Kathleen Lynch (Cork North Central, Labour)
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Having this format of debate is unique, but we are not living in normal times. To have budget statements before the budget is even produced or before we know the contents of the budget or its target and how the Government intends to reach that target is unusual. However, as I said, we are living in unusual times and in a time of crisis. That time of crisis must be addressed on several fronts. More than anything, one of the fundamentals of any economy is confidence. Unfortunately, in the present crisis the people no longer have confidence in the Government to bring us out the other side, which is unfortunate. I believe the economy can be turned around and that the Government should make every effort to turn it around. As we speak the people have lost confidence in the Government which means one of the fundamentals is now in shatters. We cannot get past this crisis unless we deal with the banks — it is as simple as that. The banks were not just reckless but treasonous in their approach to the economy. When bankers start to become gamblers, serious problems arise, and that is what happened in this country.

I have said it before and I will say it again; we had one of the most conservative banking industries in the world. We had a banking industry that would nearly ask one to sign over one's house as collateral for a very small loan. While we all complained about that in the past, and in many ways it was too strict, what happened afterwards was definitely something of which we should have been conscious and should never have allowed to happen.

We are now looking at a daily crisis. We awake to a new bad news story every single morning. Yet, the people who were responsible are still in situ. There have been just two resignations and these happened only under tremendous pressure. Through all of this, the people who got us into this position have continued to hold their positions, have continued to take salaries that to the majority of people are fantasy money, and continue to give themselves bonuses, for what I do not know. All we hear is that the Minister for Finance will be speaking to them — in polite terms, I am sure. The deference they feel they are due will be given, although it should not be. We have completely guaranteed our banking system. As a Government and a democracy, we should now have a say in how the finances of this country are run. If we do not have a banking system in which we have confidence, one that is properly regulated and one we can rely on and be assured is run in a proper manner, this economy will simply not turn around.

I heard recently that the property portfolio of the entire country was valued at €40 billion in 1986. Some 20 years later, in 2006, it was valued at €554 billion. That cannot not make sense in any man's language. Our individual wealth did not increase so much as to suggest the value of our property could have increased that much.

Day after day, I listen to Government backbenchers and Ministers who tell us, as the Taoiseach did this morning, that we are in the middle of an international economic crisis, which we are — the financial crisis has affected everyone. However, as a nation, we have not taken on any foreign toxic debt, nor has our banking system. What we have is an international financial crisis and underneath it we inserted a property bubble. That bubble burst, which is why we are suffering more than other countries.

One would imagine that if we were all suffering, other countries might suffer more than us but they are not. Per head of population, we are suffering more than other countries as a result of a tax-fuelled, Government-driven property bubble that was the equivalent of a pyramid scheme which we all knew was going to collapse — one would want to be a fool not to believe that. We were told this time and again but the Government said "no" and told us to party on. The rest of us were all doom and gloom, naysayers and pinkos. However, that is where we are now. What this country now needs is not historians but visionaries but, unfortunately, I do not see them on the Government benches.

It is usual during budget debates to suggest the Government has not done enough for one group or has done too much for another — this is the normal cut and thrust of budget contributions. This budget is unusual in that we are having the contributions beforehand. The Government says it will take them on board and while perhaps I am a little too long in the game to believe it, that is as may be.

The loss of every job costs us €20,000 and it is now estimated that there are 320,000 unemployed, with 26,000 more people on the live register in February alone. I do not believe that figure because it is far more than that, and the reason for this relates to a group I want to discuss. During the madness that we called the Celtic tiger, we forced an entire section of the population to become employers. Principal companies decided to no longer employ their workers. Due to the way our taxes were structured, it made far more economic and tax sense for those companies to tell their employees that they needed to go on a C2 or C35. The workers would then be employing themselves and were completely responsible for their own liabilities. The company would supply the workers and the materials for them to keep doing the job they were doing originally, but the company would no longer have any responsibility towards them.

There are thousands of such people out there. They were not the big developers who bought the Ballsbridge sites of this world or the big speculators who speculated on the currencies of other countries. These were ordinary people who did well when everyone was doing well and went on to employ others. These people are now unemployed, unregistered, unofficial and not protected by the redundancy schemes, social welfare or anyone. We must do something about this. We cannot continue to talk about the macro picture unless we begin to look at the human tragedy which is this crisis. These people are at the doors of community welfare officers but these officers have not received additional help and are under such strain that they are working late into the evening and are having to turn away people or adjust in some way in order to meet the crisis.

No one is talking about this crisis but it is one this budget must account for. We found money for the bankers, the developers and many others and we now need to find money for the people who find themselves in danger of losing their homes and families, and who have nothing to live on, week after week. In order to even be registered as unemployed when one is on a C2 or C35, one must have a tax clearance certificate but the Revenue Commissioners are now six weeks behind in this regard. These people saw this crisis coming a year ago and, as a result of the effort to keep going, in some instances they have outstanding tax bills. However, they should never have been in that category in the first place. It was the Government which put the system in place in order to force these people to be entrepreneurs when they never wanted that. They wanted to be employed to do a job and to build the infrastructure this country needed. We are now leaving them out there in limbo. If the Government does nothing else in this budget other than to look at the human tragedy behind it, I plead with it to do that.

Michael McGrath (Cork South Central, Fianna Fail)
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I welcome the opportunity to make a contribution to this pre-budget debate in advance of what must be one of the most important statements of fiscal strategy by any Government in this country, which we will see on 7 April. It is important for a number of reasons. In my view, the budget, which will be introduced in less than two weeks' time, must achieve a number of objectives. We must restore Ireland's credibility on the international market and among investors and we must show that we are in control of our public finances. We must set out a clear, coherent and achievable plan for the next three years if we are to bring order to the public finances. We must also rebuild confidence among consumers and the business community in Ireland that we have an economic future. We must take the correct decisions now to allow us to once again return to economic prosperity. We must be set out a clear and understandable strategy that people can buy into. We, in this House, share a collective responsibility to ensure that the steps taken on 7 April are sufficient to put Ireland on the road to economic recovery, thus benefiting everyone in the country.

