Thursday, 28 October 2010
Macroeconomic and Fiscal Outlook: Statements (Resumed)
I am pleased to have the opportunity to say a few words in this very important debate. Having listened to the contributions today and yesterday, one is concerned about the honesty of the Government regarding this issue and about how much money each man, woman and child in the country owes? Clarification needs to be given on this. We need to spell out to the people of Ireland how much they owe and what is the truth of the situation. That is my concern. While we listen in this House to speeches written by people in ministerial offices, the public want to know how much they owe and how much they will be charged to pay it back. That is the cornerstone of this debate. When we have finished this evening, the Irish people ought to know that. They need to see honesty coming from the Government. The public are angry because they do not believe what they are hearing from Government. It has changed in the last number of years, months and even weeks. We need to be honest with ourselves about where the country is and in the way we tackle our problems.
There is huge wastage in the country. The public service needs reform and the Government has failed to bring it about. I am delighted the Minister for Agriculture, Fisheries and Food is present because people throughout the country are angry about the single farm payment.
There is potential in the agricultural industry. We all know that huge numbers of young people are anxious to get involved in it. This year, certain food sectors of the industry saw an increase in exports of almost €1 billion. The potential for job creation in the agriculture industry is huge. That potential must be tapped into. I warn the Government against the proposal to tax the transfer of land holdings from one generation to the next. That should not be tampered with in the forthcoming budget. We need to encourage young people onto the land of Ireland to run the farms and create jobs.
Earlier, the Minister spoke about the huge numbers of people in employment. Yes, there are 1.8 million people at work in Ireland. How many young people are in Australia, Germany, Canada, London and all over the world? How many young people have left our shores?
The Minister for Tourism, Culture and Sport is also in the House. I would like to discuss the potential for job creation in agriculture and tourism in the time allowed to me. There is huge potential in the tourism sector. We have empty hotels and great golf courses, racecourses and walkways. There is massive opportunity because the tourism infrastructure is already in place. I encourage the Minister with responsibility for tourism to help people in that industry. Hotels and golf courses are struggling. There is room for an incentive package to help those people and encourage more visitors to our country. That potential must be realised, while we must also cut, tidy up and straighten the economy out. Incentivisation has worked in the past and other countries have done it. We have an opportunity to do it in the next number of months.
The people of Ireland must be told the truth. The House must tell them the truth. If the Government is truthful with the people they will come with us and help out in the situation in which we find ourselves.
With the permission of the House I will share my time with the Minister for Agriculture, Fisheries and Food, Deputy Brendan Smith.
This is a very important debate, if only to reassure people that everyone in this House is genuinely interested and concerned. It does not serve the debate well for people to fire phrases such as "Punch and Judy" across the floor or to advocate protests and anger on the streets, as was done on "Prime Time" this week. The best thing that can help the debate is for people to share ideas, listen to each other and develop those idea so that we can help to lift the country.
I am encouraged by the number of people in my constituency of Dún Laoghaire who are contacting me, obviously worried and concerned but also with ideas and suggestions as to how we might turn and what we might do. That shows the genuine concern, interest and fear that exists among people. We are here and we are willing to listen.
There is a perception that the last ten years were spent wasting money and that the next four years will be spent cutting money. Listening to Opposition Members of the House, one would think no new initiatives or reforms were introduced in the last ten years but that we simply spent euro upon euro. I can only speak for my own areas of responsibility in those years, in which it has been my privilege to serve in government. When I was Minister of State with responsibility for children, we introduced the national children's strategy with the aim of giving a voice to children. We have, unfortunately, very sad evidence of where that has not happened and needs to happen in the future. Nevertheless, that strategy was developed and set out.
In my time as Minister for Education and Science between 2004 and 2008, a number of reforms were introduced in the delivery of school building programmes with devolved grants enabling people to get better value and deliver locally. Thousands of school projects were carried out every year and that has transformed the education landscape all over the country. New initiatives were taken in the delivery of primary schools under the auspices of the VECs. Those pilot projects have been implemented and are being spread throughout the country under legislation. New entry requirements into medicine were introduced. For years, people had been talking about what an elitist category this was. The introduction of the HPAT gives a better opportunity to more suitable but still very highly academic people. It is working quite successfully. The introduction of whole school evaluation reformed the way parents, students, teachers and the inspectorate look to see how schools can be changed, reformed and judged and had that publicly done and published in the Department's website. We introduced new ways of reintegrating children with special needs into our schools, with allocations to them, and delivered more than 100 autism units attached to local primary schools, meaning that children with autism could go to the same school as their siblings and be in their own local areas.
On curriculum reform, Project Maths was introduced, has been spread out and is working very successfully. It is a more real and applied way of doing maths. New subjects, including new technology subjects, have been introduced, backed up by capital investment at the time. This too has reformed those subjects. The final initiative I will mention may not have had a big economic impact but it certainly will have an impact on the way go bhfuil an Ghaeilge á labhairt sa tír seo - is é sin, go bhfuil níos mó marcanna ag dul don scrúdú béil. Ciallaíonn sin go gcaithfidh múinteoirí níos mó béime a leagan ar múineadh na Gaeilge agus múineadh teanga na Gaeilge, seachas a bheith ag déanamh na litríochta an t-am ar fad. These are real changes to the education system that will not only reform the way people teach and learn but will also have a significant economic impact.
During my time as Minister for Social and Family Affairs, we were able to provide increases to social welfare benefits but, unfortunately, had to cut back on certain payments subsequently. The cuts made between 2008 and 2010 were matched by serious reforms, including a clamp-down on fraud, interagency and cross-Border co-operation and new technologies and signing on systems, which saved money for the Exchequer. We changed the way 18 and 19 year olds are treated in the social welfare system to give them an incentive to work and commenced the process of reforming payments for lone parents. We recognised that people with disabilities have abilities and should be considered on the basis of their capability to work rather than their inability to do so. Furthermore, during my time in the Department of Social and Family affairs, we finalised the long-term framework for pensions in this country so that we can support people in work as long as they are able and save money for the taxpayer while continuing to support older people.
I acknowledge the expenditures of the last years of the Celtic tiger. Members of this House, both in Opposition and in Government, wanted us to further increase our spending but reforms were also introduced that fostered real change in society and the economy. The same process will unfold over the next several years and we will not focus solely on removing money from the economy. It seems people are under the impression that Ministers take no responsibility for balancing the human impact of what we are doing. We do not sit around the Cabinet table with our calculators stuck on the minus key. We examine the proposals that come from all of our respective Departments so that we can understand what is happening across the Government. For example, we are considering the impact of changes in the education system on working families and how this will add to reforms to health and transport. We take account of the human impact of every change proposed. This is why we met on Monday, Tuesday and Wednesday and will meet again tomorrow, next Monday and Tuesday and over the coming weekends.
It is not just a question of the figures. Ultimately, we have to find €15 billion but we have to understand the personal implications of this adjustment for every individual in this country, whether a member of a working family, a welfare recipient or an older person, and ensure the combined impact of cuts and changes is not overly severe on any one group. We take our responsibilities very seriously but it does not help that we are accused of being people who lack a sense of attachment to the public or do not have the welfare and future of this country at heart.
My three specific areas of responsibility are tourism, culture and sport. In recent years, everyone has come to recognise the economic potential of the tourism sector, which employs 190,000 people. We want to maintain this level of employment and we have identified it as an area which we can expand through good marketing and the use of new media to get our message across. It was encouraging that a recent issue of The New York Times contained a three-page feature about the beauty of Ireland and our potential as a great escape. That sort of advertisement cannot be bought but it builds on the work of our tourism agencies. A previous feature in the culture section of the same newspaper invited people to attend the theatre in Dublin.
We will develop further initiatives to link culture, sports and tourism. When Ireland-England rugby matches are held in Dublin, they generate up to €83 million and a Munster-Ospreys match in Thomond Park generated €10.5 million. This is why we successfully attracted the Solheim cup to Killeen Castle, the tall ships race to Wexford and the Volvo ocean race to Galway. Other new initiatives include the Dublin Contemporary 2011. Dublin libraries took the initiative to get Dublin designated as UNESCO city of literature, which will not only give recognition to the city and its writers but also attract visitors to the country, and Dublin City Council is seeking to have Dublin designated as a city of design. These initiatives are aimed at finding ways of restoring our faith in ourselves as a community as well as generating work and income.
Significant progress has already been made on the areas in my remit and even though cuts will be required, these will be matched by new ways of doing business and delivering for the future of this country. It is not all about €15 billion in cuts; it is about supporting the best of what we have and keeping the long-term future of the country close to our hearts.
We are facing a challenge of historic proportions, with the Government having decided on an overall budgetary adjustment of €15 billion over the next four years. The extent of that challenge has to be seen in the context of budgetary savings of €14.5 billion achieved in the past two years. The Government and many agencies and economic commentators have long argued that a return to export led growth is essential to our economic recovery. At the launch of the Food Harvest 2020 report, the Taoiseach stated:
There is no doubt that export-led growth, with strong linkages to domestic economic activity, will be a key element in our economic recovery. And this is exactly what the agri-food sector delivers to our economy.
The manufacture of food and drink products is Ireland's main indigenous industry, with over 45,000 people employed in 800 companies, of which over 90% are small and medium sized enterprises, over a wider regional spread than other manufacturing industry. The industry produces over one third of our net export earnings from primary and manufacturing sectors. It accounts for over 6% of GDP and approximately 7% of national employment and has a gross annual turnover of €24 billion. More importantly, however, it is embedded in the domestic economy.
Although the sector faces many challenges in terms of international competitiveness and environmental sustainability, enormous opportunities are also opening up in the EU and global food and drink markets. It is particularly encouraging to see that during the first five months of the year the value of Irish food and drink exports, at almost €3 billion, was more than 8% higher than the previous year. Figures published yesterday by the Irish Exporters' Association provide further evidence of the export strength of the Irish agri-food sector. These figures show that a very strong return to growth throughout the year accelerated during the third quarter, when exports grew by 14%, or €214 million. They also point to a very positive trend in growth in exports to the eurozone, with exporters pushing harder for sales outside the sterling area. It is important that we continue to reduce our dependence on Britain, given that it accounts for 45% of agri-food exports. The strong performance of Irish exports in the wider economy was highlighted in IEA figures which showed a 12.8% increase in merchandise exports in the third quarter, with total exports for the quarter up 9.3% on the same period last year.
Last July, the Government launched Food Harvest 2020, a long-term strategy for the agri-food, forestry and fisheries sectors. The committee which drew up the report has shown that Ireland can grow its exports of food and beverages by one third to €12 billion annually. We can increase the value of primary production by our farmers and fishermen by €1.5 billion and value added in processing by €3 billion. The ending of milk quotas in 2015 represents an exceptional opportunity to grow our milk output by an estimated 50%. We can, and must, improve our cost competitiveness by 20% relative to our competitors. We are seeing evidence already of improving competitiveness, with the labour cost of production in Ireland having been reduced while it has continued to rise elsewhere. That improvement in cost competitiveness is being reflected in the more positive way in which operations in Ireland are viewed by international companies.
Given the dependence of the Irish agri-food sector on exports, exchange rates are of particular importance. In that regard, the strengthening of sterling and the dollar against the euro this year to September has helped Irish exports.
The Irish beef and dairy sectors are particularly export-orientated and they make vital contributions, not alone to the national economy but to local economies throughout the country. There are more than 5,000 people employed directly in the beef processing sector, which purchases the output of some 80,000 farmers and exports a high quality, indigenous Irish product with an annual export value of €1.5 billion. Ireland is the largest net exporter of beef in the northern hemisphere and the fourth largest beef exporter in the world. The beef industry has succeeded in transforming itself over the last decade, with more than 99% of Irish beef exports now placed in high value EU supermarkets. Food Harvest 2020 sets a strategy for a 20% growth in the output value of the sector over the next decade and, with the commitment of farmers, processors and the State agencies, I am confident this ambitious target can be met.
The Irish dairy sector has a pivotal role to play in delivering the growth targets. The ending of milk quotas in 2015 represents an exceptional opportunity to grow our milk output. The committee has set a target of a 50% increase in milk production by 2020. This equates to an increase of 2.75 billion litres and would enhance the primary output value of the sector by about €700 million, with further downstream benefits in the form of increased dairy product values, export earnings and employment. In order to achieve this highly ambitious target, which I believe is entirely realistic, it is critically important that the stakeholders in the sector act in a coherent way to increase efficiency and reduce costs both at farm level and at processor level, that processors adopt the most cost effective model to process the additional milk supplies, that new markets are found for the additional milk production and that there is an increased focus on research and innovative product development in order to add value in markets in which we already have a strong foothold.
During next month, Innovation Dublin 2010 takes place, and innovation is essential to everything we do, not least in the agri-food sector. I was pleased, therefore, to announce two recent initiatives aimed at encouraging additional investment in innovation and research, which were emphasised in the Food Harvest 2020 report as "a prerequisite to achieving the growth targets for the agri-food sector". In July, I announced details of innovation funding for small Irish food companies, providing innovation vouchers as an incentive to such companies to explore how innovation can change their businesses for the better, be it through new product development or the improvement of existing processes. I am pleased that over 90 small companies were successful in their applications, many for the first time.
Earlier this month, I announced details of a €10 million research call across my Department's three competitive research programmes - the food institutional research measure, FIRM, the research stimulus fund, RSF, and the programme of competitive forest research for development, COFORD. These are significant research initiatives and will have a key role to play in achieving the Food Harvest 2020 targets, for example, for the 50% growth target for milk production in regard to which one of the initiatives under the FIRM programme will provide scientific knowledge to add value to the sector.
We are very fortunate in this country to have many global leaders in the agri-food industry, most of which came from much more humble origins. As if to make that very point, Ireland accounts for an extraordinary 15% of the world market in infant formula production. The fact this industry is located in Ireland demonstrates international confidence in our food safety systems and the huge investment that we have made in food safety and quality. It is no accident that Ireland has dynamic dairy and food ingredients sectors. Thinking globally is the challenge facing the Irish agri-food sector, but one the industry should be well capable of meeting. Our strategy maps a course for the future of the sector and, with over 200 recommendations, is a comprehensive and considered roadmap for the development of Ireland's key indigenous sector.
The Taoiseach pledged the full support of the Government for the effort to realise the vision in the report. I have established and am chairing a very focused high-level group to ensure effective, joined-up implementation, including consideration and prioritisation of how best to pursue the recommendations made. At our inaugural meeting of 16 September, I emphasised to the committee that its key function was to direct and take whatever action was necessary to successfully implement the strategy. At that meeting, we agreed on the processes which will best realise the sector's full potential advance.
In the past few weeks, we acted on one of the key recommendations by establishing a dairy expansion activation group. This small group is comprised of farmers, processors and Teagasc and will address specific actions to be taken to realise the targets for dairy expansion set out in the report. By the end of November, the group will submit an initial road map to the high level committee highlighting the key milestones from the production and processing perspectives, identifying obstacles to implementation and how these should be overcome.
The next four years present the country with a formidable challenge but it is a challenge we are well capable of meeting. The Government has identified the pathway to recovery and will not shirk its responsibilities. We have a responsibility to this country and its citizens and we are committed to the effective discharge of that responsibility. We are conscious of the balance between making the necessary budgetary adjustment of €15 billion over the next four years while also encouraging growth in the economy.
That adjustment will comprise several elements and among those sectors which has a key role to play in achieving the goals of the four year plan, which we will publish next month, is the public service. The Taoiseach referred yesterday to falling staff numbers over the coming years, as the cost of the public service is reduced while service delivery is radically reformed. I am pleased that my own Department has been to the fore in restructuring the efficient delivery of our schemes and services. The reorganisation plan provides for the reduction from 58 to 16 in the number of local offices and, to date, in slightly over one year, ten new regional offices have been established and 22 associated offices have closed to the public. Despite this, services to customers have been maintained and enhanced through business process improvement. When the reorganisation plan has been fully implemented, it will yield savings estimated at €30 million per annum and a reduction of 400 in staff numbers. There are now over 1,000 fewer people working in the Department than was the case a few years ago and it is delivering a better service to its customers.
Ireland is a small, open economy and we all appreciate the value of an export-led recovery. During 2010, we have seen a remarkably strong export performance. The agri-food sector has been at the heart of the performance and the latest figures available for agri-food exports are very encouraging. Our strategy sets the scene for our agri-food, drinks fisheries and forestry sector for the next decade. Getting our future priorities right will be fundamental to growing our most valuable indigenous industry. The report captures the considerable complexity of this sector. It underlines its unique and special position within the Irish economy and it illustrates the potential which exists for this sector to grow even further.
There is a renewed interest in our sector amongst the wider society and a growing recognition of the role it can play in our economic recovery. I welcome the recent national commentary, which has been positive about the potential of the agri-food sector to contribute in a very significant way to our economic recovery. This is an important and welcome change but it also poses a challenge for us to deliver on these expectations. It is a challenge the sector is fully capable of meeting, and one I and my colleagues in Government are determined we will achieve. Only this morning I met representatives of the food industry again. All of them are committed to the Food Harvest 2020 report and believe the targets we have set are ambitious but realisable. We will ensure those plans are implemented.
With regard to the comments of Deputy Tom Hayes, he put before the House wrong figures in regard to payments under the Department's schemes. At this point, 90% of those who applied under our single farm payment scheme and the disadvantaged areas scheme have received payments. We must bear in mind that the earliest date on which we can normally issue a single payment is 1 December. However, I sought permission from the European Union, and was granted it by the Commissioner, to bring forward a 50% advance payment by six weeks.
