from that which managed to sneak in June 2007 to the three amigos — the two Brians and the Tánaiste — who are dominating the current Government. The solution to proceed, given the severity of the difficulties faced by the country, is to call a general election. If the Government has confidence in its proposals, we should have a general election as soon as possible.
I refer to the many savage cutbacks, which my colleague, Deputy Shortall, called 30 treacherous cuts in the social welfare budget. One of the meanest relates to the jobseeker's benefit. Many thousands of young workers are facing unemployment for the first time and the Government made the conditions for accessing this benefit more difficult in a most mean-spirited move. The 1% levy, as originally promulgated, was an amazing attack on low income workers, particularly those on the minimum wage. The thresholds that have been mentioned in the context of amending it are too low given the struggles of low paid workers.
Like all other Members, I have been inundated with telephone calls and e-mails. The first person who visited my clinic last Saturday was a 94 year old senior citizen who was desperately upset that a Government he supported at times in the past had reneged on its commitment to senior citizens. The fear felt by him and 350,000 other senior citizens last week can only be experienced first hand by speaking to them, as I hope Fianna Fáil and Green Party Members will do tomorrow when we have the opportunity to meet tens of thousands of them outside Leinster House.
The education cutbacks are equally harsh and every time we turn around, another is discovered. For example, a number of classes in St. Colmcille's school in Donaghmede will have 43 children next year. St. Peter and Paul's school in Baldoyle has campaigned for a lower pupil-teacher ratio and most of the children will learn in classes of well over 30 next year. The same will apply in the Cathaoirleach's constituency of Cork North-Central and throughout the State.
We feel a little let down. Before last year's general election the INTO general secretary, Mr. John Carr, was dancing around on a platform with the former Minister for Education and Science, Deputy Mary Hanafin, during a love-in at the trade union's annual conference. I presume there was a feeling the Government had made solemn commitments to the teaching profession, but 15 months later they are totally in shreds.
Absolutely. How could such a close relationship have come apart so quickly?
The key characteristic of the transport budget is commuters have been hammered right, left and centre through the increase in excise duty on petrol by 8 cent a litre from budget night and the increase in motor taxation of 4% on cars with an engine capacity of less than 2.5 litres and 5% for those with a higher engine capacity.
Commuters have been hammered on the one hand while, on the other, there have been cuts in the public transport investment budget. The urban parking charge, to which my colleague referred, will impinge on many workers. In many parts of the mid-Leinster region, Munster and Connacht, people must commute 40 to 60 miles because they have no choice. There is no public transport. For example, people must bring vehicles onto this campus if they are Oireachtas civil servants. They must also take their cars if they work in other public and private sector jobs based in inner city Dublin and in other cities.
The extraordinary betrayal by the Green Party of the transport budget is astonishing. More than 63% of the infrastructure budget, amounting to some €2.1 billion, has been allocated to the roads programme. While we have always supported road improvements and maintenance, in respect of which there are cuts, the Green Party is supporting a transport agenda that prioritises roads. During the years I spent in the first civic alliance with the Green Party, particularly in local government, a raison d'être of the party seemed to be to increase public transport. Some 15 months in government and the Green Party is out of touch and abandoning one of its basic creeds. As incredible as this seems and notwithstanding Deputy O'Flynn's comments, it appears the Minister for Transport, Deputy Dempsey, is more concerned with public and sustainable transport than his Green Party colleagues because of his defence of several Transport 21 projects.
The Minister listed a number of projects, including the Luas extensions, enhanced bus corridors, phase one of the western rail corridor to Athenry, the Midleton rail line, phase one of the Navan rail line and so on, but these are well under way and have been known of for some time. A number of major projects are in grave danger, for example, the interconnector that CIE and Iarnród Éireann want to build, which would transform the city via a four-line DART network. People wonder what will be the project's pace in 2009, given the level of cutbacks. Why will the interconnector and metro north not be moved ahead together?
From the briefings I have been given by officials at the Department of Transport, the real story in transport is that metro west, the Lucan Luas line F and the red and green line BX Luas link-up, which we have heard about ad nauseam from Ministers, are in grave danger or have disappeared from the agenda. In terms of other important projects, such as the Navan rail line, in which the Minister is probably interested, and the western rail corridor, we must ask whether either of these vital national projects will get past stage one.
