Dáil debates

Tuesday, 24 March 2009

5:00 pm

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

I call on the Minister for Transport, Deputy Noel Dempsey, under Standing Order 43.

Photo of Noel DempseyNoel Dempsey (Minister, Department of Transport; Meath West, Fianna Fail)
Link to this: Individually | In context

I am pleased to open this debate on behalf of the Minister for Finance, Deputy Brian Lenihan. The Minister will speak tomorrow in this debate.

There is no doubt that we are facing the most challenging global and domestic economic circumstances in generations. Our position as a small open economy, which has facilitated our recent prosperity, has also left us vulnerable to the rapid deterioration in the international environment. This Government took early and decisive action in respect of the deteriorating financial situation and we have sought to retain the flexibility required to nimbly respond to the rate of change being experienced.

Our plan has remained constant right from the start — to attack the gap in public finances; to sort out the banks; to create and save jobs; to protect and support the unemployed; and to restore Ireland's international reputation by strengthening our domestic governance arrangements.

This Government has already taken important action to address the emerging difficult economic and budgetary situation by bringing forward the budget, implementing taxation and spending changes and introducing a pension contribution for public servants. The decisions, which the Government will take as part of the supplementary budget on 7 April, will be designed to stabilise the public finances and improve confidence in Ireland both at home and abroad and thereby secure the future economic viability of this country. Today's debate allows the Oireachtas the opportunity to debate and discuss the kind of measures necessary to position Ireland for the next phase of its economic development.

Much of what has been achieved over the past 20 years has been based on key factors, which still remain. Challenging decisions lie ahead and the immediate task——

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

I interrupt on a point of order. Normally the Minister for Finance would circulate a statement in advance that would provide a perspective for this debate.

Photo of Noel DempseyNoel Dempsey (Minister, Department of Transport; Meath West, Fianna Fail)
Link to this: Individually | In context

I understand it is on the way.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

Is it coming from the Department of Finance or from the Department of Transport?

Photo of Noel DempseyNoel Dempsey (Minister, Department of Transport; Meath West, Fianna Fail)
Link to this: Individually | In context

It is my script.

Challenging decisions——

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

On a point of order, earlier the Ceann Comhairle disallowed questions from party leaders about the prior documentation we would get in order to facilitate a debate on the budget. Here we have the high farce of the Minister for Transport coming to the House, who is not even the Minister concerned——

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

The Minister for Transport——

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

This is not serious.

Photo of Olivia MitchellOlivia Mitchell (Dublin South, Fine Gael)
Link to this: Individually | In context

It is disrespect to the House.

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

Deputy Bruton is completely out of order.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

It is high farce.

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

The Minister is entitled to make a statement.

Photo of Noel DempseyNoel Dempsey (Minister, Department of Transport; Meath West, Fianna Fail)
Link to this: Individually | In context

In case it escaped Deputy Bruton's attention, there is collective Cabinet responsibility for Government matters.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

I did not ask about collective Cabinet responsibility. I asked whether there would be any reasonable documentation. I wrote to the Minister for Finance ten days ago looking for reasonable information which was not furnished.

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

The Deputy should resume his seat and allow the Minister, Deputy Dempsey, to proceed.

Photo of Noel DempseyNoel Dempsey (Minister, Department of Transport; Meath West, Fianna Fail)
Link to this: Individually | In context

My script will be available for circulation to Members. Challenging decisions lie ahead and the immediate task facing Government and consistent with our plan is to address difficulties in the public finances, as they continue to emerge, while positioning the economy to benefit as the global economy improves. We are all well aware that both the domestic and international economic environments have deteriorated dramatically over a short period of time. Ireland, along with almost every other country in the world, is now confronting major challenges. We need to remain flexible and respond swiftly to these challenges as they emerge. Global economic activity will contract by between 0.5% and 1% this year, according to the IMF. This would be the first decline in activity in 60 years. For advanced countries — which constitute a large part of our export market — the situation is even worse; GDP is projected to decline by more than 3% in these countries this year.

The effects on world economic activity as a result of the deterioration in global financial market conditions have proven to be worse than anticipated and in many regions the economic data which have become available in recent weeks have been overwhelmingly negative. Clearly, Ireland cannot be immune from these developments. At the same time, the changing global environment has been also associated with major exchange rate re-alignments, the most notable from our perspective being the very significant depreciation of sterling, which has exacerbated the deterioration of our cost competitiveness. On the domestic front, the ongoing correction in the house building sector continues to spread to the rest of the economy. Unemployment has risen sharply, tax receipts have continued to decline and confidence has plummeted. Last week's retail sales figures relating to January were extremely disappointing and give an illustration — if one were needed — of the scale of the uncertainty currently prevailing.

The current indications are that activity in Ireland could contract around 6.5% this year. This contraction in GDP is having a very significant impact on our resources and on what we can afford to do. It is worth reminding ourselves of the strengths which have underpinned Ireland's recent economic performance — several of which remain supportive and will help position us to take advantage of the global recovery as it emerges. Our economy remains flexible and resilient which will help facilitate a more rapid adjustment than would otherwise be the case, and we are already seeing wage cuts in many sectors.

We are also in the fortunate position of having a low public debt burden. This will inevitably change in current circumstances but the low level to which we brought the debt in the past two decades is very helpful and gives us additional flexibility. In addition, our labour force continues to be highly skilled and we are continuing to invest in education at all levels to ensure we have the skills demanded by our increasingly knowledge-intensive economy.

As a small trading economy, sustainable improvements in Irish living standards can be achieved only by supplying goods and services to the wider global economy. The Government's over-riding objective is to position the economy in order to be able to exploit that global recovery when it emerges. This is the reason we are taking action to put the public finances on a more sustainable path, to get credit flowing, and to improve competitiveness. This is the precise plan we have been following. We must also bear in mind that when one considers the scale of fiscal, and perhaps more important, monetary stimulus that is being implemented in many key regions, global recovery could potentially arise more rapidly than currently foreseen. We must have our house in order in order that we can suitably benefit should this be the case.

The open nature of our economy has meant that international attention is now concentrated on Ireland. The markets, on which we are dependent for borrowing, need to have confidence that we can address our own difficulties. To build this confidence, we now need to take the appropriate budgetary measures to restore the public finances to a sustainable footing. Our debt servicing costs have been low as a share of tax revenue and while they will rise over the next few years reflecting the increased debt needed and market conditions, we do not want to return to the bad old days where more and more of our tax revenue went in simply servicing our debts.

We cannot look outward for solutions; the primary source of our recovery must be found within. This Government is determined to find the solutions necessary to renew and revitalise the Irish economy. Restoring our domestic cost competitiveness is key to positioning ourselves for the future. We will ensure the proper policies are in place. All options have to be examined in that context and everything must be on the table for review. Action has been already taken and it is worth recalling that the scale and severity of the international downturn has meant that many Governments are continually adapting and revising their responses as the recession deepens.

Last July the Government acted by announcing spending cuts of €400 million effective for 2008 and €1billion in 2009. This was followed by the introduction in the budget in October 2008 of additional revenue raising measures of close to €2 billion. We set a vision for the future with our document, Building Ireland's Smart Economy, in December 2008. In early January 2009, the Government set a five year framework to restore order to the public finances. This plan was accepted and welcomed by the European Commission and supported by the President of the European Central Bank when he visited Ireland recently. In February 2009, in line with the framework, a series of measures to secure further savings of up to €2 billion on a full year basis were put in place.

We are steadfastly committed to sustainable public finances. The decisive actions taken to date underline that commitment as well as demonstrating the very difficult trading situation we are currently in, with the position changing on an almost daily basis. Last month's Exchequer returns show that tax revenues for the first two months of the year are one quarter less than what was collected in the same period last year. Taxes are down right across the board. Expenditure pressures are also arising and higher numbers out of work are adding to the cost of the live register. A deterioration of this magnitude cannot go unanswered and the Government will announce further necessary measures on 7 April next, involving the introduction of additional taxation and expenditure measures in 2009 to ensure the general Government deficit this year is managed. In doing so, the Government has looked to find cross-party support for our efforts to address the difficulties in the public finances. The Minister for Finance has engaged in an open way with the Opposition by arranging for officials to brief the main Opposition spokespersons on the latest available figures and on the emerging position. The social partners have been also included in this process. The Opposition has been also asked to submit any proposals they may have to the Department of Finance for costing by officials.