The current crisis is often characterised in this House and in the media as an Irish problem. That is not the case. Global trade will contract in 2009 for the first time in 60 years. That is a fact. Economies such as China, Singapore, Dubai and so on, once the shining lights of the world, are also suffering. Let us for a moment consider the profile of the Irish economy. We are a small open economy, heavily reliant on exports and international trade with a limited domestic market and a population of in excess of 4 million people. When one considers that profile, one quickly realises we are very much at the mercy of the global economic environment. It is true that we had a particular reliance on the construction sector during the boom, a boom which ended abruptly. However, we are at the mercy of international conditions and must work within that template. We cannot revert to the old model of protectionism. We must remain fully involved in international trade because the model of opening up the country, attracting inward investment and encouraging indigenous investment is what worked for us.

As public representatives, we all know that the recession in Ireland has manifested itself in a number of stark ways, including the dramatic increase in the number of people on the live register, which last month stood at 354,000. We have all seen in our constituency offices the human price being paid during this recession. There will be a sharp contraction in our economy this year, namely, in excess of 6%, with a further contraction likely in 2010. Our public finances have deteriorated rapidly, with a deficit of €20 billion or more in 2009 if corrective action is not taken immediately. As stated by Deputy Lynch, confidence has been drained. Even those who have money are not spending it because they are afraid of what is around the corner. For this reason, it is essential the strategy put forward on 7 April is credible and restores confidence among people that there is a road map to economic recovery.

We must face up to the stark reality of Ireland in 2009. As policymakers, we in Government must, as we have been doing to date, rise to the challenge on 7 April, which is a critically important day for this country. The reality is that the gap between current expenditure and tax revenue needs to be bridged. Addressing this €18 billion to €20 billion gap which is staring us in the face is too large a task to tackle in one, two or even three years. This is the reason the Government set out in its submission to the European Commission a five-year plan to return us by 2013 to the 3% deficit under the Stability and Growth Pact. In setting out that strategy, we are trying to restore credibility among the international markets and investors. The facility to borrow internationally is not one we can take for granted. We are competing with almost every other developed country in the world and do not want to be charged punitive interest rates in the bond markets because we have not demonstrated a capacity to get on top of our own affairs.

There have been some positive signs. Members may have read in today's The Irish Times that the National Treasury Management Agency raised a further €1 billion yesterday on the bond markets bringing the total raised to date to €11 billion. The Government will probably have to borrow approximately €25 billion this year. The key issue is what will be the cost of that debt. It is true that we have been paying a premium for our borrowings because of the state of our public finances. For example, the gap between the Irish and German ten year bonds widened last week to 284 basis points, its widest level in ten years. However, yesterday this returned to 249 basis points. I make that point simply to highlight the fact that there is an added cost in respect of our borrowings owing to the state of our finances, which we must get to grips with on 7 April.

We have to show that we can take the tangible steps required to get our affairs in order; otherwise, the cost of borrowing will be even greater in the months ahead. In making the fiscal correction between expenditure and revenue, we will have to strike a balance between taking the steps required and ensuring that we do not take too much out of the economy in one year, thus sending it into a complete cycle of depression which could result in the recession lasting longer than it otherwise might. We must get that balance right. A question arises as to over what period of time the deficit should be addressed. I welcome that the EU Commission has approved the Government's submission in regard to the 9.5% deficit which it hopes to achieve in 2009 and to restoring the 3% deficit by 2013.

It is important to point out that other significant players in the European Union, including Britain, France, Spain and Greece, have also been given additional time by the European Commission to correct their growing budget deficits. While general government debt in Ireland stood at 41% at the end of last year, it remains well below the 60% EU average. However, we will probably breach that percentage in the next 12 months because of the scale of deterioration in our public finances. We must borrow sensibly and we must ensure that we are not borrowing in the long term to fund current expenditure as that is simply not sustainable. There is a need for stimulus measures in the budget. We do not have the facility available to the Obama Administration of being able to print an extra trillion dollars. However, there are measures we can devise, including enterprise supports. The Acting Chairman, Deputy O'Flynn, made some positive suggestions in regard to keeping people at work. We must embrace some of those ideas. We must think outside the box if we are to get through the current difficulties.

I watched with interest George Lee's programme "How we blew the boom", which was shown on RTE during the week. While the title was provocative and created an impression of what the programme would be about, those who watched it will know it was a sensible and responsible programme. We need to put on the record how the fruits of the boom were utilised. For example, the national debt was reduced to historically low levels; we invested significantly in the National Pensions Reserve Fund, which will now be used for other purposes; we created enormous levels of employment and had 2 million at work; we invested in capital infrastructure; and we improved social welfare payments to a level not imaginable a few years ago. That is what we did during the boom. However, we are in a completely different environment now and must respond accordingly.

It is essential we remain at the heart of the European Union. The support we receive from the European Central Bank is critical to our strategy to restore our public finances and to achieve economic prosperity. For this reason, I hope people will when voting for the second time on the Lisbon treaty ensure Ireland remains at the heart of Europe, economically and politically. We must take the opportunity — it is an opportunity — presented by this recession to restore our competitiveness. We must aggressively drive down costs right across the board. If we are taking more money out of people's pockets and are reducing their disposable income, then we must, if there is not to be a relative deterioration in our quality of life, reduce the cost of living. We simply must achieve this and must emerge from this recession more competitive and in a better position to take advantage of the global upturn when it comes.

James Reilly (Dublin North, Fine Gael)
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Ireland Inc. is in serious trouble. I wish to respond to some of what Deputy McGrath has just said. If we are to be able to plan for the future, it is important to look at the past and, in particular, to examine the history of this crisis. The National Pensions Reserve Fund was established to meet the pension requirements of the public service. Many people are pleased that it will now be used for other purposes. It is far better to use the fund to invest in infrastructure than to buy stocks and shares on the international market. The boom was wasted in many respects. Examples of waste include the spending of considerable moneys on electronic voting machines and on the PPARS system. Money continues to be wasted in the HSE and in semi-State organisations like FÁS. I will not deliberate on such matters for too long.

I agree with Deputy McGrath that we need a proper plan if we are to avert this ever-worsening situation. It is worth reminding the House that it looks like this country's tax take will decrease from €55 billion last year to €35 billion, or less, this year. That is an extraordinary turn of events. It cannot be solely attributed to the effects of the international recession on international markets. The reality is that the Government's approach was unsustainable. It failed to listen to outside economists who warned that the bubble was about to burst. I refer to people like George Lee, David McWilliams and Jim Power, who contradicted what the Taoiseach was saying. Deputy Bruton had been pointing out for a number of years that Ireland's competitiveness was in decline. Ireland was the fourth most competitive economy in the western world, but it has since dropped almost to the bottom of the pile. That is why we are in our current position. We need to reflect on our ability to get ourselves out of it.