We have had an enormous amount of work to do this year, with extra mapping requirements laid down by the European Commission and the European Court of Auditors. My Department has the most efficient system of payments within the European Union. It ill behoves Members to put figures that are absolutely wrong on the record of this House. I want to put on record that we will ensure we get the maximum number of payments out to eligible applicants at the earliest possible date. Within a very short period since beginning payments six weeks earlier than usual, we have to date issued payments to 90% of the over 120,000 applicants. That is surely a successful operation by the standards of any Department.
Tá mé ag roinnt mo chuid ama leis an Teachta Ferris. Ba mhaith liom labhairt ar an cheist rí-thábhachtach seo agus leanúint le téama an Aire Turasóireachta, Cultúir agus Spóirt, an Teachta Hanafin. She said it does not serve the debate well to take certain courses of action and to encourage people onto the streets. She said the Government is willing to listen. The Government is not willing to listen and has dismissed and continues to dismiss out of hand the alternatives presented by quite a number of people. The only talks that took place on this matter had preconditions. This is not evidence of being willing to listen and to take on board the alternatives.
There is an alternative. It is correct and proper that the public take to the streets if it is angry and does not accept the way in which the Government is proposing to go. The Government does not have a mandate and has not had one for the past two years to do what it is doing. It stood for election promising the sun, moon and stars but has not delivered on any of its promises. In fact, it has delivered the exact opposite. I refer to the promises of Fianna Fáil in particular but also to those of certain Opposition parties. There is no electoral mandate. If the Government believes fully in the programme it is pursuing, the only correct course of action is to put that programme to the people. I guarantee the Government it will get the result it deserves from the people. In the meantime, it is correct and proper that the people take to the streets and that those who are offering a realistic alternative advocate it and support the people to ensure they know about it.
Sinn Féin will be presenting this year's pre-budget submission on Monday. Last year it presented a realistic alternative to that of the Government and did so every year since I was elected as a Member. My party has costed its proposals and will make them available on Monday.
The Government is devoid of any understanding of the consequences of the cuts it proposes to make in the forthcoming budget. Most Members on the Government benches have never been unemployed or poor and have no understanding of what this entails or what is involved in trying to figure out from where their next meal will come or how to pay for heating during the winter. If one does not have this understanding, it is time to acquire it. This involves getting out of Government, going back to the people and being unemployed. Perhaps they might then have some understanding. The majority of Members in the Government benches were born with a silver spoon in their mouths. I know where some of my constituents would love to stick that silver spoon.
Yesterday I listened to Deputy Gilmore's presentation. I have a major problem with one of his proposals. It was bizarre coming from a party that is supposedly of the left. I have rethought my views in this regard of late. The Labour Party's proposal is to abolish tax relief on trade union subscriptions. This is absolute madness. Trade union membership in this era should be encouraged rather than made more expensive for the normal worker. The number of workers is becoming increasingly small and they are watching their pennies, yet the Labour Party is stating union membership should be more expensive, thereby discouraging it.
Last weekend, a member on the Government benches, Deputy Chris Andrews, suggested Fianna Fáil and Fine Gael should merge. Given the Labour Party's policy, perhaps it should merge with them. Perhaps all three right-wing parties in the Chamber should merge. Then we might have a left-right divide in this country at long last.
It is not so long ago since the Lisbon treaty was being promoted as the be-all and end-all. It was stated it would lead to hundreds of thousands of jobs for Ireland. The treaty was regarded as the panacea that would allow Ireland to escape the crisis created by bad government and management over many years. I remind members of Article 9 of the treaty, which states, "In defining and implementing its policies and activities, the Union shall take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health." Every action of the Government and Union in recent times is directly contrary to the achievement of these goals. Every action taken by the Union within member states should, according to the article, take into account the ramifications of job creation and social protection. However, the Government's record is such that there are 450,000 people unemployed, banks are refusing to lend despite the Government having large shares therein, and emigration is spiralling again.
The prerequisite set by the European Commission, namely, that member states should return to a deficit of 3% of GDP by 2014, is totally contrary to Article 9 of the Lisbon treaty. That the Commission is saying the target should be met through brutal austerity budgets seems to undermine the treaty. How can we create employment, ensure sufficient social protection and ensure people are provided with education and health care of a high level if the Government is decimating services under the very auspices of the European Commission?
Many constituents have contacted me of late urging me to make a commitment to protect the poorest of the poor during this time of crisis. My party and I have made a commitment to the Poor Can't Pay campaign. I urge the Government to do the same. To date, a number of Fianna Fáil Deputies have signed up, which I welcome. They include Deputies John Browne, Michael Kitt, Michael Moynihan, Eamon Scanlon and Beverley Flynn. The public will be watching their votes on budget day. How can one introduce further cuts that will affect the poor if one has signed such a petition?
Many macro-economic decisions have far-reaching consequences that extend to the micro level, including the levels of the individual, family and community. The Government has not taken cognisance of that. Successive budgets since 2008 have targeted disproportionately disadvantaged communities. I include children, lone parents, people with a disability and the elderly. Cuts made in the community and voluntary sector have been totally disproportionate, resulting in more than 5,000 job losses in community services alone. This has consequences in terms of service reduction.
Barnardos estimates that one in every nine children is living in consistent poverty. People with disability have been hit by the mainstream social welfare cuts of the past few budgets and by the recruitment embargo, which has greatly undermined service delivery. The elderly have been hit by the loss of the Christmas payment. There have been increases in dental charges and prescription charges and recently the carbon tax was introduced. Now there is real fear that the State pension, on which the majority of older people depend exclusively, will be cut further. Older people and those with disabilities have been affected particularly badly by fuel and energy poverty, which have been on the increase as a direct consequence of the actions of the Government, particularly the Green Party's policy. There is a wide range of areas in respect of which protection is required.
Many groups have proposals that would save the Government money. However, the Minister for Tourism, Culture and Sport, Deputy Hanafin, and the rest of the Members of the Cabinet are not listening. The Jack and Jill foundation put forward a proposal to save the HSE money but the response was to cut the payment to the foundation. The Carers Association is in the same position. It put forward proposals on how to save money for the Exchequer but nobody is listening. The same can be said for many other groups. In the arts sector, considerable investment would result in considerable returns. The Government is cutting the ground from under those who are poor and most dependent on society's ability to fund and protect them. Shame on the Government. The honourable course of action for it to take at this stage is to give up and go before the electorate. I demand a general election now.
I come from a county that has been decimated by the policies - or lack thereof - adopted by successive Governments. We used to have a very viable fishing sector. The Minister for Agriculture, Fisheries and Food, Deputy Brendan Smith, made a vague reference to it. This sector has been decimated. Two years ago, with the stroke of a pen, the current Minister for Transport, Deputy Dempsey, got rid of one part of the fishing industry and those who worked in it. I refer to drift-net salmon fishermen. The livelihoods of people living in Dingle, Brandon, the Magharee Islands, Fenit and other places on that part of the coast have been destroyed.
At present, some 80 15-metre trawlers are tied up in port because either their owners cannot afford to have surveys carried out in order to ensure that their vessels meet compliance requirements or they cannot get surveyors to carry out the work. Again, this is another instance of the Government's lack of flexibility. As a consequence, a total of 400 people have been obliged to go on the live register.
The current rate of unemployment in County Kerry is 26%, the second highest figure in the State. There has been no investment in the country or in a proper infrastructure for it. At present, Michael O'Leary is blackmailing the Government in respect of Kerry Airport and his company's service to and from the county. Mr. O'Leary and his ilk are able to engage in such behaviour while poor, unfortunate people who are trying to get a day's work in order to supplement the money they receive on the dole are being persecuted and hounded by departmental officials. The rich and the powerful are able to get away with what they are doing.
Apart from the economic and financial issues we have been discussing during this debate, we must also consider the moral and ethical aspects of the situation. As Deputy Ó Caoláin inquired, who will benefit from the misery that is proposed to be inflicted on people? The Deputy read the names of some of the bondholders into the record. Many people were struck by that fact and by the names of some of the companies which appear on the list. There are websites which have published the names of these companies and there are discussion groups relating to this matter on the Internet. However, no national newspaper regards this issue as being of significant importance. Many people who work in the Houses were struck by Deputy Ó Caoláin's reference to the list. The information he provided has revealed to people the identities of those for whom they are being asked to sacrifice themselves and their families.
While most of the bondholders are based in Europe, there are also Irish connections. I have no doubt that some of our fine patriotic and charitable tax exiles have their noses in the trough. More importantly perhaps is the connection between that and the fact that representatives of these people are advising the Government on how best to make the rest of us pay for their mess. Let us consider Peter Sutherland, for example, who has held various high positions in this State and on its behalf abroad. His views are still given a great deal of credence and he was recently widely quoted in claiming that the State has an obligation to protect Anglo Irish Bank bondholders. In addition, Mr. Sutherland has, in a completely disinterested way of course, been advising the Government on how it should deal with the crisis. Among his proposals is the notion that we should sell State companies. I do not doubt that he knows certain chaps who might be interested in buying these companies at a knock-down price.
How many of those who referred favourably to Sir Peter Sutherland's excellent advice also referred to his own possible self-interest and the interest of his friends in respect of this matter? He is, after all, chairman of Goldman Sachs, the asset management section of which is key bondholder in Anglo Irish Bank and which, incidentally, makes profits of more than €13 billion per year. If our priority is to cater for the needs of people such as this, then the description given on one website of Ireland as an "international welfare state for super-rich bankers" is all too accurate.
My party and others have set out the need to use our own resources, initiative and native intelligence to find a way out of the mess in which we currently find ourselves. We can do that through the development of indigenous sectors, such as agrifood and so on, and by providing a stimulus package for the economy rather than beggaring ourselves to pay the debts of failed speculators. To do what I have outlined, we must retain our young, educated people here rather than once again condemning a generation of them to emigration.
The great Sir Peter Sutherland wants none of this. In the event that the surplus of educated young people do not clear out of the country fast enough, he wants there to be fewer of them. Earlier this year he proposed that the National University of Ireland be abolished. Of course he is correct. There will hardly be a need for so many universities if a young person's highest ambition is to get a job building the Olympic stadium in London or serving behind a bar in the Bronx. Perhaps we could replace the universities with a training college for golf caddies and fishing gillies who could service the needs of Sir Peter and the other tax exiles when they drop in for a short holiday.
TG4 is currently broadcasting an excellent series on the signatories of the 1916 Proclamation. I wonder how those men and women would feel if they knew that almost a century after their deaths, and over 100 years since landlordism was officially abolished, that an Irish Government is effectively handing the country over to a new class of absentee landlords complete with their British royal titles, just in case anyone failed to make the connection.
Another of the bondholders is Rothschilds, which was paid €1.4 million in order to advise the Government on how to deal with the banking crisis. One really could not make this up. If I owed Paddy Power a few thousand euro because I lost money on stupid bets on virtual racing, would the company call and ask me how I thought I might place more bets in order to recover my losses? Would it pay me to advise it on how to take more of its money? That is exactly what the Government is doing with the failed gamblers who have destroyed our economy.
Another of the prominent bondholders, BNP Paribas Asset Management, has bought substantial tracts of real estate in this country. That company's self-interest is also obvious but one does not hear it being attacked as a selfish sectional interest in the same way that some people in this House and the media attack the trade unions. Many trade union members within the public and private sectors are forced to claim family income supplement and their wages and overall living standards will again be under threat in the forthcoming budget. That budget will, in large part, be framed in such a way as to protect Sir Peter Sutherland and his friends.
Lest anyone obtain the impression that only Sinn Féin and other alleged economic illiterates are calling for bondholders to take the hit for their own stupidity, Ms Gillian Tett, an editor with the Financial Times, has stated that the Government must renegotiate with the bondholders and ensure that a substantial part of the burden falls upon them. I assure the House that if people were familiar with the facts and were aware of the identities of the Anglo Irish Bank bondholders and their connections with the so-called elite in this State, they would be clamouring for the same. Perhaps that is why the national newspapers do not carry the list of bondholders.
My party has been accused of being opposed to all cuts. That is not the case and our budget submission will make it clear where we would make cuts. One of those areas where we would introduced cuts relates to the higher State service. In the North, my party has led the way there by proposing cuts in salaries for MLAs and higher-paid public servants. There is certainly scope for cuts of that nature here, particularly when one considers that the Taoiseach is the fourth highest paid Head of State in the world. In addition, the Irish Chief Justice earns one and three quarter times the salary of his US counterpart, a Supreme Court judge earns over one and a half times the salary of his American equivalent and a High Court judge earns one and a half times the salary of a US High Court judge. These people have refused to take pay cuts.
Most of the general issues relating to the current crisis have already been well dealt with my party colleagues. We have detailed our opposition to the austerity drive in the EU, which has seen Ireland become a sort of guinea pig for the credibility of Stability and Growth Pact. The Government claims that the overriding priority is reduce the public sector deficit to the Maastricht treaty limit of 3% of GDP by 2014 and that massive cuts to spending will achieve this. Sinn Féin disagrees with this on all counts. We are of the view that taking money out of the economy will lead to a further growth in unemployment and the prevention of growth.
Last year, we were informed that €7 billion in savings would be required whereas now we are informed that €15 billion will be needed. This time next year, the Government will inform us that €20 billion or €25 billion is going to be required. That is because it does not know the exact amount that will be needed. It is a shocking indictment of the Government, its advisers and the relevant top civil servants that an accurate picture cannot be provided. Why is the actual amount being hidden? We were informed that we would be obliged to take a big hit in last year's budget and that the need for further savings would ease off from there on. Now, however, the position is entirely different. As my colleague, Deputy Ó Snodaigh, has said, it is time for this Government to go in order to give the people the chance to put a Government in place which they can trust and in which they can have faith.
Michael Finneran (Minister of State with special responsibility for Housing and Local Services, Department of Environment, Heritage and Local Government; Roscommon-South Leitrim, Fianna Fail)
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Many commentators and Opposition spokespersons have made contributions that would indicate the budget deficit problems in Ireland are unique to this country but that is very far from the truth. The position is that 24 states in Europe are adjusting their position in the same way as Ireland. Our nearest neighbour, Britain, has the largest structural deficit in Europe at £109 billion. They are paying at the rate of £120 million per day, with £43 billion per year in debt interest. Its response has been to cut spending by £81 billion over four years, with a cut of 19% in all department budgets and a reduction by 500,000 of public sector workers. We are not in this on our own, this is spread across the European Union, a fact which is sometimes lost in the debate in this country.
Few sectors of the economy have been affected as dramatically by the slings and arrows of the past few years as the housing sector. The pace of change has been on a scale that few would have imagined; demand has collapsed, output has dwindled dramatically, affordability is back at early 1990s levels and yet more house owners are struggling to meet mortgage repayments. Just as the supply of affordable housing reached new levels, demand dropped off, leaving local authorities with considerable numbers of unsold units.
At the lowest income end of the housing market, social housing need is already high and rising further, and the funding available to meet that need must be adjusted to contribute to the savings required to begin to restore the public finances. In the face of these challenges the Government has two choices; it can carry on as though nothing has changed, with a failure to meet housing needs as a result, or it can radically adapt the way in which it goes about meeting the need.
People in this House should by now know that I am steadfastly pursuing the latter course. I have been advancing with a significant programme of reform on the way in which housing need is met. This reform is radical and is fundamentally altering the State's response to such a need. The cornerstone of that reform programme is a restructuring of investment in social housing away from bricks and mortar solutions towards a more flexible system, where measures such as the rental accommodation scheme and long-term leasing play an increasingly prominent role in meeting social housing need.
Over time this will have a number of major implications. Such a system will be based on the fundamental acceptance that a housing need existing at a point in time may see financial or family circumstances driving that need changing or disappearing. A system which provides for only one solution to housing needs - a house for life with an entitlement to purchase at a heavily discounted price and succession rights for family members - is not one our current circumstances can support. It is not desirable from a social equity perspective either.
The transition to a new approach will significantly alter composition of the overall social housing stock over time, with permanent stock remaining relatively stable at approximately 150,000 units and, in general, new need being met through a more effective and flexible option utilising privately-owned units, leased accommodation on the rental accommodation scheme and long-term leasing. Specific accommodation types not necessarily available to the market, such as special needs housing for the elderly and people with disabilities, can continue to be provided through the new Bills. I am continuing this currently. This restructuring, clearly flagged by the Government statement on housing policy, Delivering Homes, Sustaining Communities, is already well under way. The figures on social housing output clearly show a reliance on construction by local authorities is significantly down on the previous years, with the rental accommodation scheme in the mainstream since 2006.
In 2009 and this year in particular, the long-term leasing initiative will take up some of the slack. I anticipate this and the rental accommodation scheme will together deliver approximately two thirds of the total output for housing in 2010. It has been on the way for some time but circumstances are now converging to make an insurmountable case for the restructuring to be accelerated. The scale and pace of the adjustment required to the housing budget is one factor but so too is the need to exploit this unique position that is presented. The particular circumstances existing now in the wider housing market, with the demand for home ownership on the floor because of a range of factors, little prospect of any substantial recovery of demand in the near future and an over-supply of completed vacant housing units across the country ready to be put to use, are a silver lining in a big black cloud.
