Dáil debates
Tuesday, 17 November 2009
Pre-budget Outlook: Statements
5:00 pm
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Never before has so much information and advice and so many expert reports been published in the run-up to a budget. The publication of the McCarthy report represented a dramatic new departure in the organisation of our public finances because detailed papers on the Estimates for expenditure and the options facing the Government in this regard were published well in advance of budget day. Therefore, a major reform of our financial procedures has taken place this year.
This detailed analysis of our economic position, together with the pre-budget outlook published by my Department last week, has already resulted in an informed, rational debate outside this House about the options facing the country. I hope a similarly constructive debate will take place here this evening.
I welcome the opportunity to set out the current and prospective economic and budgetary positions. I look forward to hearing the views of the parties opposite on what needs to be done to put the public finances on the road to recovery. I am glad both the Fine Gael and Labour parties agree an adjustment of €4 billion to the public finances is necessary for 2010. I hope we can reach further agreement on how that adjustment should be secured. What is at stake, after all, is the economic future and well-being of the country.
Before setting out the Government's broad thinking on the public finances, I will outline the short to medium-term prospects. As everyone in this House will be aware, the past year and a half has seen an unprecedented rate of economic decline. Gross domestic product will decline this year by approximately 7.5%. Declining levels of activity have taken a heavy toll in the labour market. This year, the number in employment will fall by about 165,000, with the construction, retail and manufacturing sectors the worst affected. The unemployment level has risen significantly, standing now at 12.5%. This is unacceptably high. All the Government's efforts are aimed at getting people back to work. A reasonable degree of agreement has emerged on the short-term outlook. The current consensus forecast is for a GDP decline of 1.1% next year. My Department anticipates that growth will return during 2010, but that for the year as a whole the economy will contract by approximately 1.5%. That represents an improved position since the supplementary budget last April. The world economy has turned a corner. It is fair to say that there is light at the end of the tunnel.
While unemployment is anticipated to rise into next year, recent labour market developments suggest that the rate of increase has slowed. The creation and protection of jobs remains the overriding objective of Government policy. All aspects of active labour market policies are required to ensure that work rather than unemployment remains the norm. There are three main pillars to the Government's economic strategy and these were further highlighted in the pre-budget outlook last week. We are ensuring that we have a properly functioning banking system, capable of meeting the needs of savers and borrowers. We are taking steps to ensure that our public finances are stabilised and put on a longer-term sustainable path. We are helping to regain our international competitiveness to be in a position to exploit the global economic recovery and to generate economic growth. All three of those problems must be addressed, as their resolution is complementary. If they are addressed we are on the road to addressing the social problems which unemployment causes and putting the economy on the road to recovery.
A significant amount of time has been spent both within this House and elsewhere discussing what needs to be done to restore the banking system. Whatever divergence of opinion there is between us, everyone agrees that a fully operational banking system is a cornerstone of a modern economy. Restoring confidence and repairing this system is a fundamental requirement for economic recovery. That is why the Government, in the same way as Governments and central banks across the globe, has intervened to provide substantial support to the financial sector and the broad economy in the current crisis. The Government's priority has been to ensure we have a banking system that can serve the best interests of the economy. Much work remains to be done, but I firmly believe we are well on the way to a resolution of this most difficult crisis in our financial institutions.
The deterioration in the economy has exposed weaknesses in our public finances. We are currently in the untenable position where our tax revenues are now back at 2003 levels while current spending has increased by 70% since then. Borrowing for day-to-day spending has escalated to unsustainable levels and an Exchequer deficit of €26 billion is projected for this year. To put that enormous figure into perspective, we must borrow €500 million each week to fund it. Another way of looking at this annual deficit is to consider it in terms of our national debt. At end-2008, our national debt stood at approximately €50 billion, next year it is now likely to be approximately €100 billion and without action would continue to spiral out of control.
All of us in this House who subscribe to the basic tenets of responsible economic management will agree this cannot continue. Debt service costs are rising rapidly and are absorbing a large and growing share of tax revenue. We must halt that phenomenon and ensure that it does not become ingrained and inhibit the Government's ability, and that of successive Governments, to provide essential public services. It is imperative to inspire confidence both internationally and domestically that the deterioration in the public finances is being arrested.
It is vital to restore balance to Government expenditure and ensure that taxation is at more sustainable levels. As a number of commentators have remarked, the improvement in the economy in the medium term will not be sufficient to close the budgetary gap. There is a significant underlying deficit that must be tackled in a targeted manner. The report of the special group on public service numbers and expenditure programmes and the report of the Commission on Taxation will form the basis for future tax and spending policy.
That said, our immediate priority is to stabilise the deficit at this year's level, which on a general Government basis is a deficit of 12% of GDP. To do so requires an adjustment of €4 billion. Without such savings the deficit would be approximately 14% of GDP. Between now and budget day, the Government will decide how the necessary savings can be secured.
Turning to where the adjustments should come from, as I said at the outset, I welcome the views of this House, but it is important to bear in mind some key facts. Taking account of the significant increases that have been made to personal taxation this year, the marginal tax rate now stands at 52% for PAYE earners and is higher for the self-employed. We know from our experience in the 1980s that we cannot tax our way out of a recession. However, who funds the income tax yield tells its own story. In overall terms 4% of income earners contribute approximately half of the income tax yield. For 2010, it is estimated that approximately half of income earners will pay no income tax. While they may have some exposure to the income levy, having 50% of earners out of the tax net is not viable if we want to fund the range of services we expect Government to provide.
In terms of the other significant taxes - VAT and excise duties - our rates are already high by international standards. There is a significant risk in terms of cross-Border factors of further deterioration in the receipts if substantial increases are imposed in those forms of taxation. The rate of corporation tax must be seen in terms of international markets and our ongoing ability to foster enterprise and stimulate job creation. Consequently, given that those four tax areas represent the vast bulk of overall tax revenue, there is limited capacity to raise additional revenue in the forthcoming budget. Consequently, I have already indicated that the immediate focus will have to be on expenditure reduction measures.
In terms of expenditure, the overall amount of gross current voted expenditure stands at approximately €56 billion in 2009. Roughly one third of spending is on social welfare related matters, one third on programme expenditure, including the capital programme, and the final third on public sector pay and pensions. Therefore, the bulk of the adjustment, which will have to be on day-to-day spending, will have to consider all spending lines.
Of significance in regard to considering such matters is that we are currently in a period of falling prices. While a prolonged period of price decline would bring its own problems, the current short-term decline in consumer prices has the effect of supporting real income levels. In that light, there is some scope to adjust public spending while protecting the living standards of those most in need. The Government is determined to achieve the necessary savings and in this evening's debate can help inform how the savings will be secured, ahead of next month's budget.
The Government's approach to correcting the public finances has been acknowledged by the European Commission. In its excessive deficit report, which was published last week, the Commission acknowledged the balanced approach taken and the measures which have been implemented towards reducing the deficit. The Commission has also proposed a one-year extension to 2014 of the deadline to bring our deficit below the 3% of GDP threshold. That proposed extension, which will be considered by the Council of Ministers in early December, is to be welcomed. However, an additional year to correct, while easing somewhat the adjustments required for 2011 and subsequent years, does not change the focus of our need to stabilise our very large deficit now. If anything, it reinforces the need to continue to take effective action in 2010.
In addition to restoring the banking system to health and stability and restoring stability to the public finances, the Government has focused on the needs of the wider economy and in particular the promotion of favourable employment conditions. The pre-budget outlook reiterates the requirement that we reposition our economy on a more sustainable, export-led growth path through regaining our international competitiveness.
Ireland's cost competitiveness has deteriorated in recent years. As a number of agencies such as the National Competitiveness Council have outlined, elements of our costs are higher than that among many of our competitors. While that has not been helped by some factors beyond our control, such as the appreciation in the value of the euro in recent months, there are measures we can take through domestic policy action to address this issue.
In recent years our labour costs moved out of line with productivity developments. As we refocus our economy on export-led growth, a focus on these crucial input costs will become more important. Reducing labour costs through some combination of nominal pay reductions and enhanced productivity is an essential part of the strategy to improve competitiveness. The Government has already taken measures to reduce the public service pay bill through the pension levy and initiatives to reduce the headcount. I acknowledge the contribution made by public servants in that regard. The Government has indicated that a further €1.3 billion in savings from the public service pay bill will be required next year and there is engagement with the public service unions on the manner in which that will be done.
The public sector has already made an important contribution but more is required. In the private sector jobs are being lost, working hours reduced and there is some evidence of downward adjustment in earnings. Engagement with the social partners is ongoing and important but Government must ultimately balance all the challenges and issues and present the best way forward through the budget.
We do have strengths. For example, our labour force continues to be highly skilled and flexible. We have made significant investment in education at all levels to ensure we have the skills demanded by our knowledge-intensive economy. We have greatly enhanced our infrastructure. Pursuing a responsible, fast and balanced approach to tackling the challenges is what we face and it is at the heart of the Government's approach.
We are facing tough challenges. To succeed in dealing with them we must continue to pursue appropriate policies to position the economy to benefit from the global recovery. The Government is acutely aware that businesses, families and almost everyone in our society are affected by the deterioration in economic conditions. In the forthcoming budget we will bring forward policies that will ensure that the burden of adjustment is spread as evenly and as fairly as possible.
A number of challenges face us, and this Government has and will continue to address them all. We have taken significant action to curbing expenditure and raising additional tax revenue since July 2008 to address the crisis in our public finances. Our immediate priority is to stabilise the deficit and this we will do in the forthcoming budget. In this regard our actions have been commended by various outside commentators, internal commentators and the international market reactions have changed in our favour.
Bank lending must be facilitated. Our actions in regard to the very difficult banking position-----
Shane McEntee (Meath East, Fine Gael)
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There are half a million people unemployed.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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-----are taking hold and are the right decisions.
Finally, we have through various measures sought to protect a climate that will facilitate employment-----
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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-----but more needs to be done here in terms of the ongoing restoration of our competitiveness.
Joan Burton (Dublin West, Labour)
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Where are the Minister's figures?
Shane McEntee (Meath East, Fine Gael)
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What is the Minister doing for jobs?
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Implementing measures in all of these areas, as this Government has and will continue to do, will enable the economy to return to a more sustainable growth path over the medium term. In so doing, this will facilitate a return to employment growth and a sustainable improvement in the living standards of all.
Shane McEntee (Meath East, Fine Gael)
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There are half a million people unemployed.
Séamus Kirk (Louth, Ceann Comhairle)
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The Minister for Finance without interruption, please.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Since I was appointed Minister for Finance I have taken action on all of these matters and in my budget in a few weeks' time this Government will take decisive action.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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If Deputies want to reflect on figures, they need to reflect on the figures in the pre-budget outlook.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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They set out clearly the gap that has arisen-----
Shane McEntee (Meath East, Fine Gael)
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The Minister should reflect on the number of people who are unemployed.