The Taoiseach presided over the beginning of the economic downturn during his four years as Minister for Finance. He told us last year that the fundamentals of the economy were sound. Does he still believe that? The Tánaiste is out of her depth. The Minister for Finance, who by his own admission is unhappy to be in that position, accepted some time ago that the building industry had come to a "shuddering halt". He now admits that it was a mistake to increase the rate of VAT, thereby costing the taxpayer €700 million and businesses €3.5 billion, which is a substantial amount of money. Rather than admitting his mistakes, he should get on with correcting them. He should start by bringing the VAT rate in this jurisdiction into line with that in the North. We need to alleviate some of the pain being caused by the weakness of sterling, which is a problem for us. Anything that makes a problem worse cannot be sustainable.

Over recent years, the Department of Finance's predictions have not been right, either coming up or going down. I understand there were 13 economists in the Department when Dr. Garret FitzGerald was Taoiseach, but there is now just one. Perhaps there has been a recent addition to the Department of Finance's advisory staff. The Department does not have the resources it needs to deal with the most serious economic crisis this country has ever experienced. Many people believe they are getting better advice from RTE programmes presented by Pat Kenny and Joe Duffy than from the Department of Finance and the Minister, Deputy Brian Lenihan.

We need a realistic and credible plan. I agree with Deputy Michael McGrath that we need a stimulus, but that has been sadly lacking over recent times. Reform is needed if we are to make the savings we need. We need to stop the waste in the HSE, which has a budget of approximately €16 billion. Contrary to the comments of Professor Drumm and the Minister, Deputy Harney, at yesterday's meeting of the Joint Committee on Health and Children, the reality is that 12 people with brain tumours have been waiting for more than six weeks to receive life-saving surgery in outlying hospitals throughout this country. That is just one example of services not being made available to patients. In 2009, that is a bad reflection on Ireland.

Deputies have alluded to the difficulties of self-employed people. Earlier this week, a man came to my clinic to tell me he had seriously injured his shoulder in a fall. It is possible that he will not be able to work again. He will certainly be unable to work in maintenance, as he was doing before. He cannot get social welfare assistance even though he has paid all his taxes and his stamps. I will raise that matter with the Minister for Social and Family Affairs, Deputy Hanafin. It demonstrates that people are not getting the help they need. More and more of them are becoming unemployed. Although the authorities knew the unemployment office in Balbriggan was to close, they made no provision for its replacement. It is outrageous that people in Balbriggan and Swords have to queue in the rain or travel to Gardiner Street in Dublin city centre.

I would like to speak about the core of this problem. We all agree that we need savings, we need an economic stimulus and we need to broaden our tax base, but we need to decide how those things should be done. Yesterday, the Minister for Health and Children claimed that I oppose all of her reforms, which is not the case. I supported her cervical vaccination scheme, which she later turned her back on. I supported her cervical screening scheme. I would support many of her other schemes if the detail could be amended. The manner in which the HSE was established was wrong, for example. Nobody took the time to do it correctly. This morning, the Taoiseach accused the Opposition of opposing everything. The job of the Opposition is to oppose and expose weaknesses in Government policy so they can be corrected. However, this Government does not take advice, get embarrassed or believe in resignation.

I would like to speak about some of the positive things we could be doing. Major infrastructural projects like metro north should go ahead. As an elected representative of Dublin North in this House, I am fully committed to that project, which would involve 7,000 jobs in its construction phase. According to the Indecon report, a further 64,000 jobs will be created along its route when it has been finished. It is extraordinary, particularly following the Celtic tiger era, that Dublin is one of the few capital cities that does not have an underground metro network. That is astonishing. The metro north project would lead to significant development. At least half of its cost could be financed through the public private partnership system. If the rest of the cost were paid over a 25-year period, it would not have a major impact on our national economic balance sheet.

It is clear that there needs to be a greater focus on green energy and green industry. We were told two years ago that bio-fuels were bad because they were reducing the global food supply, but we now find that grain prices are collapsing and farmers are looking at losses. Where is our bio-fuel industry? Why has it not been properly developed? Why has there been no real and meaningful investment in this area? What about renewable energy? Airtricity has had great success. Ireland has significant wind power possibilities, not only in coastal areas but also in the middle of the country. The Government is not investing in tidal power technology as it should. This is where we should be going. We need our own green economy so we can be independent of the vagaries of the external oil market. In such circumstances, we could use the interconnectors that have been developed with the UK to become a net exporter of energy.

We need to consider the establishment of a bank to help small businesses that are in trouble. We had the Industrial Credit Corporation, ICC, before the Government sold it. We need a new ICC to help companies like SR Technics, for example, which employs almost 1,200 people. If SR Technics is allowed to close, it will be impossible to reassemble its substantial engineering expertise, not to mention its hardware, machinery and equipment. I remind the House that the company's business books are half-full of orders. Has any attempt been made to save it? When I spoke earlier to Deputy McEntee, who represents Meath East, he told me he had attended a meeting at which it became apparent that the Minister, Deputy Dempsey, knew last October that the SR Technics hangars were being handed back.

Noel O'Flynn (Cork North Central, Fianna Fail)
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The Deputy's time is up.

James Reilly (Dublin North, Fine Gael)
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This is key. Five months has been lost, in addition to all the jobs that are ancillary to the company.

On the HPV vaccine, I want to put it on the record again that there is a need to reduce the VAT on that from 21.5% to the lower rate — an issue I have twice raised with the Taoiseach.

There should be a stamp duty holiday of 1% for six months to encourage people to jump now and get value when there is value in the market. Also, the building energy regulations should be applied to business premises as well. I thank the Acting Chairman and hand over to my colleague, Deputy Clune.

Noel O'Flynn (Cork North Central, Fianna Fail)
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No, the Minister of State, Deputy Curran, is next.

James Reilly (Dublin North, Fine Gael)
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I apologise to the Minister of State.

John Curran (Dublin Mid West, Fianna Fail)
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We are given a chance to say a word as well.