We must grasp the nettle and make those circumstances work for us. This involves a straightforward matching up of over-supply with rising demand from the long-term leasing initiative. This will be the central plank of social housing supply in the coming years. Landlords, builders, developers and banks are still sitting on properties they cannot sell and which they cannot rent privately or do not want to rent. Some of these properties will end up in NAMA and my Department has already engaged extensively with the agency to ensure that the aim of securing a sound return can be aligned with our need to provide accommodation for disadvantaged families.
The leasing initiative is beginning to bear fruit. Some 2,500 units have been sourced and approved for use up to now and this initiative is clearly gaining traction, with the pace of delivery accelerating. Thousands of households will have their needs met through this innovative, equitable and dynamic approach in the coming years. The easy path to take, as suggested by the Labour Party, is to buy up thousands of houses which are vacant around the country. We do not have the billions to spend in this way so if that party gets into Government, how will it be in a position to buy the stock and where will the money come from? Will it attack the social welfare or health budgets or will it borrow? If it borrows money, how will it meet the 3% deficit target?
My approach and that of the Government in the delivery of social housing and integrated communities is the correct one. With it, we can meet the needs of people and in 2009 alone, we have helped 15,000 households through the programmes I have in place. I expect we will compare favourably in 2010.
I want to make the case in the course of this debate for a national system of internship. At a recent parliamentary party meeting Senator Brian Ó Domhnaill raised the matter, which I seconded, and a good general discussion followed. In all my years of public life I have never met so many highly qualified young people coming to see me with a CV and hope in their faces. Much money has been spent by the Government and their parents on their education and they hoped for a brighter future in their own country. A national internship programme would ensure that every firm with vacancies could come together and there could be tailoring of people's abilities and skills to the vacancies on offer.
I would begin with semi-State bodies. Representatives from these bodies met the Taoiseach months ago but they have not come up with a national internship programme. The same semi-State bodies have chief executives with an obscene level of salary, and there is no willingness to cut this by half at least. I do not understand how they can pocket this money while believing they cannot help society.
Young people have qualifications and technical, social and professional gifts, and these can be harnessed and put to the good of the country. Several small firms have made it known to me of their wish to put a programme in place and take somebody in. They are willing to take on somebody qualified at third level who wishes to gain experience and work in this country. There is very fertile ground in this respect and it is distressing for parents to see children who have toiled hard as students to gain qualifications without anybody to take heed of what they have and how they should use it. FÁS has a good scheme and has filled its 1,000 places. I have made inquiries and it has an excellent scheme but it is not enough. I can envisage thousands coming on stream in the programme but it would have to be a Government initiated national internship programme for one or two years.
Young people say they would be willing to work for whatever they receive in unemployment benefit but I would respectfully say that there should at least be a minimum top-up and proper protocols for the employment of these people to ensure there would be no exploitation and that the young people concerned would get valued experience. After that they would be able to give their qualifications to the firm in which they would work.
The Minister for Agriculture, Fisheries and Food, Deputy Smith, is in the House. There should be a call made to every private, semi-State or State company, from the smallest to the largest, to ask if they will participate in a national internship programme and tick a box if they say, "Yes". A simple one-page advertisement in which they would be able to see how they could contribute to the future of free young people could be published. Public service departments and the Civil Service should also be able to give valued experience to young people and, in turn, contribute to a more useful tenor within particular sections of Departments.
The forthcoming four-year budget programme must include a stimulus for the economy. A national programme, such as an internship programme, throughout the country would be a stimulus to further employment and the use of young graduates who have studied hard and seen their hopes driven into the sand.
I thank the Leas-Cheann Comhairle. I know I have one minute left. I know the look which comes on his face - it is called the one-minute look.
He has a very nice face. I know he was just about to say it. I repeat my call for a national internship programme. I ask the Government to include it, amidst the doom and gloom which it will be emitting through its figures. Such a programme would provide a spark of life for young people.
Yesterday for the first time Deputy Gilmore outlined the key economic and fiscal policies the Labour Party would introduce if it got into government. The cornerstone of its policy is raising taxes and providing a stimulus package through the establishment of a strategic investment bank. Both policies are fundamentally flawed. At a time when the international markets are scrutinising our every move they will do nothing to reassure investors or restore confidence in Ireland.
Some 18 months ago we first heard of the Labour Party proposal for a strategic investment bank. The plan has received no support from any national or international institution or economic commentators. Yesterday, Deputy Gilmore once again reiterated his proposals to set up the bank with funding of €2 billion from the National Pensions Reserve Fund and raise a total of €20 billion for the bank.
What the Labour Party does not make clear is from where the funding for the bank will come. A bank does not create credit out of nothing. Every euro lent by a bank to a customer must be drawn from deposits or borrowed by the bank from somewhere else. As we all know, funding has been scarce and expensive for our banks. Why would funding be more readily and more cheaply available for a State-owned bank?
We all know that to reach a budget deficit of 3% by 2014 we will need to make significant public spending cuts and tax increases. The Taoiseach has confirmed that the Government favours an emphasis on cuts rather than taxes in order that our competitiveness is not impeded and Fine Gael agrees with his assessment. The Labour Party has stated its preference is that savings be divided equally between taxes and cuts. This means raising €7.5 billion in four years through extra taxes. Its proposal would introduce a new 48% tax for those earning over €100,000 which will only raise €410 million in year 1. Where will the other €6 billion come from?
As the Minister for Finance said in the Dáil yesterday, a 48% rate would effectively mean a marginal tax rate of 62%. I have no difficulty with taxing wealth or retained income. However, a 62% marginal rate would be the highest personal income tax rate in Europe and would have a detrimental impact on foreign direct investment. This week we heard that IBM rated Ireland as the best location for foreign direct investment in the world. Some eight of the world's top ten technology firms are based in Ireland. IDA Ireland has secured 75 investments to date in 2010, which have the potential to create 6,000 jobs. Does the Labour Party want to jeopardise this foreign direct investment when there are over 450,000 people on the live register?
Deputy Gilmore said yesterday he would put an end to the blunt year-by-year spending cuts approach. He seems to suggest we adopt a sophisticated multi-annual approach, citing the Canadian example, and that we take lessons from the austerity programme implemented there. If that is to be the Labour Party's approach, it makes a complete mockery of everything it has said over the past two years. According to The Wall Street Journal the Canadian Minister of Finance spelled out a programme of massive spending cuts from 1994-96. He slashed spending from $118 billion to $104 billion, some 15% once inflation is factored in.
The BBC reported:
The length of hospital waiting lists shot up, thousands of nurses lost their jobs and some hospitals even had to close. The hospitals that remained open suffered from overcrowding and infection rates rose as a result. In schools, average class sizes shot up from 25 children to 35, as fewer new teachers were taken on. And separate special needs classes were abolished.
If that is the example the Labour Party is giving us of how to make cuts in public expenditure, then I would rather not know about it.
In regard to the magic bank proposed by the Labour Party, it does not tell us how it will provide for bondholders. Deputy Burton said on her website on 15 April 2010:
Some commentators are keen on pointing out that senior bondholders rank the same as depositors and so can't be made to take a hit when they cease to be State guaranteed. This is nonsense. In normal times, bank depositors are explicitly protected. Bank bondholders are not. Protecting depositors is critical to any functioning banking system. While sovereign default should not be contemplated, protecting corporate bondholders is highly questionable.
The reality is that senior bondholders rank equally with depositors under Irish law. I would have thought a party that claims to be ready for Government would have at least known that. As Dan O'Brien said this morning on Newstalk's "Breakfast", "How can you tell one set of bondholders that you are not going to pay them back while at the same time try to borrow from other bondholders?" The Labour Party's strategic bank simply does not add up.
The Minister, Deputy Lenihan, said yesterday the reality is the strategic investment bank would compete with our two established banks and the State for scarce funding. Every euro this bank would attract would mean one less euro for Bank of Ireland and AIB as well as for this State which must now borrow €2 in every €5 spent on providing our public services. That would mean less lending by Bank of Ireland and AIB and higher interest rates for the State. I challenge Deputy Gilmore to spell out now where and how he will raise €18 billion. I challenge him to test the views of the ECB on such a proposal in the current banking climate. It is not possible to establish a strategic bank as proposed by the Labour Party at this time in our crisis.
We have invested considerably in our two main banks. In return, we are insisting that they provide credit for strategic investment in this country. It makes little or no sense for the State to set up a new bank to perform the functions that we are now rightly demanding from Bank of Ireland and AIB in return for the support given to these two institutions by the Irish taxpayer. The Labour Party policies, as we heard outlined today, will not work.
I want to use my contribution to outline in broad brush strokes where Fine Gael stands on the macroeconomic position of the day. We need to do four things. We need to restore the public finances, growth, competitiveness and faith.
Dealing with restoring the public finances first, the Fine Gael Party has committed to achieving the 3% of GDP deficit target by 2014. In private circles, some economists and people from different political parties state that cannot be achieved. I believe it can. It might take a little help and it certainly will take a little growth but we should not be fatalistic about our inability to achieve this target. Let us not forget that in 1987 we managed to reduce the deficit from 7% to zero in one year with a little help.
As some Members will be aware, I wrote an article in The Sunday Business Post some weeks ago suggesting that the Government estimate that we would need to reduce the deficit by €7.5 billion was inaccurate and I suggested the IMF figure of €10.7 billion was probably more accurate. Unfortunately, I was being very optimistic in that article and it now appears that our deficit reduction target will be somewhere closer to €15 billion. We will do everything we can and everything necessary to reduce the deficit to 3%.
We have argued that such adjustment should be front-loaded and that, if not the majority of it, certainly the greater part of it should occur in the first year so that people have certainty and will know for real that this budget will be the last worst budget and that they can then go on with their lives. If one spreads it out evenly over four years or, even as some suggest, over seven years - it would need to be much more than €15 billion if you spread it over seven years - that would destroy confidence in the economy for ever. We have already seen in the past few weeks how spending has reduced, how fear has increased and how people are living in fear of the forthcoming budget. We cannot go through that next year, the year after, the year after that again and then for another three years. We need to do as much as is possible in the budget this year, so long as it is not so much that it puts us back into recession.
My party has argued for a mix of spending reductions over tax increases of three to one. That is not an ideological position. It is one that is based on evidence and on fact. It is based on the myriad of the studies from the OECD, Harvard and elsewhere. These studies show that reducing public spending has a lesser bad effect on growth and unemployment than has increasing taxes. Increases taxes does more to slow growth and more to damage employment, and that is why we favour this mix of three to one. It is based on evidence.
This has been done previously. Twice in the past 20 years it had to be done in the United Kingdom. On one occasion it was implemented as 1:1 ratio while on the other it was on a ratio of 2:1. It has been done in Sweden, where they reduced public spending by 11.5% without damaging services. It has been done in Canada, as some have mentioned recently. It has been done in New Zealand and in Finland. It can be done.
We have the tools to implement such a programme. We have the McCarthy report, most of which we all, or, certainly, this party, can agree to. We have the local government expenditure review, which most of us can agree to in large part. We need to reform our welfare system, maybe not by reducing rates but certainly by the way it works and through eligibility. We can change the way our health service is funded through the Fair Care model which Fine Gael has proposed. We can dismantle FÁS and the HSE. We can also give citizens personal care budgets to allow them decide how they want to spend their money, if they have a disability or if they need home care.
We can rationalise the State quangos and agencies, something I have spoken about for two years now. The Government has gone some way but has much more to do. Since 2007 alone, the Government has established 16 new agencies. They have established as many as they have abolished.
We need to look at the tax side. We need to get rid of or restrict many of the tax exemptions that exist in our economy, which are very unfair and which are largely used by those who do not need them, the best off, to avoid paying their fair share of tax. They should go.
We should charge for water. We should broaden the tax base. Everyone should pay something, even if it is only a small amount. Even if it is only 2% or 3%, or 4%, everyone should pay something and make a contribution to the economy.
We need to ask graduates to make a contribution to their third-level education. Nobody benefits from a third-level education more than those who receive it and they should make a contribution towards it. Somebody who leaves school aged 18 and who works in McDonald's should not be paying tax so that somebody else can attend medical school. That is something that needs to be changed. It is a matter of basic fairness.
We need to avoid increasing marginal income taxes too high. They are already 54%. I have heard some suggest that there should be a 48% tax rate. If one includes the health levy, income levies and PRSI, it is already 51% for those on €36,000, which is not a high income, and 54% for those on higher incomes. Once it goes over 50%, the law of diminishing returns applies and people will not work. People will not want to be promoted because they will have to give away most of it in tax. They will not do overtime. For example, at present, a nurse already doing overtime loses 51% in tax. Also, it encourages people to go into the black economy. We made that mistake previously. Let us not make it again.
We need to avoid property taxes. There are other, much better ways to tax capital and wealth than a property tax.
As I stated earlier, we need to restore growth. That is why Fine Gael has a fully costed stimulus plan to use €11 billion that is in the National Pensions Reserve Fund to invest commercially in infrastructure projects here in Ireland and also to sell off some non-essential semi-State assets and invest that in the economy too. We can increase capital spending this way.
Finally and importantly, we need to restore faith in our system. The public does not understand why certain bank executives and certain public officials who caused this crisis have not been brought to book. They are right to be angry about it. I am angry about it too. It is incumbent now on the Taoiseach to use his influence to make sure this happens. I do not believe the public can move on until we see the arrest of those who caused this crisis. These people have done more damage to the economy than the IRA did and they should be treated like subversives. The Taoiseach should meet with the Garda Commissioner and with the DPP, not to direct a prosecution because he cannot do that but to state clearly to them that these people have done as much damage to the economy as subversives and must be treated as subversives, and they must use any legislation possible to ensure their arrest. As the House will be aware, Al Capone was done, not on racketeering but on tax fraud. Whatever it takes, whether that be the tax Acts, corporate law or the Road Traffic Act, these people must be arrested and prosecuted. The public cannot move on until they are.
I believe the bond markets would respond to this. If they see that Ireland is not a banana republic and that we do not have a Government that protects corporate criminals and white collar criminals, they will respond positively. The most important development we must see in the next six months is the arrest and prosecution of those persons.
This debate, Statements on Macroeconomic and Fiscal Outlook, is about the sovereignty of this nation. We should not kid ourselves. That is what is at stake here - nothing more, nothing less.
One would think, if one only arrived into this country and from listening to the contributions of both the Tánaiste and the Minister for Justice and Law Reform, Deputy Dermot Ahern, that we had just exited Government and the Members opposite had just gone into Government. One would think that we were the one's who had been in Government and who had led to the mess we are in. It is not true for the Minister of State, Deputy Finneran, to state that many other countries are in such a mess. They have been in a mess, but most countries are getting out of it.
I listened with interest to the Minister for Agriculture, Fisheries and Food, Deputy Smith, and I will use my time to concentrate on what we should and should not do. No matter what else this country does, we are an open economy that cannot work with out external markets. The bubble we created that led to this mess was an inward looking bubble. We lost our competitiveness and failed to export and manufacture goods. Thankfully, the one silver lining has been the figures from the Irish Exporters Association for the first three quarters of this year, and, in particular, the last quarter, which shows that with a little help we can do what we must do with gusto, that is, export and bring money in from outside this country. Exports of food and drink, for example, which have survived a gradual decrease in the value of sterling in recent months, still managed 14% growth in the past quarter. We have reports coming out of our ears, such as Food Harvest 2020 and Bord Bia's Pathways for Growth. We need an ambassador for trade tasked with selling Ireland Inc. We produce the best food to the highest standard on the doorstep of the wealthiest market on the planet but our farmers still struggle to make a living. The average income of a farmer last year was €11,000. That is not acceptable. There are now discussions about introducing inheritance tax and doing away with stock relief. This may stifle the people we need to enter the industry to grow it. We need young people who are motivated and trained to enter and grow the business.
We heard from the CEO of the National Dairy Council that it will take €850 million to facilitate the growth targets outlined in the dairy sector for 2020. A significant amount of this may well come from the industry itself; how this will be done is an argument for another day. These are the types of challenges to be faced. We can grow our industry, but unless we market it and sell it abroad, all we will do is produce more but receive the same or less. This is the consequence of not going out to sell.
We should not stifle the industry. We should not cut forestry support to a stage where we will lose the industry. The Department of Agriculture, Fisheries and Food commissioned a report by Dr. Bacon which pointed out that every euro invested in forestry yields €1.60. It helps our balance of payments because it reduces our requirement to import. It also helps our carbon footprint, helps to produce a raw material for the building industry and helps with regard to renewable energy. It has a multi-faceted benefit for the nation. On three or four occasions, the Food Harvest 2020 report mentions forestry as being crucial to various targets. Fine Gael has committed to increasing the capital expenditure programme by using the stimulus package mentioned by Deputy Varadkar. The targets outlined in the renewed programme for Government, which is less than a year old, can be achieved with 10,000 hectares a year.
One does not send mixed messages to an industry which the Minister for Agriculture, Fisheries and Food described half an hour ago as pivotal to growing our economy, jobs and our balance of payments and keeping us in surplus. We are in surplus in a shrunken economy; we need to get into surplus in a growing economy where we export more than we import. These are the initiatives we have to take. If we do, we can go to the people. We will have demonstrated to the international bond markets that we are in a position to help ourselves.
At the outset, I stated our sovereignty was as stake. We spent 700 years trying to obtain our sovereignty and it is not yet 100 years old. It is time a bit of old Irish pig-iron got stuck in again and we went out and sold ourselves and worked rather than giving away our sovereignty. It is as critical as this.
