Dáil debates
Tuesday, 3 March 2009
Public Finances: Motion
7:00 pm
Enda Kenny (Mayo, Fine Gael)
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I move:
That Dáil Éireann recognises that:
the current Government strategy for restoring the public finances, the banking system and wider economy has failed to secure public support or international confidence, and that both the Irish public and international financial markets funding the banking system and our Government are losing patience;
unless we urgently take new measures to stop Government borrowing from spiralling out of control, other measures to support our struggling small businesses, exporters and job seekers will have little effect;
the Government no longer has the luxury of the time needed for the long consultation processes by advisory groups before taking further decisions on public spending, reform and taxation in 2010;
calls on Government to introduce a new budget for 2009 as a matter of urgency that:
sets out specific measures to substantially cut the €40 billion Government borrowing requirement for 2009 and 2010 that is being forecast by most commentators;
is ambitious, wide ranging and comprehensive in its scope;
is fair in its execution by showing what role is being played by all groups in society, particularly those who are in the best position to contribute more;
offers radical reforms to our budgetary system to squeeze out waste and poor value for money;
looks not just at spending cuts but at additional tax and other revenue raising measures that can drag our public finances back under control."
I wish to share time with Deputies O'Dowd, Ring, Coveney, Creighton and Feighan.
I move the motion in respect of restoring stability to the public finances in my name and that of all Fine Gael Deputies. Last week the Tánaiste said the public finances were under control. The announcement by the Taoiseach to the House today that the public finances could be out by €2 billion by the end of the year clearly means that they are actually spinning out of control. According to some estimates, Exchequer borrowing this year could be as high as €25 billion, with general Government borrowing of around 13% of GDP, including the cost of bank recapitalisation. That means we can expect to borrow somewhere between €21 billion and €25 billion by the end of the year. Without further decisions, borrowing will remain at this level in 2010 and 2011, leading to a tripling of the national debt by comparison with 2007 levels.
No other country is suffering from such a rapid and uncontrolled deterioration in its public finances. This is because the last Fianna Fáil-led Government, under the direction of the Taoiseach, Deputy Brian Cowen, then Minister for Finance, allowed public spending on unreformed public services to rise dramatically on the back of a temporary and unsustainable tax windfall from the overheating property sector. The disappearance of this tax windfall which, according to some estimates, had reached €15 billion by 2007, has left an enormous structural deficit in the public finances which will not be repaired by a return to normal growth rates alone.
While many things need to be done to stop the haemorrhage of jobs and improve the situation of struggling businesses, exporters and job seekers, nothing will have enough of an impact, unless we take the hard decisions now to mend the broken public finances. This is because the jobs crisis, the shortage of bank credit and the spiralling Government deficit are inextricably linked for two particular reasons. First, the banks cannot lend money that they do not have. They do not have easy access to funding because, as the public finances continue to deteriorate, international markets are losing faith in the Government's guarantee that they will be repaid in the event that the banks run into difficulty. Banks, therefore, have problems in terms of liquidity and, as a consequence, in lending and extending credit lines to businesses. Second, the rapid budgetary deterioration is leading to fear and uncertainty among businesses and consumers regarding future tax rates and Government spending. This is generating paralysis in investment and consumption decisions that is killing economic activity and jobs. Uncertainty is always the enemy of stable economies. The fact is that people cannot budget for their households from one month to the next. They do not know whether their children will be able to continue on to third level or if they are facing tax increases. There is no picture as regards the economic landscape that lies ahead. Businesses do not have any idea as regards what the borrowing requirement or the reduction in the national debt will be in the period 2009 to 2011. If business does not have a perspective on the economic landscape, it cannot project for investment purposes or as regards the running of its affairs. That uncertainty, confusion and paralysis caused by the Government is a major cause of the lack of confidence in business, both family enterprises and SMEs.
That is why it is long past time for the Government to bring to an end the current state of denial and prevarication. Its strategy for the public finances and wider economy is clearly failing, and both the public and international markets funding the banking system are losing patience with it. The world outside wants a clear message that Ireland has changed direction and that there are reasons for believing in the Irish banking system and financial institutions. My view is that an election would give a mandate in providing such clarity, but obviously people are welded together and the numbers speak for themselves. Other countries have achieved very successful turnarounds, including Sweden in the 1990s, by taking decisions that were broad, comprehensive, fair and frontloaded in areas where the pain did not continue interminably.
The current strategy for the public finances, centred on the public sector pension levy and the updated stability framework for the period 2009 to 2013 fails on two grounds. There are no specific measures apart from the public sector pension levy. This has fostered the impression among public servants that they alone are being asked to carry the burden of budgetary consolidation. While Fine Gael has long argued that the public service payroll must be reduced in order to fix the public finances, it is unfair and self-defeating to present this element of fiscal consolidation in isolation from other measures. There are also clear anomalies in the pension levy that reinforce the impression of unfairness among the lower paid, as the Minister of State, Deputy Michael Kitt, knows. Public servants have been pilloried. I respect the work they do. They want to work in a service that is efficient, meaningful and lean and which gives them job satisfaction. They come to me as leader of Fine Gael and point to areas where there is wastage on a daily basis right across the State sector.
The lack of any guidance to families and businesses as to how the Government intends to repair the public finances in the coming years is hurting consumption, investment and employment. People and businesses need visibility and a sense of the economic landscape ahead before they will make decisions on savings, investments, house purchases and pensions. One cannot expect otherwise. Uncertainty is always the enemy of stable economies and the air of uncertainty and drift surrounding the Government are killing economic confidence. That is the message the Minister of State needs to understand. Economic confidence is killed stone dead by Government prevarication and its refusal to face reality.
The updated stability framework for the period 2009 to 2013 has not served to restore trust in Ireland's credit worthiness among international lenders because there is too little detail and most of the adjustments are back-loaded, deferred to 2011 and beyond. Of the estimated €16.5 billion in fiscal measures of tax increases and spending cuts planned by the Government in the next five years, €10.5 billion has been deferred until after 2011. It is like the decentralisation programme. While nobody would expect the budgetary hole to be filled in one year — after all, it took the Taoiseach four years to destroy the public finances — the extent of the back-loading creates the perception of a Government which does not have the political confidence, legitimacy and credibility to take the hard decisions needed to put the public finances back on track where everybody wants them to be.
Time is running out. Both the public and the international financial markets are losing patience with the Government's inability to present a credible economic recovery plan. We cannot delay any longer, with the €20 billion hole in the public finances facing us and getting bigger each day. We no longer have the luxury of having the time needed for long consultation processes by Government advisory groups before taking further decisions on public spending, reforms and taxation in 2010. It is better that we take decisions quickly for ourselves rather than have outsiders do it for us later this year or in 2010. This is about protecting Ireland's financial sovereignty and independence. The Minister of Finance has echoed these words on a number of occasions in the recent past. It is time to face up to this reality. That is why it is vital that the Government should announce now that it will within the next month deliver a new budget that will substantially cut the €45 billion Government borrowing requirement for 2009 and 2010 combined being forecast by most independent economists.
The Fine Gael Party will enter the debate constructively. Nothing is off the table. Given the continuing deterioration in the public finances, to be credible it is necessary to implement new measures this year, on top of the public sector pension levy, to reduce borrowing by a further €1 billion, to be followed by a programme of expenditure cuts and tax increases of €5 billion next year. Taxation measures alone will not deal with this problem. What is vital is that the Government sketch the measures to be taken in both years, with the details of the measures planned for 2010 being elaborated on in the forthcoming budget.
There are possible measures that could be considered, including a carbon tax of €25 per tonne from April. That would save €500 million in 2009 and €750 million in 2010. National recovery taxes, for instance — one point on the top and standard rates of tax — would save €500 million in 2009 and €750 million in 2010. The suspension of public sector pay increments would result in a saving of approximately €250 million. Given the tax buoyancy effects, these changes would cut Government borrowing by just under €1 billion in 2009.