I welcome the opportunity to contribute to this debate. The Government will bring forward a budget on Tuesday, 7 April. This is often referred to in the media as a mini-budget, which is an unfortunate title because in real terms it will be a very significant budget and will impact greatly on the future path this country will follow. It must address in different ways a number of wide-ranging issues such as the widening gap between Exchequer revenue and expenditure, the need to address the banking situation and, importantly, the area of job creation and job maintenance.

This morning at Leaders' Questions I was interested to hear Deputy Gilmore turn around to the Taoiseach and state that this was his fourth attempt to get it right. If that is the perspective from which he is coming, he is missing the whole picture. There is a global situation occurring. If one looks at the analysis by political and economic correspondents in September and October of last year, the outlook at that point in time was substantially different from the outlook today. The Government should be commended on being prepared to take the initiative and do what is necessary on an ongoing basis rather than saying that it made its decisions come what may. We are responding in a timely fashion as the information comes to the fore, but it would not be true to suggest that the position we are in was predicted by political and economic commentators who were commenting in advance of, and subsequent to, the October budget. There is a significant global situation.

Opposition Deputies mentioned the issue of property, which has been significant in Ireland. It is worth standing back and looking at the facts. There are other economies where property did not play a significant role and which did not have the problems in banking, yet they too are seeing substantial declines in their levels of activity. If one looks at those countries, the likes of Hong Kong and Singapore which saw huge growth, most of them are very similar in one aspect to Ireland in that they are open trading economies. The reality is that the countries with which we trade are all in recession and, in simple terms, are buying less. We can address some of the issues on property and banking, but one of the issues that is of fundamental difficulty to us is our productive sector. No matter how much we produce, if the countries into which we sell are buying less, that has a direct impact on us. It is expected in the current year — this would not have been said months ago — that total global trade could be down by as much as 9% and we are very vulnerable and exposed to that. That is an underlying factor.

The reason I mentioned that figure specifically is because Deputy Kenny specifically asked the Taoiseach what will be the Government deficit or what is the target. The problem is that it is very difficult to pin a target in the manner in which Deputy Kenny was doing if the global trade figure, which is outside our control, is reducing substantially, and one bases one's figures on an analysis at a given point in time. That is the prospect.

Not to focus too much on doom and gloom, the economic stimulus packages provided in the US, the UK and elsewhere will have an impact here because, obviously, they are purchasers of Irish goods. The commentary and the opinions being expressed in recent times by Jean Claude Trichet and the chairman of the Federal Reserve, Ben Bernanke, are becoming more optimistic in their outlook. They are markets to which we must look.

Clearly the Government has a position that the deficit will reduce to 3% during the five-year period to 2013, and that is very significant. The point is to try to track that along the way with international trade on which we are dependent. We have historical issues to deal with in terms of property and banking, but of fundamental importance to this country are exports, which account for so much of what we produce. We are dependent on that export market and if we forget about that, we are not addressing the real issue.

The type of stimulus package that was introduced in the US would not work here because we do not have the capacity internally to consume all we are producing. There are certain stimuli we could introduce that would have some impact but would never have the same impact as in a large economy like the US that is not exposed in the same way to international trade as Ireland. That is quite important.

I want to briefly mention the banking sector. I sat here a few weeks ago when the legislation on the recapitalisation was going through when a colleague on the opposite side of the House, for whom I have great respect and with whom I served on the Committee of Public Accounts, Deputy Noonan, referred to the share prices on the day. I note that in the intervening period the share prices of the main banks in Ireland have stabilised significantly. A solid financial banking system is not enough. It is how the system performs to help the economy that matters. Incidentally, I was glad to see as part of the package that in the case of homeowners in difficulties with loans, the first step would not be to institute default proceedings in the courts, etc.

One of my concerns is that we monitor and ensure that businesses, particularly SMEs, can access credit. Those credit figures need to be published on a regular basis because we are trying, not alone to do business but to instill confidence in the economy. The publishing of the credit available — I hope we see growth in the credit available to businesses — would be a positive step in that regard.

For a long time I have held the view, which I have discussed not with the Minister for Finance but with a number of other people, that the bad bank scenario should be advanced. Until that happens, until the distressed and doubtful loans are cleared up within the balance sheets of banks, there are concerns about how they will progress.

We often speak of toxic debts, but behind those are assets which an asset management agency or the State would acquire with the debt. Those assets are not to be viewed as having no value. They might be difficult to dispose of in the current economic climate — a couple of years ago they were incredibly valuable and the State in many cases would not have been in a position to buy them — and they will have value again. It is a question of managing those assets that are related to the debt over an extended period; that is very important.

Having been self-employed for 20 years before I came into this House — I was involved in an SME where, I suppose, we saw good and bad times — the following is one of the areas about which I would be concerned. We speak of job creation and foreign direct investment, but I am of the view, old-fashioned though it may be, that it is easier to hold on to a job than to create a new job, and we need to look at that proactively. For example, a hotel not far from me recently put 180 of its staff on a three-day week. Effectively, that means they are on social welfare for a couple of days and they are working for a couple of days. When they are on social welfare, they are not productively employed. During these difficult times, during the depth of the recession, we need to be able to divert social welfare payments and supports to people to maintain them in employment which would have the effect of increasing the productive capacity and competitiveness of that entity. That is something we need to look at in great detail.

Regrettably, we are seeing companies close and go into liquidation. As a consequence, those companies are not able to clear all their debts and other surviving companies are now carrying bad debts and may be encountering difficulties meeting their tax, such as VAT, and rates liabilities. Just as the Government asked the banks to deal sympathetically and leniently with homeowners, the Revenue Commissioners, instead of adopting the tradition of referring cases fairly promptly to the sheriff, now need to sit down with a more compassionate view towards business and look at companies in difficulty to understand whether they are in difficulty because of a hiccup or a bad debt they might have incurred, albeit they may still have a solid financial basis. If that is the case they need to put in place a programme to allow companies to trade through their present difficulties rather than initiating with the sheriff.

This will be very difficult. Our expenditure and revenue do not match by a long way, so the Government will have to increase taxes and cut expenditure. Our tax base has diminished and we need to broaden it, but whatever we do to raise taxes it must be seen to be equitable and be understood by the public. As a result of this budget everybody will have to pay something, but it is critically important that those who can afford it most pay most.

