Dáil debates
Wednesday, 1 July 2009
Leaders' Questions
Enda Kenny (Mayo, Fine Gael)
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Yesterday we got confirmation of 120 job losses in Bausch and Lomb in Waterford, 80 job losses in ICT Eurotel Marketing Limited in Belmullet and 100 job losses in Meadow Meats in Rathdowney. The Taoiseach knows the figures that will be released by the CSO at 11 o'clock for the live register for June. Will he tell the House what the figures are?
Brian Cowen (Laois-Offaly, Fianna Fail)
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The figures are due out at 11 o'clock. When seasonal factors are taken into account, the live register for June is estimated at 413,500, a month on month increase of 11,400, up 2.8% since May 2009. It is the slowest rate of increase since January. Obviously it is still clear that the unemployment situation continues to be affected as we implement the three necessary aspects of recovery - bringing order to the public finances, improving competitiveness in the economy and reforming the banking system.
Enda Kenny (Mayo, Fine Gael)
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The Civil Service-speak, that this is the slowest rate of increase, demonstrates just where we are. In January the rate of increase was 33,000, in February it was 26,000, in March it was 20,000, in April it was 15,000, in May it was 13,000 and in June it was 11,400. This economy is in crisis. It is a long time since one of the Taoiseach's predecessors said that if unemployment went over 100,000 the Government should resign.
Yesterday the CSO figures also showed that capital expenditure in the economy had declined by one third quarter on quarter. This morning the former Minister of State at the Department of Finance, Tom Parlon, said that the construction industry is in crisis. It seems the Department of Finance is in a state of paralysis.
The Taoiseach is aware of the importance of the creation and protection of jobs. The former secretary at the Department of Finance and historical figure, Dr. T.K . Whitaker, speaking at the commemoration for Seán Lemass, said the protection of jobs is critical. It now appears €12 billion will be slashed from capital expenditure in the period 2009-13. Obviously, some projects must be cut because they all require funding but these involve men and women working all over the country, subcontractors, service providers to subcontractors and providers to main contracts. There is real crisis, exacerbated by the fact that many suppliers of service and contractors in the construction area are now in complete limbo in the pre-NAMA phase because the banks no longer care and there is no money forthcoming.
The current forecast for capital expenditure projects in 2009 is €7.3 billion. Will the Taoiseach confirm that will be delivered? For 2010 the forecast for capital expenditure is €6.6 billion. We heard this morning from the Construction Industry Federation that all that appears to exist are promises. This is a firm commitment, reduced from €9.1 billion announced in the 2008 budget. Will the Taoiseach confirm that in respect of capital expenditure programmes, for this year the commitment of €7.3 billion will stand and that for 2010 the commitment of €6.6 billion will stand? This is about maintaining jobs, creating infrastructure and retaining some semblance of movement in an economy that is in crisis. I am sure it pains the Taoiseach as a politician and former Minister for Finance that when he delivered his budgets, he knew the trends were heading in this direction. Will the Taoiseach confirm those figures will stand for 2009 and 2010?
Brian Cowen (Laois-Offaly, Fianna Fail)
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On the public capital programme, it is our intention to spend about 5% of GNP, one of the largest ratios in the developed world for capital spending as a proportion of total goods and services being provided in the State in any given year. The €7.3 billion represents the equivalent of 5% of GNP, one of the highest ratios in the world. It is important that we continue that programme over the course of this year and I expect that money to be spent.
It is also important to point out that thankfully the prices in tenders have decreased by 15% to 20% and therefore the volume of output we can get is clearly available in the same measure for 15% to 20% less. Next year, as based on the present budgetary strategy which is outlined by the Minister in the supplementary budget, we expect a spend in the region of €6.6 billion. It is important to point out that not alone will the money that is allocated be spent this year, for next year the arrangements are in place that all Departments can arrange for committal of up to 70% of spend during the course of this year going into next year. Many of these works are multi-annual in nature, such as roads and hospital programmes. It is important to point out that arrangements are in place for Departments to pre-commit next year's spend, during the course of this year, at up to 70% of the ceiling that has been allocated to them.