The fiscal strategy to be adopted now will underpin the future recovery of the Irish economy. All sides of the House have a role to play in supporting the efforts of the Government in dealing with this unprecedented downturn. Future decisions will continue to be informed by the Government's framework for sustainable economic renewal, published in December, which provides a blueprint to best position the economy to benefit when the international environment begins to improve. Innovation, research and development, environmental and energy-related product and services development, critical infrastructure investment, employment-intensive supports and public sector reform are all key strategies contained within the framework to achieve this objective.

On the issue of banking, we have acted resolutely but must face the reality that the reputation of the sector and our economy has been damaged by the actions of some of our bankers and clear regulatory failures. In line with the fifth point of our plan, which is, to restore Ireland's international reputation, we have acted decisively and the Minister will shortly announce the details of radical reform of the system and methods of financial supervision and regulation in this country. It is imperative that our international standing and reputation in the global financial services community is restored. We are determined to ensure that the regulatory framework for financial services in Ireland meets the Government's triple objectives of maintaining a stable and sound financial system, having effective and efficient supervision of the financial sector, and safeguarding the interests of consumers. The Government's approach has been structured and considered. It has been informed throughout by advice from and in consultation with the Central Bank and the Financial Services Authority of Ireland, the National Treasury Management Agency and legal and financial advisers. In addition, the Government will continue to have regard to discussions with the EU and to agreed principles at EU level. Our approach to the banking crisis has been based on three broad principles, namely, protecting depositors and creditors and overall financial stability by protecting systemically important financial institutions; ensuring the flow of credit to the real economy; and any State involvement in financial institutions will protect taxpayers' interests.

The Government will introduce new structures for banking regulation and provide for the integration of Central Bank responsibilities with the regulatory and supervisory functions, new standards of corporate governance and a new approach to enhance consumer protection. These changes will restore our reputation and be consistent with the emerging international agenda for reform in the financial services sector. Structural changes and a substantial increase in regulatory capacity will lead to a more effective and efficient financial services regulatory system which will be aligned to best international standards.

For the supplementary budget the Government has a number of key messages to deliver demonstrating a coherent and effective strategy to achieve the full revitalisation and renewal of the economy: Government action on the public finances is being taken in response to the continued deterioration of economic conditions; the supplementary budget will contain measures to control public spending and increase tax revenues; it will reaffirm the commitment to bring the current budget to surplus by 2013; Government borrowing will be increased but will remain at a manageable level; our regulatory and supervisory structures will be reformed, thereby restoring the reputation of the Irish financial services sector; and, through the actions to be taken in the budget, the Government will demonstrate its firm intention to address the difficulties both in the public finances and in the Irish financial services regulatory system.

The restoration of the public finances to a stable and sustainable footing and the revitalisation of the economy are challenges the Government will address successfully. The exact details of the Government's plan for the necessary fiscal adjustments will be unveiled on 7 April. Above all else, the decisions will be taken in a fair and equitable manner, while protecting the most vulnerable in society. The measures to be taken will require us to act firmly in the national interest. Those who can bear the greatest burden will be asked to do so. In this manner the measures taken will address our cost base, improve our competitiveness, reorientate the economy towards innovation and export-led growth in a fair and equitable manner. The Government will set out a clear and successful strategy to deal with the public finances, the economy and address the difficulties that have emerged in the public finances.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

I am bitterly disappointed at the standard of the Government's treatment of this debate. I wrote to the Minister for Finance 11 days ago looking for the revised economic forecast for GDP, an updated figure for the tax forecasts for this year, with information on a number of other available tax options. We are facing into an unprecedented set of decisions and the House needs the maximum information in order that we may subject the available options to scrutiny, if we hope to make the best choices in these extremely difficult times to protect employment and the economy and build for the future.

I do not know whom the Government believes it is fooling. I do not want to cast any aspersions on the Minster for Transport who was sent into the House to lead the debate. However, it seems extraordinary, at a time when people are talking openly about the possibility of national bankruptcy, that the Minister for Finance does not believe it is worth his while to lead the debate on the issue of how we should prepare for the extremely difficult set of decisions we have to make. Frankly, I do not understand it. I wrote to the Minister a long time ago and have sought to contribute in a constructive manner to this debate in order that we might have a meaningful discussion about the budgetary options available.

If there is one thing we have learned from recent budgets it is that wholly inappropriate decisions have been made year after year because budgetary options have not been subjected to scrutiny. We persisted with tax reliefs building the property bubble to an unprecedented level because, again, tax expenditures were not subjected to scrutiny. Ministers have hidden behind the secrecy afforded by the budgetary process to conceal from the public what they are at. This has brought the Government and the economy, as well as the House, into disrepute. At a time of crisis the Government cannot see beyond the length of its long political nose to see that this is a time for doing things differently and realising that we have to renew politics in confronting it. The Minister has not said anything about the budgetary framework, the level of tax receipts he hopes will be achieved this year, the scale of the deficit we have to bridge or the balance between taxation and spending cuts he believes is appropriate. These are matters on which the Government surely has an opinion and on which the House should be informed in order that we can have a meaningful debate.

This is a vibrant economy. The whole world looked at Ireland because we were able to produce an economy with high productivity, high export growth and sound public finances. That economy was destroyed, however, by a catastrophic failure, namely, the embrace of high spending and high cost governance supported by an unsustainable property bubble. The catastrophic failures that happened on the Government's watch are being simply glossed over. The trouble is that many of the decisions central to the problems we face are ones the Government have walked us into, for example, by the irresponsible fiscal stimulus it pursued, particularly at election time, and the unsustainable pay settlement strategies, not only benchmarking, but afterwards in wanting to award Ministers the crazy pay packets it stated were in line with comparators in the private sector. Its methods of budgeting, as we see today, were not fit for running a corner shop, let alone an economy of the scale and importance of Ireland's. Then there was the deliberate sabotage of a performance culture in the public service, with the decisions on decentralisation and the HSE. It destroyed the quality of professionalism, effectively stating to public servants that when it came to political decisions, standards of governance did not matter: "We will move people around like pawns on a board." The only reason for establishing the HSE was to sweep away bureaucratic excess; instead a guarantee was given to all bureaucrats that they could stay in place and a super-bureaucracy was foisted on the public on top of it. Is that not saying to committed public servants, in effect, "We do not care about efficiency or professional standards"?

The Government has been guilty of following a style of governance where the transforming power of the new economy in Ireland did not reach into many sectors, but rather into privileged and protected sectors which could circle the wagons and protect their own interests. I list among these, for example, monopoly utilities which have become the most expensive in the country and believe they can give their employees pay increases when employees in the rest of the economy are taking pay cuts. The banking sector always had a commitment that the taxpayer would provide a guarantee. Even now, with the taxpayer having to ride in to rescue them, the banks believe they can still dish out bonuses to their top executives. They do not believe they need to sweep away the executives who steered the economy down the cul-de-sac in which we are severely impaired and from which we are trying to get out.

Neither have big public bureaucracies been held accountable, which is no surprise. People were let down by these sectors which were under-regulated and undermanaged on the Government's watch. This has been a really serious problem as regards the approach the Government has taken. It was never willing to confront the deep fault lines in public policy that allowed what happened to the economy to take place. Reform was always out of bounds, to be postponed to another day. Problems were bought out. The Government prided itself on the way it could buy out any vested interest that was giving out or threatening. A small circle of people had unrivalled access to the Government and still does. Those who questioned the "miracle" of the property driven economy were frozen out and told they were Jeremiahs and fit to commit suicide. That is the legacy. Regulation was based on the simple faith that those in charge knew best. There was no scrutiny of the regulations passed. The trouble is that the original strength of the economy, a shared analysis of our problems, time after time turned into a dangerous consensus which was low on reform, competition and scrutiny, as well as weak on performance.

There has been gross failure, even on the watch of the Minister for Transport who is brave enough at least to admit it, but gross failure, for example, as regards climate change, has no consequences for any Minister. That is the legacy we face and what must be corrected in this budget if we are to start to turn things around.

We are facing a meltdown in this economy. Living standards in the country will be hit with an at least 20% cut. As a community, we have choices in that we can circle the wagons, protect those in strong positions, take no cuts and leave it to the unemployed and the young people coming out of our schools and colleges to take the brunt of the pain or we can all knuckle down and say it is time for radical change in the way we do our business, starting with Government and politics and extending to the banks, the public utilities and the public sector. That is what this budget must be about.

The budget must be about reinventing Ireland, our public sector, our economy, the social contract and our face to the world. Until Ministers are willing to say they made huge mistakes, that we must change the way money is spent in this country and that we must change the standards of performance which pass for good enough — that applies to Ministers as well as public servants and everyone in this economy — we are completely at nought in having debates such as this. We will come to 7 April and we will still not have changed anything that will strengthen this economy.