On a personal note I am very pleased to see the partnership agreements and negotiations with the Irish Congress of Trade Unions is back on track. This is a national situation of global and epidemic proportions that needs all partners working together in a cohesive way. There is no use having a budget if people will strike and we lose our productive capacity and competitiveness. In that spirit I wish all well at the social partnership talks.

Deirdre Clune (Cork South Central, Fine Gael)
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It is welcome news that the talks are back and hopefully we will not have the one-day strike next Monday. Apart from the chaos and inconvenience it would have caused, it would have sent out a very bad message from this country. It is one piece of good news today. I hope the strike can be averted because in this dire situation we do not need it. Everybody needs to pull together for the good of this country, which has a very bright future. I am very confident. We have, and will continue to have, a strong and educated workforce, which has always been our strength. In latter years matters have slipped considerably and how we move forward from this point is very important for all of us.

The budget, to be announced in less than two weeks' time, has been described as a mini budget, an emergency budget, the 2009 budget and the 2008 budget. I agree with what Deputy Gilmore said this morning. It is our fourth attempt to address the deteriorating economic situation. This morning the Minister of State, Deputy Curran mentioned that Deputy Kenny had sought targets. I was here this morning and Deputy Kenny asked the Taoiseach what figures he was aiming at in the budget. The Taoiseach should know. Is it the deficit to be 9.5%, 10% or 11%?

The parameters within which the Government will frame the budget must be set out at this stage. I accept the Taoiseach's statement that Governments set budgets and they will do it here on 7 April, but the Opposition has been asked to contribute and engage in the debate and all parties are very willing to do that. However we need to know exactly what we are dealing with. We need to know the figures and the parameters within which the Minister for Finance will set out his budget. That is the point that was made this morning. Deputy Bruton wrote to the Minister 11 or 12 days ago asking the projected tax returns and GDP, and has not even received an acknowledgement. The Opposition has not received those figures, yet we are expected to come up with innovative ideas that will help the Minister.

We are in a very difficult emergency situation and the Government needs to engage with the Opposition. Many people on both sides of the Houses have something to contribute. Many people on this side of the House who have been a long time in politics and feel very passionately about their country have very positive contributions to make and I would have thought it would be in the Minister's interest to share the information he has to facilitate the Opposition. That debate has been ongoing this morning and yesterday in this House.

The Minister mentioned banks. Until we get the banks back on track, nothing will be right. We need a structure with good and bad banks. The Minister is correct that not all assets are toxic and will be written off. Some have value, for example lands with planning permission. With our projected population growth the time will come again when those assets are of a value. We need to separate the good and bad banks. Many proposals have this theme of separating good and bad assets to let the banks get on with the business of providing mortgages and lending to and supporting small businesses, which are suffering badly. It makes sense to support and protect existing jobs rather than creating new jobs. The Minister made the same point. Perhaps we should sing from the same hymn sheet in many cases.

John Curran (Dublin Mid West, Fianna Fail)
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Deputy Clune is closer to this side.

Deirdre Clune (Cork South Central, Fine Gael)
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The Tánaiste's recent decision to divert 25% of funding from the Skillnets programme makes no sense. It will be debated again and hopefully we will have the chance to do so next week through questions the Minister for Enterprise, Trade and Employment. Diverting 25% of the Skillnets programme funding to FÁS makes no sense. Skillnets is very valuable. It supports employers and employees in developing skills. It is a network from which employers and employees can benefit. It does very valuable work on the ground. Why not extend it to the unemployed as well as the employed rather than abandoning it and taking funds from it? Protecting existing jobs and keeping people in employment is an essential part of the way forward.

I hope the budget will contain a very strong statement on how we are moving forward as a nation. The EU has given us until 2013 to come back within a 3% deficit. We need a broad vision of where we are going as a country. There are many opportunities, particularly for our exporters in international trade. That has been and will continue to be very valuable for us. The cost of our exports has increased because of the value of sterling but also because we have become uncompetitive. Our competitiveness has slipped badly in OECD ratings and issues such as efficiencies in our public services and local authority charges need to be addressed. Ireland is an expensive place to do business. Local authority charges have escalated, for example water charges have increased enormously. Anybody in business knows one is charged for water in and water out. Meanwhile there is the frustration of hearing that 50% of water is leaking away, literally going down the drain. These are the inefficiencies that drive people who are trying to do business crazy. The water system sums it up. It is totally inefficient.

Electricity charges are soaring. We have the second highest electricity charges in Europe and that needs to be addressed. We had the good news last week of the €110 million for the interconnector. That should help towards developing renewables but we need investment in our electricity grid. We need to map out how we will reach our target of 40% renewables in the energy sector by 2020, 11 years from now. That is important for the country's future. Investment in broadband is needed. Last week, Eircom announced it had no intention of investing in next generation broadband, NGN, yet it is essential for a small open economy such as ours that depends on international trading to introduce NGN.

The education system is important. Our workers of the future must have the necessary skills. The National Competitiveness Council recently produced a report addressing how important education will be and highlighting the reduction in the numbers taking mathematics in our schools. Insufficient numbers of students are taking higher level maths for the leaving certificate. This subject feeds into science, engineering and IT disciplines and financial services. The broad thrust of the economy will depend on these sectors to get us to 2013 and beyond. Investment is needed in this sectors. It is often bandied around that, in times of crisis, actions can be taken and issues addressed which would not normally be addressed.

Let us turn our education system up side down and focus on what the economy needs. This was done in Finland and Sweden. It was recognised that students did not have the educational qualifications needed to drive the economy. There was significant investment in mathematics and the sciences and they were focused on ensuring that the skills necessary for the economy to grow were available. The budget on 7 April will be painful but I hope the series of tax increases and spending cuts, which will hit everybody and families, in particular, will be equitable. The Minister should make a statement about how we will move forward and outline a plan or framework for competing on international markets, which, heretofore, was our strength. We need to get back to that position.

Charlie O'Connor (Dublin South West, Fianna Fail)
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I welcome the opportunity to contribute to this important debate, with 13 days to go to the budget, which will be announced during the week of my birthday. I hope, therefore, it will not be all doom and gloom. I have had a sense all week of the doom and gloom everywhere. However, I met Deputy Charles Flanagan on my way to the Chamber who said he has been promoting the notion of us having a happy week. Perhaps he is correct.