Eamon Gilmore (Dún Laoghaire, Labour)
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I was interested to hear the Taoiseach say that unemployment was rising but rising more slowly. That is the equivalent of saying we are sinking but sinking more slowly. We are sinking nevertheless. A total of 413,000 people out of work is a record, and the number has risen by about 200,000 since this time last year. We hear a lot of talk these days about cuts in public spending and various budgetary measures; we have had two budgets already this year. The cost of the extra unemployment can be assumed to be about €20,000 per job if we consider lost taxes and social welfare payments. All the measures taken in the April budget and the previous October budget - the income levies, pension levies and cuts in spending programmes - have been wiped out by the increase in unemployment. We are talking about an additional cost of around €4 billion to the public purse as a result of that increase in unemployment, not to speak of the personal loss suffered by each individual who has lost his or her job in terms of lost income, lost hope and so on.
I now turn to what is being done about it. If the Taoiseach is saying unemployment is rising more slowly, does he have an estimate of what it will be at the end of this year? I recall that he made a speech prior to the local and European elections in which he told the country he expected that rapid growth would return in 2010-----
Eamon Gilmore (Dún Laoghaire, Labour)
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-----so I presume he has some idea of when unemployment is likely to peak and at what level. Can he tell us this? What is his answer to the comments made by the head of the Construction Industry Federation this morning that an additional 100,000 building workers were expected to lose their jobs as a result of the decline in the capital programme?
Brian Cowen (Laois-Offaly, Fianna Fail)
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As I said, I take no pleasure from the fact that unemployment is rising in our country at any time. People have asked what the trends are and I am telling them what they have been from January to May. I am stating that as a fact.
Pádraic McCormack (Galway West, Fine Gael)
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There is no one left now to lose his job.
Brian Cowen (Laois-Offaly, Fianna Fail)
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One takes no pleasure whatever in anyone's losing his or her job, but it is important to point out the trend. It is clear from the strategies outlined and the models that have been projected for Ireland's economy based on the current world situation that unemployment will continue to rise, unfortunately, before things get better. We must do everything we can in terms of short-term measures to help people who find themselves unemployed, but we must also fix the economy, and this means dealing with the situation through NAMA, as we are doing, to fix the banking system so we can get credit flowing again. We need to strengthen the balance sheets of the banks, remove the stressed assets from those balance sheets, and make sure investment money flows into the country to get credit going. That is the most important way in which businesses will be able to withstand the pressures they are facing.
In addition, we must bring order to our public finances; without that, external and internal confidence cannot be restored. We must also continue improving competitiveness. Unit labour costs have dropped by 4% in this country compared to an average increase of 3% in other EU countries during the course of the year, which has improved the competitiveness of the Irish economy by 7%. This shows the flexibility in the Irish economy, with responses coming from the various sectors to get us back into a competitive position. These are the facts. There has been an average fall in exports of 20% in Germany, while in Ireland the reduction in output has been 5% or 6%. That is a good performance compared to our competitors. However, until growth returns to the economy we will not be in a position to create jobs on a sustainable basis. Those are the issues we must face.
Unfortunately, since September 2008 we have seen a steep increase in unemployment of 197,000. One takes no joy in that. However, to answer the Deputy's question, it is clear, based on the projections, that by the end of this year unemployment will be in the region of 15% or 15.5% and could rise again going into the following year. We must do everything we can to make sure that when the world economy picks up and demand improves, this small open economy, whose livelihood depends on the goods and services it exports, is in a position to take advantage of this in terms of competitiveness. That is the whole purpose and strategy of the Government. The most important aspects of our strategy are to put our public finances in order, proceed with the restructuring of the banking sector, which has received support, and improve our competitiveness.
Michael D HigginsBrian Cowen (Laois-Offaly, Fianna Fail)
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In answer to the Deputy's question, we will continue to take whatever structural and short-term measures are necessary to alleviate the situation.