I am scared that the approach the Government will take to this budget will sleep walk us into an economic disaster. It would have been enlightening to hear the deficit target for the end of this year to which the Government is working. Will we have to meet a target of 9.5% come hell or high water? The truth is we cannot control that deficit target. It deficit could be wiped out by bad May returns and bad June returns. Will the Minister come back in May and June and announce more taxes to chase the economy further down?

Let us be honest with ourselves. The only target we can set is in regard to the structural deficit. That is ignoring the business cycle. We can change what is happening to the underlying trend in public spending versus public taxation and we must drive that down. That deficit, of a scale of approximately 8%, has become too large and must be eliminated over a period of four years. If the Minister said that, we would have some credibility — that there will be an underlying structural reform package, that we have a view of what the structural deficit associated with that will be, that we will squeeze out cost over that period and that we will not give international commitments to the EU or anyone else about the level of borrowing because we cannot make such a commitment in that we do not know the depth or pace of the depression into which we are entering.

We need to make credible commitments internationally. Has the Government committed internationally to this 9.5% target about which we keep hearing? Has it made a decision that we will meet it, come hell or high water, because that is what we were told by the Taoiseach ten days ago? I am not sure that is the case. I do not believe it is a wise commitment to make because it is one we cannot control. We can only control the underlying deficit.

I despair when I hear the Minister and the Taoiseach come into the House and say the secrecy of the budget is sacrosanct, that Government must make decisions and that it cannot provide any information to the Opposition. That is basically what the Taoiseach said in the House one hour ago. If that is the case, we are back to where we always were. I refer to statements like that which the Minister, Deputy Dempsey, made about the role of the Opposition. He stated, "In doing so, the Government has looked to find cross-party support for its efforts to address the difficulties in the public finances." Does the Minister seriously expect it will get cross-party support by coming into the House on 7 April listing off expenditure cuts and tax increases and that the Opposition will rally to the flag and say this is a wonderful Government?

There is a role for the Opposition in this House. It is a role of scrutiny and of stress testing proposals emanating from Government. This Government has destroyed that role in regard to budgetary strategy. We have learned to our expense what that has meant. After its last budget, the Government had to do a U-turn on many critical aspects. It destroyed its own credibility and our international credibility by not having a budget on which it could stand over. If it took up the Opposition's offer to have a serious debate about the options, perhaps we could stress test some of decisions in advance.

It is essential as we approach this crisis that we use it to reinvent this country. We must embed reform and not engage simply in slash and burn. We must choose taxes which promote efficiency in the way we use resources and not simply chase the economy down. We must find catalysts for economic opportunity so that even in this difficult time, we can find ways to seize and work the opportunities which remain to us.

There must be a dramatic cut in the cost of doing things. That must start with the Government. We must halve the number of Ministers of State, halve the number of committees and cut back on top level pay in the public service, including our own, an issue which still has to be addressed. We must end increments in the public service to get us through this difficult time. We must be genuinely willing to cut the cost of what we do and what everyone else does, otherwise the brunt of this crisis will be borne by people who have joined the live register queues. That is the sort of leadership we should see from Government, that is, we need to see how it will reform itself and then move to reform public spending.

The profound change in public spending which we now need means that budgets must no longer be about the demands of agencies but about the needs of ordinary people. Agencies and units of government should bid for money on the basis of what they can deliver. Is it not extraordinary and ludicrous that hospitals which face tight budgets close wards and beds and turn away their patients? Can one think of anything more ludicrous than a budgetary system which traps committed talented public servants in our hospitals into turning away patients as a way to become more effective? Surely we should have a system where money follows the patient and where hospitals which are efficient can deliver more patients for money and where the response to difficulties is to cut overheads and treat more patients more efficiently and not turn them away.

This budget must be the start of a major set of reforms starting with Government and then spreading out into the public service and beyond, into the kind of smart investments we make for new opportunities. I saw no such approach in the Minister's opening remarks, which depressed me. It depresses me that we are going through this sham of a debate at a time when the country is looking for leadership and for Parliament to play a meaningful role in offering that leadership. The Government is too short-sighted to see the opportunity.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
Link to this: Individually | In context

The former Taoiseach, Albert Reynolds, warned that it is often the little things which trip one up. I say to the absent Minister for Finance, who is rather discourteous in not attending the opening of this debate, not to dream of coming into the House on 7 April if he has not sorted out the Fingleton affair. Mr. Fingleton is not a single bad apple; there is a barrel full of bad apples.

The Minister has been incredibly slow in cracking the whip of extraordinary powers he took to himself in the legislation on the covered institutions. We pointed out earlier the four or five plenipotentiary sections of the Act which give massive powers to the Minister to impose what conditions he likes and which leave the way open to him to recover the €1 million bonus.

The Irish Nationwide Building Society is, in international terms, a tiny financial institution. When one recalls the furore and action in America regarding the $165 million in bonuses paid to the executives of AIG, which is a huge corporation by global standards, it is important to remember that Mr. Fingleton's €1 million bonus is on a par with the total bonuses of all the AIG executives. That is how much money this individual has taken.

There is nothing that corrodes confidence as much as the belief that sacrifices, like taxes, are only for the little people. Unless the Minister for Finance, Deputy Lenihan, can show in the emergency budget that he will have fairness and justice, he does not have a prayer of getting the plain people of Ireland on his side. It is the same when tough decisions have to be made about the whole edifice of political patronage and the whopping cost of the payroll vote that the former Taoiseach, Deputy Bertie Ahern, constructed. The Minister, Deputy Lenihan, will have persuaded the Taoiseach to have the reforms done and dusted before he rises to his feet on 7 April. If he does not have a plan fully in place by then to reduce the number of Ministers of State, as well as the numbers of committee Chairmen, Vice-Chairmen, and ministerial salaries, privileges and pensions, public hostility will be so great as to undermine any capacity to accept the really big adjustments likely to be announced in the budget.

I heard the story about Fianna Fáil and the Green Party's newly-appointed chairman of the Dublin Docklands Development Authority. He was given the honour by the Government of being chairperson of a large public corporation, a singular honour and responsibility. Apparently, all he was involved in was an ordinary piece of clever tax planning to abuse and utilise our non-residency laws by his family members. If that does not cry to heaven the need to close down on the tax exiles and super millionaires who continue to pay no tax, I do not know when this Government will ever bring in tax justice for ordinary workers. The people who work in this House, those who work as teachers, nurses and doctors up and down the country and ourselves are paying, if one is on a higher salary, approximately 10% in the public service levy, down to a level of 5% or 6% for people on much lower salaries.

People are angry and unhappy about it but they recognise that something has to be done to steer the economy back to fiscal stability. However, that cannot be done when one shoves in peoples' faces, on a daily basis, more stories about cronies such as Mr. Fingleton and Mr. McCaughey who get away with ridiculous schemes, whereby the little people pay the taxes and the super wealthy can walk away and laugh in our faces.

The Minister has had enough indication from ourselves and the Fine Gael Party that we are willing to co-operate regarding sacrifices which need to be made to turn around this economy and to rescue it from the state into which he has allowed it fall. He must, however, do it with justice and fairness. Justice starts with the wealthy paying and contributing proportionately more because they have proportionately more. The lower, lighter burdens, if burdens there should be at all, should fall on those people who are least able to bear them.

Every day I read the conventional wisdom for setting out cuts and more cuts, which makes me nervous. Like Galbraith, I fear the conventional view about cutting, and cutting serves to protect us from the painful job of thinking. I read many of the orthodox economists with a jaundiced view. How many of these experts recognised in time that the tax incentives of successive budgets, particularly those of former Deputy Charlie McCreevy post 2001, were in fact our road to ruin and the cause of a flawed construction boom? The Taoiseach, Deputy Cowen, inherited that and did not have the guts to address it, nor did the incoming Green Party and Fianna Fáil Government after 2007.

It is clear that the core issue this week and next week will remain, in terms of this country's status and ability to borrow — which we need to do — and the cost of that borrowing, the condition of our banks and their toxic debts. Right now our economy is being dragged down by our dysfunctional financial system. Overshadowing everything in the debate is the overhang of the flawed bank guarantee of 30 September last year. I recall the Minister for Finance, Deputy Lenihan, assuring me that his powers under the Act were so great that there was no need to cap the salaries of bank directors at the same level as his salary. Where is he now? He is to get a couple of people to report in a month's time. He is apparently passing on the reform of Ministers, Ministers of State and all such matters to the McCarthy commission. He is passing on the recovery of Mr. Fingleton's bonus to two directors. Does this Minister take any direct decisions himself? Is he just the Minister for passing on decisions to somebody else?