Séamus Kirk (Louth, Ceann Comhairle)
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Deputy McEntee, the Minister without interruption.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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-----between the receipts and day to day expenditure and general expenditure.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It is our duty as Members of Dáil Éireann, responsible for the finances of this nation-----
Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister is not responsible.
Paul Kehoe (Wexford, Fine Gael)
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The Minister should stand up to AIB.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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-----to reflect upon those figures and to take the necessary decisions which are essential-----
Séamus Kirk (Louth, Ceann Comhairle)
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The Minister for Finance, without interruption.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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-----to place this country on the road to economic recovery.
Shane McEntee (Meath East, Fine Gael)
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That was a disastrous speech. The Minister should write his own speech and not get someone else to do it.
Séamus Kirk (Louth, Ceann Comhairle)
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Deputies, please. I call Deputy Bruton.
Shane McEntee (Meath East, Fine Gael)
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Half a million people unemployed and the Minister never mentioned jobs once.
Séamus Kirk (Louth, Ceann Comhairle)
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Deputy Richard Bruton has the floor. I ask Deputies to allow him speak.
Shane McEntee (Meath East, Fine Gael)
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Four hundred thousand people unemployed and the Minister is doing nothing about it. His speech was rubbish.
Séamus Kirk (Louth, Ceann Comhairle)
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Deputy Bruton without interruption.
Richard Bruton (Dublin North Central, Fine Gael)
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The anger among Deputies in this House reflects the anger in the broader public. We are in a position where the economy has lost 200,000 jobs in the past 12 months, where many young people's futures are blighted, where one third of our young people under the age of 25 are now unemployed, and where 100,000 - 60% - of the job losses have hit young people under the age of 25. We face the prospect of seeing the renewal of emigration, with our brightest and best taken away from these shores. We are now facing the budget, one of the pivotal decisions to be made in the economic cycle, and the Government has nothing to add to the debate we have heard in the weeks running up to today's debate.
It is a reflection on the paucity of ideas on the Government benches that while the Members opposite recognise the need to confront competitiveness and create employment, not one single idea has been offered as to how that might be done. That is the problem we face.
The Government would have this debate portrayed as if it was about flushing out the Opposition to come up with €4 billion in cuts. That is what the Government would like us to have a debate about. This is the same Government that would also have us believe that it was pursuing sustainable policies until it was swept away by an international tsunami; that the property bubble and the damage it has done to this economy has nothing got to do with it; that the collapse in our competitiveness, much of it generated by public run utilities and publicly regulated activities, has nothing got to do with it; and that the weak performance management in our public services and in our health sector which, despite huge increases in spending, still cannot guarantee care to those most vulnerable when they need it, has nothing got to do with it. It would also have us believe that the extravagance and the obscene golden handshakes to people who have let us down has nothing to do with it. That is not the reality. The Minister was at the centre of a web that created those problems and he has to confront his responsibility if we are to begin to confront the problems we now face.
It would be doing a huge disservice to those young people if the Government succeeded in reducing this debate to one about how we will find €4 billion in savings. This is a debate about how we will transform this economy, this society, our politics, the way we run our public utilities, the way we run our public services and the way we generate innovation to offer our young people a future. It is about a vision of an Ireland that can be competitive again and that can create employment for our young people.
There is not a shred of evidence that the Government is giving any thought to those areas. The Government has collapsed this to a sense that this is 15 people around the Cabinet table who are victims of a collapse in public finances, and they are looking to see how they can bale themselves out. The victims of this crisis are not the 15 people sitting around the Cabinet table. The victims are the young people who see no prospects-----
Richard Bruton (Dublin North Central, Fine Gael)
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----in a Government that is not offering any vision for the future. There is not an ounce of vision in this, and that is what we must confront in this debate.
The bigger question that underlies this is whether the Government has the capacity to lead the transformation. Does it have the vision, the courage, the determination or even the authority?
Richard Bruton (Dublin North Central, Fine Gael)
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The truth is that the Government has been at the heart of the many problems we must now confront, such as the low performance in public service. The Minister has been at the heart of decisions such as that on decentralisation, the establishment of the Health Service Executive without reforming the structures, the decision to pay out benchmarking awards without getting reform, and the decision to have strategy statements for which no one would be responsible when they fail. In the process it has undermined and demoralised a highly committed public service.
In terms of the Minister leading the public service reform, how much more time does he need? The Taoiseach was Minister for Finance for four years, or 72 months. He had the opportunity to reform the public service and he did nothing about it. How can we now believe that the Minister has been transformed and that he has a vision of a high performance public service, with people rewarded for success and accountable for failure? We do not see it in his actions, and it is very hard to believe he will do it now.
How can we believe that the Minister will confront power in the banks when he has been at the heart of the web of cosy relationships that undermined proper scrutiny of the way our banks were being run? How can we believe that he will confront competitiveness when he has been at the heart of settling with big, powerful public utilities instead of confronting their obligation to perform to the highest international standards to provide utilities that are competitive with the standards in other countries? People do not believe the Minister can confront those problems because he has not confronted them during the years of inactivity in office.
The choices we make in this budget can shorten or lengthen the prospects of this recession. The sort of choices the Minister made last year lengthened it. He sought €6 billion in extra taxes. All international evidence tells us that to attempt to focus all the adjustment on the tax side is doomed to failure. It condemns thriving businesses to ruin. Whereas by contrast, if the Minister were willing to confront the cost of delivering public service, rationalising the system, delivering value and rooting out waste he would give a positive signal that would create a buzz within the economy. Yet he took the other route.
If, as he did in previous budgets, the Minister focuses on cutting front-line entitlements while leaving the bureaucracy intact, that will fail and will lengthen the recession. If he slashes investment for infrastructure, as he did last year, and it would seem he proposes to commit to another €750 million cut in our investment, that means that the infrastructure we need to build competition for the future is undermined. This is not the time to cut investment. This is the time to make room for investment by making our savings elsewhere but the Minister is persisting in taking measures that lengthen rather than shorten the recession.
The Minister's banking solution, relying as it does on a huge gamble for the tax payer that has little guarantee it will get credit flowing, is another example of a decision that will prolong the recession. It will leave us with a legacy of high property prices while not confronting the change that must happen and it fails to confront the professional investors in the banks with the losses they must take. Instead, the taxpayer is asked to shoulder the burden for the years to come.
We must look at this budget as an opportunity to make decisions that will strengthen our ability to recover and that will have employment at its heart. We propose a cut in employers' PRSI, halving the lower rate and cutting the ordinary rate by 2%. We will fund that by extending the PRSI ceiling and removing the allowances at the bottom. We will also fund it by a carbon tax and by a windfall tax in respect of energy. That move, which would reduce employers' costs by 2.5%, would create, according to the ESRI predictions, 30,000 jobs over time. That is the way to go. We must give every employer who is now struggling against an overvalued currency and excessive costs in services, many of them created and run by the Government, a break.
We have been around the country, visiting five cities, and we are heading to Athlone next week and that is the cry that is coming out. Businesses are hanging on by their fingernails, finding it impossible to get credit and finding the costs too difficult to sustain. They need relief and we must give them it in this budget.
With proper reform we can attract private sector investment to invest in electricity, telecommunications, water, energy saving and forestry infrastructure that we need for the future. We can attract private investment into those areas if we are willing to run them on a strictly commercial basis, if we are willing to put equity into them and if we are willing to raise a national recovery bond and money from pension funds that are crying out for an opportunity.
We can come up with extra investment strategies instead of solely relying on the Exchequer's public capital programme. We could attract €11 billion into investment that will be there for the long-term and that will make us the envy of other countries, with high speed broadband, a smart electricity grid and a water system that does not see 40% of the water flushed down the drain in leakage. We must use this opportunity to create that infrastructure for growth for the future and that is what this budget must be about.
Of course I recognise, as everyone recognises, that in doing these things we face a financial constraint. I accept that €4 billion must be found this year. I also accept that we must find €1.3 billion savings on the public service pay bill. I accept that we cannot leave even the social welfare bill immune, although we must seek to protect as many as possible. We must accept large swathes of the McCarthy report, particularly those aspects that emphasise rationalising agencies and reducing the administrative burden we are carrying that is not delivering at the frontline. We will set out our budget as an alternative, as to how we will square the books.
Let us not, however, pretend that this debate is about finding cuts of €4 billion or raising taxes. It is about our being willing to confront those changes, particularly the way we fund our public services. The Minister came into this House and pretended the McCarthy report would transform the way we do business. That is not the case. Look at the Estimate volume in front of the Minister. We are presenting existing levels of service as if what was done last year has some sacrosanct right to remain in existence. There is no right during this crisis for any agency to expect the money it got last year. Agencies must be made to bid for their money on the basis of the performance they will deliver. They must be accountable for the performance they deliver. When they say they will deliver something, they must do so or be held accountable for the consequences. They must be given the tools, as managers, to make decisions, to change the way they spend their money.
We would be further on if we knew from the Government how it intends to move people from one agency to another. There is still no system for that. We would be moving on if we knew what we were going to do when an agency is rationalised and some people are no longer needed. What system would there be to redeploy them or to pay them off if they must be let go? We do not have that from the Minister.
It would be an interesting if the Government said how it would manage change, how it would go about closing agencies that are no longer performing, how it would move people from areas that are wasteful. We are told there are 6,000 wasteful administrative posts in the HSE. How will we move them to frontline services that need support?
The Tánaiste tells us that many of the proposals in the McCarthy report are rubbish. We would be interested to hear the Minister's analysis of which ones are rubbish and his analysis of the impact of the different changes that have been allocated by the report on public service delivery. Then we could have a real engagement. This, however, is the usual dialogue of the deaf the Minister and his predecessor have gone on with, thinking they can come into the Dáil with a list of numbers while offering no performance as to what those numbers will deliver next year if we agree to them. That is rubbish.
The Minister must insist the agencies and the spending Departments say what they will do with their budgets. We want to see those managers report quarterly on their performance against those targets. If we were ushering that system as part of our response to this crisis, there would be some sense of hope that at last a Government is willing to hold management accountable while being accountable itself, with Ministers held accountable for what they deliver.
We have not seen that. Time and again the Government offers a strategy and when it fails, no one turns up. They are all there for the glossy launch, when there is a press conference and a beautiful slide presentation, but there is no one there when nothing is delivered at the end, when there is no primary care system, as was promised eight years ago, when there is no impact on climate change, as was promised eight years ago. No one is there to own up for the responsibility, although I take my hat off to my former county colleague, at least he admitted the Government had failed in respect of its climate strategy. That is at least a recognition that someone in Government has an inkling of what it is to deliver professional standards.
Yes, we are facing into a tough budget but we must hold out the prospect for the young people who are feeling the impact. We make no apology for saying we cannot touch child benefit. We cannot touch it because both the boom and the bust have hit young families hardest. The explosion in house prices was a direct transfer from young people trying to get on to the housing ladder to older people, who saw the benefits of selling homes. Young people are the ones who are suffering negative equity, bearing the major burdens.