There are additional measures that Fine Gael has already pointed out, including a cut in the cost of the national drugs bill — approximately €200 million — in moving from branded to generic drugs; a carbon windfall tax, referred to by Deputy Coveney on many occasions, on the ESB of approximately €300 million; a cut in the FÁS budget for in-company training of approximately €150 million; a voluntary redundancy programme targeted at back-office public servants — approximately €250 million; a 5% cut in public sector pay for those earning above €100,000 which would bring in €100 million; additional efficiency measures in current spending across all Departments resulting in a saving of €1 billion; price reductions in capital programmes resulting in a saving of approximately €1 billion; and cuts in personal and PAYE tax credits resulting in a saving of approximately €1 billion. Additional taxes are obviously being considered by the Government in the property sector and so on. All of these issues need to be teased out.
The people are willing to face up to the problem provided they know its scale. They are also willing to contribute to having the problem sorted out but want to know two things in particular — first, that their contribution will go towards sorting out the problem and, second, that it will be dealt with fairly. That means that instead of hiding behind the worsening reality, the Government will deal with it because it will only get worse if it does not. From that perspective, our view is that a new budget should be introduced which is broad, comprehensive, fair and will deal with the full range of issues that must be addressed. Dealing with it from a taxation perspective alone is only one measure that will not cover the entire scale of the problem. The issue of current spending must be examined, in particular, waste and inefficiency, to ensure we will have a public service that responds to people's needs, represents value for money for the taxpayer and is responsive in terms of where we must go. That means dealing with the banks also and, as a consequence, the issue of confidence to ensure job investment, creation and protection.
There are enormous opportunities in the health, energy and construction sectors. These are issues the Government should be facing into with confidence but what the people need is a plan from it that sets out the economic perspective over the next three years to ensure business can invest with confidence, that we can protect and create jobs and get back to a point where confidence can be given to consumers, families and business and Ireland can begin to trade again, as it did previously. That will be a very painful process in the next few years but it must be dealt with. From that perspective, Fine Gael calls for a new budget to deal with the new reality. Every issue across the spectrum should be debated fully in the House.
Fergus O'Dowd (Louth, Fine Gael)
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I draw Members' attention to the fact that for this most important debate on one of the most critical days in our economic cycle given the very bad news we received today there sits not one senior Minister, Deputy, Green Party Deputy, former Progressive Democrats Deputy or one of their supporters on the Government benches. They cannot all be hiding. Some of them are probably fleeing the country in their helicopters. The fact is they are not here because they may not want to face the music before us. If they are listening, I invite them to come into the House. We will tell them what it is like but they will not escape the wrath of the people in the forthcoming elections.
What is happening is that the hopes and dreams of all our young people and their families are being shattered before our eyes. The queues outside dole offices are not just made up of labourers and working class people but bricklayers, IT specialists, graduates, doctors, nurses and solicitors. There is a whole new world of people who have received a fine education but to whom we do not provide the second part of the equation — a job and a future. The blame for this awful state of affairs rests squarely with Fianna Fáil and its buddies — the builders and the bankers. Throughout the country people are outraged at the lack of action on the part of the Government and the corruption and the carry on in politics. The culture of political corruption exposed at the tribunals is spreading like a cancer throughout all of our systems in business and commerce. We have undermined our prospects for the future and those of future generations.
The Government stands condemned. It is planning more cuts and those who will suffer most are the old, the young and the most vulnerable. The measure of any just society is the way it treats those who are most vulnerable at a time of need. The Government stands indicted, not just here in the Dáil or the court of public opinion but in the hearts and minds of Irish people everywhere for what it has not done and for what it is failing to do. It must go.
The Government could have anticipated the very bad figures announced today but what does it intend to do? It states it will think about what it will do. There is no decisive action, no clarity or purpose or intention and no national plan. There is no presence here either, which is a disgrace. The people are extremely angry at what is happening here.
I refer to what is happening in my constituency of Louth. Vibrant busy towns such as Drogheda, Dundalk and Ardee are now ghost towns at weekends and on shopping nights because there are no shoppers. Many of them do not have the money to shop, while a significant number travel north of the Border to get a better deal with the small amount of money available to them. This is a message for the Tánaiste who puffs and pants about what she will do about retail outlets and saving jobs that are being haemorrhaged left, right and centre in the retail trade. The likes of Tesco and Marks & Spencer are ripping off consumers who shop south of the Border through the differential between sterling and euro prices. What is she doing about this? The answer is absolutely nothing. Suppliers to Tesco are being told that if they do not come up with various sums, in some cases in excess of €1 million, they will lose their contracts. What is the Minister doing about this? Again, the answer is absolutely nothing. The Government is an abject and total failure. It has shamefully disgraced itself by its absence. I could go on but clear and decisive action must be taken, particularly in Border counties such as County Louth.
Why do we not have a new deal for local government? Why do we not have a rates moratorium for businesses which cannot pay rates, publicans who cannot pay their staff and shops which cannot meet their bank bills? That is not happening because the Minister of State is not making it happen. He is running away from the problem. He is the only Government Member in the Chamber to listen to the debate. The rest are cowards. They are afraid to face the music but they will not get away with it forever.
Michael Kitt (Galway East, Fianna Fail)
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There is a parliamentary party meeting taking place.
Fergus O'Dowd (Louth, Fine Gael)
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Government Members should be here to listen to the facts as to where they are going wrong.
Michael Ring (Mayo, Fine Gael)
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We used to have a budget every year but last year had two. We are only into March and talking about having another. What has gone wrong with the Government? It has let the country run out of control. It has lost control.
I watched proceedings at the Fianna Fáil Ard-Fheis on Saturday night. I wanted to see if there would be new thinking, a new vision and new ideas, but what did we get?
Michael Ring (Mayo, Fine Gael)
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We had the old Fianna Fáil. It states it is the fault of the bankers, builders and public servants.
Dinny McGinley (Donegal South West, Fine Gael)
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It is the Opposition's fault.
Michael Ring (Mayo, Fine Gael)
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I was going to leave the Opposition until last. According to Fianna Fáil, it is not its fault. Its supporters were out on Saturday night. Poor David Davin-Power was not able to give his report. They were like the Mafia gathered around him, afraid he would say something wrong that would upset Fianna Fáil. I listened to Fianna Fáil Ministers as they told us weekly — I am in the House a few years now — that Fianna Fáil had created the boom. It created the boom but busted the country. The Progressive Democrats were the moral conscience of the country. Where is the party now? It is no more, yet we have a Progressive Democrats Minister for Health and Children. She should be gone, with Fianna Fáil and the Green Party.
The people are looking for vision. They want leadership and the country to survive. They want to keep their jobs and help the economy, but what are they getting? There is no leadership. There is a budget every week or month. The Government has lost its way and has no ideas. I heard political commentators, some former Fine Gael members, say we needed a Government with experience. The Government has been in place for 12 years and has lost the run of itself. Ministers are flying around in helicopters while the country is going down the tubes. A Minister was not able to drive from Dublin or Waterford to attend a conference in Killarney in a State car. He had to have a helicopter bring him there.
The Government does not realise what is happening in the country, but I have a message for the Minister of State. The people are waiting in the long grass for an opportunity to vote on the Taoiseach because he was not elected by them but by Fianna Fáil. We need an election to clear the Government out and bring in a new one, one with new thinking and ideas to try to give confidence to the people who are crying out for leadership and good government and want to play their play. They believe the Government is not playing its part. Those in government should listen to their constituents. Fianna Fáil back benchers are not even attending public meetings or holding clinics. They are afraid to meet the people because they know they are waiting for them. The people are angry and afraid and want a new Government. We all say we want an election because we need one now to clean out the Government and bring in a new one with new ideas.
Fine Gael had to clean up the mess before and bring the country back from the brink. We are ready and able and have Members on these benches who are well capable of being Ministers and leading the country out of the depression and recession and building it up again to be a good nation, not one destroyed by the builders and bankers. Fianna Fáil has destroyed the country and the people will talk to it shortly.
Simon Coveney (Cork South Central, Fine Gael)
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It is not easy to follow Deputy Ring. However, I am glad to have an opportunity to make a brief contribution to the debate.