The decision on the bank guarantee scheme exposed Ireland to a hostile audience among international lenders at a significant additional cost and has restricted our capacity to arrange funds for important capital investment projects which could stimulate the economy. It has left us with a tattered reputation for crony capitalism, something to which even the Minister had to admit in his meeting with the Financial Times last week.

As an Irish person, I was not happy to read the front page headline on the pink newspaper, the Financial Times, stating that the Irish Minister Lenihan wanted to try to clean up Irish crony capitalism. This was no way to talk about our country on our national day in a financial newspaper which is the most widely read around the world. It was a sad day for this country to have the Fianna Fáil Minister for Finance beating his breast and saying he would try to clean up our crony capitalism. It has left us with such a tattered reputation that this year the extra interest cost of our borrowing will be approximately €1 billion over the odds because of the rise in the cost of interest payments.

The bank policy decisions made since September have made a bad situation worse. I am disappointed that we have received no details of Dr. Bacon's proposals on toxic debts. It is one final opportunity for the Minister to get a grip on the banking crisis. He is in the last chance saloon and I urge him to engage with this side of the House before he makes a final decision. The core issue is the allocation of the bank losses and their debts. One can talk endlessly about bad banks, good banks, insurance schemes for toxic debts or special companies to handle the debts. No matter what one chooses, it will still come down to the core issue which is the valuation of the bad debts and how much of a hit the taxpayer will take.

Done badly, this will probably cost the Irish taxpayer and State €25 billion. Done well, it could cost us less than half of that. We have already spent €7 billion recapitalising the two big banks and, as the Minister and the Government knows, it has not worked. One needs to weigh up all the options, including nationalisation, and I fear the Minister has decided to rule out that option for misguided reasons and, in doing so, has run the risk of loading a grossly excessive and unjustified burden on current and future taxpayers.

I can see why Mr. Fingleton, Mr. Sheehy and Mr. Boucher are enthusiastic about schemes such as insurance policies. It should be equally obvious to Members on all sides of the House that this is a bad deal for taxpayers. Once the crisis is over, the shareholders of the companies which created it will have benefited from a whopping transfer of funds from the Government via the taxpayer. The public will be appalled by any proposal that involves paying over the odds for assets simply to keep insolvent banks in private hands. If the Government does this, it will forfeit all claims to an all-party consensus. There is a well founded suspicion which is denied fervently that the national interest in these decisions is identified solely with the interests of the very people whose wild excesses caused the problems in the first place. Is the Government the silent spider at the centre of a toxic web of dodgy land deals? This is what has brought the country down and it remains the issue Fianna Fáil will not confront. The Government has no right to barter the welfare of the country to protect the people concerned.

The budgetary process is a type of phoney process, as part of which the Opposition endures a drip feed of information. The Government must come clean in terms of its target to reduce the budget deficit and how much of the figure it proposes to recover in the five to seven-month period of tax collection after 7 April. If income tax changes are imposed on 7 April, it will not be possible to implement them, unless they are straightforward levies, until early July. On the other hand, any excise duty charges can come into force at midnight. Is the Government proposing to recover a full-year deficit of 9.5% in a five-month timeframe? This would be akin to the medieval practice of bleeding the patient except that, in this case, the Government will bleed the patient to death because consumers and the general economy will not be able for that degree of harshness.

The economic crisis does not have to be a great depression, as long as the Government makes the correct policy decisions. The 2009 allocation for the capital programme is €8 billion, of which, we are told, almost €6 million is already committed under contract. However, an area with one of the highest levels of non-contraction, as far as I can discover, is the schools building programme. Some €600 million or more is allocated to building and refurbishing schools at primary and secondary level but this allocation is not committed under contract. If the Government does the budget by rote, the schools building programme which would provide necessary infrastructure and jobs at local level will simply be replaced by a mini-programme. On the other hand, some Departments, including the Department of Agriculture, Fisheries and Food, are in a position where almost everything in their capital budget is contracted. As a result, these capital programmes will endure no reduction, whereas the schools building programme will face the chop. The Minister, Deputy Dempsey, must be aware that up to €800 million of the capital allocation for transport is not contracted and therefore in peril. Changes to the capital programme are ill devised and reflect the panic that besets the Government benches as it faces into an emergency budget arising from the mess it has made of a once vibrant economy.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

I propose to share time with Deputy Ó Caoláin.

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

Is that agreed? Agreed.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

We must all be grateful to the Minister for Agriculture, Fisheries and Food, Deputy Smith, for offering us a great insight into the muddled thinking of the Government with his comments last Sunday that savings of €5 billion to €6 billion would be sought in the forthcoming budget. The subsequent "clarification" hardly helped matters. Since the beginning of the month the Government has increased the amount of the projected deficit from €4.5 billion to as much as €6 billion. We must await the March revenue figures which will issue less than a week before the emergency budget to see how much further into the red the Government has dragged the economy.

The economy was brought to this point, not by international factors alone but by the disastrous policies pursued by Fianna Fáil-led Governments for more than a decade. I acknowledge that international factors have had an impact. However, these factors would have been mitigated massively had we had constructive, realistic policies guided and driven by a sensible and conscious Government. It has been claimed no one shouted "Stop". That is not correct. Many did so, my Sinn Féin colleagues and me among them. We pointed out that the property boom was unsustainable and that it was a recipe for disaster for the Government to rely on that bubble for so much of its revenue. This fundamental policy failure lies at the root of the crisis in the public finances.

Last autumn the Government panicked. It rushed into an emergency early budget in October without having a clear picture of what was happening in the economy. It was primarily a public relations exercise in order that the Government could be seen to be doing something. The reality was that the Dáil was in recess for the entire summer. By contrast, Members of the Spanish Government returned to their desks early in order to deal with the deepening economic crisis in their country. The October budget was unnecessary and its rushed nature led to more disastrous decisions. The Government obeyed its conservative reflex and lashed out at public services by imposing cuts in health and education, before imposing a so-called public service pensions levy which is in reality a levy on public service. The Government succeeded in bringing older people, students and organised workers out in numbers not seen on our streets since the anti-Iraq war march of 2003, the hunger strikes of 1980 and 1981 and the tax marches of 1979.

It was inevitable that these mobilisations would be followed by strike action. Sinn Féin supports the decision of trade unions and workers to take part in next Monday's national strike. The blame for industrial unrest lies squarely at the Government's door. We are calling on the Government to engage with trade unions in an effort to avert the action. However, if the strike goes ahead as planned, any disruptions will be the responsibility of the Taoiseach and his Government. The Irish Congress of Trade Unions, ICTU, called for the national strike in protest against the Government's handling of the economic crisis. The ICTU has published a commendable ten-point plan for national recovery — There is a Better, Fairer Way — which sets out the key elements of its campaign platform.

Since the introduction of the so-called "cheapest bail-out in the world", the Minister for Finance, Deputy Brian Lenihan, has made one blunder after another in his fundamentally flawed strategy to save the banks. Each time he intervenes, whether through recapitalisation or nationalisation, he tells us that this latest measure will do the job. While all these schemes have poured billions of euro of taxpayers' money into the banks, our beloved senior bankers are getting away with more embezzlement. It is simply incredible that while the Government was in the process of guaranteeing Irish Nationwide Building Society, Mr. Michael Fingleton was collecting a bonus of €1 million. Mr. Fingleton has used Irish Nationwide Building Society for well over 30 years as his own personal bailiwick. Dominating the board of directors in the way that he did, Mr. Fingleton's €1 million bonus——

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

Deputy Morgan may not refer in that fashion to a person outside the House who is not here to defend himself.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

More is the pity he is not here.

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

That is the point

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

What Mr. Fingleton did is not in dispute. The pension of €28 million may be in dispute——

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

The Deputy is not entitled to go back over the last 30 years and cast aspersions on any individual. I ask him to desist from doing so.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

What is not in dispute is that this person took a bonus of €1 million after the financial institution in question was brought under the State guarantee scheme.

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

That is a different matter.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

I will stay with that. It must be cleared up. There is much more to investigate and uncover.

Photo of John O'DonoghueJohn O'Donoghue (Ceann Comhairle; Kerry South, Ceann Comhairle)
Link to this: Individually | In context

The Deputy cannot cast aspersions on a person outside the House. If he wants to discuss undisputed facts, it is a different matter. However, he cannot cast aspersions on individuals outside the House who are not here to defend themselves. That is a fundamental principle of natural justice and it must be adhered to.