Those young people are the first hit when companies are in trouble. We must defend those people and protect them as best we can. Child benefit is one recognition that young families must be supported. Every other country in the world tries to provide support to those bringing up the next generation and we must be no different.
This is an opportunity. Rarely is there a crisis in which there is a willingness on the part of everyone to contribute but we must have a vision people can support but that vision is not coming. It is not there in the sad script delivered from a word processor in the Department of Finance.
Joan Burton (Dublin West, Labour)
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The Taoiseach wants the Opposition parties to reveal their hands long before he reveals his own. It is like asking Giovanni Trapattoni to show his tactical notes to his French counterpart a full 24 hours before the game starts in Paris. All I can say to the Taoiseach is to dream on.
The pre-budget outlook is a dishonest and deceitful document. What credence can citizens give to a document that purports to set out income and expenditure for the coming year but that does not provide a clue as to the ongoing cost of the banks to the Exchequer for 2010? There was no provision in the April budget for Anglo Irish Bank but the Minister borrowed €3.8 billion to hand it over, a decision that grossly inflated the Exchequer deficit for the year.
Without a clear statement on the provision for banks in 2010, how can we honestly debate how many billions we can afford for health, welfare and pay? Anglo Irish Bank is a clear and present danger to our national solvency and if more billions are to be thrown into the Anglo incinerator, we are entitled to be aware of that on budget day. We heard at the weekend that it is looking for €5 billion or €6 billion more. The Minister's failure to make any indication of his attitude as regards further billions for the Anglo Irish Bank bonfire is an act of gross deception. He said all along that the bank bailout would cost us nothing but my God, was he wrong.
Now the Minister wants to hide the true cost we had to pay in 2009 and to maintain that pretence by leaving it out of the budget arithmetic and the national accounts for 2010. The deficit for 2009 will be €26 billion, but nearly €3.8 billion of this is down to Anglo Irish Bank.
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is not correct.
Joan Burton (Dublin West, Labour)
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Coincidentally, this is almost the same figure as the Minister's targeted budget correction for next year.
The Minister and Fianna Fáil want us to believe that the budget deficit and the bank bailout are entirely unconnected. However, the inconvenient truth is that if it was not for the €3.8 billion allocation to Anglo Irish Bank the deficit would have been far closer to the April target and we might be beginning to see some progress and stabilisation. To escape from the NAMA hangover, I have been reading the memoirs of Deputy Bertie Ahern.
Kathleen LynchJoan Burton (Dublin West, Labour)
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One might say I am a glutton for punishment after too many late nights in this august Chamber. What lessons has the peace process for us as we attempt to deal with our economic woes? Two features stand out for me. Nothing is agreed until everything is agreed and we all jump together. Both are of vital importance now. The main gripe people had earlier this year was the sheer unfairness of the cuts and the belief that some sections of society were exempt.
The Taoiseach tells us, "We are all in this together". It is far from clear that "we" really means what is says on the tin, namely, that everyone has to make a contribution and be seen to do so in a balanced way. Justice has to be done and has to be seen to be done. The Labour Party accepts a deficit reduction target of €4 billion as long as the actual measures do not cause even further contraction in the economy. I say this to the Minister as the author of the half point increase in VAT that sent people in their tens of thousands across the Border.
Leaving party politics aside, there is both an ethical and economic dimension to this. On the ethical side, it is about fairness. On the economic side, it is a question of minimising the deflationary impact of the budget. I am deeply worried about the deflationary impact of the Minister's proposals. It seems the principal target of the cuts will be the low paid, social welfare and health. The impact of cuts on the spending power of the least well off will be far more deflationary than, for instance, effecting €1bilion in savings through closing property tax shelters and other tax loopholes principally availed of by the super-rich. It is a truth universally acknowledged that somebody who is rich and who gives up a little share will continue to spend whereas if the income of a poor person is cut, this will have a much greater deflationary effect. We want to cut the deficit percentage. Spending cuts are part of the mix but cannot be the sole component of the budget day package.
The Minister never tires of repeating his "Apocalypse Now" scenario, although he never acknowledges his own and his party's complicity in creating this situation. How often we hear the refrain, "We are where we are". No, we are where the Minister, his leader and his party have brought us. Those who feathered their nests as a result of this Government's actions and policies cannot be allowed to withdraw to the sidelines while everyone else picks up the pieces.
The Minister for Education, Deputy Batt O'Keefe has boasted that in 2007 Ireland had 33,000 millionaires. Now those millions are well and truly hidden from public gaze and we are repeatedly told that the poor souls have taken such a hit that they cannot cough up anything extra. How different it is elsewhere. I read that in Germany there are moves afoot among the wealthiest to put together a national recovery fund, rather like ICTU has suggested, with as much as €100 billion to assist that country's efforts. Now that is wartime psychology, with everyone pulling together to protect the country they love. In the USA, billionaires campaign for additional taxation on wealth to demonstrate social solidarity during the emergency. Have I heard a single squeak from our home grown millionaires to echo that call? All I hear are special pleas to the effect that no pot of gold exists. Ansbacher Man has gone into retirement but his sons and daughters have inherited the same mindset. When things get tough, the tough pack up and run. Deputy Bertie Ahern let the cat out of the bag recently as he feted his good friend Mr. FitzPatrick of Anglo Irish Bank fame. He said, "I'm sure Seanie has a bit stashed away". I am sure he has, and so have many like him.
We have the Revenue accounts which tell us, in a study published in the summer, that the effective rate of taxation for many in the top echelon, people with incomes of €2 million annually, was between 9% and 20%, after the measures the Labour Party had advocated were finally introduced. Millionaires they might have been, even billionaires, but Fianna Fáil in Government faithfully served their interests and tweaked the tax code in a thousand ways to accommodate them and release them from the obligation to contribute their fair share.
Are they still free of that obligation in the Minister's mindset, or do these people have to jump together with the rest of us? I can say without equivocation that my party will face the obligation to meet the deficit target. In our last spell in Government we produced, with Deputy Ruairí Quinn as Minister for Finance, the first balanced budget in a generation, so we have form on this and we have total commitment to financial stability. We will agree nothing, however, until everything is agreed and that "everything" has to be a balanced mix that can command the confidence of the whole of society.
Do not ask me whether I agree with this cut or that. I agree to nothing unless it is part of a fair mix. I will agree to a great deal, if it is. If the Minister bites the bullet, or the garlic, on fair taxes at the top, I will bite some others.
The Minister has spoken of wartime. Can there be tax exiles in a wartime economy? If one lives and does business here, then one should pay one's share, no ifs, no buts, no special pleas. Our tax system is enormously unbalanced and part of the challenge of restoring us to a stable, fair and prosperous society involves rebalancing it. All should read Dr Peter Bacon's account this week of the hotel sector and the destruction of so many viable and important family hotels and chains because of irresponsible tax breaks which, in his words, have made a whole sector insolvent. If we are to jump together then tax reform and tax justice is a core part of the equation. I am not a supporter of high marginal rates and never have been. The high marginal rates of yesteryear are a nightmare scenario. Low tax rates, however, must run in tandem with the principle that everyone pays his or her share. There are people in this country who talk of low taxes when they really mean, "No taxes", for themselves and their clients. That has to end now.
The McCarthy report was published on 16 July. In each chapter there are suggestions about agencies, administrative cuts and savings which individually are of no great consequence but collectively add up to a great deal.
Some were so obvious that I am amazed there were no announcements to implement them on 17 July. Why this procrastination? Did Ministers get cold feet about their own sections? Did the Minister for Community, Rural and Gaeltacht Affairs, Deputy Éamon Ó Cuív, refuse point blank to walk the plank as suggested? How could the Minister have sanctioned a large advertisement in this weekend's newspapers for a new Secretary General of a Department that may be abolished? Does joined-up government exist at all? While there are big spending Departments, there also are ten other Departments in which efficiencies could deliver a good slice of savings that could amount to as much as €500 million in total.
Curiously, the Minister has balked at publishing the report on higher pay grades in the public sector. Some of these salary levels have grown excessively in recent years and are no longer justified. If the private sector wishes to take some of those concerned and to pay them more, let it do so. This is the reason the Labour Party advocates a cap that would apply to the Taoiseach, the President, Ministers and senior grades in the public service generally. The combined savings would be worth the effort in itself. No less important is the signal it would send that the Government means business. Percentage cuts of 10% here or 5% there are not the way to go at the top whereas a cap is a serious indicator of intention. One should see where one gets with this suggestion as a start and could work down the scale thereafter. It is impossible to ask for cuts in pay generally unless it is accepted that those at the top must show serious intent in reducing salary levels that have been allowed to drift up through the tyranny of percentage increases that gave most to those already at the highest levels.
Scientists use an especially strong conditional expression called IFF, meaning "if and only if". The Labour Party is willing to support the €4 billion budget target on four conditions: first, if, and only if, the burden of sacrifices is shared and seen to be shared by measures that require a major contribution from those who own the lion's share of our nation's wealth; second, if, and only if, salary reductions oblige those on the highest incomes to sacrifice most and those on the lowest are protected; third, if, and only if, the spending cuts are spread across the board in each Department and are focused on the elimination of duplication and other sources of waste and inefficiency; and fourth, if, and only if, there is compelling evidence of deep cuts in the cost of maintaining this bloated Government with all the perks and luxuries accumulated for far too long.
Three weeks remain before budget day. In those three weeks, Ministers have an opportunity to build a sense of national unity that would help us to deal with the crisis. At present, only some are in the firing line to make sacrifices while others, who can easily afford to take a hit, are assured that their pot of gold is safe. This is no way to build a national spirit. The young people who now constitute 20% of those on the unemployment register are being offered €204 per week, which may be reduced, to go on the dole instead of the Ministers opposite using their imagination to release that creativity, education and fantastic skill about which the managing director of Microsoft spoke so eloquently in Dublin at the weekend. He spoke of the need for optimism with a small "o". To get people on-side and to release their creative energies, the Minister must build a consensus around fairness and justice.
Arthur Morgan (Louth, Sinn Fein)
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I welcome this opportunity to put forward the Sinn Féin proposals to the Minister. He has stated repeatedly that he does not want to take the measures his Government is about to take, namely, cutting dole, pensions, child benefit and front line services. Sinn Féin's proposals would raise sufficient funds for him to avoid being obliged to introduce any of those measures and we hope he is willing to adopt them. If he does not seek actual proposals but is looking to Sinn Féin to provide political cover to further impoverish the most vulnerable in society, he will be left wanting.