We have all been cheered up and buoyed by the good news that has broken through the doom and gloom. I am reminded of this by the Minister of State, Deputy Curran. Bernard Dunne cheered us all up late last Saturday night and, earlier that evening, I was in a pub in Tallaght watching Ireland narrowly defeat Wales for a great victory. Those two results cheered us all up significantly. As I went about my business on Saturday and Sunday, people were buoyed by what had occurred in Clondalkin, Tallaght and throughout the country. We need more of this. I will attend the new Tallaght stadium on Friday night to watch Shamrock Rovers play Derry City and, on Saturday, I hope to attend Croke Park where my Tallaght neighbour, Robbie Keane, will lead out the Ireland team to play Bulgaria. We need these outlets because many bad news stories are breaking

As we all go about our business, we are aware people are worried and living in fear because they do not know what will happen. There is a great deal of speculation and many commentators are giving different views. I recall having to emigrate at a time when information about Government finances was not made public. Thank God for George Lee. A great deal of information is being put out by the media, which must do their job. However, it worries people and they are concerned about what will happen. I echo the comments of previous speakers that whatever happens on 7 April, the budget should be about fairness and equity.

The Minister of State shares my commitment to social inclusion. I said repeatedly at the time that large boats were rising that the little boats had to be remembered, but this is absolutely the case as the large boats struggle. I am a member of the executive of the Tallaght drugs task force and there is great concern about services. All of us are receiving many representations. I attended a presentation by the Carers Association earlier and I met the association's representatives in Tallaght last Monday morning. Everybody has a case to make and I am trying to listen to all the groups, which all want to be the priority, but the Government must strike a balance. However, we cannot neglect the groups looking after vulnerable people, including the drugs programmes.

There is significant speculation about social welfare payments but circumstances would have to be bad if we were not to continue to look after those in receipt of such payments, as Fianna Fáil has always done. Vulnerable people will always need this assistance. I was made redundant three times earlier in my career and I signed on in my local social welfare office. I know, therefore, how difficult it can be. Everybody, including social welfare recipients, is under significant pressure and everybody is feeling the recession. However, the unemployed, the unemployable and those with disabilities will worry even more. All Members have commented strongly on the need to look after those in poverty and, as vice-chairman of the Joint Committee on Social and Family Affairs, I have raised this issue on a number of occasions. With all the competing demands, it is important that this vulnerable group in society continues to receive Government aid and I hope the Minister will take that into account.

I represent Dublin South-West and I live in Tallaght, where 7,261 people were signing on in January, according to the most recent figures. Whatever about the doom and gloom and the need to correct the Exchequer finances and look forward, it must be remembered that at some point people must be able to see a light at the end of the tunnel and the beginning of a recovery. Even though it is gloomy currently, I hope everyone in Government strives for that. People need to continue about their business spending the money they have in the shops and on entertainment and leading as normal a life as they can. I have lived through previous recessions and recovery was always important. It is always about getting out of the recession and working through it. Preserving and creating jobs, even though that is difficult and demanding, must continue to be the core principle underpinning what the Government is doing.

The Minister of State referred to what has been done in America and different approaches. I received a letter from someone, who probably wrote to every other Member, saying we needed a Barack Obama but that person received a reply saying he probably would not be elected.

Joe Costello (Dublin Central, Labour)
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Not in Tallaght.

Charlie O'Connor (Dublin South West, Fianna Fail)
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Without being insular, we need to focus on our own situation. We are a small economy and we need to be focused. I am not afraid to say from the Government benches that we need to continue to give people confidence. There is a sense that nothing will be built if any money is to be found. I heard a good debate on radio this morning in which a contributor said that we should continue to build infrastructure. I do not want to be parochial but all the local Deputies have campaigned in the Tallaght region for the building programme at the Holy Rosary Family national school, which is 25 years old. I raised this matter on the Adjournment a couple of weeks ago. The school, which deals with a mixed international community, is still working in prefabricated buildings. I have said to the Minister for Education and Science that if he has money, he should be able to spend it on programmes such as this school because that creates confidence, jobs and infrastructure. I would hate to look back on this period in ten or 20 years' time, if we are still around, and say that, whatever about struggling through the post-boom period, we did not make efforts to continue to build for the future. I hope those kinds of projects continue to get the attention they deserve.

The best way to deal with poverty has always been, down the generations, through employment. While I do not wish to put any pressure on the Department of Enterprise, Trade and Employment, it, above all the other Departments, faces a serious challenge. We cannot give up or surrender. We must continue to create jobs all around the country. I will make the case for Tallaght as strongly as anybody else but we need jobs in Ireland. I hope that whatever happens on 7 April the budget will take account of some of the issues I have raised.

Joe Costello (Dublin Central, Labour)
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It is difficult to follow Deputy O'Connor talking about Tallaght. I will try, however, to keep away from my own patch in Dublin Central, north of the Liffey.

Charlie O'Connor (Dublin South West, Fianna Fail)
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I was being national.

Joe Costello (Dublin Central, Labour)
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My area has high unemployment and is disadvantaged in respect of housing, education for special needs and so on. It needs as much money as can possibly be injected into its infrastructure and facilities.

This is effectively the third budget in six months, following one last October and the pension levy which was to take a further €2 billion out of the economy. This new budget is to take anything up to €6 billion out of its expenditure. These are substantial sums of money. While I understand the Government's five year strategy, it will take approximately €16 billion from the taxpayer and out of capital projects. This will have a major impact on retail. If one takes money out of the economy, it is difficult to stimulate it and if one takes money out of taxpayers' pockets, it is difficult for them to spend. We must be careful to avoid deflation. We are breaching the terms of the Stability and Growth Pact by a massive 6.5% at least, bringing us to three times the 3% normally allowed under the EU legislation and agreements. We have been allowed to do this on a temporary basis and are going from 9% this year to a colossal 11% next year and then we are supposed to row back to the normal 3% in 2013. It is difficult to see that happening without employment taking a massive hit. Already 354,000 people are unemployed and the Taoiseach says the figure will be 400,000 by the end of the year but it could well be more, especially with a budget like this, coming after the previous budget and the pension levy.