6:00 pm

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
Link to this: Individually | In context

At the very least, it was dubious practice. Somebody must answer to the House for what was allowed to take place at this institution, into which taxpayers' money was poured. A number of weeks ago when the evidence of Anglo Irish Bank cooking the books surfaced I called for the Criminal Assets Bureau to investigate that bank. This evening I call for a CAB investigation of Irish Nationwide Building Society and Mr. Fingleton. While one scandal after another is surfacing from our corrupt banking institutions there is still no clear evidence that the Government is reforming corporate governance. It is corporate governance that is crucial in restoring confidence in our banking system. That can happen only after this mess has been cleared up. It is now evident that banking institutions without radical intervention are in terminal decline. If the Government does not intervene in the form of nationalisation, our banks are finished and a number of SMEs and family homes are finished as well.

The €4.7 billion or possibly €5 billion — it could be €6 billion because the Government obviously does not know — which is being sought will mean nothing if another 300,000 people are laid off by the end of the year, which seems a real prospect at this time. Because of its obsession with cutbacks and our doomed zombie banks, jobs are being lost and thousand of workers are being cut back to working two days per week. The Government has basically done nothing to stop this crisis and it seems to be almost suffering from shock.

Yesterday Sinn Féin launched a jobs retention and creation strategy in order to stop the tsunami of unemployment which is sweeping across this country. We called for a €300 million fund to subsidise jobs in SMEs because our view is that it is better to use public money to keep people at work rather than to keep people at home. The Taoiseach will need to give serious consideration to State intervention in the private sector to save jobs. We also need increased investment in our schools and public transport. A few weeks ago the Government opened up the National Pension Reserve Fund to continue its never-ending bailout of the banks. Why can it not do something useful for once and use the National Pension Reserve Fund to finance critical infrastructure projects. Jobs can be created only through investment not through cutbacks.

Photo of Caoimhghín Ó CaoláinCaoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
Link to this: Individually | In context

At the end of February we were presented with catastrophic unemployment figures. There were then more than 350,000 people out of work and we are losing jobs at a rate of 1,000 per day. Predictions of more than 500,000 on the dole by Christmas might very well prove to be conservative. This will mean tens of thousands more families becoming dependent on social welfare. When I asked the Taoiseach in the Dáil before the St. Patrick's Day recess, and again today, if we would have a new social welfare Bill arising from the supplementary budget, he answered the question in the context of expenditure cuts and revenue raising. The Taoiseach's replies were an ominous signal that social welfare will be included in expenditure cuts.

Already arising from last October's budget, newly unemployed people have been penalised. They are now required to have been in employment for two years before qualifying for jobseekers benefit, as against one year before the budget. The payment period for job seekers benefit has been shortened from 15 months to 12 months, after which the unemployed person must move to the means-tested job seekers allowance. Newly unemployed people are also facing very long delays before their claims for social welfare payments are assessed.

Low-income families have also suffered disproportionately from VAT increases, health charge increases, the cut in child benefit for 18-year olds and the cut-off of child care supplement at five years of age. Many of these families still do not qualify for medical cards because the threshold has been allowed to stay at a disgracefully low level. The Government has been strangely silent on this major issue. I challenge Government speakers to guarantee in this debate that existing levels of service for medical card holders will not be cut and that those who become qualified for medical cards through unemployment will not be faced with a diminished service after the 7 April budget. The opportunity for Government speakers to give an answer to that concern is afforded them in the course of these pre-budget statements this evening and tomorrow.

In its panic in the lead-in to the unnecessary 14 October budget, the Government lashed out at public services, cutting health and education. This was followed by public transport cuts with a hypocritical Green Party standing over the attacks on bus services and jobs in Bus Átha Cliath. These were instinctive acts by a Government that does not value public services for what they are — essential services for our society and economy — but sees them as goodies to be doled out when the revenue figures allow. The Government must ring-fence social expenditure to support all those who are on the threshold of poverty. Revenue must be raised through taxing those who can afford to pay, through eliminating waste in public expenditure and through job retention and job creation — the most critical element that the Government has failed to grasp so far. We need a real and effective employment strategy and it is glaringly absent from Government.

With regard to job retention, we need only look at the scandal of SR Technics to see how the Government has failed to be proactive and has allowed a big multinational company to take over the operation and then force it to close, even though it is a very viable business. The owners of SR Technics are mostly oil billionaires based in the United Arab Emirates. They have no interest in or knowledge of Ireland. They want to close the Dublin operation because their long-term plan is for a massive aircraft repair facility in Dubai. Yet what has the Tánaiste and Minister for Enterprise, Trade and Employment done? She has allowed IDA Ireland and Enterprise Ireland to refer directly to the owners of SR Technics all potential investors who have expressed interest in taking over the company or parts of it. As the workers have pointed out, it is they and the local management in Ireland who are the real stakeholders in SR Technics. Their plan for the survival of the company should be fully supported by Government and the Tánaiste should instruct IDA Ireland and Enterprise Ireland to work directly with workers who are the real resource at SR Technics. These jobs can be saved and I urge the Government to act effectively towards that end.

We in Sinn Féin have pointed the way with our 'Time for Action' proposals, including an employment fund to help struggling viable businesses to retain their workers. This is far preferable to allowing people to be added to the ever-lengthening dole queues. I urge the Government to take on board our proposals. I urge it also to take on board the constructive proposals of the trade union movement and I commend trade unionists on their campaigning for a better way forward. Workers are now being vilified in some sections of the media for preparing to take strike action next Monday. I am also aware that pressure is being placed on some workers in advance of that, which is outrageous. Workers have the right to make a democratic decision and to follow through in line with that trade union decision making process. We need to remember, however, that this strike is in opposition to the disastrous policies of the Government and in support of the better and fairer way forward that is possible.

I hope that from the collective of contributions in the course of these statements this evening and tomorrow the Government will take note and act in accordance with the commonsense proposals and ideas suggested. With no disrespect to the Minister of State, Deputy Mansergh, who is the sole Minister or Minister of State on the Government benches, I hope the Government will take heed and note of the contributions of Opposition voices over the course of these two days.

Photo of Darragh O'BrienDarragh O'Brien (Dublin North, Fianna Fail)
Link to this: Individually | In context

In response to Deputy Ó Caoláin, SR Technics is slap bang in the middle of my constituency, in Swords in north Dublin. I assure the Deputy it is not true that the Government is not being effective in trying to examine every avenue it possibly can, across the parties. With regard to the Joint Committee on Transport and a meeting of colleagues from Dublin North and adjoining constituencies, all of us, regardless of party, are doing our level best to ensure we save as many of those jobs in what I agree is an absolutely viable company that we need to do everything possible to save. I assure Deputy Ó Caoláin that both the Taoiseach and Tánaiste have been involved on a daily basis with regard to SR Technics. I remain quietly confident we can step back from the brink on this matter and retain many of the jobs in SR Technics.

I am pleased to be given the opportunity to contribute to this debate on the upcoming budget of 7 April. The Government has rightly taken the decision to introduce a supplementary budget. The challenge we now have is to set the balance between cutting spending and raising taxes, on one hand, and not over-taxing the economy, on the other. The worsening Exchequer returns discussed earlier today mean the Government needs to act now to further address the situation and to bridge the gap between Government income and expenditure.

We have taken very difficult decisions in recent months, many of which are understandably not popular, particularly with those who have been directly affected in their pockets. However, every decision taken by the Government has been in the interest of the country as a whole and for Ireland's future economic prosperity. The cornerstone of this budget and our economic strategy has to be that we get the public finances in order, continue to sort out the banking situation, protect and create jobs and, most importantly, do all we can to support the thousands of people who have lost their jobs in the past eight months in particular and get them back into viable employment.

The global economic situation has led to a severe loss in confidence and a drastic decrease in the public finances which needs to be addressed. In doing so, however, we must remember from where we have come. As I stand here today, more than 1.8 million people are at work in Ireland, nearly double the number at work only 20 years ago. This budget must ensure we do everything in our power to protect current jobs and to continue to attract foreign direct investment to grow jobs in areas where we have been successful, such as the pharmaceutical and technology sectors. It is important to state that in 2008 alone more than €4 billion of foreign direct investment was secured in the research and development sector. I put it to Members that much of this is directly related to Government policy in this area.