I have corresponded and interacted considerably with Labour Party councillors in cities such as Cork, Galway and Limerick regarding light rail lines in all three. What is occurring on this front? We do not know whether the relevant feasibility studies will be completed. The projects seem to have been placed on the back burner indefinitely.
Fears concerning the total abandonment of metro west and the Lucan Luas line epitomise what the Green Party has done. I welcome the Minister for Transport's commitment on metro north last week. Despite Deputy Kennedy's comments, I have been a strong supporter of metro north because of economic and other developments. Unfortunately, the route will not pass through my constituency as I had advocated, but I am happy to see it pass through Dublin North and Dublin North-West. I hope the work to be done in 2009 will not peter out and that there will be no further harsh news in the years ahead.
Before the 2007 general election, my colleague, Deputy Shortall, called for a massive increase in the Bus Éireann and Dublin Bus fleets. We are still waiting. Since Transport 21's establishment, Dublin Bus has only received 100 additional new buses. If one wanted an accessible, reliable and speedy bus service for all city quadrants, one would need 300 to 500 new buses. I was struck by how the Minister, when discussing this issue last week, did not seem to understand how a bus company worked or how many buses needed to run at peak times to provide an efficient and reliable service. Why is the Green Party staying in government, why is there a green component in the Government and why can we not have a general election?
During the budget debate, I welcomed the new cycle to work scheme, which provides for a maximum tax exemption of €1,000 in a five-year period. Why could the Ministers for Transport and the Environment, Heritage and Local Government not embark on a wider pro-cycling initiative? The latter merely discussed a Sutton-Sandycove cycle route, which has been in the works for ten or 15 years. Local councillors in the various councils around Dublin Bay handled the issue.
The Minister, Deputy Gormley, also spoke last week about producing an electric car sector to follow the examples set by Denmark, Israel and so on. I would welcome this warmly, but the only way the Minister's carbon budget will reduce transport emissions — transport and agriculture are the two problem areas in terms of CO2 emissions — will be by plunging the country into a significant recession. There is a close relationship between rates of economic growth and percentage rates of increase or decrease in CO2 emissions. The Minister and his seven parliamentary colleagues have decided to get us in the right carbon emissions territory by bringing about a major recession. As my colleague, Deputy Tuffy, stated, nothing in the carbon budget details how anything can be done quickly about carbon emissions.
The parking levy will be problematic. Will part-time workers on the minimum wage be levied at the same rate as highly paid senior executives, as seems to be the case? If an employee does not have a dedicated car parking space but shares it with other colleagues, he or she would still face a €200 whammy. Last week, I was contacted by a couple sharing a car. Must they pay €400? As with so much else done by the Government, we are finding out the intricate and desperate conditions day by day.
The air travel tax will have an unhealthy impact on, for example, Shannon, the west and the tourism industry, an area that did not need any more taxes or hassle, given——
——Aer Lingus's withdrawal from Shannon Airport against the wishes of my party and the House.
One of the meanest cuts was in the road safety budget. Last weekend, seven citizens died in car accidents. We have been calling for a speed camera system. Some 11 years ago, the former Taoiseach, Deputy Bertie Ahern, stated that Ireland would get a speed camera system. It would have cost £25 million then. We are still waiting because it is not referred to in the budget.
The budget is outrageous and unacceptable in that it targets the most vulnerable, low and middle income families. They are carrying the can for the disastrous mistakes of the Taoiseach and Charlie McCreevy. The budget shows that Fianna Fáil and the Green Party are out of touch. While it would be difficult for every Deputy, there should be a general election.
We find ourselves in difficult and uncertain times, unprecedented in my lifetime. Turmoil in the financial markets and steep increases in commodity prices have placed enormous pressures on economies throughout the world. The budget sets out a plan to deal with these unfavourable circumstances. The aim is to restore order and stability in the public finances and to increase productivity and competitiveness.
The budget seeks to secure the significant gains we have made in the past 15 years. These include the increase in the numbers at work to 2 million, major improvements in living standards, a more generous welfare system and the largest public investment programme in the history of the State. All these advances were made in better economic times. However, the context has changed dramatically and with great rapidity. It is incredible to consider how quickly our circumstances have changed in the recent past.
As a small open economy, we are vulnerable to economic shocks beyond our shores. There has been a sharp rise in unemployment and a steep decline in revenue, with businesses experiencing the types of economic difficulties not seen for more than two decades, although we are now in a better position to address those difficulties. We must not forget that even in this global downturn, Ireland continues to attract a disproportionate amount of all foreign direct investment into the European Union. We continue to welcome announcements of new investments in cutting edge companies and new high value jobs for graduates.