Sinn Féin has examined a series of proposals that will contribute both to bringing borrowing under control in the short term and to raising money for a stimulus package that will address the deficit in the long term. The Government has failed abysmally to recognise the necessity of dynamic stimulus measures to kick-start the economy. Sinn Féin also challenges the other Opposition parties to support these proposals. Our proposals are fair and some are radical. However, radical measures must be taken with a €22 billion deficit. The Government has shown that it is not willing to leave anything off the table except taxing the wealthy. Its proposal to charge medical cardholders for prescriptions shows the moral cowardice of its approach. Sinn Féin is not afraid to take on the big earners and the vested interests. The Government would rather take from children and grannies than from its wealthy friends.
Before I outline my party's proposals, which I launched yesterday, I wish to consider briefly the coalition's own pre-budget outlook. The Government has claimed it is capable of running this State's economy, which is a dubious assertion considering the hames they have made of affairs to date. It has once again set out its plan for recovery in this pre-budget outlook, which is breathtaking in its assumption of correctness despite all the previous misguided and downright wrong forecasts from the Department of Finance. The aforementioned document almost is laughable in its poor analysis of the current crisis and the solutions it offers to us.
First, I note that a heading on page 4 of the pre-budget outlook states "Repairing our banking system – a separate issue to the fiscal challenge". I will credit the Minister for having done a magnificent job of separating the banking issue and his biggest brainchild, NAMA, from the fiscal issue. The special purpose vehicle set up for NAMA to keep the €54 billion the State will be obliged to borrow off the books is one of the greatest con jobs I have ever witnessed. The mantra from Ministers that this State cannot continue to borrow in the region of €500 million a week when, in one year, NAMA could end up costing the state €1 billion a week is one hell of a sleight of hand. Repeating the myth that the problems caused by the banking system are separate from the public finances does not make it true. Moreover, people will see it is not true when faced with a huge debt service obligation because money was borrowed to keep bank executives, shareholders and developers happy and not for public services such as hospitals and schools.
The next page of the Government's pre-budget document sets out five reasons it is necessary to take those crucial actions planned by the Cabinet and I propose to deal briefly with them. The first is "to restore economic competitiveness, without which we will be unable to benefit from the global upswing". This is the global upswing for which the Government is hoping and praying, like the rising tide, in the hope it will lift all boats. Unfortunately, the Government appears to think restoring economic competitiveness can only be achieved by slashing wages and public spending and does not contemplate our serious lack of infrastructure. Sinn Féin's pre-budget submission focuses on using this period of recession to invest in that infrastructure, thereby both readying the State for a return to competitiveness and stimulating the jobs market and hence the revenue stream.
The second reason is "to inspire confidence, internationally and domestically, that the deterioration in the public finances is being arrested". Were I an international investor, last May I would have heard the Government promise that, by the end of this year, Ireland would have a deficit of just €19 billion, which it would be reducing by €4 billion in this budget. It now is known that the deficit will be in the region of €22 billion but the €4 billion adjustment is still the Government's figure. We will be cutting spending to almost a stand still, which hardly is confidence inspiring. My party's proposals include a stimulus which will raise revenue so the cycle of cutting and deficit contraction can be ended.
The third reason is a gem. It is "to prevent the debt level rising to unsustainable levels so that the cost of servicing that debt is contained". My reply to that in a single word is NAMA. The fourth reason is "to assist economic growth by taking responsible action on fiscal and incomes policies, which will avoid unnecessary further adjustment in the labour market". This is interesting. Does the Government have an income policy? Can the Government tell us how this policy applies to Brendan Drumm, or to the Taoiseach? Or does the income policy apply only to people with average and low incomes? Is this necessary to avoid unnecessary further adjustment? Is this a promise from the Minister? Are we to believe that after he has slashed social welfare, pensions and child benefit, put a charge on medical cards and cut the pay of people on €30,000 or less per annum, that he will not do anything else and that there will be no further cuts after this budget? My party would protect those on low and middle incomes and bring fairness to the top of the income scale, particularly in the public sector.
The fifth point is "To restore expenditure and taxation to more sustainable levels." I thought taxation was completely off this Government's agenda. I bet the Minister is wondering how that dirty little "T" word crept in there. Our pre-budget proposals make a start towards fairness, but there is much more to do.
These are the Minister's reasons for his proposed fiscal adjustment and I question the motivation behind each and every one of them. I question everything this Government says because it has lied to us time and time again. It has been wrong time and time again. Not one financial measure introduced over the past 12 months has brought us closer to economic recovery. They have driven us further into recession. In the October budget it increased VAT, despite the State's being already over-dependent on consumption taxes, which the Minister acknowledged this evening, so contributing to the collapse in those taxes. In January it took money out of the pockets of low and middle income earners, lowering their disposable income. In April it doubled levies, bringing some of the lowest paid into the tax net and cancelled Christmas for people on the brink of poverty. The Government has taken from the economy where it makes no sense to take, the bottom and the middle. It has left the top relatively untouched, yet it claims there is no more room for taxation.
Our way of dealing with the social welfare bill is to create jobs, to reduce the live register figure of 422,500. Our total stimulus package of €4 billion must be paid for and to this end we examined the taxation system and genuine waste in the public sector. In total, combined with a transfer from the National Pension Reserve Fund of €2 billion, which is €2 billion less than the Government is giving to the zombie Anglo Irish Bank, we have raised €7.6 billion in our pre-budget submission.
Our proposals are radical and brave. We challenge the Government's assertion in its document that expenditure cuts are more effective than raising taxation measures to close a deficit, an assertion backed up by the disreputable IMF and that bastion of democracy, the EU Commission. The right will always seek and find other creatures within its ranks to back up its biased view of the world and the Government has done that well this year. Expenditure cuts in this budget will not bring about recovery. They will bring about poverty, irreversible damage and more cuts next year, and the year after, until the Government breaks its cycle of slash and burn economics.
The deficit is a result of our economic woes, not the cause of them and only a stimulus package for the economy will create the momentum for recovery that will ultimately bring the deficit under control. To pay for that stimulus and to bring much-needed funds into the State's coffers, the only option available to this Government is to raise money from those who can afford it. A 48% tax rate on income in excess of €100,000 raises €355 million. A 1% wealth tax on assets, excluding farmland, of more than €1 million, could bring in €1.6 billion. Standardising discretionary tax reliefs raises €1.1 billion. Capping public sector pay at €100,000 brings in €450 million. These are just a few of the many proposals we put forward yesterday. In total they help us to pay for a stimulus worth €4 billion that invests in a €2 billion labour intensive infrastructure package; that provides for a €600 million jobs retention fund; that cuts excise duty for the Christmas period and returns the Christmas social welfare bonus. These are all business and household friendly measures that will not only boost confidence in the economy but start bringing in the revenue needed for recovery.
This is not rocket science. It will not be popular for those used to being protected from Government measures except when they have a positive money-raising effect. It will, however, be a damn sight more popular with most on this island who fall into the not so well-off category. More important, it will put the country on the road to recovery.
The Minister spoke last October about patriotism and how it is necessary in these times. He asked for patriotism from the lowest paid, those who could least afford to contribute. I ask the Minister to show patriotism. This is a great land. We are a great people. We are masters at triumphing over adversity and punching well above our weight. We can achieve success again, but it must be a fairer success this time, not one that benefits the few but that benefits the many. To get there, the start must be fair. What the Minister plans for December is not fair and it is not just. Our proposals are both and we urge the Minister to take them on board at this critical time.
6:00 pm
Brian Cowen (Laois-Offaly, Fianna Fail)
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I am glad to have an opportunity to contribute to this debate, albeit for just ten minutes. The Minister for Finance has set out as per the pre-budget outlook the basic parameters within which we must operate. The narrative being suggested here is that nothing has been happening since this Administration took over which is at variance with the facts. We have taken corrective measures. In respect of taxation and the fiscal consolidation the tax changes in the two budgets that the Minister for Finance has introduced have been progressive, seeking to reduce the impact on those with low incomes and to ensure that those on high incomes pay and contribute more. That is precisely what has been done in the progressive nature of the tax changes which, in addition to the expenditure savings, were taken as a first part step in the approach to stabilise our public finances.
We do not need to engage in a long introductory debate on what this economy has had to contend with in the reduction in international trade, the collapse of the financial markets, the adverse impact of currency exchange rate on our competitiveness and the pressure that has placed on exports. In response to what Deputies have said about taxes, the marginal tax rate on the average industrial wage increased from 26% to 30% as a result of changes made in 2009. The marginal rate for those on twice the average wage increased from 43% to 51%. The marginal rate on earnings over €175,000 increased from 43.5% to 52%. That has brought about a progressive change in respect of who is making the contribution on the tax side.
It is wrong to suggest that the Government has been indifferent to that matter or that it is not interested in fairness on that issue. Quite the contrary is the case. We must also accept that the economic model that we built up over time brought employment to almost 2 million people at the height of our prosperity, when we were at a different stage in the economic cycle before the financial and economic market collapse. We had a competitive marginal tax rate which helped in maintaining employment and an external investment policy that brought in many world leading companies in new growth industries and sectors.
We must be mindful in the debate on taxation that we do not, at a time of contraction in the economy, seek to burden a labour market which has already experienced job losses of 165,000 or 170,000 in the past year. Thankfully the level of unemployment has not bottomed out to the level anticipated last March but we face a rise in unemployment next year because growth will return in the second half of the year if we take the action required now.
There are aspects of the deficit that will recede as a result of growth, buoyancy and increased revenues if we take the right corrective action in a timely fashion. The most benign interpretation of the structural element of the deficit from the ESRI and others is €10 billion, while other more pessimistic outlooks put it at €15 billion to €16 billion. The €4 billion in cuts to be undertaken in this budget will start to make an important impact on the overall structural deficit which will not be eliminated regardless of the growth that will return to the economy. It is also true that the tax revenues that come from export-led growth will be less than the domestic driven growth we have seen in the past.
We neither have the time for or people interested in a history lesson. However, the narrative that comes from the other side of the House is about profligate Government spending. When one checks the record, at a time when there were still budget surpluses, the critique from the Opposition was that Ministers were too mean. Ebenezer Scrooge was one name ascribed to me by Fine Gael Members during the budgets I brought before the House.
Damien English (Meath West, Fine Gael)
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The Taoiseach should check Deputy Bruton's budget day speeches.
Brian Cowen (Laois-Offaly, Fianna Fail)
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When they talk about the need to avoid a bubble, we all know their policies meant exactly that in the last election.
The important point is about correcting our public finances. It is also about regaining competitiveness in our economy and maintaining and creating jobs. The Government will examine all areas whether it be the tourism sector or the construction sector particularly after the serious job losses with the collapse of the domestic housing construction in the past 18 months.
Perhaps Deputy Bruton will clarify his suggestion that there should be no cuts in capital investment. He believes this must be maintained at present levels which means greater cuts would have to be found on the current expenditure side. This would have a serious impact on day-to-day service provision.
Tender prices are down by 30%. The Government is interested in maintaining the same level of output in capital but ensuring we use the more competitive tendering process now available. The depression in the market place will help get better value and outcomes. This is enabling us to get far more done with less money with the schools, roads and public transport we intend to build. It is important to point this out as there was a critique coming from the Opposition that the Government was not achieving in a range of areas.