To protect jobs and create new jobs, we must ensure our cost base is competitive. While I welcome the recent reductions in energy prices for homeowners and businesses, we must do more in this area to reduce costs further. We must continue to reduce red tape for business, thereby reducing administration and the costs associated with it. We must continue to work to ensure businesses have access to lines of credit to keep them in business through these difficult times. This was one of the cornerstones of our decision in regard to the capitalisation of the two main banks and the nationalisation of Anglo Irish Bank.

I welcome the recent announcement by the Taoiseach of the establishment of the €100 million fund for viable and vulnerable businesses. This scheme needs to be brought through quickly in the budget and needs to be expanded upon. We should retain our competitive edge in regard to the area of corporation tax, where we should retain the 12.5% rate. Any increase in this rate would be a retrograde step.

The budget also provides an opportunity for stimulus. It will be not just about cuts and taxes but must be also about stimulating the economy. One of the tragedies of this recession has been the thousands of people who have lost their jobs. A priority within the upcoming budget must be to help those who are unemployed regain employment and to continue to assist them financially while they are out of work. The recent announcement by Hewlett Packard clearly shows that Ireland continues to be a place for multinationals to invest and to create jobs that can be filled by very well qualified people who have recently lost their jobs.

This budget will be tough but it also will be fair. The Taoiseach has said that those who can bear the burden best will bear it most. The overriding principle of this budget must be one of fairness. The general public know that we are in the midst of the worst global financial crisis since 1929. Ireland, as an open economy within Europe, is not immune to this crisis and has in some areas suffered worse than some of our neighbours. However, we have the ability to come through it.

I firmly agree that we need to continue to invest through our national development plan to improve both our physical and social infrastructure. It is right that we will spend in excess of €650 million this year in providing new schools and refurbishing existing ones. It is also right that we will spend 5% of GNP in the coming year, double the European average, in making sure we are investing in Ireland and retaining jobs. We need to ensure that in all of these projects we get value for money. We must continue to examine Government expenditure across all Departments. Any budget changes must be seen in the context of zero inflation. Increases which we have seen in the past number of budgets will not be seen this year but I would ask all parties and commentators to be fair in their assessment of the budget proposals.

The Dáil should take the lead in considering how it can reduce costs. It is now time to bring forward changes to pension arrangements within the Dáil. I agree with many others that former Ministers across all parties should not draw a pension while serving in the Oireachtas. I ask here this evening that changes be made in this area.

I know many public servants still feel aggrieved with the pensions levy, on which I spoke in the House, but I still believe it was the fairest approach. It was also right that the impact of the levy was felt by Members of this House.

One area in which I take a particular interest is that of pensions. In 2007, €2.9 billion was allowed in tax relief on both private and public sector pensions. There has been much comment in the media about what changes should be made in this area. I would not like to see a change to the system that would mean a reduction in tax relief, allowing it only at the standard rate. This would be a retrograde, short-term step that would do nothing to bridge the gap between people who do not have adequate pension provision and those who do.

The area of directors' pensions needs to be examined in great detail. A disproportionate amount of tax relief is paid to company directors who can roll up their salaries for pension purposes in the ten years prior to retirement and benefit greatly from corporation tax relief and the reduction in capital gains tax liability. I have sent proposals to Government on this matter and I personally would reduce the maximum allowable fund from €5 million to €3 million, thereby reducing the tax free cash amount that is payable.

I genuinely hope — I have noticed a change in this regard in the past couple of weeks — that all parties within the Opposition will present viable proposals for this budget and not just disagree with Government proposals for the sake of it. I welcome many of the proposals I have seen from the Opposition parties in recent weeks. This is the forum in which to discuss them and I ask the Opposition to look in detail at the budget proposals and take them on their merits. It is clear, based on the Exchequer returns, that further measures are needed to ensure we remain within the 9.5% of GDP target agreed with the European Commission as part of the plan for the stabilisation of the public finances. It is only right and proper that this be done in the interests of the country. I know these decisions are tough and not all of them will be immediately welcomed by the public. However, in time, people will see they have been necessary to ensure the future prosperity of the country.

The Government will continue to work on areas where we can stimulate growth, protect those currently at work and ensure our policies in regard to tax and savings are fair and balanced. The Government will not shirk its responsibility to its citizens. I know people will recognise that these decisions, while difficult, have been taken for the good of the country as a whole and for our future generations.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

I am delighted to contribute to this debate, although I find it frustrating that the Minister for Finance did not come into the House to open it.

Deputy O'Brien made a number of points with which I would like to deal. If we are to have a proper discourse on the budget, we need full information. The Government cannot simply tell us it is considering proposals which, it appears, we will not see until budget day. We have sought the provision of meaningful information by the Department and Minister for Finance. For example, what are the monthly tax projections for the remainder of the year and what is their basis? What proposals have been made by various Departments? Meaningful discussion and dialogue on the budget is a two-way street. We have, through our spokesperson, Deputy Bruton, written to the Minister requesting these details which have not been forthcoming.

A number of key factors require to be addressed in the budget, including the restoration to order of the public finances, an issue on which I will speak further. The abiding feeling among the general public in terms of the budget is fear. People are afraid of what will be contained in the budget. They have suffered cut after cut, following previous announcements by the Government. The Government, when it should have taken a proper approach in the budget announced last October, fudged it. People are fearful and finding it difficult to keep up with mortgage and car loan repayments. The Government needs to give an indication that it is in control and that there is a methodology in what it is doing. The public understands we are in great difficulty in terms of the public finances but they see no economic plan or road map from the Government. The abiding feeling among the public is fear. They are worried that further cuts will be announced. Also, the budget will have to be seen to be fair across all areas.

Fine Gael has tabled a Private Members' motion which proposes a reduction in the number of Ministers of State from 20 to eight. Leadership must be provided from the top. Also, we have proposed reform of the committee system, changes to the residency rules and across a range of areas, including the banking sector. In the past few days there have been two important announcements, including on the €1 million bonus paid to the CEO of Irish Nationwide Building Society following the introduction of the Government's guarantee scheme. I draw Members attention to paragraph 8 of the guarantee scheme which states the Minister may review and vary the terms and conditions of the scheme from time to time at no later than six monthly intervals. I take the opportunity to point out to the Minister that the first six month period will expire at the end of March and that he should use the opportunity to apply this provision to what is happening in Irish Nationwide Building Society. Paragraph 48 of the guarantee scheme states each covered institution shall submit a report to the CIROC no later than six weeks after the relevant covered institution joins the scheme, demonstrating how its remuneration policy for the year ahead will comply with the overall merits of the scheme. How did it arise that Mr. Fingleton was able to take a €1 million bonus after the scheme was introduced? The money must be repaid. The payment of this bonus sends the wrong signal to ordinary people.

We also heard today of issues relating to tax avoidance on the part of another individual. While it might be suggested the amount of money involved is not huge, that is not the point. A tax system, if it is to work, must be fair. In recent months low to middle income earners have had to pay a 1% income levy. Those working in the public sector are also paying a pension levy of between 3% and 10%. Side by side others who have made a great deal of money are not paying their taxes. There must be radical change in these areas.

In restoring financial stability we need to know what the Government is proposing to do in terms of the general deficit and how much it proposes to borrow in the current year. It has not to date stated its intentions in this regard. It has been given five years by the European Union to restore the public finances to order. With the public, we are entitled to know what it proposes to do.

Credibility must be restored to the banking sector. Currently, it is not giving credit to small business. The Government is pumping €7 billion of taxpayers' money into the two main banks, Allied Irish Bank and Bank of Ireland, which we believe cannot and will not work. The fact that the banks have toxic debts means they will require further funds in the next year. Fine Gael has brought forward a model which is gaining approval in various quarters which we believe would be tenable and viable, namely, that two new good banks be established and that the two existing banks, Allied Irish Bank and Bank of Ireland, effectively remain as currently constituted but as debt management agencies. This would allow the new banks to trade. I would support the Government in putting funds into these new banks because it would at least be investing in something viable from which funds would flow. Currently, funds are not flowing to small business.

The Government and banking sector issues are interlinked. I believe the Minister of State, Deputy Mansergh, will agree with me on the following point. Currently, Ireland is paying 2.75% above the rate paid by Germany in borrowing on the international market. The reason for this is a lack of credibility in how the Government is looking after the economy. Credibility must be restored. Implicit in this is that the Government will deal with banking sector issues. If we do not resolve these issues, it will be extremely difficult for the economy to recover from the recession. Hard decisions need to be made and proper regulation provided for to ensure CEOs such as Mr. Michael Fingleton cannot take a €1 million bonus at a time when taxpayers earning between €20,000 and €40,000 per annum are bailing out Irish Nationwide Building Society. This defies logic; it is immoral. The Government must make a stand on the matter.