The Government is determined to retain and enhance Ireland's reputation as a pro-enterprise economy and an attractive location for foreign direct investment. The most important action we can take in this regard is to stabilise our public finances. Fiscal responsibility has ensured a modest national debt burden, a strengthened ability to deal with the financial and economic crisis now affecting the world economy and a credible tax regime which incentivises work and investment. We must take the right decisions now to place us on a path to budgetary stability in the interests of everybody who lives and works in the State.
The budget provides a social welfare package of €515 million, with spending in this area increasing by 8.4% to €19.6 billion. Education will see an increase of 2.8% to €8.7 billion, while health spending will rise by 2.1% to €15.8 billion. The budget acknowledges the importance of protecting young home owners. Mortgage interest relief increases to 25% for first-time buyers in the first and second years of their mortgage. Most auctioneers have welcomed this initiative and expressed confidence that it will be of benefit to those seeking to purchase their first home. First-time buyers in the third, fourth and fifth years of their mortgages will see an increase in mortgage interest relief to 22.5%. Those in years six and seven will continue to receive relief at 20%, while those after year seven will continue to receive relief at 15%. The existing local mortgage scheme will increase the maximum loan available to borrowers from local authorities. In addition, a single Government equity initiative will be introduced to assist those seeking affordable housing and to simplify the delivery of affordable homes.
The budget provides for €56 million worth of improvements in support of families and children. The qualified child rate is to increase by €2 to €26 per week. All family income supplement, FIS, thresholds are to increase by €10 per week per child. The income threshold for the back to school clothing and footwear scheme will also increase to allow more families to qualify.
The budget recognises the importance of keeping people in work. Capital expenditure of €309 million, representing an increase of €15.4 million over the 2008 forecast outturn, is made available to continue the implementation of the strategy for science, technology and innovation, SSTI, as part of the Government's commitment to promoting a competitive, knowledge-based economy. This provision will continue to support the work of Enterprise Ireland in driving innovation and research and development in companies, and will maintain the commitment to world class research through the capital allocation of €179 million to Science Foundation Ireland.
Support for the major enterprise development agencies will continue in 2009, with a €90 million capital expenditure allocation to IDA Ireland to attract foreign direct investment. A further €48.4 million will be allocated to Enterprise Ireland for the indigenous sector, reflecting the importance of maintaining and attracting foreign mobile investment and a strong commitment to increasing exports by indigenous companies. By moving to restore stability, the economy will be in a position to benefit from the next global upturn.
We all must pull together in these uncertain times. However, we must not forget how far we have come as a country. The past ten years have seen a major increase in the public services financed by taxation. Day-to-day expenditure has risen by 200% between 1998 and 2008. Spending on health has risen by 293%. Provision for education has increased by 174%, while the social welfare allocation has risen by 200%. Many other European Union member states are also obliged to take difficult decisions. This is a financial shock that affects everyone.
I am concerned by the recent announcement of the intended closure of four Army barracks. This came as a complete surprise to me, particularly the proposed closure of Connolly barracks in Longford town. I hope this proposal does not proceed and I will meet the Minister to make the case in this regard. A rally will take place in Longford town next Saturday at 2 p.m. after which a march will proceed from the railway bridge to the barracks. I will attend this rally to show my support for and solidarity with the people of Longford.
I wish to make absolutely clear my opposition to this proposal. I am not closing the barracks.
In fairness to Deputy Barrett's party, when Mr. Louis Belton was Deputy for Longford he kept the barracks open by political intervention. I recognise that achievement. We kept it open for the succeeding 23 years.
I intend to arrange a meeting between the Minister and the town and county mayors. They will be coming to Dublin to protest outside Leinster House on Wednesday week. I have been in contact with the Permanent Defence Forces Other Ranks Representative Association, PDFORRA, and hope to meet them tomorrow. I will continue to impress upon the Minister and the Chief of Staff the importance of keeping this barracks open. The Chief of Staff will meet the soldiers at Longford barracks this Thursday and I hope he will bring clarity to the matter.
This is a tough budget — we are in hard times. The Government takes no pleasure in telling people it does not have sufficient finances. It has a duty to govern and to make decisions that are in the interests of the State and the people. Short term, quick fixes are not the answer. We owe it to our children and to future generations to straighten out our finances however long it takes and to ensure that we hand over the State finances to them in as good a state as they have been for the past ten years.