The three big spending areas are health, education and social welfare. I agree there is need for further reform of the HSE. It must be acknowledged, however, there have been significant improvements in basic measurement of health staff performance and benchmarking it against best international practice. We are seeing real improvements in output and productivity growth as a result of having better management systems in place.
There has also been development in primary care services. I accept we have not yet reached the target of 530 primary care teams but by the end of 2011 they will be in place. It is by diverting activity from hospital services into properly resourced primary care that we will see an improvement in health service delivery. There has also been increased productivity in hospital services. With 1,000 fewer beds there have been lower waiting times for elective surgery. There has been improvement in the management of patient care in our hospital system with greater throughput and efficiencies.
It has been suggested that there is absence of vision on the part of the Government about where it wants to bring the economy. The smart economy framework sets out the platform for the areas of growth that we can identify. It is not about people in white coats in laboratories but about increasing productivity across all sectors of the economy. It is only by improved productivity that we will regain economic growth and competitiveness. By examining our labour and other rates we can see how we can get more productivity out of this economy in both the private and public sectors.
It is important that public sector reform needs is accelerated. This crisis provides us with an opportunity to do this, I hope by agreement. There are many tens of thousands in the public service who are dedicated to their jobs but who want to move away in some sectors from the crisis management mode to more redeployment, flexibility and opening up of organisational boundaries. There is an appetite for this and it can be done, particularly in the health sector.
However, it involves a rate of change from getting way from the nature of the health debates held in the House recently. There is a need to redeploy and reconfigure to move hospital services to centres of excellence. I accept parochial and local pressures have been brought to bear in this area. However, we must be prepared to recognise reform involves discipline and preparedness to move the existing configuration of services to ensure they are more cost effective.
There has been unprecedented investment in education. Even in the more difficult times of today, there is still a commitment to continue with schools refurbishment and ICT investment. It has also not just meant investment in teacher training and providing computers in classrooms but ensuring broadband infrastructure for schools and the bandwidth to enable it to be used as a real e-learning tool. The vision remains to modernise our education system at primary and post-primary level.
We need more collaborative projects in third level education. The problem which has bedevilled the health system, that institutions are stand-alone operations rather than a wider network of universities and institutes of technology, must be overcome. There are also opportunities in the internationalisation of education services with bringing more income and people to the country. It is important to recognise education as playing a role in economic policy and as an economic tool.
All of this investment and commitment in upskilling and preparing our people to adapt to new technologies to take up new opportunities can only happen if we face up to the short-term reality - we are spending far more than we are taking in. This is not a sustainable position and we must proceed with the budgetary adjustments. The Minister for Finance recognises, as does everyone who supports the Government, that it is open to Members opposite if they wish to put forward their constructive contribution to the debate. There is at least consensus in the House that this level of adjustment is necessary. All parties will have to recognise that there is no unanimity on what is fair when it comes to these cuts.
Fianna Fáil is very proud of what it has been able to achieve for those on fixed incomes during the recent period of prosperity. When inflation was approximately 12%, increases were made to the old age pension of more than 50% and the basic unemployment rate of 37%. We are conscious of the need to calibrate how we deal with that issue, knowing it cannot be avoided. The present level of investment in the social welfare area cannot be sustained in view of what taxpayers are in a position to contribute. We will approach that with the care and consideration that would be expected of parties in Government who have as much social concern in this area as any other party in this House.
The social welfare area amounts to one third of expenditure, as the Minister for Finance pointed out. The public pay and pension area must make its contribution, no matter what people think about it and we seek agreement on that issue. The programme area of expenditure also must make its contribution. These three areas must all contribute to the adjustments to be made. Despite what Deputies Burton and Bruton have said, the Government will take on that responsibility as carefully as it can. It will do so on the basis that all of us are interested in promoting Ireland's economic growth and ensuring job creation. Unless these corrective measures are taken, economic recovery will not occur quickly.
Enda Kenny (Mayo, Fine Gael)
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I have listened carefully to the Taoiseach's remarks and I have read the speech of the Minister for Finance. The Taoiseach is somewhat realistic in his observations this evening. The problem's affecting this country are beyond any one person and cannot and will not be addressed without coherence, cohesion and a deal of courage. It will need a very clear and decisive agenda. The Taoiseach said he does not wish long contributions about the context in which we are having this debate and that is an important statement. For this to happen we could all go on political rants about how we got to this position. We remember very clearly the statements from the Fianna Fáil Party that 98% of taxpayers would be better off under Fianna Fáil and that they were the only party that could look after the economy.
The speech written by the Minister for Finance does not contain anything new. The sad fact is the people who put this together, the senior civil servants, will be out on strike next week, if that is what they voted for. There is nothing new in his speech, nothing we have not heard in the past couple of months.
This debate is only a veneer. It was stated that the Taoiseach, Deputy Brian Cowen, was going to challenge everybody to present budgetary details this evening and yet there is nothing new in what we have heard from Government. I would make the analogy that when the good ship Economy Ireland last pulled out of a port after a change of crew from Fine Gael and the Labour Party, it was well equipped, well stocked and was well balanced, on an even keel. Unfortunately its destinations with the next two crews provided me with an observation that people on that ship would be better off as pirates of the Caribbean. The treasure of Ireland has been looted by those who were permitted to do so. The Minister for Finance is correct when he says there is light at the end of the tunnel and that the world has turned a corner, yet people are in prison in other countries and we are still just beginning to talk about things here in Ireland.
I do not wish to make a political rant. The Fine Gael Party accepts the principles of the figure of €4 billion as being a necessary adjustment. Between the Lisbon treaty referendum and now, I have been to practically every county in the country. I say to the Minister for Finance there are so many fine people who are thinking ahead, who want to develop new products, who want to be able to market their products, who are paying wages and salaries every week, who feel crucified by the way the State does not appear to have an agenda and a clear view of the horizon as to where we will be in three years' time. These people want to contribute and their workers also want to contribute.
I recently visited an unemployment exchange. The Minister should consider the potential in any of those queues, which include graphic designers, engineers, young architects, teachers, young farmers and others. The Minister will know of the potential in this country that is doing nothing. We want to harness that potential.
In many ways this time of crisis presents a great opportunity to sort out things that have gone wrong for so many years. The Minister refers to the courage to sort things out. What was the Government doing in the last number of years when it was getting very clear advice in this House on a whole range of areas? The advice on the economy and policy in many cases came from my party and from the man beside me, Deputy Richard Bruton. It is now six years since I said if the Government was paying benchmarking at €1 billion a year, it should be sure to get efficiencies in return. This advice was laughed at, yet it is now costing €2 billion and it has not worked. I refer to the public servant who walked into my office in the past fortnight and said he wanted to get out because there were five of them in his office with nothing to do. That is not the way we want to be.
If we are going to make these adjustments I advise the Minister to seriously consider what Fine Gael announced this evening, a cut in PRSI which will affect 100,000 businesses and which will create a palpable ease for employers. We have demonstrated how this can be funded. If the Minister is looking for constructive suggestions, we will give him plenty of them and we will publish our budget strategy before the budget date of 9 December, just as we did last year. We will set out our views on how the strategy can be achieved. We will retain the strong capital programme and make a bigger adjustment at the other end. We will demonstrate what we believe is the way to get the country moving and kick-start job creation again.
At meetings in Dublin, Waterford, Cork, Limerick, Galway and next Thursday in Athlone, people who write cheques, who pay wages, who are thinking about their employees, who want to keep their businesses open, are saying to the Fine Gael Party to give them a break. They are saying they need some assistance. They say if we want workers to be kept employed, if we want families to be able to pay their mortgages and their taxes and to contribute to the economy, then they insist we give them the opportunity. They are willing to respond to decisive Government but that is not what has been there.
In response to such an announcement this evening, 100,000 businesses will react very positively. It will affect 1.7 million workers across the country to their benefit and ease a restriction and obstacle to business. This is the kind of thinking that Government should implement in order to get people back to work, shorten the dole queues and move us forward. If we decide to focus solely on expenditure cuts of €4 billion, which everybody accepts in principle, that will not create a single job. We will be stuck next year with another €4 billion and another €3 billion or €4 billion the year after and never get out of the current mess. We have been led onto the rocks.
It is about having a broader agenda. I agree we must deal with the fiscal challenge and the adjustments that have to be made in social welfare and in public pay and current spending. We will give our views on those policies. However, the Minister must go beyond that agenda and look at the broader methods for restoring abroad our financial credibility, integrity and reputation. We must increase our competitiveness, cut Government costs and go back to where we were, proud and strong internationally so that people will regard Ireland as a place of quality and high productivity. These qualities are still there in many Irish firms but our competitiveness rating has slipped significantly.
Last June, before the Dáil summer recess, I explained Fine Gael's programme for a national economic recovery authority to be set up under the Department of the Taoiseach, which would leverage €11 billion between the pension reserve fund, the European Investment Bank and an appropriate bond. We believe we could create 100,000 jobs in the big areas where State assets are not being utilised properly, in broadband, clear water, smart grid, in renewable energy and for the greener homes bank. There are many opportunities for creating up to 100,000 jobs. The Taoiseach said at the time he would make a considered response to our proposals but I never heard anything more about it. If the Government takes this action now we will assist. The people on the dole queues want to work. I do not want to see them going to Australia or England or wherever else.
I have a letter from Galway which asks if I realise that about 100 newly trained nurses from Sligo, Galway and Ballinasloe are planning to leave the country as there are no jobs for them. England is paying them relocation allowances. Neither the Taoiseach nor I want that.
Enda Kenny (Mayo, Fine Gael)
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When the Taoiseach says there will be efficiencies in the HSE I can dispute this statement in so many areas. I agree that primary care is the way to prevent people from going into hospital in the first instance. I visited a primary care centre in the Rowe Creavin centre in Waterford. It is a great location and those involved do incredible work. I am sure the Donegal centre also does great work. However, we are behind in our targets. There is evidence there are at least 6,000 surplus staff in the HSE. There has been talk of redundancies but nothing has happened.
The Government will not give any detail of its budget proposals, nothing except what is stated in the pre-budget outlook and what the Minister for Finance said in his speech tonight. I ask the Government to remember the thousands whose homes are in negative equity and the thousands of young people whose future careers in this country are in doubt. There are many businesses struggling who are looking to this Government - because it is the Government in situ - to deliver some relief to them and to remove some of the obstacles. Some people do not agree with me but I would much prefer that given the scale and complexity of the problems we face we would all be seeking the one thing that would allow any Government to sort out this, and that is a mandate from the people. People will say a general election is not what is needed, but I believe it is needed. The people should vote for the Taoiseach, for Fine Gael or for different parties. They must make up their minds, and the best horse will jump the fence. Then the Government will have a mandate and the real authority to take the decisive but fair action that is so necessary in the interest of social justice and equality.