It is fitting to have these statements over two days to throw some light on how we might get out of the very dark place in which we find ourselves. However, nothing I have heard so far from the Government is encouraging. My constituent colleague, Deputy Fahey, who has left the Chamber, spent all of his allocated time criticising what people in the Opposition, particularly the Labour Party, stated in their proposals, without putting forward one concrete proposal on what the Government itself might do. I thought the purpose of the debate was to find out what the Government might do, but criticism is the trend of the debate.
I listened with interest to the first contribution to the debate by the Taoiseach, Deputy Brian Cowen, and I have his five page script. The best that can be said about it is that it is in small print and both sides of the page are used so at least he did not waste too much paper. Apart from that, his long contribution to the debate contains no positive proposals. Saving paper reminds me of all the glossy magazines we receive from Departments and quangos. They are piled high in my office and I am seeking somewhere to recycle them. We do not have time to read them.
The Taoiseach stated the people of Ireland are looking to this House with understandable concern, and this is very true. He stated the people are concerned about their future, the proposals for their children, the well-being of their neighbours and the country as a whole. This is also true. He then stated the people are looking to this House with hope and expectations. I doubt it very much. I would say they are looking at the Government benches in the House with fear and despair.
To solve the problem, the Government must first acknowledge the depth of the problem and its serious neglect in causing the problem. None of the Government speakers has done this. Instead, the Government has attempted to suck in the Opposition to spread the blame and share in the severe measures necessary to solve our problems. This seems to ignore the fact that the Government was elected to govern, but the Fianna Fáil-led Government has failed to do so for the past ten years. It allowed Anglo Irish Bank to run amok with reckless lending, closely followed by AIB with Bank of Ireland following third.
The Taoiseach's address is laced with phrases such as "the necessary confidence to the international markets" and "secure our funding position". I asked the Taoiseach whether we were now governed entirely by our European partners. The Taoiseach stated the public service has a critical role to play. Where is the evidence of the reform of the public service as promised in the Croke Park agreement? The Government continues to state it will set out income and expenditure measures but we have not heard what they are. However, it expects the Opposition to produce an alternative budget.
The Taoiseach stated he must aspire to the goal that all our citizens have an opportunity to work and be valued in our society, and so say all of us. However, who caused the problem? The Government did and it is now trying to suck in the Opposition to ask us to help it solve the problem. Deputy Varadkar and others have put up very positive proposals. Our spokesperson for finance, Deputy Noonan, spelled out for the Minister for Finance a number of workable solutions with minimal costs to the State. These are practical measures that I ask the Government to examine. I advise the Government to read again Deputy Noonan's contribution.
I have further advice for the Government. It is estimated that the Irish people have up to €90 billion in savings in banks, post offices, under the mattresses or perhaps in safes; I do not know where they have it. They are saving this money because they fear losing their jobs or houses or for medical care in later life. If the Government issued bonds at 3% or 4% it would be able to use this money rather than purchasing bonds from abroad at 7%. That money is in the country to be used for the country. With just a little initiative from the Government we would solve some of the problems. I suggest it seriously considers this.
Throughout the country are empty houses, unfinished estates, empty and closed hotels, and deserted houses at seaside resorts. These were driven by Government tax breaks between 1966 and the most recent election. The Taoiseach suggested in 2005 that he would abolish these tax breaks but postponed this until 2006 and then kept them until the election. The purpose of this was to win the election, but at what cost to the State? This reckless situation has now cost the State billions in revenue. The Taoiseach recognised this in 2005 but did nothing about it because he wanted to retain the votes of the developers, the breakfast roll man and everybody else who thought the bonanza would never finish. This was done to buy votes at a cost to the State and this was the serious aspect to it.
The Taoiseach's version of events is simple.
He claims he terminated most of these. He decided to terminate them in 2005 in his first budget. He takes the credit but now regrets he did not do it sooner. The Taoiseach's decision in opting for a phasing-out of those tax reliefs has cost the State and is responsible for the current situation in which many young couples are facing the threat of losing their jobs and losing their houses. This is the reality as a result of the policies of this Government yet it is criticising the Opposition proposals instead of offering concrete proposals to solve the problem.
Áine Brady (Minister of State with special responsibility for Older People and Health Promotion, Department of Health and Children; Minister of State, Department of Environment, Heritage and Local Government; Minister of State, Department of Social and Family Affairs; Kildare North, Fianna Fail)
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I will be sharing my time with Deputies Jimmy Devins, Mattie McGrath, Maureen O'Sullivan, Finian McGrath and Joe Behan.
As we continue to debate the state of our economy, it is important to place this debate in an accurate context. We have to be clear about the challenges we face, but we must equally outline our strengths which we have built together over many years, and over the past 20 years in particular. While the difficulties we face are significant, it is vital to paint the real picture of these difficulties. It is vital, not just for the wider financial community, but also for our own community's self confidence, that we do not succumb to the tendency to report our current situation in almost fatal terms, or to overstate and hype our difficulties. Using emotive and alarming language, which does not give an accurate reflection or a true picture of challenges we face, places our economy in an even more perilous state than at present. Our problems are bad enough and we should not exaggerate the situation and presenting a doomsday scenario which only makes the challenges we face more acute. I welcome the many constructive proposals we have heard from all sides of the House during this debate.
As we reflect on the current state of the economy, it is important to take stock of the investment we have made in our economy in recent years. This investment is now the platform on which to sow the seeds for future growth in our economy. We have transformed the infrastructure surrounding us. The Taoiseach recently opened our new world class convention centre, which, together with the new Grand Canal Theatre and the O2 Arena, serviced by Luas, has rejuvenated the docklands area and places Dublin in an ideal position to improve our tourism industry, attract international conferences and enhance our culture and arts infrastructure.
The International Financial Services Centre, a product of Irish entrepreneurship, continues to provide employment to our people. The IFSC is now linked to the O2 by the new Luas line, while the city centre is now also accessible by road from all parts of the country via our new motorway system and the Dublin port tunnel. The north Kildare area, which I represent, has a comprehensive public transport link to the revamped docklands area, via the Maynooth rail line, Kildare route line and Luas.
We have wisely invested in many sports facilities. Sports stadia such as Croke Park and the new Aviva Stadium at Lansdowne road are both financially supported by the State and are world-class stadia. Many sporting clubs throughout the country received financial assistance over the past 12 years to improve local sports facilities and provide a solid base for generating an interest in sports among young people. The new Terminal 2 at Dublin Airport, will open next month and this will be a key piece of infrastructure for our air transport industry for many years to come.
The major inter-urban routes between Dublin and all the regional cities, including the Limerick tunnel were completed ahead of schedule and within budget. These are delivering dramatic reductions in travel time between our main cities, greatly increasing the competitiveness of our economy and contributing to a reduction in the number of accidents on our road network.
Notwithstanding future investment in public transport, as outlined in Transport 21, we have seen significant improvements to date in our public transport infrastructure, with many public transport companies providing enhanced services to commuters. I have seen at first hand the improvements that have taken place.
We have invested in a comprehensive bus priority scheme which has improved bus travel times not just for city commuters in Dublin, Cork, Limerick and Galway, but also for commuters from the greater Dublin area. Indeed, the investment in inter-urban motorways has also enabled public transport providers to enhance and improve the services they provide for commuters from the regions.
Our over-riding priority now is to drive forward the process of economic recovery. Despite the challenges we face, and apart from the infrastructural improvements, we have other strengths and it is important that we highlight these strengths. Foreign direct investment is very significant to our economy and continues to be an important source of new jobs. Figures from the Irish Exporters Association show a 12.8% growth in merchandise exports in the third quarter and a 9% increase in total exports on the same period last year.
The role of Government is to create an environment in which business can invest with confidence and thereby provide employment opportunities. We are determined to maintain our pro-business taxation policy, which has been, and continues to be, so successful in bringing foreign direct investment to Ireland. As has been pointed out by other speakers in this debate, there are three essential building blocks to ensure that we foster and utilise our national resources and achieve our goal of providing jobs for our people. The successful resolution of these three key challenges - competitiveness, the public finances, and the supply of credit - is key to forming a basis for future growth. The decisions we have taken are the right and responsible ones to address the problems we face and to lay the foundations for economic recovery.
I will cut to the main point in that case. As many speakers have said, our sovereignty is at stake. I accept the need to reduce the deficit but I do not accept the need to reduce it by 3% of GDP by 2014. In my view, such cutbacks in the region of €15 billion are far too much for our economy. I believe we should start nearer home and that Members of the House should show leadership to the people and provide them with the answers they expect. We need to accept the blame for the mess and we need to apologise and be contrite and ask the people to stand with us which, I believe, they might do. We need to bring to book the senior bankers, the regulators and all the other members of the cabal who brought this country to its knees. They should be brought before the courts and charged. The excuse that it takes a long time because it is a complicated area, no longer washes with the public. Any law-abiding citizen has to obey the law and it is clear that laws were flouted and broken. These people have to be dealt with and taught a lesson and this House has to show leadership by doing so. We have to close down these tribunals as they are just a gravy train for certain sectors or society and they are achieving nothing. The courts of the land should be able to deal with the wrongdoings of politicians or others. This House needs to show leadership by introducing emergency legislation to cap the wages of Members of the Oireachtas and of the chief executive officers of semi-State bodies and companies because it is a scandal. Emergency legislation should be introduced to cap the wages of anyone in the country at €200,00 for a period of five years. There are people who have no jobs and have families to provide for. They have no jobs and no hope.
I suggest that senior civil servants also need to come into the real world. These people procrastinated last year after the budget and misled the Minister for Finance about their pay. They undermined the budget strategy for the Government and for which I voted while everyone else took the cuts. We have to get rid of the quangos-----
I have not. I see wrong as wrong wherever it happens. We have to cut out the waste and get rid of the quangos instead of adding to them. We have to promote the different schemes. Muintir na Tíre in my constituency and nationally is promoting a positive change for rural communities to get people back to work. We have to cut out the baggage and let people work.
I will be brief as I am under pressure of time. I have listened carefully to many of the previous speakers. I am delighted that suggestions are being made from all sides of the House as that is the purpose of this debate. My suggestion is worthwhile and one that has come to me from some of my constituents. I suggest a national voluntary contribution fund be set up. The trustees could be the Minister for Finance and the Opposition spokespersons on finance. I suggest that people be asked to donate 1% of their weekly income to the fund. The people who made the suggestion to me are on social welfare payments and they want to help our country, as do many people. If one million people gave €1 each, we would have €1 million. The cynics will say it is nothing and they will come up with a thousand reasons it should not happen but €1 million is better than nothing. If the fund were to rise to €5 million or €10 million, this might mean the saving of a school or it might be a protection for our front line health services or for some social welfare payments. I think it is a good idea and I ask the House to give it serious consideration.
My second suggestion is that the Whips of all parties examine legislation between now and 7 December so that only emergency legislation be put on the Order Paper. We should attend here on a Monday or a Friday or start work on a Tuesday at 10 a.m. in order to devote extra time to this debate. It is ludicrous that most of the 166 Deputies in this Chamber are not getting a chance to speak. Those of us who are getting a chance to speak are getting between two and ten minutes.
I accept the Taoiseach's description of these times as a "period of unprecedented economic challenge". We need major initiatives, policies and programmes and extraordinary leadership, creativity and flexibility. Constructive and meaningful leadership can only be shown by leaders who have a real sense of the principles of social justice and fairness, rather than merely paying lip-service to such concepts. Given that leaders must lead by example, we must introduce significant cuts - not token ones - that will affect the Taoiseach, Ministers, Deputies and the President. I call on other leaders in society, such as the executives and chief executives of State and semi-State bodies, the Judiciary and the well-paid higher echelons of the medical and legal professions, the Civil Service, the universities and the trade unions, to lead by example by initiating significant cuts in their salaries, eradicating bonuses and cutting their expenses by at least half. The savings in question might appear small on the grand scale, but if they are implemented they will show the Government's willingness to share the pain. I dispute the Taoiseach's point that the Celtic tiger misled us all. Many people, including Professor Morgan Kelly, warned that the potential existed for a crisis in our banks, financial institutions and development projects. An obvious sign of the impending crisis was the over-spend on construction projects like Luas and the Dublin Port tunnel. If we could access the moneys that were over-spent, we might not be in this crisis. There must be a change in the financial policies we have pursued to date, which have brought us where we are. This Government and its predecessors have been responsible for allowing and facilitating such recklessness and greed.
Last Thursday in the Mansion House, I met people with physical and mental disabilities whose lives depend on assistance from carers. They are now living in fear. A civilised Government would have taken the first opportunity available to it to assure such people, as well as those whose sole income comes from social welfare, that they do not need to fear any budget. I remind the Taoiseach, who said we have to take "credible, thoughtful and resolute action", that such action should also be fair. If we are to be fair, the burden has to be shared equally. I ask the Government to eliminate those tax breaks that are mostly availed of by a small wealthy minority. As our tax take is one of the lowest in the developed world, I suggest it should be increased, broadened and deepened. We should increase corporation tax and impose a charge on international transactions. We must eliminate the waste that is identified in the reports of the Comptroller and Auditor General. We need to secure better value for money in the delivery of our public services. We should stop funding private education. We should not give away our natural resources, as we did with Shell. We must tackle welfare fraud. The drug-related money and assets that are seized by the Criminal Assets Bureau, including the proceeds of drug crime, should go directly to the communities, schools and projects that are most affected by the drugs industry. I want to acknowledge the positive things that are happening. Those who are not unduly affected by this crisis have to contribute more now.
I am grateful for the opportunity to speak on this important matter. I regret it was only after Deputy Finian McGrath's protestations - he said Independent and non-aligned voices were not being given a hearing - that consent to speak was granted. I am shocked, amazed and disgusted that just 12 months after significant sacrifices were demanded of people on the lowest incomes, we are back in this House to discuss an economic and fiscal situation that is twice as bad as it was then. It is no exaggeration to suggest that the mean and savage reductions in social welfare payments that took place last year have been a waste of time and effort. The most disadvantaged women, children and men in this country were targeted then and are being targeted again this year. It is unforgivable that those with least to give are to be asked to give yet again. It is all the more unfair and unjust when one considers that the most wealthy people in this country have been excused from making anything other than a token contribution. It is incredible that the lesson of last year's swingeing cuts has not been learned. Money was taken from taken from those who spend all their incomes on day-to-day necessities, as opposed to those who can afford to save it for a rainy day. It appears we are going to witness a replay of that madness this year.
I am also shocked by the manner in which the latest ESRI quarterly economic commentary has been smothered at birth by the Government and the main Opposition parties. The views of the ESRI, which is a respected institution, are usually taken seriously by the establishment in this country. At this most challenging time in our nation's economic history, however, the ESRI's stark warning is being ignored. I would like to refer to a paragraph of the report that should cause alarm bells to ring all over the land:
Before discussing further the implications of the austerity programme, it is important to note that we have grave doubts over the wisdom of the parameters of an austerity programme where such a high levels of savings will be sought in such a tight time frame. A restoration of sustainability in the public finances is needed, of that there is no doubt. But to us, if one accepts the ESRI's Low Growth scenario as being a reasonable depiction of how the Irish economy might grow in the coming years, a longer time frame for adjustment would be preferable. The problem arises because an austerity package of €15 billion within four years could damage the potential of the economy to grow its way out of recession. The scale and speed of adjustment is such that it will be exceptionally challenging to retain societal support. From our perspective, an agreement with the European Commission to reduce the deficit to 3 per cent by 2016 would have been preferable and would have been seen as being credible by international lenders, once EU agreement had been achieved.
It is clear to me that the four-year timescale for reducing our debt burden is too short. It is incredible that Fianna Fáil, the Green Party, the Labour Party and Fine Gael have all accepted the target and bound themselves to it. The ESRI and the community and voluntary sector agree that it is wrong. The Irish Congress of Trade Unions has said it will not work. The Government's plan, which is being compiled with the assistance of the main Opposition parties, is madness. It is not sustainable. It will not convince the international lending community. What will we do in January if the interest rate we are being charged remains at record high levels despite the front-loading of pain? We need to re-evaluate this dangerous situation as a matter of urgency. At a minimum, we should agree a longer period of adjustment. I appeal to the Government with all sincerity to think again before it is too late.
I thank the Leas-Cheann Comhairle for the opportunity to speak during this important debate on the macroeconomic and fiscal outlook. This is an important crossroads in the economic development of this country. It is important that voices from all sides of the political divide are heard and sensible proposals are considered. I say that as an Independent Deputy who wants to support new and radical ideas that will facilitate job creation and investment in this country. Anyone who says they can solve this problem without being part of the solution is living in cloud cuckoo land. Major cuts will lead to no growth. No growth will mean fewer tax receipts and more unemployment. I agree that reforms are needed, but slashing and burning the services that are provided to the elderly, disabled, sick and unemployed should not be an option. The balance between reforms and increased taxation will have to be measured correctly. A common sense approach is needed if we are to ensure the growth and development of this country is not buried. When the tough decisions are being made about taxation and salary cuts, those with the most will have to take the biggest hits. Deputies, Senators and Ministers should take the lead. They should stop moaning and whinging and get on with it. My bottom line in this debate is that front line services have to come first.
I strongly support the comments of the Irish Congress of Trade Unions and, in particular, Ms Marian Harkin, MEP, about the arbitrary imposition of the 2014 deadline. The requirement that Ireland must comply with the EU Stability and Growth Pact by that date will irrevocably damage our small open economy and lead to a lost decade for Ireland. We should examine Article 9 of the Lisbon treaty, which provides:
In defining and implementing its policies and activities, the Union shall take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health.