Job retention and creation are vital. We must ensure the live register statistics do not continue to tumble in a downward spiral. More than 100,000 have joined the live register since last November. We must find radical ways to ensure people retain their jobs. If they can, they will be able to continue to pay their mortgages and car loans and for their children's education. Currently, approximately 1,000 a day are losing their jobs. I cannot understand the Government's lack of urgency in this regard. It has stumbled from issue to issue and from budget to budget without making the required decisions.

We must become competitive as a nation. We began to lose our competitiveness in 2003 when our exports began to fall and the Government put all it had into the construction sector. It knew this was unsustainable. The Taoiseach, when Minister for Finance, having been told by the Central Bank, the IMF and others that the economy was sound, continued to build. Most of that building was undertaken on the basis of funds borrowed abroad by the banks which we are now repaying. Most of that building was done on the basis of foreign debt — money the banks had to borrow — that we are now repaying. That money is going out of the Irish economy at the moment. When the Minister for Finance, Deputy Brian Lenihan, comes into the Chamber tomorrow night——

Photo of Olivia MitchellOlivia Mitchell (Dublin South, Fine Gael)
Link to this: Individually | In context

If he bothers.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick East, Fine Gael)
Link to this: Individually | In context

Exactly. I hope he will set out an honest and reasonable plan with which we can work. If that happens, he will see a spirit of co-operation. So far in this debate, all those on the Government benches have done is play politics. We want to be able to work together. That will not be possible if information is not exchanged openly.

I welcome the opportunity to speak during this pre-budget debate. This is an opportune time for Deputies from all parties on the Government and Opposition sides of the House to make a major statement about how Ireland will tackle the difficulties it is encountering during this period of global economic unrest. It is fair to say that the work done by the Taoiseach in the United States last week was excellent. Everybody in the State was proud of the ease with which the Taoiseach was accepted when he met the US President, Mr. Obama, in the White House.

The Government has been reasonably steadfast in setting out its plans for dealing with the ongoing crisis in the economy. It took an approach to the banking crisis from day one. In fairness, it took the lead when it provided a guarantee to this country's financial institutions. The action taken at that stage has stood the test of time. Nobody can criticise the stance taken by the Taoiseach or by the Minister for Finance when they provided a guarantee of that nature. As the global financial situation continues to change on a daily basis, it is clear that no single solution will assist every economy. Having said that, we need to examine all the problems we face and deal with them. Rather than reacting to every little issue that comes along, it is only proper that an appropriate statement is made at an opportune time. That time is now, as we approach next month's budget. The Government has had a constant plan from the outset. Its efforts to attack the gap in the public finances are ongoing. While the recent pension levy was difficult to implement, I am glad the Government took a strong stance. Every Deputy on this side had to take the rap when it was being introduced. A great deal of false information was disseminated by the media, fuelled by certain unions that failed to give proper or up-to-date information to their members. If we are to overcome this financial crisis, the unions need to act in a much more co-operative manner. They did not put their shoulder to the wheel when the pension levy was being introduced.

The Government's plan also involves sorting out the banks, which is no easy task. We are aware of some of the discrepancies that have developed in recent months. Time will show that the Government has the right plan of attack in this regard. It has done everything possible to create and save jobs. In the current climate, Ireland is no different from any other economy. We are very open to foreign direct investment. We are doing particularly well, given the climate we are in. Perhaps that is a bold statement, but that is how I feel about it. It is not an easy time to be Minister for Enterprise, Trade and Employment. When one considers the financial constraints on other countries, it is clear it is not easy to maintain jobs in the Irish economy. Great work has been done to create and save jobs. We should not forget that jobs are being created and more jobs are in the pipeline. It should not be all doom and gloom day in, day out. Much work is being done behind the scenes to protect and support the unemployed. The Government is restoring Ireland's international reputation by strengthening domestic governance arrangements.

If there is a message I would like to send to the Opposition, it is that it is time for us to stand together in advance of the forthcoming budget. If the economy is to get where it needs to be, we will all have to put our shoulders behind the wheel. I do not believe that has been happening in recent times. I have not seen any signs of it. Some of the proposals made by the Opposition in this week's Private Members' motion are futile and unimaginative. The best it has come up with is an attack on the number of Ministers of State and the extent of the supports available to Ministers and Ministers of State. To choose such easy targets is gombeen politics, as far as I am concerned. People who have been elected to this House should be far more constructive, in the interests of the good of the people. We all know this is the worst crisis to hit this country for many decades. Party politics should be left outside for a few weeks, if possible, for the good of the country. Deputies should start making proper proposals to help those who elect them. The recent petty calls for a general election were crazy. Before Christmas, some members of the Opposition did not want an election. They were probably afraid of it. They might have thought they would be better off if the election were delayed by a year. However, this week they have called for a snap general election. It is time for Members of this House to think about what we say rather than jumping to a conclusion this week and another conclusion next week.

The fundamentals of the economy are still strong. That is probably what is saving us. We need to recognise that many economies of a similar size are in a much worse position than the Irish economy. Stimulus packages, such as the national development plan, are helping to keep jobs in the economy. I do not ignore the fact that many jobs are being lost every week, which is a pattern that will continue for some time. It is worth recognising that matters would be much worse if we did not have the forms of economic stimulus that are currently available, such as the national development plan. All Deputies are aware that significant moneys have been spent on building and upgrading roads across the country. Substantial funds have been pumped into our motorways and our regional and county roads in recent years. That is continuing to more or less the same degree. The development of new school buildings and extensions in the past ten years has been phenomenal. Schools have benefitted from many additional resource assistants. Work is ongoing to extend hospitals across the country. The health service is being reformed. The consultant contract that has been introduced, which was controversial in some ranks when it was agreed by the Minister and the consultants, will go a long way towards reforming our health service. I look forward to the completion of the review of outpatient services. It is important, for once and for all, that consultants will be able to deal with outpatients as they come along. It is farcical that doctors who are not consultants are currently dealing with outpatients. That is largely the reason there are long queues at present.

Contract thresholds is the last issue I want to raise. I raised this matter today with the Minister for Health and Children, Deputy Harney, and Professor Drumm, and it applies right across the board in Departments. In any Government tender process there is a European Union stipulation whereby when a contractor prices for a job, his or her previous year's turnover must be two or three times the cost of the job. Gone is the day when a bond was good enough to secure a contract. That leaves us with the situation where only large companies can tender for these jobs, with the result that all small local contractors are ruled out. I refer to the boys who over the years did jobs such as school and hospital extensions. Such jobs are not rocket science or very technical. I have an engineering background and I know what I am talking about. It is time we reviewed that tender threshold.

I have every confidence in the Minister, and in the Government and the Taoiseach, to make the right decisions next week.

Photo of Olivia MitchellOlivia Mitchell (Dublin South, Fine Gael)
Link to this: Individually | In context

If it were not so serious, it would be laughable to listen to one Government speaker after another ask us to put party politics behind us and to support their budget. They did not give us any information. When my colleague Deputy Bruton wrote to the Minister asking for information in order that we could make helpful suggestions on the budget, he did not even get the courtesy of a reply, much less the kind of information we would need to make any kind of meaningful input. We did not get projections for revenue over the year or specific or general information about the kind of options available. That is not to say the Government does not need our help. After all, this is the fourth budget in 12 months. It certainly does need our help. This is the Government's last chance. It has barely seven months to implement the kind of measures that will stabilise the national finances. The Government needs our help because this time it must get it right. This is its third attempt in the past six months and it must get it right this time.

The markets demand that the Government gets it right. They have seen the blind eye turned to our banking regulation. Some people call it soft touch, others call it blind-eye regulation. They have seen our bankers' disregard for shareholders and depositors, for any kind of prudential behaviour, and for legal, not to mention moral, considerations. They have seen our economic instability, the yawning gap the Government has allowed emerge between revenue and expenditure, and they have seen the Government's bank guarantee. They must now be asking how a Government, on its third budget in six months, its fourth in 12 months, could make good that guarantee if it were called upon to do so. The markets have seen the money already committed to the banks, not just in the guarantee but in the nationalisation and in the recapitalisation, and they must wonder at the Government's ability to meet all of those debts when already the yield on Government bonds is twice that in Germany. This gives us an indication of the view of international markets of the Government's credit worthiness. That view of Ireland is what this budget must change. We are in the last chance saloon and the Government must show its determination to stabilise borrowing, at least, in this budget, and to do so at a time when, unfortunately, the Exchequer is already on its knees in terms of funding.