This country has so much potential, but to harness it is beyond the scope of any one person. I urge the Taoiseach to listen, as he said he would, to the constructive suggestions from this party on employment and job creation. In order to move our country forward, we must get workers off the dole queues and back into a situation in which they can pay their taxes and contribute to our economy. I would like to see us moving up the list again in three years' time in the fields of education and health, with our public finances back in order, and earning money for our country by exporting, as we have always been able to do.
John Gormley (Dublin South East, Green Party)
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The Green Party came into Government in entirely different circumstances in June 2007. The scale and speed of the economic crisis that has hit the Irish people since then is now well documented. To be honest, all of us in Government have struggled to come to terms with what is happening and put in place effective measures to deal with our major problems. However, we will persist. Above all, we will tell it as it is and give a truthful picture.
It would be all too easy to emulate the actions of some in Opposition and tell people that we can resolve our difficulties without any pain or sacrifice. It would be easy to claim there were painless solutions. I have a clear memory of what happened to the Irish people in the late 1970s and 1980s. I was among the legion of people signing on at the dole office and ultimately I had to go abroad to get a job. This is etched in the memory of anyone over the age of 40. Too many of us here today have failed to grasp those lessons of the 1980s, much less apply them to our current difficulties.
In summary, what happened through that period was that Ireland's political leaders failed to take control of our shattered finances in time. They failed to take necessary and painful corrective action early enough and we reaped the fruits of this with a slow and chronic recession which lasted into the mid-1990s. A generation of young people were left without work and without hope. They had no option but to leave Ireland. Now we find that some in this House would have us repeat that cycle. We cannot, must not and will not do that. Unlike others involved in previous coalition Governments, we in the Green Party are ready to apply those lessons from the 1980s. We are prepared to take hard political decisions to cut costs over the coming two years. Right now, we must put the future prosperity and independence of the people first. We must apply the lessons of the 1980s which the people paid so dearly to learn.
There is a simple sum at the heart of this debate. It costs €58 billion per year to run the country, but tax revenues are just €32 billion. We are running a deficit four times the amount permitted under the membership rules of the European single currency. We are borrowing between €400 million and €500 million per week just to stand still. Increasingly, our ability to borrow that money is being called into question. We must find economies. We must cut spending and we must all take our share. If we act swiftly and decisively, we can set things to rights in a relatively short period. I believe that as long as we tell the people the truth, they will see the wisdom of what we are trying to achieve. I have confidence in the intelligence, toughness and resilience of the people.
The forthcoming budget will be tough. However, we are working with our partners in Government to make the cutbacks as fair as possible. We are working to minimise the pain for the most vulnerable people and we are working on reforms to ensure that we do not return to the depressing economic cycle of boom and bust. Our first obligation is to restore stability to the economy. Just to stand still, we must find €4 billion worth of savings next year. The harsh reality is that €1.3 billion of this must be saved from the public sector pay bill. Public service pay and pensions account for more than one third of our spending. I understand the anxiety this causes to public sector workers and their families, and I understand their instinct to protect their livelihoods. However, I appeal to that very instinct when I urge them now to step back from the brink of conflict and industrial action. Most public servants are committed to serving the public. There are efficiencies to be found, but we face a choice between cutting essential services and cutting pay. I favour cutting pay, and most public servants I know agree.
I am a long-time supporter of social partnership. It had its flaws and some important mistakes were made in its application but, overall, social partnership served us well and was the mainstay of efforts to haul the economy out of recession. Social partnership took us out of the bad times in the past; now is not the time to abandon it. We must re-visit it, strengthen it and use it to point the way forward. Cliches and fantasy economics will not fix the economy. Only tough action and implementing the right decisions will do that. Let us see the colour of the Opposition's money. Let us hear exactly what they have to offer. So far, I have been deeply underwhelmed.
Bernard Durkan (Kildare North, Fine Gael)
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Not for the first time.
Johnny Brady (Meath West, Fianna Fail)
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Allow the Minister to continue.
Bernard Durkan (Kildare North, Fine Gael)
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The Minister will be overwhelmed as well.
Johnny Brady (Meath West, Fianna Fail)
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Nobody interrupted the Deputy's party leader.
John Gormley (Dublin South East, Green Party)
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So far, I have only heard the Opposition's bogus claims that there is an easy fix for our problems.
Richard Bruton (Dublin North Central, Fine Gael)
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Did the Minister by any chance write that before the debate began?
John Gormley (Dublin South East, Green Party)
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I have long believed the current crisis had its genesis in the election campaign giveaways of 1977. History recalls that this was a Fianna Fail giveaway. However, if we delve a little deeper into the same period of recent history, we will find that their opponents were offering comparable blandishments to voters in that fateful June 1977 election auction.
Bernard Durkan (Kildare North, Fine Gael)
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That is utter rubbish.
Bernard Durkan (Kildare North, Fine Gael)
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It is a load of blarney. The Minister is talking about something he knows nothing about.
John Gormley (Dublin South East, Green Party)
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Even when the economy was finally put to rights in the mid-1990s-----
Dan Neville (Limerick West, Fine Gael)
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It must have been a very junior civil servant who wrote that.
Andrew Doyle (Wicklow, Fine Gael)
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Where was the Minister in 1977?
Johnny Brady (Meath West, Fianna Fail)
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I ask the Deputies to have some manners.
John Gormley (Dublin South East, Green Party)
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-----there was no fundamental reform to the way we do things, and so the cycle is now repeating itself.
We must all act now not only to get us out of this mess, but also to ensure that-----
Bernard Durkan (Kildare North, Fine Gael)
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The Minister is digging himself into a hole.
John Gormley (Dublin South East, Green Party)
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-----we do not revert to the old cycle of boom and bust.
John Gormley (Dublin South East, Green Party)
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We urgently need fundamental reforms not as an add-on luxury, but as a central aspect of our future economic well-being. The reforms we make now must enable us not just to weather the next few years, but to adjust to the long-term challenges we face as a species.
Bernard Durkan (Kildare North, Fine Gael)
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A political species.
Paul Gogarty (Dublin Mid West, Green Party)
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The Deputies may laugh. They are a bunch of philistines.
Enda Kenny (Mayo, Fine Gael)
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It is Homo sapiens he is talking about.
John Gormley (Dublin South East, Green Party)
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I am glad the Opposition finds this so funny.
Declining energy and resource availability, together with climate change and biodiversity loss, constitute a radical challenge to the basis of our economic system, a challenge which the Green Party came into existence to address.
We must be solvent both financially and ecologically. It will not be easy but we must undergo a transition to a sustainable economy. Our taxation system, our regulatory systems and our public spending must all support this transition. That is why we are working to reform our planning system. It is why we are working on projects to deliver greener and cleaner energy from renewable sources. It is why we are working on a scheme of tax reform which will be broader and fairer to all.
Bernard Durkan (Kildare North, Fine Gael)
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Did you hear that, Chairman? They are reforming the planning system.
John Gormley (Dublin South East, Green Party)
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It is also why the forthcoming budget will contain a carbon levy among its provisions. We are now working on the details of these provisions.
Enda Kenny (Mayo, Fine Gael)
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There will not be many houses in rural Ireland when they have finished.
John Gormley (Dublin South East, Green Party)
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We need a carbon levy because we need to change our behaviour-----
John Gormley (Dublin South East, Green Party)
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-----by using less energy and using it more efficiently. We need to tackle the disastrous effects of climate change-----
Enda Kenny (Mayo, Fine Gael)
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The Minister of State, Deputy Michael Finneran, would not stand up against the Minister.
John Gormley (Dublin South East, Green Party)
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-----and because it is a common sense policy which is now being adopted in many key Western economies. We will work to ensure that it is fairly applied. The proceeds will be ring-fenced to ensure that it does not add to fuel poverty and that energy-efficient projects are promoted. As set out in the programme for Government, we need to move to a site-value-based taxation system for land, which will provide a fair long-term tax base and encourage sustainable economic activity. We must learn the lesson the collapse of our transaction-based taxation system is teaching us.
I admitted at the outset that the Government had struggled to make sense of our current predicament.
Bernard Durkan (Kildare North, Fine Gael)
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It is still struggling.
Johnny Brady (Meath West, Fianna Fail)
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Allow the Minister to continue.
John Gormley (Dublin South East, Green Party)
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However, we have now begun to master our difficulties. The road ahead is daunting and difficult, but if we act together we can resolve our difficulties much sooner than we think. I urge everyone in this Chamber to make common cause.
Joan Burton (Dublin West, Labour)
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Were they in the remedial class?
John Gormley (Dublin South East, Green Party)
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I urge everybody in this Chamber to make common cause. I appeal to the social partners to intensify efforts to find a plan for common action.
Joan Burton (Dublin West, Labour)
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It is a class for slow learners.
John Gormley (Dublin South East, Green Party)
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Let us not fight with one another at this crucial time in our history. Let us combine to conquer our difficulties.
Kieran O'Donnell (Limerick East, Fine Gael)
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I wish to share time with Deputy Seymour Crawford.
Paul Gogarty (Dublin Mid West, Green Party)
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It was the Fine Gael Party that brought the incinerators in, not the Government.
Bernard Durkan (Kildare North, Fine Gael)
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Do I hear a voice calling in the wilderness?
Johnny Brady (Meath West, Fianna Fail)
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Allow Deputy O'Donnell to continue, Deputy Gogarty.
Shane McEntee (Meath East, Fine Gael)
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The Green Party wants an end to stag hunts. That is all it wants.
Kieran O'Donnell (Limerick East, Fine Gael)
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I believe Deputy Gogarty is eating into my time.
Joan Burton (Dublin West, Labour)
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The incinerator could burn the €6 billion that is going into Anglo Irish Bank.
Johnny Brady (Meath West, Fianna Fail)
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Deputy Burton, allow Deputy O'Donnell to speak.
Kieran O'Donnell (Limerick East, Fine Gael)
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The one result we got from the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, was the lack of a plan. He spoke of a plan but none was provided by the Government in the Chamber today. The Minister for Finance read out a document that was devoid of a plan. The only item I agreed with was that we know from our experience in the 1980s that we cannot tax our way out of a recession. The Government tried to do that last year and it failed dismally. I hope it learned its lesson.
The Fine Gael Party believes three issues must be tackled. The Government must address the public finances, restore banking and get credit flowing and deal with the area of international competitiveness. We put forward a proposal to deal with these. We are an exporting nation. The only way we will come out of this crisis is by getting back to what we are good at, namely, dealing on the export market. We are a small open economy. We were doing that up to around 2003 and suddenly the wheels came off the wagon when the Government moved towards construction. It was getting €30,000 from every house produced. As the Minister stated, less tax is received from exports than from construction. However, ultimately the revenue is more stable. We no longer have the luxury of being able to devalue our currency but we must make our economy competitive. We must ensure that we maintain jobs.