I do not believe anybody could have in their wildest dreams envisaged the wealth we enjoyed for the past ten years. We are all completely shocked by the recent deterioration in finances worldwide in such a short space of time. I wish the Minister for Finance, Deputy Brian Lenihan, and the Taoiseach, Deputy Brian Cowen, well. It is a tough time. They have a duty to this country and have, and will continue to, govern well. This is an important time in our history and tough decisions had to be made. Sadly, not all were popular decisions but they will in the long term prove to be in the best interests of Ireland and its people.
I am delighted to have an opportunity to speak on this budget. I believe it is the first of a number of difficult budgets because clearly matters will not improve over night. The situation in the globalised world in which we live today, as in Ireland, is pretty severe. Despite the difficult economic circumstances in which we find ourselves, Ireland today is in a much better place than it was ten or 15 years ago. Currently, we have 2 million people in work. This is not to lessen the impact of people losing their jobs, which is clearly a traumatic experience, or the fact that more people will leave Ireland to find work abroad. However, the need to leave Ireland does not carry with it nowadays the same fear experienced in the 1980s that if one left, one might not get back for many years. The changing world and airline industry makes it possible for one to feel not very far away from home. While people may have to move to another country for work, they will not leave with the same level of sadness with which people left in the past.
There has been a real improvement in living standards in Ireland and we now have a much more generous welfare system. The Government introduced the biggest public investment programme in the history of the State. All these advances were made in the context of good public finances and impressive and record levels of economic growth. However, we are in exceptional times and must make difficult choices. The Minister for Finance, Deputy Brian Lenihan, has made difficult choices. I believe he has a steady nerve and a steady hand and showed his coolness under pressure two weeks ago. The situation with the banks showed the Minister to be a man apart from the crowd. He was impressive and is continuing in that vein.
The global economy is going through a severe storm. I recently heard President Bush say on radio that things are getting better. I am not sure I share his optimism, but who knows? Perhaps he will get one thing right during his tenure as President. In this severe economic storm, Ireland is but a small boat bobbing on the economic seas and has been left open to the harsh winds of the downturn. We must make the right decisions now. While they may not gain us short-term popularity, people will in time recognise they were the right choices. Time will prove that this budget was what was needed to steady the Irish ship in these stormy times. It will be the first of many budgets devised to get us back on course and to take advantage of the upturn in the global economy when it inevitably comes.
Two weeks ago, the Minister for Finance introduced measures to deal with the threat to the banking system and the knock-on effects on the economy. There has been much talk of the Government bailing out the banks. The Government did not assist the banks for the banks' sake. It did so to ensure that the economy did not collapse around us and that families and communities throughout the country were not plunged into the economic abyss that faced us. Many people, excluding the Labour Party who did not support the Minister, believe he handled the matter with great confidence and determination.
The banking system in Ireland differs from the banking system in the US and other models used throughout Europe. Each banking system has grown up with its own differences. There has been much criticism of the regulatory system in Ireland which is made up of the Central Bank, the Financial Regulator and the Department of Finance. Despite what people say, the banks, who are players in this, do not want the banking system to go under. They have as much interest in the banking sector surviving this crisis and in co-operating with the Minister for Finance through the new bank guarantee scheme. Our regulatory framework is among the best in Europe, if not the world.
Last April, I was part of a group that visited New York and Washington to meet with different groups from the Federal Reserve, the Treasury and some of the banks. It was clear that there was no one in the US who had a vested interest in calling a halt to what was happening. From homeowners and brokers who thought they would make a killing right up to Wall Street, everybody felt this could not go wrong. Clearly, nobody was there who wanted to or was able to call a halt.
That is not the case in Ireland. We have difficulties but in America, national confidence in the banking system collapsed. This spread like a virus through the Irish banking system and we now have a real problem. It was not caused by any gross negligence in the banking system but by the lack of confidence in the American banking system. I understand sub-prime lending in Ireland accounts for less than 3% of the residential market whereas in the US it accounts for over 25%. Clearly, our market and banking system bear little resemblance to that of America.
There is no doubt this year's budget has been one of the trickiest in many years as we are not in as healthy a financial position as we enjoyed over the past ten years. We are not alone in this position as countries across the world are experiencing downturns and face tough decisions. When one considers what has happened in Iceland, one can be thankful we have a Minister for Finance and a Taoiseach who could act with such decisiveness and determination. Although their actions were criticised by Germany and England — the British Government expressed concern — those governments realised the Irish model was to be followed.