When every other country is implementing stimulus packages — some are taking breathtaking decisions in that regard — we, because of the mismanagement of funds, are planning to take billions out of our economy — €6 billion, if we are to believe the Minister for Agriculture, Fisheries and Food, Deputy Smith. When demand is down, when consumers have finally zipped up their wallets and discretionary spending has virtually ceased and when confidence is on the ground, although we know the normal response in such circumstances is that Government fiscal policy should lean against the business cycle, we must do the exact opposite simply because of the bad management of finances.

Nobody on this side of the House denies that the challenge is enormous. It will be difficult to strike a balance between the interventions needed to sustain demand and jobs, on the one hand, and allowing the necessary structural adjustments to take place so that real recovery and new jobs can begin to be formed, on the other. It will be difficult to strike a balance between reducing the revenue gap and at the same time incentivise economic activity.

The misery and the pain is inevitable for everybody, not just for the 100,000 people who have lost their jobs in the past 12 months but for all of those who are still lucky enough to be in employment. The only question is whether it will be short and sharp, or measured in decades. That will be the effective outcome of this budget. That is what this budget will decide.

Short-term but time-limited measures, such as PRSI holidays for distressed companies to keep people in employment, are vital. Also vital are reforms of how the Government does its business, of how it regulates the private sector, and of how it has protected monopolies and special interests. All those long-term structural changes must come as part of this budget in tandem with the taxes and the short-term measures, or we will simply prolong the misery for everybody, and that will be this Government's legacy.

In the absence of specific information about what the options are, how much they would cost and how much money we will have available, I want to make some general remarks about specific issues. Several Deputies spoke about the need to sustain jobs, and specifically about the building industry. We heard today — although the Deputies who spoke obviously have not heard — that all public projects that have not been contracted for are on hold or stopped. What is the sense of this move which will effectively wipe out the entire building industry, all its suppliers and all of the 280,000 jobs which are left in it? Home building is gone and will remain so for a number of years. No matter what people say, the reality is the overhang in inventory is enormous. There is negative equity for many people. That sector will not be revitalised any time soon and it is up to the Government to ensure that infrastructural work continues and some of that slack is taken up. The truth is it was the absence of infrastructure that pushed up costs during the years of the Celtic tiger and the Government will make the same mistake again in failing to create the conditions for future growth at a time when tender prices will never be as low.

The industry has made the point that the real cost of providing finance for these projects is just a fraction of the nominal cost when taxes forgone and social welfare payments are taken into account. In the roads programme, which is only one aspect of infrastructure, we will lose the expertise that has been amassed and the momentum that has been gained. We will perhaps lose it forever because architects, engineers and all of those with skill sets honed over the past number of years are disappearing out of the country every day. The reality is we will be left with the fixed costs. For example, we will have all the engineers in every local authority around the country and we will have the NRA staff. One may say what one likes about what is happening in many local areas, but the NRA has been one of the most efficient agencies in the country and it has delivered what it set out to do. It will be left now with nothing to do.

The schools that need to be built and all of the other infrastructure that needs to be built can be done now at a fraction of the cost when the economy is growing again. Deputy O'Brien stated there is €600 million to be spent on schools. That is not the case; it has been put on hold. It has been stopped. Those projects are not contracted for. They are stopped. Deputy Blaney spoke about the roads programme. It is stopped. There is no roads programme. That is the reality.

The industry has suggested the reform of the public private partnership because it simply is not working. It is convoluted, bureaucratic and expensive, but it offers an opportunity to provide infrastructure by taking it off balance sheet, although perhaps not for the roads programme because all of the tolled roads have been built. There is not an opportunity for tolls in the future, but there is certainly an opportunity for commercial undertakings. There is certainly an opportunity to postpone expenditure if we opt for the design, finance and build. That must be considered if we are to save some of the jobs. Turning off the tap completely is lunacy for a Government which must be concerned about maintaining jobs.

The motor trade has had many good years but businesses are one-by-one going to the wall, with all the loss of jobs that entails. I do not want any special deal for them but I want the Government to examine, as requested, the nonsense of the claw-back system on VAT whereby they pay VAT on their losses. That is an oxymoron and makes no sense.

I want the Government to spend money in one other area, that of the Protestant faith schools. As the Minister of State, Deputy Mansergh is aware, the decision to cut their funding reneges on a 40 year decision and I ask the Government to examine it. The outcome is that many Protestant children will no longer be able to avail of a Protestant education. We already know that in September children will be taken out of schools because their parents cannot support the fees without that grant. It is not an exaggeration to say this measure, notwithstanding that it is a very small amount of money, will devastate the Protestant community. I do not say it will impact on Protestant faith numbers in the short term but fragmenting their community in this way will create such a long-term effect. I ask the Government to take the opportunity of this budget to reverse that decision, which it will regret.

Photo of Peter KellyPeter Kelly (Longford-Westmeath, Fianna Fail)
Link to this: Individually | In context

The global recession has severely affected Ireland as a small open economy. It gives me no joy to have to say that. It is sad, but factual that we find ourselves in a very serious situation. Unemployment is rising, many people in the private sector have taken wage cuts and people are extremely worried about their future and their children's future. This recession has been compared by some to the depression in the 1930s. We find ourselves globally in the worst situation since 1929. Clearly there are similarities. The main difference is that this time it is global. Every country and every sector of the economy is affected. It is no exaggeration to say we are living in extraordinary times. Extraordinary times call for extraordinary measures.

A supplementary budget is necessary to restore this country's public finances. It is evident that our public finances have deteriorated rapidly since October. This year it is estimated that there will be a €20 billion deficit in the public finances. The Government must curb public spending to plug this gap. We cannot continue to spend and borrow, and saddle our children with a lifetime of debt. That is why the Government is making tough and unpopular decisions to restore the country's public finances and our international reputation. We are doing what is in the best interests of the country to best position ourselves for when the upturn comes.

Some commentators have berated the Government for what they perceive as a lack of stimulus packages. Yet, next week will see the launch of the national insulation programme, which will provide householders with reduced energy costs while providing work for construction workers all over the country. Likewise the Minister for Education and Science, Deputy Batt O'Keeffe has provided €680 million for the schools building programme. The combination of these investments is expected to provide 10,000 jobs this year. All national road projects at the planning stage will be reviewed and reprioritised so that those projects that support the most jobs will be built first.

Last December the Government launched its document "Building Ireland's Smart Economy". This sets out our roadmap for Ireland's move back to growth and prosperity over the next five years. Competitiveness is clearly an issue. It is key to sustaining employment. The depreciation of sterling against the euro has had a severe impact on Irish exports. Cost competitiveness remains critical to ensuring companies based in Ireland have the ability to compete successfully in international markets. It is vital if we are to continue to attract foreign direct investment. In 2008 foreign direct investment resulted in the creation of 9,000 jobs. Enterprise Ireland continues to provide a range of supports for high-potential start up companies, including financial supports, business and market intelligence, mentoring, innovation and research and development. More than 10,500 new jobs were created in Enterprise Ireland client companies in 2008.

Every day brings more stories of redundancies and pay cuts. Behind these statistics there are hardworking men, women and families who are lying awake wondering how they are going to survive. We are committed to helping these people find jobs. This year FÁS will provide an extra 51,000 places under traineeships programmes for job-changers or those who are unemployed. This year the 35 city and county enterprise boards will receive funding of €34 million. This will enable the boards to be actively involved in economic development and will ensure available funds are targeted to maximise entrepreneurial development around the country.

Investment is also coming from the European Union. Earlier this month the EU Commissioner for Regional Development announced that €105 billion will be invested in the green economy through the EU cohesion policy. Ireland will benefit from over €153 million in funding which will cover transport, environment, energy management and regeneration schemes.

I have touched on three out of four of the Government's cornerstones for recovery: getting public finances in order, sorting out the banking situation, protecting and creating jobs and looking after those who have lost jobs. There is a strategy in place. By taking the tough decisions now Ireland will recover and return to prosperity. There is no magic bullet. A variety of economic measures have been introduced in countries around the world to deal with the banking and economic crisis. There is no magic solution. It will take patience and decisive decision making to restore stability and confidence. We are living in extraordinary times. The Government has its work cut out, but the introduction of a supplementary budget is an important step to restoring prosperity in the medium to long term.

Yesterday my colleague, Deputy O'Rourke and I met the midland branch of the Carers Association of Ireland to discuss the forthcoming budget on 7 April. We realise that carers give their lives to caring for the elderly, infirm and disabled in their homes.

Debate adjourned.