What is extraordinary is that those in government seem to be the only ones who are surprised by the Exchequer figures announced today. The Government has responded to them by saying it will have to change tack again in its management of the public finances. It may, by the end of the month, have to introduce a new budget and cut backs. What happened today was absolutely predictable. People have been predicting it for four months. The figures on which the Government has been working, in terms of where Ireland will be at the end of the year, are not realistic, as everybody has been telling it. However, it continues to peddle the myth that somehow Ireland will come out of the mist and be okay. It is as if we will wake up in the morning and there will be prosperity again in Ireland. The truth is the Government has not only failed to lead in introducing policies but, more importantly, also failed to lead by communicating with the people and telling them the truth about the crisis created by its mismanagement and the series of other elements outside its control happening outside the country.
What has the Government done in response? It has avoided telling the people the truth and continually avoided making decisions until forced to do so. When Fine Gael called for a public sector pay freeze last October because it knew it was the only responsible thing to say at the time, the idea was dismissed by the Government which stated Fine Gael was anti-public service. Three or four months later, it had to bring forward measures which were far more extreme and introduce pay cuts. When Fine Gael stated it would be necessary to recapitalise banks for them to survive, its proposal was dismissed by the Government and the banks as unnecessary, but what has happened since? The Government has had to do this. When Fine Gael stated it would be necessary to nationalise Anglo Irish Bank, the Government dismissed it as being out of touch and stated it did not understand the figures at Anglo Irish Bank. One need only look at what has happened since. Last week and the week before Fine Gael called for a mini budget to introduce new revenue raising measures to try to make a positive impact on the growing deficit. Again, itt was dismissed by people such as the Tánaiste, Deputy Coughlan, who said the Government had everything under control. The reality is that because of the way the Government has behaved and communicated, politics has broken the trust between itself and the people. The people are crying out to be led and inspired, even if that means hardship.
The people understand the situation. They are not fools, even though they are treated as such by the Government. If the situation is explained to them properly, they will understand the crisis Ireland is facing in terms of the Exchequer figures, job losses, the banking sector and the range of measures needed to tackle the crisis. They will understand and accept that we need to respond in an appropriate manner, but what they will not accept is a Government which leaves the country limping along without leadership and which, month after month, introduces new measures in response to the latest crisis because that is what continues to happen.
Last year the Government took in just over €40 billion in the tax take. In the first two months of this year we are already €1.5 billion short of last year's figure. If that is replicated in the next ten months of the year, we will be €9 billion short of last year's tax take. Does the Minister of State know what that means? It means we will be €23 or €24 billion short in terms of a deficit. Instead of having to save €18 billion, it will have to save €23 or €24 billion. That is what we are talking about and the gap which must be closed.
The Government must give leadership. It might be surprised if it does because the Opposition parties are moving beyond simply bashing it. It might even receive some support here if it makes some brave decisions.
Lucinda Creighton (Dublin South East, Fine Gael)
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I echo the comments of my colleagues. It is disgraceful that only one lone ranger is on the Government benches. It is appalling, given the economic crisis we face. It is high time the Government told some truths about the economic freefall in which the country finds itself. It is past time for recriminations, admonishments and blame and it is time for Government Members to leave behind the self-pity and self-exoneration that has become the mantra of this Administration in recent months. Does any Government Member have the courage to explain to the people the scale of our problems? I hope the Minister, who has joined us, does. More important, does any Government Member have the vision, drive and determination to set out a path for recovery? I fear the answer is negative on both counts.
The current meltdown being experienced by business and workers throughout the State and economic forecasts, which are frightening, need to be examined to put in context the current economic position. Ireland is on the precipice of catastrophe and we now need, more than ever, strong political direction to lead us safely from the edge. The facts, about which I hope the Minister will be aware, are stark. The economy is set to shrink by at least 5% this year. Even in the depths of recession in the 1980s, the economy shrank by only approximately 1.5% annually. The scale and rate of decline is utterly startling. The number unemployed will increase to at least 450,000 while some are predicting it will be higher by the end of this year, which is more than twice the number signing on when the Taoiseach took up office last year.
In the face of such devastating conditions, one could reasonably expect that a government would step up to the mark and set out an economic recovery plan as a matter of urgency and priority. One could at the very minimum expect a government to attempt to step up to the mark, irrespective of how incompetent and paralysed it might be. However, in the case of our Government, we see nothing but denial, delusion and a short sighted fixation on tinkering with the public finances. Deputy Coveney referred to the tinkering, which amounts to €2 billion, but this is the tip of the iceberg.
The majority of the people are reasonable and intelligent and they are willing to do their bit for the economy. If the Taoiseach had the courage and character to set out the scale of the challenges that lie ahead, the people would respond but, instead, we are faced with the hyperbole of a Government, which still insists on referring to "adjustments", "economic indicators" and other jargon that means nothing to ordinary families. People want the truth in plain language. Any Member who believes we can spend our way out of this recession is living in a fantasy land. It is time to get real and the people want politicians and the Government to get real.
The Taoiseach owes it to the people to be honest about the cuts that will have to be imposed and the tax increases that are on the table. He should show some respect for them by announcing an emergency budget, for which Fine Gael has called, to introduce the cuts and tax increases, which inevitably will be required to bridge the huge gap between revenue and expenditure. No one will appreciate the postponement by the Government, for political purposes, of this urgent task until after the local and European elections. On the contrary, with some straight talking, the people will accept the necessary measures as being in the national interest.
As this is largely a self-made mess on the part of the Government, hard working people will not endure massive cuts and tax increases unless they are integrated into a long-term strategy to get us out of the current economic mess. That is what is lacking. We have not been given a vision for the reintroduction of competition into the economy, the creation of new jobs and so on. We are not seeing a long-term strategy and people are finding it difficult to buy into this, as is the Opposition.
Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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I take great pleasure in contributing to the debate on this difficult motion. In recent months, we have witnessed the over 70s campaigning against the loss of their medical cards and public servants marching because they feel the pension levy is unfair and unjust. These people recognise the public finances are in a mess and the banking sector, in which we all had great trust and confidence, has virtually gone to the wall. There is no confidence in the Government. There does not seem to be any leadership or unit and if the Government made hard decisions, there would be unity among all parties in the House.
The Minister has seen nothing yet. I know what is happening on the ground, as I have a business background. Business people with overheads invested in property and shares to diversify because they were told it was the right thing to do at the time. They became involved in various property schemes and so on and they indirectly funded the Government's appetite for additional revenue. However, they now are under serious pressure. The clients of most solicitors have nothing left in the tank. They have used up all their resources and not alone will their businesses fold, their employees' jobs will not survive.
The banks are not foreclosing and the Government is talking up this, but unless something drastic is done in the next six months, the Minister has seen nothing yet. Most solicitors are aware of the scale of what is happening and the banks are afraid to foreclose because that will further exacerbate a difficult situation. We are on the precipice of an economic downturn, the back of which we may not see. I have stated repeatedly in the past six months that the Government parties have not been honest with the people because they feel the people cannot handle the truth. Before the last general election, we were told it was anti-patriotic to talk down the economy and that there would be a soft landing. It is some soft landing. The people want the truth and the Government must inform them how deep is the recession. If it does so, they will be able to handle it.
The banks are not providing capital to businesses. When a business owner seeks a loan, he or she is charged a fee of €1,000. If the loan is not paid on time, the bank hikes up the interest rate. What is the Government doing about this? The Government parties say we have control of the banks but small business owners are being threatened and abused and their charges are being increased at a time they cannot afford it. Big bankers and the golden circle gambled big and lost. Many employers gambled as well because they were told it was the right thing to do. Unlike the bankers and those in the golden circle, they will not walk away and leave it to the taxpayer to pick up the pieces. They have always supported the country by paying their taxes and standing by the State. However, they need the Government to stand by them in order that they will survive. Most of their businesses will go to the wall within three months and most of their staff will not have a job and will have to join dole queues, unless something radical is done.