My party has been around the country meeting business people. They wish to keep people in employment.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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The Green Party has gone.
Kieran O'Donnell (Limerick East, Fine Gael)
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The Green Party's contribution is fleeting, like a butterfly. It is now leaving.
Paul Gogarty (Dublin Mid West, Green Party)
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The Green Party is going to a meeting, just like the Deputy's party leader did in Waterford.
Johnny Brady (Meath West, Fianna Fail)
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Please, Deputy Gogarty, allow Deputy O'Donnell to speak.
Kieran O'Donnell (Limerick East, Fine Gael)
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That is good to hear. The Deputy's party might come back and we will give it more.
According to the ESRI, up to half our general Government deficit came about because of unemployment. We cannot come out of this crisis without dealing with the issue of unemployment, getting people back to work and ensuring that employers can keep people in work. We put forward a proposal today which would deal with employers' tax cuts. We would cut the lower rate of 8.5% in employers' PRSI to 4.25% and would take 2% off the top rate of tax, from 10.75% to 8.75%, for people earning up to €40,000. That would impact on more than 1.6 million employees and 100,000 employers. There would be enormous benefits. For every person who does not go on social welfare, the State would save €20,000.
Kieran O'Donnell (Limerick East, Fine Gael)
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That is the key. They would contribute in terms of taxes and would retain their homes. Such a step would ensure that we dealt with the fundamentals. We cannot restore this economy without keeping people in jobs. We cannot restore the economy without cutting the costs for employers. The only way we can restore our competitiveness internationally is to bring down our costs. The luxury of devaluation is gone. We have the benefits of certainty with the euro. We must address the issue of employment costs. My party proposes doing this through the employment tax code measures and we hope the Government will take this on board. This proposal on restoring competitiveness is one of a series of measures we are putting forward, unlike the Government which has none.
Other areas that must be addressed include energy costs. The four biggest costs for employers at the moment are labour, rent and rates, energy and bank interest charges. All need to be addressed. My party has come up with an employment tax cuts package. It is very straightforward, cutting costs to employers, restoring competitiveness and ensuring that people can stay in jobs. Concerning energy costs, the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, must look at the issue of the energy regulator and how to set prices in terms of energy costs. It should be possible to have ongoing reviews to ensure that the reductions in world markets are passed on to businesses.
Regarding rates, my party is committed, at council level, to a policy of no increases in commercial rates in the coming three years. I have not heard the Government say that. It is a very pro-active measure.
Regarding banking, there is nothing in NAMA to ensure that credit will flow. If credit does not flow, businesses will not be able to function. The measure I proposed for cutting employers' PRSI would give a cash flow advantage to an employer which is needed in big measure. In its last budget, the Government included nothing of a stimulus package for jobs. We put forward a proposal for employers' PRSI exemption for two years and are now building on that with tax cuts for existing jobs. What the Government did was ludicrous. Nowhere in the world would business people increase their charges at a time when business is going badly as the Government did, going from a 21% to 21.5% VAT rate in the last budget. It was illogical. It was done during a bi-monthly VAT period just coming up to Christmas and made no sense.
What is needed is a plan and we in Fine Gael wish to play our part. The Government cannot have a debate on the budget and not put forward a single proposal. The document from the Minister for Finance is a load of waffle. It creates nothing of a pro-active nature and shows no direction. I can see why the Financial Times published a survey today which showed our Minister for Finance having dropped from 18th to 19th place - last. That is how international markets view the way this Government is dealing with the Irish economy. We need a change of direction, a general election and a new Government to ensure that we can introduce these measures to restore our international competitiveness, get our public finances in order and have a banking system that is both sound and provides credit to small business.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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In the limited time available to me I wish to deal with three issues - farming, jobs and cross-Border trade. After his first budget last year, the Minister for Finance, Deputy Brian Lenihan, admitted his decision to raise VAT at the same time as the UK Chancellor decreased his rate meant a loss of €700 million in revenue to our State. Even though he brought in a second budget, he made no effort to rectify this situation. It is important that he advises us what this loss has come to in a full year. I understand 50% of the alcohol sold on the island of Ireland is now being sold in the six Northern counties.
Jobs are being lost in retail and other sectors as a direct result of this haemorrhage of business. The Minister can no longer ignore the issue. A reduction in VAT would certainly help our tourist and other high employment sectors and must be introduced. We can never tax ourselves out of the current crisis but the Government clearly has no commitment to bringing in structures which would help create employment, minimise the dole queue and, in turn, improve our tax income.
Agriculture is still the main industry in my constituency of Cavan-Monaghan but the Government has done everything to undermine the structures. It has cut REPS, installation and EU aid. Even the dairy industry which used to give the single best income on family farms is in crisis. Beef and sheep farmers are losing money and pig farmers are in serious crisis. We are advised that many pigs will die this Christmas if funds are not made available. Many farmers are failing to get necessary support from either their banking institutions or the Department of Social and Family Affairs. In all my years of involvement in the industry, I have never seen such fear among farm families. Like many mortgage holders, they cannot understand that a Government could find so many billions of euro to prop up the banking structures without having received any commitments in return to support small industry, mortgage holders and agriculture.
We appreciate, and most parties have agreed, that it is necessary for EU reasons and common sense to make savings of €4 billion, but it is vital that whatever cuts are made are fair and reasonable and do not cause further deterioration in the potential of agriculture and job creation in general. Only jobs can bring us out of this crisis. Taxation will not.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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I am sharing time with Deputy Charlie O'Connor. Will the Acting Chairman tell me when five minutes have passed?
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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Listening to various speakers this evening has been interesting. It seems that Fine Gael has a policy called, "Let us have a general election".
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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It would not be a bad one.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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Each Front Bench spokesperson has said that he or she wants a general election on the grounds that it is the only thing that could clear up the financial morass in which we find ourselves.
Damien English (Meath West, Fine Gael)
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Deputy O'Rourke is finally beginning to listen.
Johnny Brady (Meath West, Fianna Fail)
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Allow Deputy O'Rourke to continue.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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As to whether they believe a general election would solve all of our difficulties, it is interesting that it was the main point put forward by each speaker on the Opposition benches to whom I listened.
Kieran O'Donnell (Limerick East, Fine Gael)
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Deputy O'Rourke has obviously missed the main point of the speeches.
Johnny Brady (Meath West, Fianna Fail)
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Please, Deputies. No one interrupted you.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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I listened carefully and did not shout and roar, even though I was tempted. Fine Gael's point in this debate has been made clear, namely, let us have a general election. We will not, since it would solve nothing.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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The Government is afraid.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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We are operating on the mandate given to us by the people when they voted for us. For some reason, Deputy Enda Kenny cannot get it out of his head that he did not make it two and a half years ago or get into the position for which he had hoped.
Be that as it may, we are faced with a budget. I thank the Fianna Fáil Front Bench, including the Taoiseach, for this debate. Everyone agrees that there must be €4 billion in cuts. I listened to Deputy Richard Bruton, who stated that Fine Gael agreed with many of the McCarthy proposals as outlined by an bord snip nua. However, the party will not tell us with which proposals it will agree, because not doing so enables each of its Deputies and Senators to tell their local newspapers that they are appalled by the latest cuts. "Appalled" is a good word and Fine Gael uses it often. Its eminent spokesman on finance is able to say the party agrees with most of the McCarthy cuts, but it does not specify a single cut it would implement.
Jan O'Sullivan (Limerick East, Labour)
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The Minister for Finance did not specify anything.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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Excuse me, but Deputy O'Sullivan will have plenty of chances to talk.
Emmet Stagg (Kildare North, Labour)
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It is the same with Fianna Fáil.
Bobby Aylward (Carlow-Kilkenny, Fianna Fail)
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Give her a few minutes to speak.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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It is deceitful of Fine Gael to tell the House that it agrees with most of the McCarthy report without ever telling anyone the specifics. Pressure groups approaching Fine Gael and Labour will be told that the parties do not agree with the cuts in question and would not have included them in their agendas.
Emmet Stagg (Kildare North, Labour)
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Deputy Aylward would never contemplate doing that.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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If one only gives a global critique, it is simple to claim that one does not agree with something.
Jan O'Sullivan (Limerick East, Labour)
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The Minister did not have any specifics today.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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I would prefer to be part of a Government that is seeking to come to grips with our current economic situation than be part of an Opposition that is seeking to inhabit a land called Pollyanna where there is never a need for a difficult decision.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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One need only give a grand assurance to people and away they go. The hilarity from those on the benches who cannot string two coherent thoughts together is amazing. All that they can do is engage in comic carry on. They have no definite ideas.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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Deputy O'Rourke is a comic.
Kieran O'Donnell (Limerick East, Fine Gael)
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She is using up her time.
Johnny Brady (Meath West, Fianna Fail)
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Deputy O'Rourke has one minute remaining.
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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My few minutes are up. It is all very funny for the Labour Party, is it not?
Charlie O'Connor (Dublin South West, Fianna Fail)
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I thank Deputy O'Rourke, who is difficult to follow.
Kieran O'Donnell (Limerick East, Fine Gael)
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The Deputy will do his best.
Seán Sherlock (Cork East, Labour)
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Its surrounds would need to be expanded.
Kieran O'Donnell (Limerick East, Fine Gael)
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Make sure to mention Tallaght.
Charlie O'Connor (Dublin South West, Fianna Fail)
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I am comforted by the fact that so many Labour Deputies, led by Deputy Eamon Gilmore, have entered the Chamber to hear what I have to say. Deputy Pat Rabbitte is also welcome.
I was interested in everything the Minister said, particularly his statement that never before-----
Kieran O'Donnell (Limerick East, Fine Gael)
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Did the Deputy follow it?
Charlie O'Connor (Dublin South West, Fianna Fail)
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-----has so much information and advice and so many expert reports been published in the run up to a budget. He was correct. I heard a contributor to Marian Finucane's programme recently who asked for the budget, but there are three more weeks to go in this process.
Michael D Higgins (Galway West, Labour)
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It never pays to hold out.
Charlie O'Connor (Dublin South West, Fianna Fail)
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Every organisation in the country is contacting us. I expect that Deputy Rabbitte is receiving the same mail as me. People are contacting us from all over our constituency to tell us their views and what should be done. We have met a number of organisations in recent weeks. For example, we met the Carers Association last week. We have also met students and a farming group. I know that Deputies will believe that farming is not a significant issue in Tallaght, but there is a rural community in Bohernabreena, which I am happy to represent. One day, former Deputy Mervyn Taylor asked me how I managed to get four votes from Bohernabreena. He said that I must have canvassed.
From going around my constituency, I know that people are suffering, have concerns and are angry. It is important that we try to represent what people are telling us. I was about to say "in the build up to the budget on 9 April", but that is my birthday. On 9 December-----
Mary O'Rourke (Longford-Westmeath, Fianna Fail)
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I think it could be.