Eamon Gilmore (Dún Laoghaire, Labour)
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The problem is that the Government is not giving sufficient priority to employment and to dealing with the problem of unemployment. What the Taoiseach seems to be saying is that if we sort out the banks and the public finances, a recovery in employment will happen as a consequence. There are a couple of things wrong with that argument. First, we are pumping large amounts of borrowed money into the banks, including €3 billion into Anglo Irish Bank recently, and the banks are not lending. Credit is not flowing in the economy to enable businesses to generate employment and save jobs. Second, the Taoiseach argues that if the public finances are sorted out, economic recovery will follow. However, let us take, for example, the speculation, which the Taoiseach was not inclined to pursue yesterday, that €1.5 billion would be taken out of the social welfare budget. If employment rises to the level he is expecting - 15% or 15.5% - that will wipe out any savings made on that side. It follows that the Government cannot either help the economy recover or put the public finances back in order without dealing with the issue of employment.
The difficulty I have with the Government's approach is that it does not seem to be sufficiently urgent. For example, last December it announced with great fanfare a plan for Ireland's smart economy. It was a plan the Labour Party agreed with; we had been talking about such a plan for some time. However, it took the Government six months to appoint a task force to advance it. It only appointed one last week. If it was serious about trying to create employment and get the economy moving it would be showing a little more urgency and would not have taken six months to set up a task force to advance the proposals, many of which are good ones, to develop a smart economy.
We had the same thing yesterday. The Taoiseach mentioned a proposal, about which he has been talking to ICTU, to provide €250 million in assistance, although it is debatable whether this is sufficient, to retain existing employment, but he was not in a position to tell us how many jobs it would actually protect. The information he gave was extremely vague. The difficulty is, on a day when we heard that record numbers of people are unemployed, that the Government is not giving sufficient priority to getting people back to work.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I do not accept that contention whatsoever. I will deal with the issues raised by the Deputy in the order that he raised them. In regard to getting credit flowing again, the situation is not just about the recapitalisation issue and the bank guarantee which, by the way, were regarded by the IMF as fundamental to maintaining financial stability in the State at the present time. The third leg to that stool is the need to provide an assets management agency to take the impaired assets off the balance sheets. That is necessary and it has been approved and agreed.
The proposal by Fine Gael on this matter involves reneging on senior bond holders. That is the Lehman Brothers solution and we see where that got us. The proposal from the Labour Party in respect of the banking situation is a pre-emptive nationalisation of all banks. That is the Icelandic model and we know where that got us.
Enda Kenny (Mayo, Fine Gael)
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We are not proposing to screw taxpayers.
Brian Cowen (Laois-Offaly, Fianna Fail)
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Now the shouting starts.
John O'Donoghue (Kerry South, Ceann Comhairle)
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The Taoiseach is entitled to respond.
Bernard Durkan (Kildare North, Fine Gael)
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What does the Taoiseach propose to do?
Brian Cowen (Laois-Offaly, Fianna Fail)
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I am entitled to respond. I listened in silence to other speakers.
John O'Donoghue (Kerry South, Ceann Comhairle)
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The Taoiseach is entitled to the same courtesy as was extended to Deputies Kenny and Gilmore. I ask that he be listened to in respectful silence. He has been asked a question.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I am responding to the important points made.
Seán Barrett (Dún Laoghaire, Fine Gael)
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All the Taoiseach is doing is shouting and roaring. We do not need lectures from him.
Brian Cowen (Laois-Offaly, Fianna Fail)
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We will wait for another few minutes.
John O'Donoghue (Kerry South, Ceann Comhairle)
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The Taoiseach must be allowed to answer the question.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I am outlining my Government's approach because it is being misrepresented by the Opposition.
Seán Barrett (Dún Laoghaire, Fine Gael)
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The Government misrepresented its policies.
Brian Cowen (Laois-Offaly, Fianna Fail)
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I am entitled to do that and I am entitled to point out that a paucity of alternatives is being provided by the Opposition.
Richard Bruton (Dublin North Central, Fine Gael)
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The Taoiseach is happy to misrepresent our position. When will he come into the House and present his proposals?
John O'Donoghue (Kerry South, Ceann Comhairle)
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The Taoiseach must be allowed to answer the question.
Brian Cowen (Laois-Offaly, Fianna Fail)
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In regard to the question about jobs, the quickest and best way to provide jobs for our economy is to return growth to our economy. However, we cannot return growth to the economy in the context of a public finance position that has to be rectified if people are saying we must spend, spend and spend more. We cannot do that.