The debate is about the country's economic survival and not about polls or the political survival of Fianna Fáil or Fine Gael. The Government will have unity if it tells the people the truth for once.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
commends the Government for its continued vigilance and management of the economy and public finances which has enabled Ireland to meet the current difficult economic challenges from a position of relative strength;
notes that Budget 2009 announced measures designed to raise almost €2 billion in additional taxation in 2009;
notes that the Addendum to the Irish Stability Programme Update published on 9 January last outlined a 5 year framework for the restoration of sustainability in the public finances over the medium term;
endorses the action taken by the Government in line with the Addendum through the introduction of further measures to secure up to €2 billion in expenditure savings in 2009 consistent with the framework for a Pact for Stabilisation, Social Solidarity and Economic Renewal which was agreed with the social partners;
acknowledges, in order to stabilise and restore the current budget to surplus by 2013, the importance of ensuring the implementation of the measures already announced and of those required over the years out to 2013, with particular emphasis on the period out to end-2011;
notes the disappointing end-February exchequer returns and the need to ensure that the General Government deficit in 2009 does not worsen from the previously forecast 91⁄2% of GDP;
notes the Government decision today to announce further necessary measures by the end of this month to ensure the stabilisation and sustainability of the public finances;
endorses the Government's ongoing action in support of the country's banking system including the recapitalisation of the two main banks which will facilitate increased access to funding for SMEs and for first-time home buyers as well as offering protections for existing homeowners in arrears;
notes the need for the introduction of important reforms to financial regulation in Ireland which will secure confidence in the banking system through the introduction of new standards of banking regulation and corporate governance, will restore Ireland's international reputation and will reposition the country's regulatory system;
and
endorses the Government actions to reorientate and refocus the economy towards innovative and export-led growth through the promotion of policies and actions set out in 'Building on Ireland's Smart Economy: A Framework for Sustainable Economic Renewal'.
I propose to share my time.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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With persons unknown.
Fergus O'Dowd (Louth, Fine Gael)
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With no one. Nobody supports the Minister.
Lucinda Creighton (Dublin South East, Fine Gael)
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One cannot count on Fianna Fáil Deputies.
Fergus O'Dowd (Louth, Fine Gael)
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They have left the country. The Minister should take his time. The ghosts are present as well.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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May I share my time with Deputies Kennedy and White?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have no difficulty in telling the House the truth about this matter.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am happy to put on the record the truth of our economic position. The future economic viability of this country is at stake. We are living in uncertain times and are faced with new economic realities. The financial crisis sweeping the world is the worst experienced since 1929. We are living in an economic blizzard that is not uniquely of our making. The difference now is that the globalisation of markets in recent years has meant that the speed and severity of the downturn has been unprecedented. In Ireland, our economy has been hit hard on three fronts by the downturn, namely, the rapid decline in the domestic construction industry, our exposure to the international deterioration as a consequence of our small open economy and the growing euro-sterling differential.
The end-February Exchequer returns published today show that tax revenues in the two months to the end of February are down 24% on the same period in 2008. All of the tax heads are down on the same month in 2008, reflecting continuing weakness in the economy. For the month of February alone, the decline was 31%. On the basis of this emerging trend and without further action, a shortfall in taxes will now occur. The February 2008 return included an amount of capital gains tax receipts that we did not anticipate would be repeated this February. Notwithstanding this fact, there is a real deterioration in income tax and value added tax receipts.
In addition, expenditure pressures are also emerging as a result of higher live register costs. Unchecked, this means a general Government deficit of 9.5% of GDP will be breached this year. The 9.5% limit on GDP must be fundamental in terms of our borrowing requirement for Government current and capital purposes this year. It is a fundamental matter because it already counts as one of the highest levels of borrowing in the EU, paralleled only by the UK. Within the euro zone, it is the highest level of borrowing. While it is correct to say that a number of euro zone member states are drifting well beyond the 3% barrier, none has reached the 9.5% barrier. For this reason, it is of fundamental importance that we stabilise our finances before reforming them progressively.
At its meeting this morning, the Government discussed the emerging position and was strong in its resolve to take the decisions that are necessary to ensure the stabilisation and sustainability of the public finances, which are an essential prerequisite for the renewal of the economy. We decided to announce the further necessary measures in this regard by the end of the month. This will involve the introduction of additional taxation and expenditure measures in 2009 to address the continued deterioration in the public finances and to ensure that the general Government deficit this year does not worsen from the previously forecast 9.5% of GDP. No option can or will be excluded at this stage.
It is disappointing that commentary to date has fixated on whether our measures should be characterised as a budget, a mini-budget or a supplementary budget. No option is being excluded, as that is what the country needs.
Kieran O'Donnell (Limerick East, Fine Gael)
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What about the economic plan?
Fergus O'Dowd (Louth, Fine Gael)
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The country needs a Government.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The measures to be announced before the end of this month will be announced in the context of a definite plan that will not only cover this year, but——
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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——2010 and 2011. They will be announced later this month.
Kieran O'Donnell (Limerick East, Fine Gael)
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The plan will come with the budget.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In the coming weeks, the Government will consider all options necessary to restore the public finances to sustainability, focusing on the additional measures required for this and next year. I am arranging for my Department to brief the principal Opposition spokespersons and the social partners on the latest position. My officials will set out the scale of borrowing required and the income and spending projections likely over the next two years. I would also like to extend an invitation to the Opposition to submit any proposals it might have to the Secretary General of my Department for costing by my officials.
The fiscal strategy we adopt now is of fundamental importance to the future of this country. We must all play our part in dealing with this unprecedented downturn.
Kieran O'Donnell (Limerick East, Fine Gael)
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Will we get the year's monthly projections?
Brendan Howlin (Wexford, Labour)
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Allow the Minister to continue.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I appreciate the concern voiced by Opposition Members regarding their anxiety to contribute to the resolution of our problems. I am extending an open invitation to them to brief themselves on our circumstances and to submit any proposals they might have for full costing by my Department. It is time that all Deputies faced up to their responsibilities. I have not defaulted on mine in the past year.
Kieran O'Donnell (Limerick East, Fine Gael)
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Where is the economic plan?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This will be the fourth time I have needed to attend the House with measures to respond to an ever-changing world position. There is no point in allocating blame for what has occurred in the past year.
Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister has no economic plan.
Brendan Howlin (Wexford, Labour)
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Please, allow the Minister to make his contribution.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Fundamental to events in the past year was the speed and scale of the deterioration witnessed in this country. It is essential that the Government respond to any deterioration in the public financial position as quickly and as promptly as possible.
Fergus O'Dowd (Louth, Fine Gael)
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The Government has built a house of cards.
Kieran O'Donnell (Limerick East, Fine Gael)
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The October budget did not deal with the issues.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Since the return of the House a few weeks ago, the Opposition has tabled motions on the economy.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am extending an invitation to Opposition Members to contribute in a constructive way to the resolution of our difficulties by first of all——
Kieran O'Donnell (Limerick East, Fine Gael)
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Last October, we made a proposal to the Government.
Fergus O'Dowd (Louth, Fine Gael)
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The most constructive thing the Government could do is to go.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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——briefing themselves on the essentials——
Brendan Howlin (Wexford, Labour)
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If the Minister will excuse me, the Fine Gael Deputies had 40 minutes in which to contribute without interruption.
Fergus O'Dowd (Louth, Fine Gael)
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There was no one on the other side. Government Deputies are asleep.
Brendan Howlin (Wexford, Labour)
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Please, allow the Minister to make his contribution.
Kieran O'Donnell (Limerick East, Fine Gael)
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This is constructive.
Fergus O'Dowd (Louth, Fine Gael)
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They are snoozing in their helicopters.
Brendan Howlin (Wexford, Labour)
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Please, this is a serious debate.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It is critical that Opposition Members brief themselves on the essentials of the position, given the serious situation in which the country finds itself.
Kieran O'Donnell (Limerick East, Fine Gael)
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We should not be patronised.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Opposition is not being patronised in any respect. Rather, it is being invited to participate in the business of the Government by submitting proposals for costing by my Department.
Kieran O'Donnell (Limerick East, Fine Gael)
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The Government chose to ignore the many proposals we made last October.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That submission can be made through the Department's Secretary General, a manner entirely separate from the political process. It is essential that we as a country get real and face up to our current options.