Ireland can make a compelling case that the social cost of the 2014 deadline is in breach of the spirit of Article 9 of the Lisbon treaty. As a sovereign state, our first duty is to safeguard the welfare of our citizens. Under no circumstances can the 2014 deadline for meeting the terms of the Stability and Growth Pact be allowed to override that.
We can, and will, live up to both responsibilities but we need an extended timeframe. When trying to get out of this mess, it is very important we have growth, investment and job creation. It is also very important to support any sensible ideas in this debate which will increase job creation and thus increase tax collected.
I am delighted to contribute to this debate but we must face the realities, as stated in The Irish Times editorial today. Irish Government bond yields in international markets today are 7.06%, the highest since monetary union. Over the next 12 weeks, we, as a nation, will be fighting for our lives. The policies pursued by this Government have taken us to the edge of the cliff.
Bloomberg reported yesterday that the bond investors were losing faith in Ireland's plan to lower the deficit as spending cuts threatened to undermine economic growth and reduce government revenues. That means it believes the Government has no growth strategy. It has lost credibility and is taking us to a point where our financial sovereignty and independence is being threatened. The international bondholders and the European Commission do not believe the Government can bring the economy out of recession.
When announcing his first budget, the Minister for Finance called on the people to do their patriotic duty. The Government must take that on board. Its patriotic duty should be to call a general election and allow a new Government that has a five-year mandate to bring in this four-year plan which is required and has growth prospects within it.
Fine Gael agrees a reduction to the 3% deficit is required and previous speakers referred to the sustainability of that. The problem is we must borrow €60 billion over the coming years just to survive. The Government's policies have put us in a situation where we are in hock to international bondholders and cannot function. At the same time, these international bondholders believe the Government has no growth strategy.
Some 22,000 of the 450,000 people on the live register are in my constituency. Their biggest worry is whether they will be able to survive. The biggest worry among the rest of the population is whether they will have a job. They face Christmas, are talking about buying presents and are worrying about making ends meet. This Government has given no hope. Fine Gael has a definite growth strategy, NewERA. We will shortly bring forward a growth and jobs strategy to take account of the current economic climate.
Will the Government sit back and reflect? It blames the world economy. The projections for the European economy are that it will perform better than expected three months ago. There was a growth rate of 1.2% in July. The growth rate in the eurozone is 1.3%. In the last quarter, the UK had better growth rates than expected. It is expected the growth rate in 2011 will be 1.8%. The US economy is growing as well. Exports are the only light at the end of the tunnel. Will the Government come down out of its ivory tower? It is so out of touch that Ministers drove into Farmleigh House last Monday in their €200,000 chariots. That does not generate confidence among the people.
If the Government is serious about bringing this economy to a situation where we do not have to avail of the rescue package in Europe, it should go to the people and allow a new Government to formed. We have a 12-week opportunity to ensure we put forward credible plans so that we can go back to the bond markets and access money in January and ensure plans are put in place in order that people have confidence that their jobs will be secure so they will begin to spend again.
At this stage, the Government should do its patriotic duty and allow us to show the international bond markets that it is willing to support the effort to bring Ireland back to financial sovereignty and independence which can only be done by a new administration because this one has lost all credibility in the international markets.
Unfortunately, as Deputy Devins said, there is little time available to us to discuss this matter, so I cannot afford to spend time engaging in recriminations. However, the public are well capable of engaging in recriminations and will do so when they get the opportunity.
I wish to comment on the notion of consensus. I was at the Committee of Public Accounts all morning, so I did not hear what was said in the House but I watched the monitor. Judging from the Minister for Justice and Law Reform's body language, there will be no consensus from certain quarters opposite.
Tough decisions must be made. The House and the public must accept the reality of that. However, there must be an element of positivity. Deputy O'Donnell spoke about the importance of a strategy for growth, which is what the public believe is absent. They know there is doom and gloom here and more of it on the horizon. However, they do not see any light at the end of the tunnel or any opportunities for them, their businesses or their families to try to get through this.
The slow pace of decision-making has created an even worse climate. There is uncertainty about the severity of the cuts and conversely that has turned into certainty among people about how painful they will be. As a result, people are making very rash decisions.
For example, an article in the newspaper on Tuesday suggested that farmers should transfer their lands to their children before the budget because of the risk of tax implications arising from recommendations of the Commission on Taxation. That advice was being given to people. For anyone to make a life-changing decision such as that based on the belief that something might be in the budget is causing even more uncertainty. I have no doubt a significant number of people will make that decision and would be very badly advised in doing so. They are making it because they feel under such pressure to sort things out before the budget because it will penalise them so much. The environment being created by flying kites and so on has resulted in much concern and indecision.
We must create an environment for growth. We cannot just leave it to the agencies which operated in the so-called "good times" and expect that the same old same old will work in this climate, because it will not. I question the capability of many of the agencies, small and large, to deal with the current situation. I also question whether they have the expertise to get us out of the current position.
I refer to duplication and will give an example. The Minister of State, Deputy John Moloney, will be aware of the FÁS building in Mount Lucas in our constituency. FÁS is now offering a course to people which Offaly County Enterprise Board and, I believe, every county enterprise board in the country have been offering for ages. It is costing us millions of euro. There will be 36 places on the course which will take place in this vast empty building. Unfortunately, resources are going down the drain and it is not being tackled.
We must look to our indigenous industries, in particular tourism and the agrifood sector. There has been much talk about the capability of the tourism industry but it is only lip-service because things are operating in the same way. Ireland's national science centre is located in Birr Castle Demesne. The National Roads Authority put up road signs for the castle but one cannot visit the castle. Tourists leave disappointed that they cannot visit the castle. We do not promote what is available on the site. We must re-examine the concentration of resources in tourism geographical, administratively and sectorally.
The cuts must be fair. In the past week alone, I met two families who have children with severe special needs and who are in preschool. We give them the preschool grant but we do not give them special needs assistants so they may as well not be in preschool because they are not able to participate. The HSE has informed the families that special needs assistants are not being provided because it must scale down and implement cuts. One must examine the areas on which money is spent because increasing sums will be spent on the children in question as they progress through the education system. The State will not secure value for money and the children will not have their needs met.
Cuts in funding to the Jack and Jill Foundation ignore the money the foundation saves the State. This decision must be reconsidered.
We must ensure that work pays. I was laughed at when I raised this issue during the debate on social welfare legislation two years ago. Some of those on lower wages would be better off not working. Constituents attending my clinics have produced figures which demonstrate that the logical advice to them would be not to work as it would leave them financially better off. I have never given such advice but it remains the case and the issue needs to be tackled in the budget.
I welcome the opportunity to speak in this important but unfortunate debate. The Fianna Fáil-Green Party Government tells us we had a great time in the boom years. The policies of the people opposite - they do not deserve the title of "Minister" - brought this country to the edge of the abyss. Deputy Moloney has been part of the Government for the past ten to 15 years. The reason we are in the current position is that the Government protected its friends and cronies.
John Moloney (Minister of State, Department of Education and Science; Minister of State, Department of Health and Children; Minister of State, Department of Enterprise, Trade and Employment; Minister of State, Department of Justice, Equality and Law Reform; Laois-Offaly, Fianna Fail)
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On a point of order, before Deputy-----
John Moloney (Minister of State, Department of Education and Science; Minister of State, Department of Health and Children; Minister of State, Department of Enterprise, Trade and Employment; Minister of State, Department of Justice, Equality and Law Reform; Laois-Offaly, Fianna Fail)
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I am not hurt.
John Moloney (Minister of State, Department of Education and Science; Minister of State, Department of Health and Children; Minister of State, Department of Enterprise, Trade and Employment; Minister of State, Department of Justice, Equality and Law Reform; Laois-Offaly, Fianna Fail)
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On a point of information-----
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Deputy Kehoe is getting carried away.
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On a point of information, before he continues, I ask the Deputy to be specific regarding my cronies. He is not in charge of his statement which was obviously prepared by someone else. Who are the cronies to whom he refers?
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Perhaps the Deputy will name five of them.
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The Deputy is obviously not in a position to provide names.
People are afraid of where the Government is leading the country. As Deputy O'Donnell stated, the only way to lead the country out of the crisis is to have a general election. An election would give citizens an opportunity to give a clear mandate to a new Government to lead us out of the current problems.
I listened attentively to speaker after speaker yesterday and not one Minister referred to a stimulus package for employment. The Government has ignored the fact that we will not emerge from the current crisis without such a package.
The House debated small and medium-sized businesses last week. The Government has failed to recognise that the SME sector is the lifeblood of the economy. Small businesses are closing their doors every day of the week as a result of Government policies. False promises were made in recent years.
Speakers referred to the tourism and agriculture sectors, both of which can help us overcome the current problems. The Minister for Agriculture, Fisheries and Food, Deputy Brendan Smith, did not propose any plans to assist the agriculture sector. Many young people from a farming background are emigrating. They could be helped to get off jobseeker's allowance if the Government provided incentives.
It is unfortunate that my speaking time has elapsed. I was interrupted most ignorantly from the benches opposite.
Fine Gael Deputies have repeatedly argued in this debate that a growth and jobs plan must be introduced in parallel with a fiscal plan for recovery. It is difficult to create jobs in the current environment. Many companies have gone out of business owing to the burden of rates and service charges. To ensure local authorities do not seek court orders against employers or developers, the Valuation Office should be instructed to reduce valuations on commercial and industrial properties by between 10% and 20%. Local authorities would then be required to reduce their rates demands, which would allow many small enterprises to continue to operate.
We must eliminate many of the invasive restrictions imposed on businesses by statutory and non-statutory bodies and agencies. The work of some of these bodies in the areas of employment and health and safety constitutes an attack on entrepreneurs and business people. While regulations are important, certain agencies take an excessively zealous approach. Several people have recently complained to me that they have great difficulty complying with certain employment regulations because they impede the reasonable operation of small businesses. I refer, in particular, to the National Employment Rights Authority, which is causing serious problems to many businesses, especially in the hospitality sector, as they try to operate in difficult times. The authority must be reasonable.
The Minister for Agriculture, Fisheries and Food indicated that agriculture accounts for approximately one third of total exports. I will highlight an event that has caused embarrassment to Irish Members of the European Parliament. Although the matter was covered in the media, I heard about it on Monday from Mr. Jim Higgins, MEP, who represents the west constituency. At a recent food trade fair in Brussels, the 27 member states of the European Union had an opportunity to display the quality foods they produce. For some unknown reason, Bord Bia and the Irish embassy have refused to take responsibility for a problem that arose at the show and I was unable to obtain answers to questions this morning. The Irish stand, which was located between the French and Greek stands, both of which featured high quality products, was manned by two non-nationals and featured nothing more than an empty Murphy's stout bottle and business cards for Irish pubs. Although Bord Bia has responsibility in this regard, it has stated it was unaware this event was taking place. Moreover, our embassy personnel there have commented that due to cutbacks at home, they were unable to either staff or stock the event. Had the opportunity been given to Irish food producers instead, they would have stocked all the stands in Brussels. I seek an explanation as to the reason such an promotional opportunity was missed because all Ministers, including the Taoiseach, have been talking about the promotion of Irish farm products and the quality that exists in this regard. However, the farming community has been let down by reneging on an opportunity that does not often present itself in such a fashion.
The people of Ireland are afraid because the legacy costs of the property boom and bust experienced over the past ten years are beginning to become evident. Just as one would advise someone in personal debt difficulties to not simply let bills rest at the bottom of a door but to begin to open and manage them, this is what the Green Party is doing in government. The Green Party was not responsible for that boom and bust and probably was the political party that warned most about the likely costs. However, by dint of electoral circumstances, it is the party's job to fix the problem and that is what its Members are doing.
There are three areas of debt in which a particular problem exists. The problems associated with bank debts have been particularly difficult. The solution has taken time and I acknowledge this has not helped confidence. However, it was far better to be honest and rigorous in that process to achieve certainty as to what was the real legacy cost in the banks and this now has been done. We can now move to a process whereby the banks will begin to work for us, rather than against us, as has been the case in the past ten years. In addition, as the banks recover we can look to profit as a means by which some of our losses can be recovered. It was the right approach and I have not heard an alternative approach in this House that is credible.
The issue of private debt also is a cause of fear at present and some individuals who are in negative equity because of the property bust are in real difficulty. As social solidarity is critical at this time, the Government will ensure they also are protected and helped and are able to get back on their feet, which will be for the benefit of all. Moreover, the work of Hugh Cooney and his group, the establishment of which the Green Party insisted on, is doing positive and progressive work and will propose further recommendations to help such people. This is an essential element in the management of that debt legacy. However, I also wish to provide a sense of hope and confidence that this issue is manageable and some simple figures do so. At present, average Irish household interest paid still is less than 10% of disposable income. Many Irish people will recall the experience of the United Kingdom in the late 1980s and early 1990s when it experienced a property bust, albeit not as dramatic or difficult as ours. At that time however, interest payments there as a percentage of disposable income was closer to 15%. Consequently, while the costs are high and the legacy for certain key groups are very difficult, it is not impossible. I will provide another figure from a macroeconomic perspective to give people a sense of confidence that we can succeed. I acknowledge that we have a lot of debts. In 2009, loans to Irish households totalled approximately €201 billion, which could truly frighten one. However, another figure in the same Central Statistics Office statistical outlook indicates that as a country, our household assets in shares, deposits and insurance premiums totalled €306 billion and consequently, we can manage this. As we are saving very large amounts, we can draw down our debts and get our country through this legacy of debt issue.
The Government debt is causing particular difficulty at present and is being looked at by the markets. The problem arising from the boom and bust legacy of the property bubble is that we built up a tax base that was dependent on huge transactions in construction and in the buying and selling of property. This now has ceased and will not return. Moreover, I do not necessarily seek to return to some of the bad things from those years. While I wish to retain what was good, this will not return and nor will the unsustainable tax revenues that were dependent on this property boom culture. Both the present Government and the next Government must address this structural deficit and it is the job of the political system to do this. I am confident that all sides in this House can do it but it must be done. It is not in our interests to delay or put it off.
People ask the reason the figure now is €15 billion, when it stood at €7.5 billion one year ago. I will explain the changes that have occurred to create this €7 billion gap. A total of €5 billion of it is accounted for by lower growth forecasts for 2011, 2012 and 2013. Growth in 2010 actually has been what had been predicted but various market analysts have stated it now is less likely that growth for 2011, 2012, 2013 or 2014 will be as high. This may be excessively pessimistic and I am confident that Ireland will end up growing at a slightly faster rate than expected by the aforementioned market analysts, which would make our case and task easier. However, at present the market has stated that we must operate on the basis of the growth rate of approximately 2.75% the Department of Finance has calculated as a consensus figure among different market outlooks. Approximately €500 million of the adjustment to reach the changed figure of €15 billion arose from a statistical change within the CSO on how it measures national accounts. I acknowledge the remainder of approximately €1.5 million to €1.8 billion is accounted for by higher debt interest payments because the costs of the banking crisis are higher than the Government had expected and because of higher interest rates the State must pay at present. This explains the change and the rationale behind the figure being €15 billion, rather than €7.5 billion. Some people say we should delay action. However, to return to that household metaphor, that would be akin to us simply adding increasing amounts of money to our credit card bill, thereby obliging us to pay ever-increasing interest payments. It would not be clever or rational to end up paying such a high proportion of our tax revenue in interest payments. It is better for us to address and recognise the issue and to close the gap.
Primarily, this will require much more efficient public services. That huge increase in spending on social welfare, education and health, which was based on proper instincts, was not managed properly. We did not get real value for money because it was thought the country would be on an ever-upwards stream in which revenue increased continually. While one should be honest and clear about that, now is the time to manage this issue and we will be able to do so. The job of the political system is to achieve efficiencies in the public service that will allow us to meet the change that will take place.
To use, however, a term I have heard in this Chamber, just as anger is not a policy nor do I believe fiscal rectitude alone is a sound economic approach at present. The Government is not making this adjustment on an ideological basis and is not suddenly stating that Keynes was wrong. It simply is a recognition that given Ireland's particular circumstances, the aforementioned boom and bust has left behind it a structural adjustment that must be made. This does not pertain to ideology but simply recognises what went wrong and what must be done to adjust to this. In addition, this State cannot return to an over-reliance on fiscal conservatism as an economic policy. That policy dominated some of the thinking during the early decades of the State but did not serve us well. We must get the budgetary approach right and we must get the banks to work because failing to do so would act as a constraint on proper growth. However, it will not be the driver of growth itself and will not stimulate the economy in any way.
I wish to provide a sense of confidence by noting that a fairly wide overview of our economy demonstrates that we are in far better shape to achieve that growth, even as we make a fiscal adjustment, because the other underlying factors that are the real drivers of growth exist and are stronger than they have ever been. For example, Ireland has a tax system that encourages and supports enterprise. While one needs good, competitive sound infrastructure, Ireland has such infrastructure like it never had before. We need skilled people and the investments we have made in our education will stand to us now. These factors are what will drive growth and these policies still are in place and will remain. Even in tighter fiscal circumstances, we have the money to spend on capital areas and can keep that sector working. We can revert to a model that is truly sustainable and which works for this country, and that is our job. The Green Party in government has not simply been in office to fix the problem but to introduce new thinking and new ways of looking at how one stimulates such growth and this is what it has been doing. The smart and sustainable economic plan the Government announced in December 2008, to no great acclaim at the time, is starting to work. Exports are growing strongly. We are back in the black, as a country. Foreign direct investment has a research component that will fix those companies into this country. We have critical infrastructure, such as broadband and electricity, that are starting to work and will bring jobs.