The overall aim of the budget is to rebalance the public finances. This will not be done in one or two budgets and may not even be done in three. We must do it and savings sought by the Government must be found. They will be sought through indirect taxes, such as the rise in cigarette and fuel taxation — there was some discussion as to whether the tax on cigarettes should have been increased by more for health reasons. In considering health issues, one must take the broad view that, on balance, the increase achieved by Government is fair. The same applies to the rise in the cost of petrol.
The €200 levy on non-principal residences is innovative. I represent Dublin South-East and a large section of the constituency has second homes or non-principal residences. All these people have said that although they would prefer not to pay it, the levy is there and they are not that upset about it. They recognise that paying a small levy is not a significant inconvenience.
I am satisfied this budget is pro-business and aims to encourage new commerce and research, which is vital to keeping the economy healthy in the long run. Measures include an increase in the research and development tax credit from 20% to 25% and the remission in capital gains tax for new companies in their first three years. The filing of tax returns is always a big concern for businesses and the Government proposes to encourage take-up of the Revenue Commissioner's on-line service by providing a general extension to existing deadlines where returns and payments are made via the on-line system. This is a good initiative which is about encouraging people rather than penalising where possible.
It is very important that corporation tax is kept low and achieving this aim has been prioritised. Even US presidential hopeful John McCain is now talking about this in his speeches.
We are all aware of the recent controversy about medical cards but it is important to focus on the fair deal initiative, for which the budget has provided €55 million. The deal will make arrangements for financial support for people who need long-term care, which is vital to ensuring stability and security for people in old age. In the past few days we have seen that security and being able to plan for the future is a very important requirement for older people in the community.
I welcome the increase in mortgage interest relief for first-time buyers. The decline in house prices has offered some opportunity for those seeking to get on the property ladder but it is nevertheless daunting for those trying to purchase a home. I spoke to a group of young people in employment today who said it was a good budget for them because prices are coming down and mortgage interest relief is going up. It has been increased from 20% to 25% in the first two years of a mortgage and to 22.5% in the third to fifth years. The rate has reduced from 20% to 15% for non-first-time buyers. It is a good initiative.
Although we speak of the rising unemployment rate, we must remember that over 90% of the workforce is still in employment. Such people see house prices coming down and are closer to the opportunity to buy a home, which is good. Every cloud has a silver lining and such people see it.
There has also been a significant increase in investment in social and affordable housing, which I fully support. This is being done largely through the extension of the local authority mortgage scheme and the introduction of the Government equity scheme.
There is no doubt people will have to make sacrifices. I welcome the 10% cut in Ministers' salaries, although I am not sure Ministers would welcome it. It sends a signal. None of us wants to pay tax — if we had a choice we would not pay any — unless one is from an ideological party which believes so much tax should be paid that nothing would ever work. To refer back to America, I heard US presidential hopeful Barack Obama say he would prefer to pay no tax. Although nobody wants to pay tax, we recognise we must do so to get the balance right. The Government has done this and its approach has been to make tough decisions now so we can ride out the economic downturn and be in a good position to avail of the upturn when it arrives. There is no doubt we are in a better position to do this than we were ten, 15 or 20 years ago.
I will briefly refer to the medical card. Today's announcement and the accompanying figures will put older people's minds at ease. A significant aspect for older people is having a bit of security and being able to plan for the future, as I mentioned. The issues surrounding the medical card have shown that people were very upset by these events and I am genuinely sad at the upset and concern which older people felt on the withdrawal of the card. Many people were unclear as to whether their medical card was to be withdrawn, although in many cases it would not.
Those who would have been affected by the original proposal were clearly upset and everybody knows people of advanced years. I welcome today's announcement. The Minister has shown he is willing to listen and to bring about changes when the case is strong. Older people had a strong case, which they made, and the Government will get on with managing the country. In many ways, the Government has acted as a union for older people and Members must ensure they continue to protect older people.
While sitting in the Chamber for the past hour or so awaiting my turn to speak, I have been listening to speaker after speaker on the other side of the House stating that sacrifices must be made and the books must be balanced. While that is all great stuff, at whose expense? This budget is a complete cop-out. I had the pleasure of serving in the Cabinet a couple of times and anyone who knows anything about running a country is aware that the three main spending Departments are Education and Science, Heath and Children and Social and Family Affairs. The bulk of public expenditure takes place in them.