Kieran O'Donnell (Limerick East, Fine Gael)
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We need to see an economic plan.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We are devising one.
Kieran O'Donnell (Limerick East, Fine Gael)
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When will we see it?
Brendan Howlin (Wexford, Labour)
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If Deputy O'Donnell persists in interrupting, I will ask him to leave the House.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We are inviting the Opposition to make suggestions. The Government will lead and make decisions, but I will not listen to any more radio or television programmes suggesting that we do not listen to or entertain constructive suggestions from the Opposition. We do and I do.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am giving the Opposition an opportunity to make constructive suggestions, which I will consider with great care. I assure the House that the Government will introduce a plan and whatever measures are necessary to address the current position.
Kieran O'Donnell (Limerick East, Fine Gael)
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I look forward to seeing the plan.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We are not alone in our economic difficulties. Our colleagues in the European Union and countries beyond have been affected. Virtually no economy can remain untouched by this global financial and economic crisis. We are in the international spotlight because of the pace and scale of the adjustment we are experiencing. International markets, on which we are now dependent for borrowing, need to be convinced we can address our difficulties. The immediate solutions to the crisis must be domestic. We need to restore the public finances to a sustainable footing.
We have taken actions in the teeth of opposition. As far back as last July, the Government acted by announcing spending cuts of €400 million effective for 2008 and €1 billion in 2009.
Kieran O'Donnell (Limerick East, Fine Gael)
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Did the Minister read our document, Recovery through Reform?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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These savings have been achieved. Furthermore, additional revenue raising measures of close to €2 billion were announced in the budget last October. Despite the controversy surrounding them, they are also being achieved.
Kieran O'Donnell (Limerick East, Fine Gael)
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They were ill conceived.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In early January, the Government set a five-year framework to restore order to the public finances. This was welcomed by the European Commission. I am glad to hear of support for our actions from Mr. Jean-Claude Trichet, president of the European Central Bank, when he visited Ireland last week. He made it clear that he approved of the Government's measures to date and expected and anticipated further Government measures. He had full confidence in the Government and the Minister for Finance to implement them.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That the Government is doing this is not enough. This is a moment of national crisis. It is essential that the Opposition play a constructive part.
Kieran O'Donnell (Limerick East, Fine Gael)
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With all due respect, we have done so for many months.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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For that reason, I have extended an invitation to the Opposition.
The Commission assessment that has been produced, which concluded that we are in excessive deficit, is reasonable, fair and balanced. The first step of the framework was delivered on 3 February with the announcement of a series of measures to secure further savings of up to €2 billion on a full year basis. This also will be implemented and that money also will be saved. The Government greatly regrets it was unable to achieve the agreement of either the social partners or the Opposition parties to the pension levy but it must take the decisions it considers necessary in the best interest of us all.
Kieran O'Donnell (Limerick East, Fine Gael)
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They must be balanced.
Brendan Howlin (Wexford, Labour)
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Please, the Deputy will have his opportunity.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In the light of the end-February Exchequer returns, however, further action now is necessary. Accordingly, the Government will consider what additional measures now are required to restore order and ensure that we stick to the agreed framework agreed by all earlier this year. It already has stated that it must restore the current budget position to balance by 2013 in order that it is not borrowing to pay for day-to-day spending. The Government remains vigilant and is committed to continuing to take the difficult decisions that are necessary to ensure the stabilisation and sustainability of the public finances. It hopes it can obtain the support of the social partners and the parties opposite to deliver on this commitment. However, it will not be deterred from doing its duty to this country.
Several important ongoing processes will continue to inform our actions. This is not a matter of outsourcing decision-making but of sharing, within the Department of Finance, the expertise of others in arriving at decisions that will be taken by the Government. The special group on public service numbers and expenditure programmes will report to me in the coming months and make proposals to the Government on additional options for expenditure controls.
Kieran O'Donnell (Limerick East, Fine Gael)
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Will the Minister bring them forward?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In addition, I expect the Commission on Taxation to have finished its deliberations by early autumn.
I should also add that any future decisions that will be made will continue to be informed by the framework for sustainable economic renewal published in December, which provides a road map for meeting the short-term challenges and positioning the economy in order that Ireland can benefit when the international environment begins to improve. We will achieve this by building on our strengths in innovation and research and development, by addressing the huge market for environmental and energy-related products, services and innovation, investing in critical infrastructure and supporting employment-intensive activity in the short term, as well as reforming government to ensure we have a more efficient and effective public service.
The Government already has taken action in this regard through adjustments to the research and development tax credit to increase Ireland's attractiveness as a location for this activity, which were included in budget 2009. It will continue to protect jobs and offer support to those losing theirs. It will, to the greatest extent possible, continue to provide an ongoing stimulus to the economy through its capital investment in roads, public transport, schools and housing to support future development and to enhance Ireland's productive capacity at this time of great need.
It is of vital importance to continue to take all steps necessary to get the banking system fully operating again. Crucial to our recovery will be a fully functioning and well regulated financial system that enjoys confidence and credibility inside and outside of the country. The essential measures the Government has taken most recently with the recapitalisation of Allied Irish Banks and Bank of Ireland are targeted at underscoring the stability of the sector and restoring credit flows that are critical to the effective functioning and performance of the real economy.
Kieran O'Donnell (Limerick East, Fine Gael)
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That is vital and is the key.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Agreed. A direct outcome of the capitalisation programme will be improved access to credit for small and medium-sized enterprises and first-time buyers, as well as offering safeguards to those homeowners facing difficulties at this time.
There is no doubt that the economy has been undermined by the actions of some of our bankers. It has clearly damaged our international reputation with regard to standards of corporate governance. The Government is moving now, as a priority, towards reform of the regulatory structure through the proposed full integration of the Central Bank responsibilities with the regulatory and supervisory functions of the Financial Regulator.
Kieran O'Donnell (Limerick East, Fine Gael)
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Will Members be provided with an opportunity to debate this measure?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The reformed structure is expected to deliver new high standards of banking and financial regulation and corporate governance. It will help restore the reputation of our regulatory regime and rebuild confidence by creating a single oversight institution charged with the important functions of ensuring financial stability, reinforcing prudential supervision and pursuing regulatory integrity through the entire financial sector in Ireland. This will involve a fundamental reform and I will seek to ensure that the best EU and international practice is applied to Ireland's regulatory system.
The Government wishes to send a strong signal that the types of practices followed in some of our institutions are unacceptable, that the regulatory lapses will not be repeated but that Ireland remains open for the continued development of a soundly based, well regulated and competently supervised financial services sector.
The key messages I wish to give to the Irish people who hold the Government to account and to those outside with whom we trade and offer investment opportunities, are first that the Government has taken action on the public finances and is scaling up that action in the face of continued pressure on these finances. Second, public spending will continue to be brought under control, tax revenues will be increased and the commitment to bring the current budget to surplus by 2013 will be met. Third, while Government borrowing will increase, it will remain at a manageable level, given the low base from which it is being increased. The Government will be able to borrow as all the credit rating agencies recently have re-affirmed Ireland's AAA rating, the highest credit rating. Fourth, sweeping reforms of our regulatory and supervisory structures are planned to restore domestic and international confidence in the Irish financial services sector. Finally, the Government will continue to work with its partners in the euro zone, the European Union and the international community to communicate its firm intention to take the necessary measures to address the difficulties both in the public finances and in the regulatory system.
The restoration of the public finances to a stable and sustainable footing is one of the most daunting challenges to face any Government since the foundation of the State. The Government will meet this challenge and I ask the parties opposite to set aside their political differences and support whatever Government action is for the good of the country and of its people. We will adjust our cost base, improve our competitiveness, reorient our economy towards innovation and export-led growth in a fair and equitable manner and will ensure that this economy will once again provide employment, prosperity and opportunity for our people.
I move that Dáil Éireann affirms its support for the Government amendment.
Michael Kennedy (Dublin North, Fianna Fail)
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I am pleased to have the opportunity to speak. I emerged from our parliamentary party meeting when Deputy O'Dowd was speaking and someone told me he made reference to Fianna Fáil backbenchers being cowards.