Most critically for the Green Party, we are bringing a change in politics because that was one of the legacy issues that we needed to change. We have cleaned up our planning system, which was at the root of the property bubble and the dysfunctionality around it. We will remove the corporate influence from Irish politics, which was also a root cause of some of our difficulties.
Within months. We need to move, and we have moved, beyond the Civil War Punch and Judy politics that is not in tune with the needs of our people at this time. That is one of the reasons why we stayed in Government: to do the hard thing and the right thing and turn the country around, which we will.
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I welcome the fact that the Taoiseach invited all political leaders to look at the books. I am glad of that initiative. Opposition Deputies may smile but I am not trying to be funny. The action was taken by way of inviting comment, as this debate has presented in the last two days. I have heard some very solid contributions from all sides of the House. The Taoiseach's invitation was not an attempt to spread blame, far from it. It was a recognition, for the first time in the House, that everyone has an important contribution to make.
It is also important that almost all the political leaders recognise the need for the reduction of the budget deficit to 3% of GDP by 2014. While it is important to build external confidence, it is also important to retain the confidence of our own people. I take the point made that Members on the Government side must recognise some of these very important points.
The comment is often made on the street that the Government should act quickly to imprison bankers. It is important that we deal with this point. Of course, it is important. It is also important that due process takes its course. If that happens people will find themselves behind bars, provided, of course, it is proven that they have acted illegally. If we in Government ask for cutbacks or reduced services we must not be accused of covering for people who dealt severe blows economically to this country. It is important to state that up front.
I take the points made by Deputies Jan O'Sullivan and Joe Behan. It is equally important that Members of the Dáil should make their fair contribution. Over the last while, the charge has been levelled that we dictate the policy but have not taken the pain. The forthcoming budget, the third in a line of severe budgets, has to do more than attempt to correct this. It must show that we are all in this together. The only way we can do that is by making sure that everyone makes his or her just contribution, and the level of each contribution must be decided justly.
I am not in the business of making excuses and I accept all that has been said about the downturn. It is also important to stress, although not by way of an escape clause, that it is not only this country that is suffering economically. We have seen what is happening in France. We see what is happening in the United Kingdom, where some of the severest cuts since the time of Mrs. Thatcher or even the 1930s, have been applied. Last night on television, I saw that Democratic election candidates in the United States do not want President Barack Obama to canvass with them. It is not just here; it is everywhere. I am not making an excuse but it is important for us to be solid in our support for economic policies and to try to retain our financial credibility.
I will not revisit the good times of the Celtic tiger. This morning, I heard Opposition speakers say that the people will decide on the Government's future and that they did not need to go into that. Neither do I feel it is important for me to list the huge gains of the Celtic tiger era. However, I repeat Deputy Ryan's points about our educated workforce and our huge investment in infrastructure. These must be part of our economic recovery.
Rather than rely on my own few words, I recognise what has been said by the EU Commission. We are often reminded of criticisms made by the EU about the Irish economy but it is fair to make this point. The EU Commission made it clear that the budgetary policy decisions taken by the Government in recent months are having the intended impact on the public finances and are restoring much needed confidence in the country. It is not a matter of trying to challenge each other for the sake of it but of bringing about a proper outcome. For the first time since I came into the Dáil in 1997, this debate has allowed contributions to be made in the proper context of trying to secure a sustainable future.
I welcome the opportunity to contribute to this debate. While macroeconomics is the issue we are discussing today we must relate matters to the experiences of people and to their own circumstances. Everyone knows the country's level of income and taxation has dropped dramatically in recent years. It is almost akin to a house where two people were working but where one has lost their job. The household must maintain a level of expenditure while as much as 40% of the household income has gone. Approximately €50 billion in taxation income is now down to €30 billion or thereabouts. This is a serious reduction. The same basic question must be addressed, whether by an individual, a household or the public at large. When people wonder what we should do with the economy, I ask how much money that we have not got should be spend next year. I am not talking about figures in billions. I simply ask how much money that we have not got should we spend next year. If the people of Ireland feel that we should borrow €1,000 for every man, woman and child in the country we would have a €5 billion deficit. If we borrow €2,000 for every man, woman and child we would have a deficit of €10 billion. A borrowing of €3,000 for every man, woman and child would make a deficit of €15 billion. This year, we have borrowed €4,000 for every man, woman and child in the country and we have a deficit of €20 billion. In this calendar year, we are borrowing €4,000 for every man, woman and child in the country so that we can spend money we do not have. Can we continue to borrow money we do not have and run up interest rates? We all know the clear answer to that question.
Some say we should continue to borrow. Some social commentators say we should not try to cut back but should continue to borrow more than 3% of GDP beyond 2014 and run up debt for a longer period of time. The Government is committed to bringing the budget deficit down to 3% of GDP by 2014. This is based on increased taxes, reduction in expenditure and growth of about 2.75%. That is not an Irish Government figure. It is what the IMF is saying will be the approximate case for Ireland. The figure is not based solely on what is happening in the Irish economy because we have considerable exports and our growth will be based on growth in other countries. We cannot export extensively to countries that are not growing.
Some say we should ignore bondholders and those people who give us loans. I have heard this suggestion from across the House. That is like saying to a couple who come into a Deputy's clinic and tell of their big mortgage and the need to borrow more that they should ignore the bank and the mortgage and that their loans will go away. Saying we should ignore bondholders is, in layman's English, saying one should ignore personal debts. One cannot do that. Especially if we have to continue to borrow, we cannot walk away from the commitments we have already incurred.
Some aspects of this debate have been unreal. We have a budget deficit of €20 billion and all the main parties have agreed that we should get our budget deficit down to 3% of GDP by 2014. GDP is of the order of €150 billion, bringing our deficit down to about €5 billion in 2014. We are starting at €20 billion and we have all agreed to get to €5 billion, yet people are saying they do not agree with the figure of €15 billion. A child of eight in second class in school could tell us that if one has to go from €20 billion, which we are at today, to €5 billion in 2014, which all the major parties have agreed, the difference is €15 billion. A number of people are now refusing to accept this €15 billion figure. The sums being done on the other side of the House suggest that we can go from €20 billion to €5 billion with an adjustment of €9.5 billion. Perhaps Opposition Deputies are using a new type of mathematics but it is not an approach the IMF will find credible.
Growth is based on our exports. Agriculture and food have done well this year and tourism and the smart economy are improving enormously. The new wind farms being developed will help our overall trade balance by allowing us to reduce our dependence on imported fossil fuels. We will also have to stimulate domestic demand, however.
If the Government does nothing else over the next 12 months, it should investigate whether the money paid on the jobseeker's allowance can be translated into supporting people in work rather than paying them to remain unemployed. Both employers and those in receipt of the jobseeker's allowance would be happier if people were in work, and all of us would benefit from such an outcome.
In the limited time available to me, I wish to address some of the points raised by the Minister, Deputy Eamon Ryan, regarding public service reform, an important issue about which his Government has done nothing. Reform of our public service, institutions of State and public expenditure decision making system could make a huge contribution in the medium term to the cost of administering the State's services. Week after week, the Committee of Public Accounts considers various stories of overspending by one Department or another. Year after year, the Comptroller and Auditor General produces annual reports detailing the breathtaking scale of waste. From time to time, his office carries out value for money audits which expose the extent to which we are not getting value for money. The budgetary cycle is such is that we are usually examining expenditure after the event.
Without being specific, the Taoiseach stated that our economy needed structural reform. Our public service is certainly in need of structural reform. At the last election, the Labour Party committed to appointing a Minister who would drive public service reform. The Croke Park framework continues to have merit but its potential will never be realised unless it is presided over by a Minister. I do not wish to undermine the work being done by Mr. Fitzpatrick, in whom I have confidence, but to acknowledge that the wider reform agenda will not be implemented without a Minister who is accountable for it to this House. I remind Deputies of the experience of benchmarking. Some trade union leaders claim they were minded to run with certain reforms but public service management showed no appetite for change. How are we to reform the public service if sections of its management do not believe reforms are necessary?
In addition, we need to redefine the relationship between Ministers and their Departments and between a Minister and his or her Secretary General. Nineteenth century notions of personal ministerial responsibility coupled with legal ministerial responsibility for all official departmental acts and the legal competence of civil servants to perform such acts without any necessary recourse to the Minister lead to a situation where accountability to the Oireachtas is demanded on an entirely fictitious basis. It is absurd to persist in the make believe notion that a Minister is personally responsible for every action in his or her Department no matter how trivial it may be or how remote he or she was from it. It is a dereliction of accountability to excuse a Minister because he or she did not know something in his Department that he or she should have known. It is not acceptable that a Minister might fail to intervene when he or she should have done so or neglect to stay informed of potential, as well as actual, problems. Our system suits weak Ministers and traditional civil servants. When cock-ups occur, they circle the wagons and engage in collective self-defence. The Minister's impenetrable corporate shroud protects the civil servant and Minister alike from individual examination and accountability. This system breeds the kind of Minister who sees himself or herself as an ambassador-at-large who photographs well but does not read a brief. There is a world of difference between being an ambassador plenipotentiary and being a Minister who wields executive power.
We need to revise the Ministers and Secretaries Act and the Public Service Management Act so as to clarify the functions that can be transferred to the Secretary General of a Department. If a Minister takes a decision personally, he or she should say so and account for it. Where the Department takes a decision under a delegated power then the senior official should say so and account for it but the Minister must account for the degree of supervision exercised over the Department in respect of delegated powers. Senior civil servants are important people who should get credit for their achievements but they should also take the blame when their decisions turn out badly.
Deputy Bruton referred on several occasions to the report on public expenditure decision making I prepared for the Committee of Public Accounts in 2005. That report questioned the appropriateness of our traditional system for modern conditions. Sometimes I think Deputy Bruton is the only Member of this House who read it. The committee adopted the report and endorsed its recommendations to the then Minister for Finance. The Minister took some of the recommendations on board but did not act on the more meaningful ones. The report sought to examine whether the traditional budgetary cycle is adequate to today's conditions. The committee took the view that the Estimates formation cycle, that is, the so-called Estimates campaign, and the bilateral negotiations between line Departments and the Department of Finance should commence much earlier, perhaps as early as January, and end by summer. It was agreed that the Estimates volumes and budget day documentation should contain information on existing levels of service and their full cost in order to assist the Parliament in undertaking output and performance scrutiny and to enable Deputies to understand fully what moneys are being voted, to what end and for what level of service, and what is old and what is new money. Apart from the critical issue of timeliness, the traditional practice of taking last year's allocation line by line and increasing it by inflation is no longer good enough.
It is ironic to observe the process in recent days whereby information is reluctantly fed to the Opposition because the Government is in extremis and desperately wants to hold on to whatever is left of our economic sovereignty. My report suggested that changing the timing of the Estimates cycle would allow earlier completion of this phase of the budgetary cycle. This would require the following changes - abandonment of the abridged Book of Estimates; earlier publication of the White Paper on income and expenditure; publication of the Estimates and the budget as a single event staged in September or October before proceeding immediately to the parliamentary scrutiny of Estimates and Votes and approval or appropriation; and alterations in planned expenditure to be made, if necessary, as a result of parliamentary scrutiny.
The existing system of scrutiny of the Estimates by the relevant committees is not effective. We considered the establishment of a budget committee but decided instead to recommend better resourcing for the Select Committee on Finance and the Public Service so that it could properly scrutinise the Estimates of all Departments. The specialist back-up unit for this committee might have the power to request, where necessary, relevant papers and records from Departments. A consequence of this enhanced role for the Select Committee on Finance and the Public Service would enable the other sectoral committees to analyse, in more detail, the level of service being given by the Department within its remit.
Timeliness of information release is critical, particularly in respect of the Estimates. The situation we now have is unsatisfactory. The ex ante phase of scrutiny is little more than nominal. The Revised Book of Estimates is still not published in a timely fashion and scrutiny in committee is rushed and often cursory. Parliament is often dealing with spending "proposals" half way through the year to which they relate. The fact is that so many of the routine daily operations of government are connected to the budgetary process. What is good for the health of the budgetary process is good for the health of the overall system of governance.
We must then turn our attention to how this House does its business. Sensible changes are crying out to be made. An overly defensive, discredited Government will never make the necessary changes. If we are to restore confidence in politics, so badly undermined by the appalling scale of dereliction of duty by Fianna Fáil Ministers in this and the previous Government, the new Government will have no choice but to implement measures that will restore public respect for this House.
The two-day Dáil sitting this week has been devoted exclusively to these statements on the macro-economic and fiscal outlook. I must ask why this is happening. We have been provided with none of the critical budgetary data and the Government has not provided any indication of the approach it intends to take to the budget, so why is it happening? The only explanation that makes any sense is that it is part of the cynical political game the Government is playing to try to suck in all political parties and to somehow spread the blame for the catastrophic mess it has created. It desperately tries to choreograph the scenario which implicates all political parties in some kind of phoney consensus to hatch a secret plan to somehow sort out the budget problems, not just for this year but for the next four years. The Labour Party is having none of that.
Fianna Fáil created this problem through its reckless mismanagement of the economy over the past decade. It has wrecked people's lives and burdened the Irish people with massive debts which will be with us for at least a generation. The Labour Party will not bail out the Government. It is time for the Government to do the decent thing and to get out and give others a chance to put things right. The people who caused this recession are incapable of bringing about a recovery. The Government does not have the authority or the ability to pass a budget this year, let alone to produce a four-year plan. The members of the Government have no mandate for a four-year plan. They will not be in government to implement such a plan and they should do the patriotic thing now and go to the country. For everyone's sake, they should allow a new Government with a fresh mandate to bring about recovery.
The prevailing feeling among the public now is fear - fear for their jobs, their homes, the welfare of their families and about what the Government will do to them in the budget in December. That fear is a self-fulfilling prophecy as it stops people from living any kind of normal life, stops them spending and destroys consumer confidence. Of course, the mishandling of the economy and the ruinous bank bailout have destroyed confidence in the money markets also. We are asked to participate in this debate yet there has been a marked information deficit when it comes to the Government providing accurate data. It seeks the Opposition's support yet it refuses to provide the basic economic information to accurately assess the current situation.
It was interesting to listen to the Minister, Deputy Ryan, earlier. He had a wholly different rationale for the kind of figures that are being tossed about at present. It is the first time we have heard that type of rationale or explanation as to why the deficit has suddenly jumped from €7.5 billion to €15 billion. Is that rationale shared by anybody else at the Cabinet table because today is the first time we have heard it?
There is no indication that the Government will consider an open budgetary process as suggested by Deputy Rabbitte. It seems intent on refusing to discuss the situation in an honest and open manner. When one considers the contribution made by the Minister, Deputy Brian Lenihan, yesterday, he seemed far more interested in knocking any proposals coming from either the Labour Party or anybody else on the Opposition benches than in listening in any kind of constructive manner to the proposals and suggestions being made. This would seem to be what the game is about as far as the Government is concerned - it is about sucking in the Opposition parties and then knocking them. All of the Government's forecasts to date have turned out to be very wide of the mark. There is no reason whatsoever to think it is any more competent or honest about it now.
Another point concerns the approach due to be taken in the budget. I always worry when I hear Ministers say their priority is to protect the vulnerable because I know from bitter experience they will actually do the opposite. The coded language which they regularly use, such as "We are all in this together" or "Everyone must share the burden", inevitably means that those on low and modest incomes will take the brunt of the cuts. Fianna Fáil has always looked after the privileged and protected the golden circle. It does this in good times and it will undoubtedly do it in bad times too.
In approaching this budget, not only is there a major hole in the public finances due to the mismanagement of the economy over the past decade but there is a major millstone around our necks with a €1.5 billion interest bill to be met as a result of the bank guarantee every year for up to 15 years. We know that bridging that gap will be crippling but front-loading the adjustment to the extent suggested by some Government spokespersons is simply not sustainable. The argument is that we must convince the markets we are serious when we go back to borrowing in January. However, it can hardly be seen as serious or credible to seek cuts that are so severe they are utterly deflationary and destroy all prospect of growth. What if front-loading does not work? Will the Minister, Deputy Brian Lenihan, be coming back and talking about a €30 billion adjustment next year? He has been wrong so often before. What if he is completely wrong on this occasion too?
The truth is that the ratings agencies and the bond markets expect to see a viable plan which is capable of leading this country to recovery. Critical to this is that growth is achieved. They need to see that our economy is viable and what they need to see most in order to create confidence is that there is a competent political leadership in the country. The Labour Party believes that an even mix of spending cuts and taxation measures is required in order to balance the key objectives of achieving growth, protecting employment and reducing the deficit. It concerns me greatly to hear the Ministers talk about cutting welfare rates and taxing the working poor. Not only would it be completely unjust to target those on the lowest levels of income, it would make no economic sense whatsoever. People on low incomes have no choice but to spend their money because they cannot afford to save. Cutting their incomes means depressing consumer spending even further and we simply cannot afford that.
It is very telling that the Government has not ruled out cutting the State pension yet it shows no appetite at all for tackling the obscenely generous pension tax breaks for the wealthy.
How can the Government defend circumstances in which the best off in society can put away pension funds of €5.4 million and, on retirement, take out €1.3 million in a lump sum and pay no tax whatsoever thereon. That this was ever allowed to happen is a scandal. That the Government allows it to continue in the current economic circumstances is completely indefensible, yet neither the Minister for Finance nor his colleagues has ever mentioned this sweetheart arrangement for the wealthy.