The Government has copped out from taking the hard decision to cap salaries or have a pay freeze and to deal with reform of the public service. Instead, almost 85% of the total budgets of the Departments of Health and Children and Education and Science go on salaries. Consequently, those who wish to make cuts without touching salaries will be obliged to fiddle around with 15% of the budget. This is the reason for all the stupid decisions that have become apparent since the budget last Tuesday. I wonder whether anyone foolproofed this budget before the Minister delivered it, as anyone who did so would have discerned the wrongdoing that was being perpetrated on two essential groups in society, namely, the elderly and our schoolchildren.
I am in my 60s and can remember my parents and many neighbours who were much older than me. They lived on scrapings in Ireland and fought to educate me and others when there was no free education. They paid high rates of tax, in excess of 70% or 80%, at times when things were bad. These are the people who were singled out in this budget to balance the books and to get the economy back on track. What a load of nonsense. The Minister for Health and Children has a budget of €15.8 billion and I will refer to the Minister for Finance's budget speech and the facts he presented therein. He stated: "Since the establishment of the HSE the number of whole-time equivalent staff has increased by 12%." The number of administrative staff alone has increased by approximately 1,900 since the executive's establishment. The Minister went on to state that the Government has decided that a targeted voluntary early retirement scheme will be introduced for the HSE and discussions are under way on the development of such a scheme. This will initially be targeted at surplus middle management and administrative staff, he added.
This is a Minister for Finance who admits the HSE, which has a budget of €15.8 billion, has surplus staff about which he has done nothing for a number of years. He has allowed the number of administrative staff to increase by 1,900. However, the single cut he sought in this area was to take medical cards from people who are over 70. What an extraordinary thing to do. Moreover, the Minister stated, with hand on heart, that we all must make sacrifices. This constitutes complete and utter mismanagement and cowardice of the worst order.
When this debate resumes tomorrow, I will deal with the subject of education in greater detail. However, I will refer to others who have been affected. I received an e-mail from a lady who spends her life looking after children with autism, particularly those who leave primary school and attend secondary school. Heretofore, at 16, such children were in receipt of a disability allowance of €197. It went to the family towards dealing with this terribly difficult problem. However, in this budget, the Minister has decided to take the allowance from 16 year olds and one now must be 18 before getting it. Although there are 1,900 surplus staff in the HSE, the elderly and the disabled have been hit. I refer to a disability allowance for a 16 year old whose parents must put up with tremendous hardship. They must travel for miles to get any sort of education for a child who is not capable of earning a living alone. This is the sort of cutback one gets when one funks the hard decisions and does not do one's job. In the past ten years, the Government has failed to do its job. I do not want to hear hypocritical comments that, having listened for the past week, the Government suddenly realised the hardship it was causing for old people by taking away their medical cards. What a load of nonsense.
One now hears that everyone, save the super rich, will retain them. To be super rich is to be someone on €700 a week, which is €36,400 per year. This is the exact figure to which the Minister for Finance, in his budget, has increased the standard 20% rate of tax. In other words, those who now are on the standard rate of tax are being called the super rich.
How will this system work? What constitutes a couple? In the case of a married couple in which the wife has no income, will she be regarded as having an income of €36,400 in order that she and her husband can earn up to €1,400 per week? Alternatively, is it someone who has independent means? What happens if one of them dies? Does the other partner lose his or her medical card? Should they take into account any small savings they may have? None of these questions has been answered. The level of uncertainty increases with each passing day because the Government refuses to recognise that it made a great mistake in asking vulnerable people over 70 years of age to give up their medical cards. As I have noted, the income limit is the same figure at which one pays the standard rate of income tax. The Government should not try to claim it now only intends to take the cards from the super rich and that 95% of those who are over 70 will have a medical card. How can the Government possibly state that a person who is on the standard rate of income tax is part of the super rich? Such nonsense is hard to stomach.
Regarding the other interesting point that arose in the Minister's speech, Members should watch this space. The next thing to be attacked will be child benefit. Will there be another debacle on child benefit and will incomes be taken into account? The Minister stated he intends to halve child benefit payments for children aged 18 and, eventually, the benefit will be taken away from them. This marks the beginning of another system of taking away a benefit that was awarded previously, through the taxation system, without an income limit. It is the beginning of something which will cause untold problems in the future. Will the Minister explain how people on the standard rate of tax at €700 per week are suddenly the super rich?