Fergus O'Dowd (Louth, Fine Gael)
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I am delighted the Deputy is present.
Michael Kennedy (Dublin North, Fianna Fail)
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No one in Fianna Fáil is a coward and certainly not north Dublin Fianna Fáil backbenchers.
Fergus O'Dowd (Louth, Fine Gael)
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What about Ray Burke? What was he?
Michael Kennedy (Dublin North, Fianna Fail)
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We are courageous enough to make decisions in this country's interest and——
Fergus O'Dowd (Louth, Fine Gael)
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What was Liam Lawlor? What was Charlie Haughey?
Michael Kennedy (Dublin North, Fianna Fail)
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——we are doing so. Only quite recently, the Government introduced the levy, which Fine Gael saw fit to ignore and to vote against.
Kieran O'Donnell (Limerick East, Fine Gael)
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It divided the public and private sectors for the first time in Ireland. It created a social divide.
Brendan Howlin (Wexford, Labour)
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Deputy Kennedy has very limited time.
Michael Kennedy (Dublin North, Fianna Fail)
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Having considered the motion you tabled tonight, Fine Gael has not a single specific proposal to make other then generalised comments.
Brendan Howlin (Wexford, Labour)
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I ask Deputy Kennedy to address his remarks through the Chair.
Michael Kennedy (Dublin North, Fianna Fail)
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I am doing so.
Fine Gael has not made a single specific proposal.
Fergus O'Dowd (Louth, Fine Gael)
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I forgot G.V. Wright and the folded copy of The Irish Times containing €4,000 in the bar of Leinster House.
Michael Kennedy (Dublin North, Fianna Fail)
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Fine Gael Members have never costed any of their pious statements. They never back them up with a single cent, much less the €16.5 billion and more, after today's Exchequer figures, that this country must save.
Fergus O'Dowd (Louth, Fine Gael)
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The Deputy should not lecture me.
Michael Kennedy (Dublin North, Fianna Fail)
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Fine Gael Members will have credibility after outlining where they intend to save €18 billion. The same is true for the Labour Party. Not alone does it not cost anything, it does not even have proposals. Although Fine Gael sometimes waffles on about some proposals, it does not cost them and it is time it was honest with the public. It should tell the people where it will save this horrendous amount of money.
Kieran O'Donnell (Limerick East, Fine Gael)
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Has Deputy Kennedy seen our documents?
Michael Kennedy (Dublin North, Fianna Fail)
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It has not done so and if it believes in honesty and integrity, its Members should have a frank and open debate in which they tell the public——
Kieran O'Donnell (Limerick East, Fine Gael)
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Let us hear Deputy Kennedy's ideas.
Michael Kennedy (Dublin North, Fianna Fail)
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I will come to them. The Government has the ideas. Although Fine Gael has tabled a motion today——
Kieran O'Donnell (Limerick East, Fine Gael)
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Let Members hear those ideas.
Brendan Howlin (Wexford, Labour)
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Allow Deputy Kennedy to make his contribution.
Michael Kennedy (Dublin North, Fianna Fail)
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—— it contained neither a single specific proposal nor a costing.
Today, the Taoiseach clearly told the House that the Government would be introducing further measures by the end of this month. When that time comes, Fine Gael should, for once this session, deal realistically with the issues, rather than waffling on.
Kieran O'Donnell (Limerick East, Fine Gael)
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What are Deputy Kennedy's personal views?
Michael Kennedy (Dublin North, Fianna Fail)
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The Minister for Finance, Deputy Brian Lenihan, has informed Opposition Members they have been invited to see the full financial figures tomorrow. Their spokespersons already have had a briefing on the banking issue. However, having received all the facts and figures, the Opposition chose not alone to ignore them but to vote against it.
Fergus O'Dowd (Louth, Fine Gael)
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We published proposals for a €2 billion cut in public expenditure.
Michael Kennedy (Dublin North, Fianna Fail)
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In a situation in which the country needs a proper banking system——
Fergus O'Dowd (Louth, Fine Gael)
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Not Deputy Bertie Ahern's banking system. I forgot that one, whereby one puts money in the safe and it will grow overnight.
Michael Kennedy (Dublin North, Fianna Fail)
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—— the Government brought forward realistic programmes in respect of guaranteeing deposits and re-capitalising the banks.
Fergus O'Dowd (Louth, Fine Gael)
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Moreover, the money will change from euro to sterling.
Michael Kennedy (Dublin North, Fianna Fail)
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Fine Gael tries to assert it is acting in the national interest when it would allow our banks to sink.
Kieran O'Donnell (Limerick East, Fine Gael)
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It would not be in the national interest to vote for Fianna Fáil.
Brendan Howlin (Wexford, Labour)
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Please, allow Deputy Kennedy.
Michael Kennedy (Dublin North, Fianna Fail)
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As Members are aware, our banks are no different to those anywhere else.
Michael Kennedy (Dublin North, Fianna Fail)
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Only last week in the United States, having previously put US$850 billion into the banking system, the US Government, under President Obama, was obliged to put another $40 billion into Citibank.
Kieran O'Donnell (Limerick East, Fine Gael)
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Will the Government do the same with AIB and Bank of Ireland?
Michael Kennedy (Dublin North, Fianna Fail)
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Members are familiar with developments in Britain regarding Royal Bank Of Scotland and know what is happening in Germany, whose banks are securing reinvestment almost every day of the week.
Kieran O'Donnell (Limerick East, Fine Gael)
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What is Deputy Kennedy's point?
Brendan Howlin (Wexford, Labour)
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Please allow Deputy Kennedy to speak.
8:00 pm
Michael Kennedy (Dublin North, Fianna Fail)
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——that we need banks to operate in a normal commercial fashion. We cannot allow them to sink, as Fine Gael and the Labour Party seem to be suggesting.
In terms of the Government's plan, the Taoiseach reiterated today that the five-year plan is to reduce debt from 9.5% to 3% of GDP. The proposals to make savings of €3 billion, together with the €2 billion set out last week, represent the first steps. There will be more proposals by the end of the month. It will be interesting to see what Fine Gael and the Labour Party have to offer after they are briefed by officials in the Department of Finance. I look forward to their proposals for achieving savings of €20 billion. What tax increases will they propose? The Opposition keeps talking about mini-budgets but will not say how it proposes to increase taxation revenue or reduce public sector expenditure. Let us hear its proposals.
Kieran O'Donnell (Limerick East, Fine Gael)
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Deputy Kennedy wants us to do the Government's job for it.
Michael Kennedy (Dublin North, Fianna Fail)
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Let us have an honest debate. The Government is willing to put forward its proposals.
Kieran O'Donnell (Limerick East, Fine Gael)
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There has not been a single proposal.
Michael Kennedy (Dublin North, Fianna Fail)
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The Deputy should listen to what he is told.
Kieran O'Donnell (Limerick East, Fine Gael)
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I have been listening carefully.
Michael Kennedy (Dublin North, Fianna Fail)
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I reiterate that the Government's plan is to reduce debt from 9.5% to 3% of GDP in the course of the next five years. We have already undertaken to make savings of €5 billion this year. I expect that figure will increase in light of proposals to be brought forward by the Government at the end of the month.
What has the Opposition to offer? What proposals has it brought forward setting out precisely the level of savings it would seek to achieve and how it would do so?
Kieran O'Donnell (Limerick East, Fine Gael)
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We will send our policy document to Deputy Kennedy.
Michael Kennedy (Dublin North, Fianna Fail)
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Where are the detailed proposals on income taxation? We want a frank debate. The public expects all political parties to set out their proposals. The days of waffling on without offering any solutions are over.
Fergus O'Dowd (Louth, Fine Gael)
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That is precisely what Deputy Kennedy is doing.
Michael Kennedy (Dublin North, Fianna Fail)
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The Opposition has waffled in recent weeks. Now it is time for it to bring forward solutions. We must make clear to the public the alternatives that exist. We will tell the people clearly what, in our view, must be done.