The Government spends approximately €3 billion on pension tax reliefs, the vast bulk of which apply to the top 20% of earners. This seems to be a very well-kept secret. Strangely, the Revenue Commissioners do not even collect data on it. Incredibly, the Department of Finance denies any knowledge at all of the costs involved. I have been looking for some of the costs for the past three years. The Department does not collect data. In the most recent reply I received last week to a parliamentary question on this subject, I was told, incredibly, that the Department is to approach the pensions industry to see whether it can put a rough figure on the cost to the State of these generous tax reliefs.
There is a wide range of other tax breaks, all designed to assist the wealthy in avoiding their responsibility to pay tax. There are 126,000 people in Ireland earning salaries in excess of €100,000. Why do we hear nothing from any of the Ministers on the need to implement a fair taxation system such that we can target the serious wealth that still exists in this country in order to achieve fairness in the approach to bridging the budget gap? Unfortunately, we only hear about tackling people on low incomes and hitting them yet again. We know what the Government is and that it has always been a supporter of the wealthiest. It has no moral authority to introduce a budget this year or in any of the coming years. The only solution is for it to do the decent thing, go to the country and allow the public to decide.
That is correct.
Nobody underestimates the serious economic challenges this country faces. Notwithstanding that, it is important in political, public and media discourse to have a sense of perspective. We must have it for many reasons. Reference was made yesterday to confidence. Deputy Gilmore spoke about the "confidence fairy". Confidence is not a policy but it is important, as are attitude and mood. They are important in terms of our perception of ourselves and to inspire confidence among those who lend us money. Some €2 out of every €5 we spend running this country at present are loaned by people outside this country. It is important that those who invest in this country and those who want to expand their businesses here have confidence.
Householders are currently saving just under 12% of income. Normally, a figure of 3% is considered very good. The reason people are saving and hoarding is because they are being cautious and do not have the confidence to spend. They will not begin to spend until they have confidence. Equally, businesses are running with precautionary cash surpluses.
I listened to the Deputy.
Businesses are running with huge precautionary cash surpluses on the scale of the deficit.
To put matters in perspective, since 1995 this country's per capita income has grown by 30% more than that of the EU 27 and by 16% more than the eurozone average. Almost 900,000 more people are at work today than were working in the late 1980s. At one stage in the late 1980s, the rate for ten-year bonds was between 5% and 10% per annum. For many of those years, the rate was over 7%, which is higher than the rate that obtains today. In the late 1980s, repaying the national debt consumed 25% of the revenue collected whereas today the figure is under 10% and will rise to between 14% and 16% over the coming years. This is why I ask for a sense of perspective.
The initiatives that had to be taken under what have become known as the MacSharry budgets in the late 1980s are not on the scale of what is required now. However, because of the sense of direction they gave people, they inspired confidence. Without confidence, there will be no investment or expansion, and householders and businesses will not spend money. Without it, one will not inspire people to lend us money so we can run the country on a sustainable basis.
With regard to front-loading, we have a gap of €15 billion. The main parties in this House are committed to a 3% debt-to-GDP ratio by 2014. If we are to close the gap in a credible fashion, that is, credible to those who are bankrolling us, we must be able to get money at a sustainable rate. If we do not do so, it will inflict far greater pain on people, or perhaps we would not be able to get money at all, in which case others would make decisions for us. This is why front-loading is so important. It is to inspire confidence that we, as a Government and people, have the capacity to make decisions that are necessary at this point of our economic history.
The sad reality is that adjustments of the order discussed are immense. There must be a balance between current spending, capital spending and taxation. We must get the balance right because it matters. It matters in terms of generating confidence at home and abroad.
We withdrew from the bond market not because nobody would lend us money, as some have suggested in this debate - we have a cash buffer that will last until the middle of next year - but because the rates of interest were unsustainable and not affordable. Therefore, the decisions we must take on the four-year plan must be clear. They must give a clear sense of direction such that we can see our way through the enormous deficit of €19 billion between now and 2014.
We must fix the banks, the public finances and continue to invest in research and improving skills. We must promote exports and enterprise and regain the reputation we have lost and which can only be won by having the capacity to take the tough decisions required over the coming weeks.
The health budget accounts for 27% of current spending. It consumes 133% of income tax and half of all the taxes collected. Clearly, any fiscal adjustment will have a major impact on spending in the public health services. There are no easy choices in health and no low-lying fruit.
There has been much discussion on generic medical products. The total output from generic and off-patent products is €325 million. Unless we got all those products for nothing, one could not get €300 million, as has been suggested by Members opposite. I ask Members to refer to the Mark Moran report, which was published recently. Last year we succeeded in achieving a 40% reduction in prices, worth €123 million in a full year. We must achieve more reductions. In the next two to five years, approximately €300 million worth of drugs will come off patent and we must receive substantial reductions. Over the past two years, we have lowered drug costs by €0.25 billion. One must compare like with like and account for the increase in demand for drugs, the increase in illness and demographics. We must do more.
Issues arise in regard to management and administration and they must also be addressed. Deputy Shortall should note that every effort will be made to protect services for patients and others who use the health service. I refer in particular to mental health services and disability services. These cater for the most vulnerable in society.
This economy is not as strong as it was a number of years ago but it is still wealthy. It is worth €160 billion. Its value has lowered by almost 20% from a peak of €190 billion. Given our population of 4.3 million, that categorises us as one of the wealthiest economies in the world. The economy will not go under. We are very heavily reliant on exports. In the second quarter of this year, there was a balance of payments in our favour of 23%, which is very encouraging. The exports will not vanish. Our economic growth will come from fuelling consumer demand in addition to export-driven growth. The exports pertain to food, pharmaceuticals, medical devices, information and communications technology and tourism. These will not disappear and do not all pertain to foreign direct investments. Half the medical devices companies in Ireland are indigenous.
I will attend an event later in the day at which those responsible for a number of health research projects will be in discussions with medical devices companies in respect of the commercialisation of research that is taking place as a result of SFI and other Health Research Board funding. Some extremely exciting research being done in this country can be commercialised and what is happening in this regard represents the future.
The remedy required in respect of the difficulties we face is somewhat different from those which were applied in the past. For example, we had our own currency in the late 1980s but we are now part of the euro. We cannot encourage female participation in the workforce on the scale we did in the 1990s because there is now such a high level of such participation. We do not have those tools but we do have better business know-how and we have a higher level of skill in the area of research. Educational attainment among 15 year olds here is on a par with that which obtains in Sweden and Denmark. We are at the top of the OECD's chart in respect of the number of people under 35 who have obtained third level qualifications.
All of the innovation studies emanating from the USA show that from the point of view of foreign direct investment, FDI, business and innovation and research, we are - depending on the analysis used - in the top four or five nations. In that context, it is important that we should have confidence in our ability as a people. We are good at solving problems.
Yes, but yesterday the leader of the Deputy's party referred to the need to control health spending. I am of the view that he would appreciate what I am saying. Unless the Deputy wants the salaries we pay-----
There have been huge advances in health in Ireland in recent years. Life expectancy has grown faster here than in any other European country in the past ten years. Our outcomes in respect of cancer are improving faster than anywhere else. That is a reality. The fair deal was the subject of much criticism in this House but almost 12,000 people are benefiting from it.
I wish the Deputy would listen. I find that I learn more when I listen than when I speak. I am sure that also applies to Deputy Shortall.
The challenges we face are immense. The Government is up to dealing with those challenges and is not going to run away from the difficult decisions that must be made in respect of both the four-year plan and the budget to be introduced on 7 December. What we will be obliged to do will not be easy. It will be painful and it will not be popular.
I welcome the opportunity to make a small contribution to this debate. If people were not depressed on Tuesday morning, they certainly will be depressed by this evening. We know things are bad and that people are suffering; of that there is no doubt. Each day we see evidence of what is happening at our constituency offices and we are doing our best to tackle the problems that exist.
There is an onus on all Members of this House to send out a message of hope. During the past two days, such a message has been sadly lacking from those who occupy the Opposition benches. The more we hear from them, the more obvious it is that they are heading in opposite directions. They are now even fighting with each other over the airwaves.
What is happening to the Opposition reminds me of the events depicted in George Orwell's novel, Animal Farm. If those on the other side of the House have not read that book, I suggest they study its contents at some stage.
I want to try to give people a message of hope and comment on the four-year plan that is to be introduced to address the difficulties this country is encountering. We should consider that plan an opportunity - it is not a threat - to address the many shortcomings and difficulties that have come to light during the past 20 years. It will take political courage and initiative to tackle these shortcomings and difficulties.
To date, the Government has shown courage, particularly in the context of taking €14.5 billion out of the economy. That was not an easy task. We must now move to the next level. We must move faster, think quicker and be proactive rather than reactive in respect of the way in which we go about our business. In addition, we must follow through on the many reports that are sitting on shelves. We must set targets and establish methods to achieve them. We must then achieve those targets and move on. There is no shortage of ideas among Members on the Government side. In that context, most of the ideas that have been put forward during this debate emanated from this side of the House.
There is a need to move in respect of the Croke Park agreement. We must establish measurable targets and obtain updates on a weekly basis to ensure these targets are being achieved and discover what is being delivered. We must also foster a flexible workforce which will have the ability to move quickly and deal with issues as they arise.
I was struck by Deputy Rabbitte's contribution which, to a large extent, was spot on. However, the Deputy has been a Member of the Dáil for the entire period of my adult life. Why, therefore, has he not done that which he outlined? Why has that to which he referred not been achieved?
We need to deal with much of the red tape that has been allowed to build up and with the various difficulties that have arisen. We must adopt a value-for-money ethos in respect of everything we do. In addition, we must address the burden that has been placed on small businesses by reducing the level of red tape that obtains and adjusting the way in which we fund local government. In that context, we must review the way in which rates are levied. This is a national, not a local, issue. We have tied ourselves up in process and procedure and lost sight of outputs and outcomes. It is on the latter we really must focus.
We must foster and support the development of an entrepreneurial culture in schools and colleges. The Leas-Cheann Comhairle will be aware of the great work done by Wexford Local Development Limited. He will also be aware of the number of people who are fighting back and developing new initiatives and business ideas. Their efforts are leading to the creation of jobs in our constituency. We must work more closely with IDA Ireland, Enterprise Ireland and FÁS and ensure they adapt in order that their ways of operating might prove more suitable in the context of dealing with the difficulties we are encountering.
In the context of tourism, I am on the side of the debate which states a stimulus should be provided. I support what is happening in respect of small business and I also support the tourism sector. The Minister for Tourism, Culture and Sport, Deputy Hanafin, is continuing to highlight this country's unique selling points in the areas of the arts, culture, sport and marine and leisure activities. She is also making efforts to extend the tourism season to the full 12 months of the year. We should not be too proud to open our doors and bring in Michael O'Leary and representatives from Aer Lingus and the ferry companies to see if we can find creative ways to encourage people to visit this country.
We have worked extremely hard to address the difficulties relating to agriculture, forestry and the fisheries sector, with which I deal. A number of complex and difficult issues arise in respect of fisheries. It is easy for Deputies on the opposite side of the House to make certain points. There are two types of people in the world: sayers and doers. I would prefer it if Members could suggest ways in which we might deal with the difficulties that arise.
I have great faith in the people of Ireland and in their ability to pull together to work in the interests of all in society, to make changes now for the better, to learn from the mistakes that have been made to ensure we end up with a fairer and better society and to build on the many positive developments that have taken place in this country. We have done a lot but we have a great deal more to do. I visited Sir John Rogerson's Quay for a photo shoot on Wednesday morning of last week and I noticed the Samuel Beckett Bridge and the new convention centre, which is responsible for attracting huge numbers of people. It is now possible for me to travel from New Ross to Dublin Airport in one hour and 40 minutes. We must consider all of the positives that exist and build on them rather than concentrating on the negative aspects. This can be achieved only if we bring all of our citizens and this great country with us. I am confident we can do this.
I wish to fire one shot at the messengers. In that context, I appeal to the media to adopt a balanced approach. We have been kicking ourselves for two and a half years and there is no doubt we have got the message. Those in opposition are now so intoxicated by the thoughts of getting into power that they have forgotten the plan. They do not have a plan.
The radio programme "Morning Ireland" has become "moaning Ireland". Let us be realistic, the material broadcast on that show is all very depressing. The only exception was on Wednesday. Again, the Leas-Cheann Comhairle will appreciate the contribution people from Wexford made to the programme to which I refer on that day. It was a fantastic show. Perhaps its producers should ensure those who present the programme visit other areas throughout the country to might meet those who are working hard to fight back in these difficult times.
I have absolute confidence that this great nation can deliver in respect of what will be required during the lifetime of the four-year plan. We need support and political courage like never before. I am confident we can deliver in that regard.
I beg the Deputy's pardon but because she was not in the House, I overlooked the Minister of State at the Department of Justice and Law Reform, Deputy White, who is still to make her contribution. I hope the Minister of State will accept my apologies.
Mary White (Minister of State with special responsibility for Equality and Human Rights, and Integration, Department of Justice, Equality and Law Reform; Minister of State, Department of Community, Rural and Gaeltacht Affairs; Minister of State, Department of Education and Science; Carlow-Kilkenny, Green Party)
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They are accepted. I do not intend to discuss figures, targets or doom-laden lists of statistics. People are tired of such things. They are aware of the figures and of the problems that exist. What they want now is to know that the country will extricate itself from the black hole in which it currently lies. They are seeking leadership and vision.
What do we have in Ireland at present that is really good? We have a fantastically well-educated population that is full of innovative and creative individuals. Ireland is an English-speaking country in a strong economic and monetary bloc. It has a good climate and good natural resources such as those relating to agriculture and renewable energy. In addition, it is a gateway for America into Europe. Ireland is also developing stronger trade and economic links with countries, such as India and China, with developing economies and consolidating existing links with others.
This country is becoming more competitive. The facts show that, relative to the remainder of the eurozone area, there has been a 5% fall in unit labour costs here. The exchange rates for the euro against the US dollar and sterling are more favourable than in previous years. The banks are just beginning to start extending credit, which is the lifeblood of our economy. Our exports are increasing, as has been reaffirmed by the positive figures that emerged this week with a strong growth in merchandise exports and sound service exports. Manufacturing output has improved, including indigenous manufacturing. These are good strong statistics. There are problems, of course, and we do not yet have an adequate level of credit flowing. Public and private debt is too high, we have a very skewed property market and high unemployment must be tackled. We must look to our combined natural and current strengths in tackling the problems in the economy.
What are those strengths? We must encourage strong entrepreneurs and support our small and medium-sized businesses, as well as those with good ideas for business. We must provide more incentive to exporters and manufacturers so we are not overly reliant on foreign direct investment. My colleague, the Minister for Communications, Energy and Natural Resources, is implementing a digital economy to create thousands of jobs to be realised through new technologies being developed. We can and will go further with the generation of renewable energies. That will make us more secure in energy usage, with the possibility of energy export in the short term. This is an environmental and economic imperative, and we are carrying this out.
We can redefine and reinvent the possibilities for Irish agriculture. The past seven days have seen marvellous debates in both the Dáil and Seanad on the recent report on the future of Irish agriculture, and there is significant potential for Irish farmers with new markets through the organic route for exporting food, energy crops and forestry. We must maximise the benefits of being an island free of genetically modified organisms and in other areas of agriculture, which is the backbone of our economy.
We will continue to develop strong rural development through tourism. There is a high percentage of new visitors coming to Ireland on walking trips and we should link with local tourism plans and Leader groups to encourage walking in the north, south, east and west in order to benefit the small and medium towns and villages in our most scenic areas in Ireland. We should also link with farmers to ensure they get a spin-off from that too.
We will continue to develop our infrastructure in transport, communications, energy, water and waste, which will in turn solidify our economy. We will continue to invest in our children's education in order to consolidate a knowledge economy in which Ireland is producing new ideas and graduates which are the envy of other countries. There will be a learning environment which will incentivise foreign companies to conduct research and development here because of what we are doing in education.
We must build on those strengths of innovation, education, resourcing, land intelligence and resourcefulness to build a strong and sustainable country. Seneca was right when he said "Men love their country, not because it is great but because it is their own". He is right and I would add that women believe so too. Ireland is not a great currently, but it is our country. We are taking hard decisions and acting correctly because it is our country.
The previous speaker said she would not talk about figures but launched straight into numbers, forgetting the big statistic of more than 452,000 people unemployed in the country. The Minister for Health and Children spoke about increasing life expectancy but when vaccination as a health factor is stripped out, less than 10% of health involves longevity improvements in the country over the past 20 years. I remind the Minister that €1 billion in overtime in the HSE has not been tackled and €121 million has been spent on taxis. There are currently 716 grade 8 administrators in the HSE whereas there were only 13 when it was formed, as far as I can remember. She might consider such issues.
We are not here to debate health matters but our country and the financial morass in which we find ourselves as a consequence of this Government's handling of the banking crisis and the economy. My colleague, Deputy Michael Noonan, yesterday spoke of the quiet fear that has taken hold in Ireland and generated by the Government. The spin doctor thinking behind this is crudely obvious. The Government will float the idea of taking a fiver off the old-age pension. What is a fiver? It will soften the pensioners up and get them ready for the cut.
It is part of an undeclared war on the middle classes. Does the Government remember them? These people worked hard, contributed to pensions and invested such funds in what they believed were safe places such as bank shares. My grandmother would say "as safe as houses" but we all know how safe they are now. She would also say "as good as money in the bank", which is just not the option it used to be either. These people are hitting their pension years without any of the fruit of their hard labour; they dread the next blow, the fiver gone, the free television licence taken away and the free travel reduced.