We must focus on the sector of greatest employment, the small and medium-sized enterprises, SMEs, which employ approximately 1 million people. A total of 64% of the people employed in the private sector work in SMEs, while 50% of all those employed are in SMEs. A survey last December found that the banks had refused credit to 58% of SMEs. Another survey last month found that figure had dropped to 49% but that many of those who had applied for credit in December had not bothered to apply again because the banks had indicated that they would not get it. The lifeblood of the economy is being starved of credit.

The credit crunch is increasing, six months after the October budget. How can the Government guarantee the banks to the tune of €500 billion, inject €7.5 billion into the main Irish banks and still not ensure that the banks will respond to the needs of SMEs? Why have a Minister for Finance if he is not going to crack the whip and tell the banks that they were recapitalised and guaranteed to support in every way possible the stabilisation of the economy through the sector that is crying out for funding to keep it going? That is the sector that is haemorrhaging jobs. Once again, the banks will betray the country. If it does nothing else, the Government must sort out that situation.

The European Union foresaw this problem. At the summit last October, when we were putting together a budget, the European Union put €30 billion aside to provide continuous funding for the SMEs in the 27 member states. The Irish banks refused to go near that money until the middle of this month, after the SMEs howled at them for it. They did not apply for it before now because the margins were not good enough for them. They were not the exorbitant margins they were used to getting. That is outrageous. This month, the European Central Bank has reduced interest rates by 65%. Anglo Irish Bank has reduced its rates by 16%, the Bank of Ireland by 21% and National Irish Bank by 5%, but Ulster Bank has not reduced its rates. The cost, however, of borrowing money through the European Central Bank is 65% and the interest rate is down by that amount. There is no sense of reality in the banks. Do they realise we are in a crisis? They operate as though it were the good old days of the Celtic tiger. We have seen this already in their considerable remuneration and pension packages. That cosy cartel has still not come out of its closet into the limelight of the real world. They still operate in virtual reality rather than in the reality of the situation.

I offer only one recommendation to the Government, namely, it should tell the banks they have failed us. The private banks have failed us. We now have our own nationalised bank, Anglo Irish Bank, which should become the State corporate bank, used to ensure that the Irish economy is not betrayed again, and to draw down money. Specifically, it should be given the portfolio that once belonged to the ACC and the ICC, both support banks for the Irish economy which served it well. We now have a nationalised State bank. Let us use it and ensure that never again will the Irish economy and small and medium enterprises be bled of the funds they are crying out for in order to keep people in employment and to stabilise this economy once again.

Dara Calleary (Mayo, Fianna Fail)
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I welcome the opportunity to speak on the budgetary situation ahead of 7 April. There are several areas in which I have an interest and I would like the Minister for Finance to address these on that day. Some involve cuts and others involve packages that might stimulate activity. Our most important need at present is to reduce costs right across the economy and to continue to do so.

Some areas are within Government control. For example, it can reduce the cost of employing people by reducing the current level of employers' PRSI. In that way we can stimulate more employment and give employers a better incentive to hire people. There is a commitment in the programme for Government to reduce by 25% the red tape burden on small business. In the current climate let us be more ambitious and aggressive and increase our ambition to make that, ultimately, a 50% reduction.

In recent years this House has put in place a number of organisations, such as the National Employment Rights Authority, NERA, and other bodies that currently inspect Irish business as if it now operated in the same way it did some years ago. It does not. The majority of small and medium enterprises are struggling to keep doors open and can do without red tape being forced down their throats at the current time. Let us call off those inspectors. I respectfully propose they might be better employed now in addressing the social welfare backlog and there might be a better transition of employees between Departments to address current demands. That is an action the Government might pursue.

Public procurement is another area within Government control. In spite of the cuts and the curtailment in capital and current expenditure, the Government is still the biggest buyer of services and goods in this economy. The rules, however, curtail the involvement of small business and crucify it, preventing it from getting access to that market. Whether one is a builder, a printer or an office supplies company, if one is small one is not wanted as far as Government procurement is concerned. To protect jobs and provide greater competition and a more local response to local situations, we must review this. I ask the Minister to do so ahead of 7 April.

The issue of stimulus is being discussed and, although we are not in a position, either as a current economy or as a style of economy, to take US-style actions, we can examine a number of issues. Again, these involve a change to the way we do things. Now is the time to change. For instance, is there a need for the State to own school buildings? That system served the country well since the foundation of the State but there is a backlog of schools to be built or refurbished. The construction industry is at a low in terms of activity but also, and more important, it is at a low in terms of pricing. The industry has a substantial landbank. Two and two equal four. If we review our rules and open up our school building programme to a buy and rent scheme, the State would not have to lay out significant expenditure up-front. Through a good rental agreement, which could be very easily negotiated at present, we can get good schools, stimulate activity and address the difficulties in building schools. We must think outside the box. Solutions that worked in this country over the past 70 years, or that may have served rather than worked, will not work in the current climate.

Concerning stimulus, we must address the concerns of the motor industry. We are not bailing out big car dealers but are bailing out the 50,000 people who depend on those dealers for their jobs, the mechanics and those just above the minimum wage. There are a number of cost neutral proposals we can implement, such as revising the VAT system.

The low direct tax model was a model of its time during a period of surpluses and economic growth. It is no longer appropriate for us. Everybody is braced, perhaps not quite ready, but expecting large increases. However, we must be careful that we do not burden with further large increases the middle sector of those who pay tax. The sector that gets paid between €50,000 and €80,000 gets very little support from the State but it pays a lot of the State's bills. Surely there is ability within the Department of Finance to devise models that would place the impact and the burden on those on higher incomes and, on this occasion, probably also on those on lower incomes.

The ongoing drive to reduce costs is paramount. The cost of food is beginning to fall as are costs of other necessary household items, and this must continue. Regarding social welfare reform, a €21 billion budget cannot be exempt from examination in the current time. However, there are ways to do this. The recent initiative on tackling cross-Border fraud shows our social welfare system has grown fat. There is a lot of room to cut back on that fat before we start tackling direct rates. For example, every case should be examined to ascertain if the need that originally applied still applies and whether the total benefit being paid to specific households from social welfare payments is disproportionately high.

I make a special plea for self-employed people who in the past five or six years employed people and paid taxes and PRSI and who now, through no fault of their own, find themselves out of business. They are not eligible for social welfare. They have paid their share to the economy and now at their time of need the economy should support them.