Fergus O'Dowd (Louth, Fine Gael)
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The public will have its chance to let Fianna Fáil know what it thinks of it.
Michael Kennedy (Dublin North, Fianna Fail)
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I look forward to the proposals from Fine Gael and the Labour Party. The latter has offered absolutely no solutions thus far. The media have used the word "waffle" in reference to its party leader and its spokesperson on finance. I hope Deputy Burton will show us how the State can save €18 billion or €20 billion.
Mary White (Carlow-Kilkenny, Green Party)
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In recent months we have all become far more conversant with the language of finance. We have spoken about bear and bull markets, regulators, taxes, shares, dodgy banks and dodgy bankers. Today, however, I intend to focus on taxation policy and the measures I would like to see implemented over the course of future budgets.
It was the view of my party when it entered government that the taxation code would have to be rebalanced so that higher earners would pay more and that the tax base must be made more sustainable. It was for this reason that we insisted on the establishment of the Commission on Taxation, which is due to report in the middle of the year. As outlined in the programme for Government, the commission was asked to examine four key areas. These were as follows: the balance between taxes collected on income, capital and spending; tax expenditures with a view to recommending the discontinuation of unjustifiable tax expenditures; the future financing of local government; and the feasibility of fiscal measures to protect the environment, such as a carbon levy. The latter is of particular concern given our escalating emissions. According to the Economic and Social Research Institute, now may be the ideal time to introduce a carbon tax when fuel prices are low.
I have two specific proposals for Fine Gael. The first is to revise toll charges. Second, I have been speaking to the Minister for Communications, Energy and Natural Resources, Deputy Ryan, about the possibility of introducing a tax on mobile telephone texting. Given that there are 4 million people in the State and taking into account average texting frequency, a charge of 1 cent per text message would be a relatively painless way of yielding some €1.4 billion in one year. Such a scheme would provide a means of spreading taxation in a fairer way. I am pleased that some elements in the media have already picked up on this. I hope it can be implemented in the short term.
For the Green Party, our priorities in regard to rebalancing the tax system are based on the principle that those who have the greatest capacity should pay the most. We are in favour of sustainable taxes on wealth and property. There should be devolved financing of local government so that local authorities have funds at their disposal that will allow them to counteract the reckless overdevelopment of some towns and villages which took place in recent years, where development levies were collected at the expense of appropriate planning. In that context, the current debate on the introduction of water charges, which seems to be led by noises from Europe, is an important debate in terms of how we might in future finance local government. Citizens must become more conscious of their domestic consumption of water. The water supply is of concern to everybody. We have even had predictions that there may yet be a war fought on the basis of a struggle for access to water supply. Water is precious and it is the responsibility of all of us to conserve it.
While there is much rhetoric from the Opposition about the need for fairness in the tax base, it is important for us all to acknowledge the importance of spreading the tax burden. The low-tax regime we have enjoyed in recent years is no longer sustainable. Everybody will be obliged to pay more tax in return for the services the State provides. The last several months have been ghastly, in this House and outside of it, as the financial turmoil unfolded. With unemployment rising, I am delighted that the Minister, Deputy Ryan, has set aside €100 million for insulation grants. As well as making people's homes warmer and reducing their fuel costs, this scheme will take plumbers, small builders and electricians off the dole queues. This is one small step of which we are very proud.
Tough times require tough measures. However, the Green Party will insist that any cutbacks are implemented fairly. For a long time, we were a prudent people. More recently, we became big spenders. The Japanese have a wonderful word, chindogu, to describe this type of unrestrained spending. Much of our new-found wealth was spent on unnecessary purchases. I met a person recently who had built an enormous house with six bedrooms, all en suite, but who has now lost his job. That type of behaviour was the consequence of reckless lending to people who hoped the good times would never stop rolling.
Despite the Opposition's hypocrisy, I am hopeful that the decision to guarantee bank deposits and recapitalise the banks was the correct one. The bottom line is that people must have trust and confidence in the banking system. I spoke to an elderly lady in my home town of Borris, County Carlow, who proclaimed how happy she was to insert her ATM card into the slot and find, after all, that the money comes out. That security has been achieved. I am hopeful too that small and medium-sized enterprises will be better able to conduct their business now that there is additional liquidity in the banking system. It is important for all towns and villages that small retailers, and even larger stores, can keep going in tough times. I am confident the State can regain its former high standing in international banking circles. I commend the Government's amendment.
Joan Burton (Dublin West, Labour)
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I propose to share time with Deputies Sherlock and Morgan.
Joan Burton (Dublin West, Labour)
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The Taoiseach seemed to announce today that what he quaintly referred to as a finance (No. 2) Bill will be introduced later this month. That seems to be what he said but I am not entirely sure. Many families who are watching television or having dinner together tonight are extremely worried about what the future holds for themselves and, in particular, for their younger members. It is tremendously difficult for families, individuals and business people caught up in these catastrophic financial difficulties caused by the Government to deal with the situation that is unfolding. The Government has been extraordinarily maladroit and cack-handed in dealing with the crisis. Within a couple of weeks, some 20 Ministers and Ministers of State will depart for countries around the world for St. Patrick's Day celebrations. The Government must have a message that this country is open for business and hopes to do business. Looking at the Taoiseach's face today, I saw someone close to being on the ropes and I felt sorry for him. Having come from being hailed as someone wonderful at an Ard-Fheis he returned to a cold——
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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We do not need sympathy, we need support.
Joan Burton (Dublin West, Labour)
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At the Ard-Fheiseanna of all parties, even the Green Party, the leaders of the parties are hailed by the members.
Joan Burton (Dublin West, Labour)
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There is nothing wrong with that.
Michael Kennedy (Dublin North, Fianna Fail)
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Some 7,000 people attended, ten times more than were at the Labour Party Ard-Fheis.
Brendan Howlin (Wexford, Labour)
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Deputy Kennedy should allow Deputy Burton to make her contribution.
Joan Burton (Dublin West, Labour)
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I heard so much from Deputy Kennedy about waffle earlier that I thought he must have a strong association with Belgium.
Michael Kennedy (Dublin North, Fianna Fail)
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I was quoting what was said about Deputy Burton and the Labour Party leader.
Joan Burton (Dublin West, Labour)
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I will allow the public to be the judge of whether what I have said over the course of this financial crisis has been responsible and correct in its analysis. Unfortunately, it has been correct in its prediction of the outcome of Government policy. I want to move forward, difficult as it may be for someone like Deputy Kennedy.
Michael Kennedy (Dublin North, Fianna Fail)
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It would be welcome.
Joan Burton (Dublin West, Labour)
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I refer to the families losing income and employment, as the Government announces another budget that will consist of increased taxes. Deputy Mary White extolled the virtues of a carbon tax. Does that mean that this measure will be brought forward? The purpose of a carbon tax is to shift people from excessive consumption and carbon emissions and to recycle the revenue from tax into employment creation activities or reducing taxes on labour. The Government must spell out the following issue. Are we facing a carbon tax and what will it apply to?
This Government introduced a process of regulation in respect of energy. At the end of the process, with an expensively paid regulator, we have the dearest domestic electricity prices in Europe and, disastrously, some of the dearest prices for electricity to businesses and industry.
Mary White (Carlow-Kilkenny, Green Party)
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Prices are dropping.
Joan Burton (Dublin West, Labour)
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For industrial, commercial and domestic consumers this model has been a disaster. Members of Fianna Fáil in government know this and do not deny it. Is a carbon tax one of the proposed new taxes?