Charlie O'Connor (Dublin South West, Fianna Fail)
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I will not tell the Deputies. It is important that we listen to all of our groups. I want to say clearly that Fianna Fáil must continue to do what it has done throughout the decades.
Pat RabbitteCharlie O'Connor (Dublin South West, Fianna Fail)
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It must look after those who-----
Charlie O'Connor (Dublin South West, Fianna Fail)
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I will not take a lecture from the Labour Party or its various incarnations on previous payments to the vulnerable.
Johnny Brady (Meath West, Fianna Fail)
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Allow Deputy O'Connor to continue without interruption.
Charlie O'Connor (Dublin South West, Fianna Fail)
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Members know that I am genuine when I say that those on the margins must continue to be protected. They are under more pressure than anyone else. As many Deputies have stated, including the nice people on the Labour benches, there is a new poor, people who never had to face the dole queue or look for assistance but are now doing so. I am glad to hear Deputies from every party discussing people who are under pressure where mortgage payments are concerned. I hope that some sense will prevail regarding a moratorium on repossessions. We cannot throw people out on the street because it will only lead to different problems. Stating this is important.
My good friend from the Border counties, Deputy Seymour Crawford, mentioned jobs, which is also an issue for those of us in Dublin, particularly those of us who represent Dublin South-West. In the Tallaght social welfare office, the unemployment figure has increased by more than 90% in the past year. One need not be on the Opposition benches to be caring and upset about this situation. Some Deputies might smile, but I have been made redundant three times. Maybe some of them will get me again. I know what it was like to go home and tell my family that we were under pressure. In recent weeks, my brother-in-law lost his job, as did my sister, a nice woman in Kilnamanagh who Deputy Rabbitte knows. She has never been unemployed since leaving school, but she lost her job in a reputable firm.
Brendan Howlin (Wexford, Labour)
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Deputy O'Connor is discovering it quickly.
Michael D Higgins (Galway West, Labour)
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Deputy Rabbitte will look after her.
Charlie O'Connor (Dublin South West, Fianna Fail)
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I am trying to be fair in this situation and I am not afraid to represent those who are suffering, angry and vulnerable.
Kieran O'Donnell (Limerick East, Fine Gael)
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We are all doing that.
Charlie O'Connor (Dublin South West, Fianna Fail)
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Is the Acting Chairman waving at me?
Johnny Brady (Meath West, Fianna Fail)
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No. The Deputy has more than one minute remaining.
Kieran O'Donnell (Limerick East, Fine Gael)
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The Acting Chairman is adding on time.
Charlie O'Connor (Dublin South West, Fianna Fail)
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I hope that the one message to come from this debate will be the need for recovery, job creation and continued investment in our infrastructure.
Kieran O'Donnell (Limerick East, Fine Gael)
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Did the Deputy write the Fine Gael document?
Charlie O'Connor (Dublin South West, Fianna Fail)
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Not to be too parochial, but the Minister for Education and Science gave a good presentation to the Fianna Fáil Parliamentary Party, as one would expect. I told him that I was glad he was not suggesting that the lights would go out.
We still need the building sector. Let us not forget that building schools is important, as it will provide employment and help people. I want to mention two schools in my constituency. The first is the Holy Rosary national school in Ballycragh which has operated in prefabs for more than 20 years. The other one is the all-Irish school, Scoil Chaitlín Maud, in Knockmore. Surely some mandarin in the Department could find an innovative way to complete these projects. We all have priority projects we want to see built, but I am putting on record my genuine support for those two projects and I hope the Minister will consider them along with the others.
I will listen to the Labour Party leader and to all other contributors today, and I look forward to this debate. I thank the Acting Chairman, Deputy Johnny Brady, for his courtesy.
7:00 pm
Eamon Gilmore (Dún Laoghaire, Labour)
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The Minister for Finance began by stating that more information has been made available before this budget than before any other. It is true that we have a great deal of information about the state of the economy and much of it was contained in the pre-budget outlook published last week. It tells us that the economy will contract by 7.5% this year, and estimates contraction of 1.5% next year. Taken with the fall of 3% in GDP in 2008, this is one of the worst recessions experienced by any developed country since the Second World War.
It tells us that the unemployment rate will average 11.75% in 2009 and 13.75% in 2010, and that employment will fall by 7.75% in 2009 and by 3.75% in 2010. Recent data show that unemployment in Ireland is now the second highest in the OECD, and a third higher than the eurozone average.
The pre-budget outlook shows us that confidence in the economy is so low that consumption will fall at a greater rate than incomes. Consumption, according to the outlook, will fall by 7.5% in 2009 and 3.5% in 2010 in response to a rising savings rate. It tells us that the Exchequer borrowing requirement for 2009 will be almost €26 billion and next year, after corrective action, it will be almost €20 billion, while the general Government deficit for 2009 and 2010 will be 12% of GDP, four times the Stability and Growth Pact target. By the end of 2009, the level of national debt is set to be double the 2007 level. By the end of 2010, the general Government debt is forecast to reach 78% of GDP. The cost of paying for all of this has been pushed up by the mishandling of the banking crisis. The cost of ten-year Government debt issued in today's auction is some 140 basis points above bund rates. The money that has been handed over to the banks amounts to €4 billion to Anglo Irish Bank and €7 billion between AIB and Bank of Ireland, and that is before we come to the €7 billion that may be lost in the NAMA project.
That is the legacy of Fianna Fáil, after 12 years in Government. In any other democracy a Government with that record would have resigned or fallen in the face of those economic failures. When Deputy Mary O'Rourke states that the only policy the Opposition has is a general election, she is right. The only solution to this is a general election and the sweeping from office of the Government and the main party which is principally responsible for this tragedy.
The Government's only policy appears to be one of a brass neck. Fianna Fáil and the Greens have tied themselves together and to office, and their only answer to the economy is to demand to know what the Opposition will do about it. The Labour Party has been clear that the fiscal deficit must be dealt with now, rather than adjustment being delayed. We have, therefore, accepted that an adjustment of approximately €4 billion is required in the coming year. We should not pretend this will be easy, such is the scale of the problem that Fianna Fáil has created. This will be a difficult adjustment, no matter how it is done. What we must seek to ensure is that the least damage is done to the economy and that the burden of adjustment is fair. Where we face choices is in the make up of those adjustments.
In April last, the Government, through the Minister for Finance when he spoke in the budget debate, set out a mixed approach to the €4 billion adjustment, consisting of €1.75 billion in taxation, €1.5 billion in current spending and €0.75 billion in capital spending cuts. Since then, however, the Government has utterly shifted its position, explicitly advancing the argument that there is an economic benefit from cutting expenditure alone.The Minister for Finance today, in a speech in which he told us nothing, might at least have offered an explanation as to why he has shifted his policy and why Government policy has shifted as to the mix that should go to make up the €4 billion adjustment. The Government position is a dangerously partial and one-dimensional reading of the situation which ignores important economic and social realities.
For the budget to succeed it must be credible to both domestic and international audiences. To achieve that credibility requires a realistic policy mix including spending reductions and revenue raising. It also must be fair, and be seen to be fair. Where possible, the measures adopted should be based on reform – reform of taxation, reform of spending and reform of administration. I have already stated that there should be a negotiated reduction in the public sector pay bill. That must be knitted into an agenda of reform in the public service, something for which Labour has been calling for years. Across-the-board pay cuts are an admission of failure because they will not deliver the necessary changes in working practices and organisation of the public service. We need a Minister for public service re-organisation, but we also need far more autonomy and responsibility to be devolved to Departments and agencies.
As capital budgets were increased during the bubble, tender price inflation eroded the volume of output that was achieved. Now, tender prices in construction are falling. The Society of Chartered Surveyors estimates that tender prices for general construction fell by 17% in the second half of 2008 and the first half of 2009 and commensurate savings can be made on the capital budget, without affecting the level of activity. Reductions in capital budgets, however, must be accompanied by two policy changes. First, we need a new national development plan that takes account of changed economic circumstances and that sets out a clear set of priorities for Government investment. We can no longer afford the laid-back approach to capital budgeting that has been seen to date. Second, the Government should move on proposals to access non-traditional sources of investment financing, to deliver on infrastructural needs, without impacting on the general Government balance. There are a number of ways in which this can be done, including through a national investment bank. Again, there were promises made in the April emergency budget, but nothing has happened.
If spending cuts are to be part of the budget mix, as they must be, so must revenue raising, which must be accompanied by reform. Ireland simply cannot afford the vast array of tax expenditures that are still in the system. Labour has identified many of these over a long number of years. There is still more than €600 million in rent relief for landlords, more than €400 million in property-based tax reliefs and a series of reliefs across the system that are too generous in current circumstances and which can be pared back. Labour will also support a carbon tax, which would raise approximately €0.5 billion.
We need to seek a contribution from the better off in society. Labour has proposed a third rate of tax on single incomes over €100,000, and the Government must deal with the scandal of tax exiles who are not making their contribution. One cannot talk the language of fairness but then insist on pursuing cuts in social welfare without seeking any contribution from the best off in society.
There are choices. There are real options if the Government has the courage to embrace them, but it does not and it will not. I do not accept that there is only one way to deal with this problem, nor do I accept that the person who wants to inflict the most pain on the weakest sections of society somehow has the greatest grasp of the problem. Frankly, we have had enough of that kind of undergraduate advice. It shows little understanding of the past and no regard for the future.
There is a dangerously divisive tone to public debate in our country now. Fianna Fáil is promoting a beggar-my-neighbour approach, in the hope that by dividing the country, by isolating and demonising particular sections in society and the workforce, it can pretend that those sectors alone can carry the burden of adjustment. That is a false choice and a sum that does not add up. We will not get through this crisis by creating division. The problem cannot be hived off onto the backs of one group or another. It can be dealt with only by all of us pulling together.
We will get through the crisis only on the basis of unity and a negotiated national agreement. If we abandon the partnership approach, it could take a generation to restore. People who are sent away from the negotiating table will not be enticed back when the economy improves. One will be faced with conflict and higher wage claims when the economy starts to recover.
It will serve the interests of no one to go down the road of conflict and industrial action. I am not just saying that here, but have already said it at trade union conferences. That is why I have advanced a set of five proposals that, I believe, should form the basis for negotiations on a new agreement for national recovery. They comprise a moratorium on home re-possessions, a coherent jobs strategy, a negotiated agreement on public sector pay, a budget based on fairness and industrial peace.
Today, the Government borrowed a further €1 billion and we paid 1.4% more for ten-year money than the German Government would pay. By seeking out conflict, by facilitating those who are trying to dodge paying their fair share, Fianna Fáil is making the problem worse. A negotiated and shared approach, on the other hand, would send a powerful signal that Ireland is united in its commitment to dealing with its problems. http://www.labour.ie/press/
The most depressing thing I have heard in this debate is the promise from Deputy Charlie O'Connor that Fianna Fáil must continue to do what it has always done. Fianna Fáil has always looked after itself and let the country go to hell.