Seán Barrett (Dún Laoghaire, Fine Gael)
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That is what the Government did.
Brian Cowen (Laois-Offaly, Fianna Fail)
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The second point I want to make in regard to the jobs situation is that, as I have pointed out, the measures we have taken, including the pension levy and other difficult decisions, which are impositions on our people and all of which were opposed in this House, were the means by which we have improved our unit labour costs vis-À-vis other competitors by 7% this year alone. This has been commented upon by everybody in the international community as a major achievement by our economy in the current circumstances. If we are going to get into a competitive position when the upturn comes in the world economy, we have to make those decisions. They are difficult decisions that impose difficulties for our people, but the Government is implementing these policies for those reasons.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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The difficulties people are experiencing were caused by the Government.
Brian Cowen (Laois-Offaly, Fianna Fail)
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There is no alternative coming from the Opposition except to say-----
Paul Kehoe (Wexford, Fine Gael)
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Members of the Opposition would be a major improvement on this Government.
Brian Cowen (Laois-Offaly, Fianna Fail)
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-----that we should spend, spend and spend more. We have an Opposition finance spokesman who says we should cut more and every other spokesman saying we are not spending enough. That is the position of the Front Bench across from me. That is the truth of it.
Richard Bruton (Dublin North Central, Fine Gael)
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Is the Taoiseach unaware of what the IMF said about the Government's performance? He should read its report.
John O'Donoghue (Kerry South, Ceann Comhairle)
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The Taoiseach should be allowed to continue without interruption.
Pádraic McCormack (Galway West, Fine Gael)
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The Taoiseach should stop digging.
Brian Cowen (Laois-Offaly, Fianna Fail)
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That is the truth of it. We cannot have a rational debate on this issue because the Opposition is trying to play both sides of the fence.
Third, in regard to the question Deputy Gilmore asked about the smart economy, the innovation task force was set up in response to the innovation alliance which Trinity College, Dublin, and University College, Dublin, came forward with some months ago. They asked for the innovation task force to be brought forward and that was done. Its task is to look at innovation across the economy, not just in regard to the smart economy. Innovation is the only way in which we will be able to do things better. We must do things in a smarter way in order to be more competitive in a way that is price sensitive to market demands. Everybody agrees this is required.
In regard to the Smart Economy document, I am glad it is now getting some belated support. I look forward to continued support for it. We are trebling spending on research and development, with €2.5 billion allocated this year. When we came into office 12 years ago, the research spend was zero. Not €1 billion or €500 million but zero.
Brian Cowen (Laois-Offaly, Fianna Fail)
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So much for the visionaries on the benches opposite.
Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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What about the real economy? It is on the floor.
Brian Cowen (Laois-Offaly, Fianna Fail)
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In regard to the building industry, as I have outlined, it was always our budgetary strategy to provide for increased capital spend from the public capital programme in an effort not to replace but to alleviate the downturn that was coming in the residential construction sector in any case. The seismic change that occurred since last August when Lehman Brothers collapsed meant that the industry has now come almost to a halt.
Joan Burton (Dublin West, Labour)
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The Government created a property bubble. We are now seeing the consequences of the bursting of that bubble.
Brian Cowen (Laois-Offaly, Fianna Fail)
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We will see in due course that residential construction will increase from 25,000 or 30,000 units per annum to 45,000 into the future, which is the sustainable level.
In regard to the statements by the chief executive officer of the Construction Industry Federation, I have just made the case, explained what the situation is and how it works. There will be €7.3 billion in public capital spend this year. We have allocated €6.6 billion for next year as things stand pre-budget. There will have to be some contribution made from the capital spend towards the correction in the public finances.
Brian Cowen (Laois-Offaly, Fianna Fail)
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That will be a budgetary decision.
Willie O'Dea (Limerick East, Fianna Fail)
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Deputy Burton is asking the question which she herself will not answer in respect of the Labour Party's proposals.
Brian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy either wants a reply or she does not. The full output will be 20%, allowing for the change in tendering prices so that output and volume can be maintained. Of what is currently committed, up to 70% of next year's budget for the capital programme can be provided for by Departments during the course of this year. That is the factual position.