Concerning jobseeker's payments and benefits, currently many people are being forced onto that payment who would like to work in their communities and have the talents and skills to do so. This is the area of responsibility of the Minister of State, Deputy John Curran, and he will be well aware there are many organisations who could well do with those talents and skills. Surely we can marry the two needs in some shape or form and get those people working for the benefit of their communities and in voluntary activity, while being in receipt of a State payment. As sure as night follows day, the time will come again when we will be begging for volunteers. That will be the case when we return, as we hope, to a situation of high employment.

Another social welfare issue that must be addressed is the payment of benefits directly to bank accounts. This encourages fraud and so-called welfare tourism and should be reviewed as a matter of urgency. In reviewing it, we will support our smaller post offices and social welfare offices around the country.

We must also examine our own operations in this House as we approach 7 April. There was a campaign for many years to link our salaries with those of Principal Officers, but that would take the matter outside our control. That situation should be examined and if there is a need to suspend that link for the next number of years and to take reductions, that should be done.

The issue of Ministers of State is being considered at present as are issues of expenses and allowances, including those paid to committee chairmen, vice-chairmen and convenors. These must all be reviewed between now and 7 April. The very legitimacy of this institution and of our democracy is being scrutinised at present and we must review and protect it.

The Government must be congratulated for introducing the cap on salaries in the banking sector. It should be extended across the public sector in both semi-State and State companies, to include contracted employees, who are either independent contractors or direct employees. If a person is paid no more than €500,000 to run a bank, then they do not need to be paid any more than that to run any company, to present a radio or television show or to do any other job paid out of the public purse no matter what the shape or form of an organisation funded by the public purse.

It is essential that on 7 April we protect the vulnerable. People like those we met this morning, the carers and people providing support to those with Alzheimer's, are not able to respond in the way we can respond to this economic challenge. The Minister needs to show a path of recovery to the country and I am confident he will do so. He needs to show that there is a plan at the end of all this, that the shoots will grow again and that we will be in a position to begin to lead this country out of the current challenges. I am hopeful from his statements to date that he will do that and I hope he takes some of those ideas on board.

Jimmy Deenihan (Kerry North, Fine Gael)
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Ireland is having a deeper recession than any other eurozone country. The economy shrank by about 2.5% in 2008 and may contract by another 6.5% this year. Unemployment has jumped from 5% to 10.4% which is a faster rise than in America. Ireland's banks are still in a state of turmoil and there has not been the expected major restructuring of the banks when the House issued the guarantee before last Christmas. As is the case with Anglo Irish Bank, the same people are running the banks as were doing so before. The major restructuring did not take place and, as has been mentioned by previous speakers, the revenue flow has not been made available to small and medium business. This is a significant issue because no matter what the banks say, it is not business as usual. The rising unemployment figure which could definitely go to 400,000 by the end of the year — I hope it will not — affects communities across the country. We will be facing the major issue of the public finances on 7 April when the Government will introduce an emergency budget. This is the fourth attempt in the past year to deal with the issue of the public finances.

It may be helpful to take an overview of what has happened in the past 20 years. Between 1990 and 2007, the economy grew by an annual average of 6.5%. Ireland's expansion had two phases with the first being led by exports and powered by foreign direct investment and which ended in 2002. This phase was also powered by EU Structural Funds as a significant contribution from 1994 to 1999. This pump-primed the economy and led to major infrastructural projects for which the EU has never been given full recognition because politicians were not too forthcoming in acknowledging that this money came from EU funds.

In that period, mainly American foreign companies such as Intel, Hewlett Packard, Apple and others, provided considerable capital and know-how. They provided the well-paid jobs that contributed so much revenue to the economy. At one stage, Dell was contributing approximately 10% of our tax revenue. During that time, there was a sale of State assets and tax amnesties were made available and which yielded a lot of money into the State coffers. The economy was going well but we were not setting down conditions when we had the opportunity to do so and which may have been able to help us now in this hour of crisis. I acknowledge the international crisis has had an effect on our economy but the Government has been in power for 12 years and it cannot escape responsibility for what has happened.

Among the reasons we attracted foreign capital investment was our young, educated, English-speaking, low cost workforce. Our State grants were very generous with a corporate tax of 10% and we were also the only English-speaking country in the eurozone. All these factors came together to make Ireland a very competitive and attractive country in which to invest.

I visited Silicon Valley in America in 1991 when I was promoting County Kerry. I explained that it cost approximately £6 an hour to employ a worker in Ireland. This was a far more competitive rate than the American rate at the time. I was in Silicon Valley last year and last March it cost $28 an hour to hire a worker in Ireland, $6 an hour in Poland and $26 in Silicon Valley. It was more expensive to employ someone here than in Silicon Valley. America is currently about 20% more competitive in employment rates than Ireland and this is posing major problems.

The other aspect of the Irish economy from 2002 onwards has been the building boom. This was fuelled by lower interest rates due to our membership of the eurozone. This is one of the advantages of being in Europe but on the other hand, it fuelled a building boom. Capital gains tax was reduced from 40% to 20%. At the time I suggested it should have been reduced from 40% to 30%, which would have been accepted by everyone. This fuelled speculation because people were making small amounts of money and moving property very fast. They were buying off the plans and before the house or apartment was built it could have changed ownership two or three times. People were making their margins. Every house built yielded about €100,000 to the Revenue and in one year a total of 90,000 units was built which equated to a total of €9 billion. This year the total might not reach 15,000 or 20,000 units so this will leave a gap of €7 billion. When the rainbow coalition left Government in 1997 there was a budget surplus but a decade later we have a deficit, which is not acceptable.

In that period under the captaincy of Charlie McCreevy who was Minister for Finance from 1997 to 2004, the size of the public service was increased. The Minister always said that when he had money he would spend it and when he did not have it he would not spend. This was his philosophy and there was a laissez-faire attitude to the economy at that time. The notion that fiscal policy should lean against the business cycle was scorned by the then Minister. Those actions in the past are not a help today. Good people applied for jobs in the public service and it is unfair that they are being attacked and targeted. It is not their fault they applied for jobs by means of public competition. However, at the same time a bureaucracy was being constructed without any hint of reform.

People are questioning our ability to dig ourselves out of our financial hole. The yield of 6% on ten-year Government bonds is way above the rates in Germany, where it is 3.2%. Both countries borrow in euro so the gap between the two is a rough guide to how Ireland is viewed by investors.