I made a request to the Taoiseach that all papers and information from the Commission on Taxation should be published now. The Commission on Taxation was my proposal. I argued for this over a long period of time and I was pleased that many other people in all parties took up the idea. In the context of my proposal the Commission on Taxation was intended to identify with some clarity who pays tax, the rate of tax they pay and the tax breaks that have become an amazing feature of our tax system. These allow very wealthy people to pay no tax and allow the phenomenon of tax exiles, who leave the country at one minute to midnight, live in Ireland and yet pay no tax. The purpose of the Commission on Taxation is somewhat similar to the Law Reform Commission, to set out the facts so that political parties and whoever is in government can reach a conclusion in the broad public interest in terms of fairness and incentivising areas such as employment, business and job creation. The challenge for the Government is to open up the papers of the Commission on Taxation. The Government suggests that this might wait until June or September. The country cannot wait that long. If people talk about a bipartisan approach to taxation, this must be in the context of reliable information. I have the tax figures from two years ago and three years ago. The February tax returns, released today, are roughly the same as the February tax returns for 2004. Having figures from last year or the year before is not of great relevance because many of the categories have collapsed. If the Government wants to act in a bipartisan way, so that all parties contribute their views on what can be done, we need the information.
Throughout the banking crisis, I was astonished that the Department of Finance was behind the curve in respect of international banking and the consequences for banking in Ireland. I was astonished that the Department of Finance and the regulator were hopeless in respect of what was taking place in our banks. AIB acknowledged yesterday that six developers owe more than €500 million each to the bank. Some 15 developers each owe more than €500 million to Anglo Irish Bank. The capacity of the Department of Finance and consequently the Minister for Finance to have a grasp of what is going on is astonishing. I heard from the Fianna Fáil Ard-Fheis that we are blaming the bankers and clearly they deserve a large portion of blame. People are completely disappointed that the regulator failed totally or else had a complete misunderstanding of what the role entailed. If we are to move forward we need solid, reliable information. It is not possible to make policy otherwise. The principle of the policy must be that those who are wealthy and have availed of extraordinary tax breaks during the Celtic tiger years now have an obligation to give something back. One cannot ask a clerical officer in the Civil Service, who must pay a contribution of 6% net of tax in respect of a pension levy, to pay more at the end of this month unless we first establish the principle that the tax adjustments begin with the very wealthy in our society. As a country we must retain some fundamental notions of fairness. Otherwise, it is not possible.
I was amused when I heard the Minister for Transport, Deputy Dempsey, talking about bankers and Cromwell at the Fianna Fáil Ard
Arthur Morgan (Louth, Sinn Fein)
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Those in the party are only republicans in very small writing. I thank the Labour Party for sharing time with me. Sinn Féin supports this Fine Gael Party motion.
Who does not know that we need a new budget as our public finances deteriorate daily? Who does not understand that the absence of effective strategies for job creation, taxation and public finances actively make a difficult trading environment for business a dire one? Who does not know that taking action now is vital and that each day lost is another body blow to a bruised economy?
It seems that the only people who do not know are the coalition Cabinet and the docile backbenchers who will, upon command tomorrow, once more vote en masse to oppose this motion knowing that within it there is the undeniable truth that the Taoiseach has been sitting Nero-like for nearly a year now.
Do the 1,000 plus jobs lost each day in January not prove the depth of the crisis we face? Unemployment figures for February will be announced this week and tell an even more dismal tale. It is 155 days since the banking bail-out was announced at the end of last September. Longer since is the calling of an early budget last year and it is longer still since the Government first went public last June about the deteriorating Exchequer finances. I congratulate the Taoiseach today on his 300th day in office but I cannot congratulate him on his record over the last ten months.
Napoleon got within striking distance of Paris within a 100 days of leaving exile on Elba before he met his Waterloo. It seems that our Taoiseach's nadir will have to wait until 5 June. The Taoiseach had some Napoleon-like characteristics as he strutted, huffed and puffed, presenting himself as a person of purpose and of action. The truth is very different and there the comparison ends.
Sinn Féin, like many others, has been seeking a solution to the current economic downturn and attempting to probe the jungle of Government finances and policies to find out just what is feasible and practical. Our first conclusion must be that there is so much that the Government does not know. When asked in parliamentary questions, the Government, and particularly the Minister for Finance, does not know how many former Deputies are drawing down pensions. The Minister for Transport does not know how many miles of motorway have been built under public private partnerships, but we know that each mile was more expensive for the taxpayer. Does the Minister for Transport know this? No, but the Government persists in supporting PPP financing which is wasting taxpayers' money.
The Minister for Finance cannot quantify the financial loss to the Exchequer of tax exiles who are non-residents. Is he aware that in the last year for which the Revenue Commissioners have issued figures, there was a 13% increase in the number of people claiming to be non-residents? Will he release the names of the 5,803 people who live here part of the year, work here, create wealth here for themselves but do not pay tax here?
Did Bono send the Taoiseach a copy of the new album? I am sure it came with a big "Thank you" from the boys in the band. I hear one of the tracks is called "Moment of Surrender" and I would not be surprised if some of the bankers penned that one. Perhaps the Minister has it on his iPod? It is interesting that we can have new copyright laws and court cases to protect the rights of music artists from illegal downloads yet we cannot make people who live here pay tax. We do not imprison tax fraudsters or deviant bankers who squander billions but we can catch the more traditional bank robbers within hours of a heist. If only the Government was as active and effective as the Garda.
Let us not dwell on the negatives of the Government's abysmal record and focus instead on the positive steps to pull the economy out of this malaise created by this coalition Government. Does the Minister for Finance know that an increase in the income levy to 6% on salaries of €200,000 and over would yield €130 million annually to the Exchequer? I trust that he and all the other Ministers who enjoy salaries in this bracket would be more than willing to do their patriotic duty and pay such a levy. Has he considered confining to the standard rate of income tax the deductions and reliefs which were allowable at the 41% rate, given that such a measure could, according to figures from his own Department, amount a sum in the order of €1 billion? Will he also not consider abolishing the PRSI ceiling as such a measure would bring in €223 million in a full year?
I fear the Minister and Cabinet are not considering any of these options. Instead it is the equivalent of the route of one long ball tax strategy of taxing those who can least afford it, with the lowest disposable incomes. Finance and taxation is only one plank of what the Government needs to be doing. Where is the strategy on job creation? Given that the Taoiseach is flying to Washington for St. Patrick's Day, has he been reading the US media to catch up?
One column in a series in Sunday's New York Times on the recession was penned by Google CEO Eric Schmidt. In it he wrote, "When looking at our economic decline, we can all agree on two things: we did not get here overnight and we will not recover tomorrow". Schmidt continues by stating there are steps that "need to be taken to speed up the process" such as "getting credit flowing again, taking action to create jobs, repairing our broken infrastructure and increased transparency to ensure we measure the effectiveness of the dollars we spend".
Would the Taoiseach accept that none of these actions is being implemented in Ireland? Perhaps it is worthwhile for the Taoiseach to travel to a White House reception as he might take on board some of these proposals. Perhaps the Taoiseach read last Thursday's Irish Independent. I know he did not read Friday's edition as we know he does not do "bad" news. I was taken by the strap in one tabloid newspaper referring to the claim by EU Central Bank Chairman, Mr. Trichet, that the Taoiseach was "acting resolutely". The headline declared "Banker backs him, voters don't". We know why that is the case.
In the business section of the Irish Independent last Thursday, an interview with Microsoft Ireland managing director Paul Rellis made interesting reading. He spoke of building an innovation economy in Ireland and said: "One of the most emotional challenges facing this county is the fear factor. The country needs to focus on being ahead of the curve". He proposes that "Fibre-optic networks need to be deployed nationally to benefit schools and business but fundamentally, Ireland's core advantage in the years ahead will be its people". Rellis proposes developing core clusters in the area of renewable energy and digital media and finishes by saying that there "are a lot of open ears in the public and private sector for building future industries". Those industries will need stimulation and Government initiatives, none of which has been evident yet.
We must ask the Government if its eyes are open as up until now they have been closed to the reality of the challenges we face and the opportunities available to us. In a British newspaper interview today, British Chancellor of the Exchequer Alistair Darling admits that Ministers there "must have the humility to admit that mistakes were made in the lead-up to the financial crisis". When will some of that humility be evident from the Ministers here?
It is worth recalling that in the run-up to the last election in 2007, my party was castigated for advocating what were at the time extremely modest tax increases. Some very arrogantly described my party members as economic illiterates. It is very evident now that all other parties in this House advocated tax decreases and had they any modicum of our understanding of the economic position, they would have known better and this State would be in a much better position economically than it currently is.