The Government started the war against the middle class when it cosied up to the builders, developers, bankers and light touch regulators. This Government has now shifted its affections to Mr. Ollie Rehn and the bondholders, and the only consistency is the war on the middle classes. The view of this Government is that everybody must be kept happy other than the hard-working and hard-pressed population at home.
The first duty of the Government is to vindicate the rights of its citizens but when the Government took over several banks, did it investigate how thousands of those citizens were actively misled and persuaded to take out loans they could never repay? Banks have a duty of care to customers but despite this some banks suggested to customers that they should claim a room would be rented in a house that the customer planned to buy, even when the bank knew this would not be true. Some duty of care. We also know some banks accepted income statements they knew to be false and extra money was shoved at people. In foreclosure cases, it is becoming increasingly apparent that innocent people were effectively bamboozled into borrowing money. We all know the stories of people receiving uninvited telephone calls from bank managers offering money but the Government has not investigated it. Unless some of the impoverished and terrified people in negative equity go to court to challenge banks on their actions, nothing will happen with this Government.
The Government has betrayed its own people at every opportunity and continues to do so. Right now the Irish people are the shareholders of several banks and the first duty of those banks, and by inference, the Government, is to those shareholders. That duty has gone unfulfilled.
This morning the newspapers are full of an abject apology on the part of the HSE for its failure to vindicate the rights of one family of children, a failure so bad it would put shivers up the spine of any parent. The apology should not have come just from the HSE but from the Minister for Health and Children and her Minister of State with responsibility for children. The buck stops with them, or at least it should.
The Harney years in health care will go down in history as the lagging jacket years, the "nothing to do with me" years. They were the years in which the Minister insulated herself against pain, failure and responsibility using a lagging jacket called the HSE. It was nothing to do with her if pregnant women were told their babies had died when the babies are alive and well inside them. That involves the HSE. The X-rays that were misreported had nothing to with her, and neither has the €1 billion or €2 billion to be taken from a patently inefficient system. She will just allow the HSE make the decision.
I welcome a positive development today in the announcement that planning has been approved for the metro. This is one of many infrastructural projects we need, as it could yield 37,000 jobs and make us competitive. Fine Gael's NewERA plan takes in renewable energy, the extension of broadband throughout the country and the mending of water pipes which lose 47% of water that is expensive to distribute. These are jobs are not just for their own sake, but to make us competitive.
Ultimately, people feel builders, developers, bankers and bondholders come before the crying needs of the citizen. This is shameful but not shocking because it is part of a long-established pattern. The Government has lost the confidence of the people and the markets. How long will it be before it loses the confidence of this House? It already has and the people who support the Government but no longer believe in it must have the courage to put an end to it so that Ireland can have a new start and leadership providing solutions that will give our people real hope and the markets real confidence.
I welcome the opportunity to briefly contribute to this debate on the economic future. We need an independent future but this will only happen if the right steps are taken to reduce the country's deficit. We have taken two steps backwards as a country and we are closer to the International Monetary Fund taking control of this country because of the mismanagement of the public finances. We were told only a few years ago that the country was awash with money which could not be spent quickly enough but we are now broke and looking into an economic abyss. Clearly, it is not just the Opposition or members of the public who share this view. It is the view of the bond markets and the analysts. Earlier today, it is sad to report, the Irish bond rates went up to 7%. If we were to go to the market at this moment in time we would be crucified because the markets do not believe the full truth and nothing but the truth is being told by this Government.
Fine Gael is hugely committed to putting the country first, ensuring we achieve the 3% deficit reduction by 2014 as agreed with the European Commission. There has to be some level of front-loading in December's budget but there is a tipping point at which ordinary citizens cannot accept any more tax increases. From the Fine Gael perspective, for every €4 spent, there should be €3 in departmental cuts and €1 of tax increases, which is a fair point and needs to be taken on board by the Government.
We also do not know the percentage reduction the Government is seeking to achieve in December's budget and in 2012 and 2013 to achieve the 3% reduction by 2014. That needs to be set out clearly in the four-year fiscal plan. Without this information being in the public domain the markets will not have confidence in Ireland and its ability to achieve the target. That the Government has opened up the books to the Opposition and encouraged it to come forward and see the extent of the black hole in the national accounts has to be welcomed. However, it did not happen before time. The constant drip feed of information which has been taking place in the past 12 months has clearly set Ireland's credibility back because we were told there would be €3 billion in cuts, then €4 billion and now €5 billion, €6 billion or €7 billion could be taken out of the budget in December.
Clearly, we have been strung along all this time and the public are angry. We have had no apology from the Government and the Taoiseach who brought the country into the abyss and who have mortgaged the futures of our children's children. The Taoiseach has not come forward and apologised directly to the Irish people. There are no bankers in prison, despite the reckless lending and everything else that went on in this country in the past few years. On the growth scenarios which have been predicted, there is a difference of opinion between the ERSI and the Department of Finance. We need full information on what the growth predictions will be for the coming four years. We also need to take into account the worst case scenario..
All the forecasts from the Minister for Finance have been wrong to date and his credibility is in shreds. We need to set out the different scenarios on the growth predictions in order that we can have a real debate on how bad things really are. That is why Fine Gael has consistently sought independent verification from someone outside the Department of Finance to examine the books and state what is the situation. From our perspective, we are very positive regarding the economy. We want an economic stimulus package included in December's budget. We need to get people back to work and that is the crux of the matter. If we have more people paying more taxes there will be less of a burden on the people who currently have to pay tax. The priority should be getting people back to work.
I do not have the interest or time to criticise the Government for its sins of the past decade. They are well recorded and it will be judged accordingly.
I will make two points. First, if John Bruton had been re-elected as Taoiseach in 1997 we would not be in difficulty to the extent we are today. He would have had the intellect, capacity and focus that was missing in the past ten years and would have been unburdened by the personal difficulties which must have been a huge distraction to our last Taoiseach. Second, I am confused by the continuous reference by Government Members to the fact that we must push political differences aside and work for the good of the country. Surely we were elected to work for the good of the country and if a generation of politicians have to pay a price of failure, then so be it.
The most important challenge facing this Government, and what should be its whole focus, must be securing our future in terms of funding. Confidence in Ireland must be restored to the economic markets. We do not have to whisper this, because the markets are way ahead of where we are in this House. The general public is ahead of us. We have been cocooned in a parallel universe and indulged in manoeuvrings that have no relevance. The public has moved on and so must we.
Faith in the political system will be restored only by our actions, not by our words. Corporate donations must be banned and clear blue water has to be created between the builder, the banker and the politician. The criminal justice system appears to have failed to deal with wrongdoing in this area. We must correct this. Spending limits on a yearly basis must be imposed on politicians and legislation should be introduced to achieve this. Our banking guarantee alone will cost in the region of €60 billion to €70 billion over the next ten years. In seeking to ensure funding we must be mindful of the impact on economic growth and the need to look after the most vulnerable in our society. The Government will eventually bring in a set of proposals. This should be done sooner rather than planned as a terrorised public lose confidence by the day. There is no mystery to this. In the interim the Opposition must also put forward proposals. Fine Gael proposes to bridge the gap by 75% cuts and 25% tax increases. The cuts must be across the three main headings of pay, welfare and other services. Pay savings to the Exchequer are important but, greater than that, they send a signal to the markets that we are a country concerned with competitiveness and the private sector is not alone in taking pain. In the past two years the average national income has decreased by 20% while that of the public sector decreased by 13% to 14%.
The Croke Park agreement allows for a change if there is a significant financial deterioration Surely now that is the case. The social welfare budget protects and helps many vulnerable people but also helps many who are not so vulnerable. There is scope for savings. Other services, such as health, justice and so on, will have to be cut back. The tax base will have to be expanded. Aligned to all of these measures there has to be a policy of economic growth. We have to invest in our potential strengths, namely, education, tourism and agriculture.
We always tip the cap to small businesses but time and again we establish agencies to patrol rather than assist. Our economy has contracted by 20%. Surely charges should drop accordingly and local authorities should improve efficiencies. Can we put in place a package for our diaspora to purchase our ghost estates? Can we devise a scheme to release the billions in savings, such as a macro car scrappage type scheme?
Throughout this debate we all talked about restoring confidence to the economic markets. The solutions are tough but also straightforward. We also call for political leadership but surely that is in our hands and the next few weeks will demonstrate if we have it. We must act now before others do. Do we want to hand over sovereignty or take the hard decisions? The budget should be brought forward to the earliest possible date as the current fear and vacuum has created paralysis in our economy.
In a nutshell, we have to reform politics and put a divide between the politician, the developer and business. We are looked upon abroad as a banana republic due to the close relationships between those sectors. We also have to make the hard decisions and examine the Croke Park agreement. It is not about going after the public sector. This will have to happen in the next few years anyway so let us be realistic. If we are serious about restoring confidence to the economic markets we have to examine every aspect. We cannot come in here and pontificate and call for leadership, hard decisions and the restoration of confidence by the bond markets in this country if we do not make the necessary decisions which are required to ensure confidence is restored.
I sat in this Chamber yesterday for most of the day listening to the various contributions, the first of which was given by the Taoiseach. I was very disappointed with the blandness of his contribution and that there was so little help held out for the hundreds of thousands of people who are in the most serious economic difficulties they have experienced in their lives. I was also amazed that the Taoiseach's speech started in 2008 and that there was no mention or recognition - not one word in his speech - about what happened before 2008. There is a collective political amnesia on the other side of the House. One can mention anything, but one cannot go back further than 2008.
At that time the Government and its predecessor organised the greatest national binge that was organised by any Government in the world. We were all on the pig's back and were led to believe the pig would run forever and not stop.
Even the media were taken into the loop. The national newspapers and magazines we picked up at the weekend celebrated the excesses of this country, the hundreds of millions of euro spent on hotels to knock them down, handbags for €5,000 plus - one would not look at it if it was less - and champagne that cost €2,000 and €3,000 a bottle. This is what we celebrated, and there was no acknowledgement or regret expressed by the Taoiseach, or, indeed, by anyone from that side of the House. I will not dwell on it any longer except to say that there are persons out there who organised this crisis.
I have been in this House for a long time, probably longer than any other Member present - even the Leas-Cheann Comhairle. I do not remember any Opposition at any time over the past 25 or 30 years which acted as responsibly and as patriotically as this Opposition. Whether it is the Labour Party, Fine Gael or the Independents, we all have bought in to the crisis and we all have more or less agreed on the parameters of the adjustments that must be carried out.
The people, in spite of all the suffering and difficulties, such as the 22,000 unemployed and the hundreds of young couples in my constituency and, indeed, all over the country who are in negative equity, know that there will be pain and suffering, but they want fairness. When they see the wives of developers have property signed over to them - houses, yachts, aeroplanes and jets costing millions of euro - to escape paying their fair share and when they see some of those who were in charge of the banks and financial institutions still enjoying the corporate life to which they had been accustomed, they ask why they must sacrifice and suffer when those persons are still there. I include the Government in that regard.
In whatever cuts that must be made, I appeal to the Government to look after the capital programme. This programme is an investment in the future of this country and we should build roads, schools and health centres now. We must provide employment for the 450,000 or 460,000 unemployed in this country as it is an investment for the future. We should keep our engineers, architects and quantity surveyors at home and give them employment instead of them having to go to Canada, Australia and New Zealand, as is happening every day in the case of my neighbours in Donegal and, I am sure, the neighbours of every Member. The Government should maintain the capital programme and spare the elderly, the sick and those who contributed to the country in the past.
Ciarán Cuffe (Minister of State , Department of Agriculture, Fisheries and Food; Minister of State , Department of Transport; Minister of State , Department of Environment, Heritage and Local Government; Dún Laoghaire, Green Party)
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With the Leas-Cheann Comhairle's permission, I intend sharing my time with Deputies Sargent and Gogarty.
Ciarán Cuffe (Minister of State , Department of Agriculture, Fisheries and Food; Minister of State , Department of Transport; Minister of State , Department of Environment, Heritage and Local Government; Dún Laoghaire, Green Party)
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Yes. Rather than looking back, it is more important today to look forward. We could spend a great deal of time asking what if, but it is more important to reach agreement on our vision for ten years' time. Once we are clear on this, many other ideas will flow naturally. I want to move beyond the criticism into the realm of ideas, and I am grateful that Deputy McGinley, at the end of his contribution, threw out ideas that moved beyond criticism.
We are a small country, an island nation on the edge of Europe. In historical terms, there was the European century of the 19th century and the American century of the 20th century. The 21st century is, in my mind, the Asian century and that puts pressure on a small island nation on the edge of Europe. The factors that help us are that we have a decent education system, we speak English, the demographics are good in that we have many young people in training, education or available for work, and we are fairly good at thinking on our feet. Those all are positive advantages for Ireland. On the downside, our costs are high, we have an up-hill battle on balancing outgoings with income, the bond spreads are tough at present and the Government, paradoxically, is over centralised in some areas and too scattered in others.
However, let us look ahead to 2020 and work out what will get us through this. The future will be smart, green and about added value. The question is, who will make those jobs. The Government will make some, but not all, of them and we must be careful that we do not see Government as being the main provider of all the jobs of the future. The more important role for Government is to bring about a programme of reform and, in the short and medium term, reform of our budget. At present, €3 out of every €5 that we pay in wages is being borrowed. Looking ahead, one cannot sustain that position.
The other reforms are crucial as well. In the past couple of years, in Government we have dramatically reformed the planning system in Ireland. We are reforming public transport. Today, metro north received the green light for the railway order from An Bord Pleanála and it is important that this project goes ahead. We are putting in place climate change legislation, local government reform, a directly elected mayor for Dublin city and county, and more competition and more choice in the market. This process of reform is very valid. We have already brought about significant banking reform. Heads have rolled at the top level and we have put in place a head of the Central Bank and a regulator who have the trust of the Government and the people.
Let us think for a second of what the smart economy will consist. Education must be at the heart of it, as must access to education for both the well-off and the less well-off. It is crucial that we get the early years right and that is why the Government, particularly in the past year, has prioritised education by ensuring that children get the education to which they are entitled.
Even as we face a very tough four-year fiscal programme, there is an opportunity to look ahead and ask what investment in education, in buildings and capital infrastructure will happen up to 2014. There is an opportunity in making tough fiscal adjustments.
I think the future will be green, and I am glad to see Deputy Gilmore's recent conversion to advocating retrofitting. I agree with him. It is something we have been doing for the past three years in Government and something we have been talking about for the past 20 years. It is good to invest in renewable energy. It is already happening. The amount of renewable energy has doubled in our time in Government. We are now second in Europe for supplying clean, green renewable energy into the grid but we can go a great deal future. We can double that again by 2020, to provide 40% of our electricity from renewable sources.
There is a green future in farming. There is clean, green growth ahead in farming. We have good soil, a good climate and good grass, and I believe there is a strong future for Irish farming. There is a strong future in adding value to farming in Ireland. There is an explosion in artisan producers. There is a real interest in making more with our good fresh raw ingredients in dairy, meat, fruit and vegetables. I believe there is a bright future there, but it is tough to get the cost balance right and we are working on that in Government.
The green future is in public transport, in reforming Dublin Bus, which we are already rolling out on doing more with less which is crucial, but also with metro north. It will create 4,000 jobs directly in its construction and 2,000 indirect jobs. I hope Deputy Gilmore will throw his weight behind support for that project.
There is a future in added value. There is a significant future in the digital economy, with the web summit in Dublin at present, and in applications in new media and in the kinds of jobs one is seeing in Google and Facebook, and in the other new media of the future. There is a bright future, if we can agree on that vision. While it is tough at present, there are massive opportunities out there that can be seized not only by Government, but by the private sector. However, it is all predicated on reform.
Tá áthas orm deis a bheith agam labhairt ar an díospóireacht tábhachtach seo.
I know we are part of adversarial politics and this is highlighted by the nature of the Chamber in which we are. However, it is also important to try to rise above the temptation to be adversarial at times, particularly given the situation we are in, and to think more laterally than we are encouraged to do normally, perhaps through the media and other pressures on politicians to act in a certain way. I have listened carefully to the debate and the fact that we need to look at where we are in terms of the geographical and historic space has not yet been mentioned.
Since it was issued and separated from a tradeable stable commodity such as gold, the international monetary system has relied more than ever on confidence. This confidence is an extremely fragile commodity, if one can call it such. When I was Minister of State at the Department of Agriculture, Fisheries and Food, dioxins were an international issue which had to be worked at and confidence restored. This happened, but it takes serious focus to ensure confidence is at the heart of what we do. I am not speaking about false confidence, I am speaking about reasons to be confident. Without that confidence, the world of business, wealth creation and every transaction depending on money becomes problematic. This is why we need to reflect in a fair way that which is working and the positive trends as well as the problem areas, and this is not to shirk, shun or overlook those problem areas.
Unfortunately, good news does not make the biggest headlines so we need to try to ensure there is fair representation of good and bad news. It was reported in a very small article that food and beverage exports have increased and are 8% higher than this time last year. The Minister of State, Deputy Cuffe, mentioned this area as it is one of his responsibilities. It is important that we emphasise where we are doing well.
We state the Dublin bike scheme is part of life and that it is great but not everything. It is not everything but internationally, it reflects extremely well on Ireland. It is seen as the most successful, efficient and cleanest and the best. We need to take pride where we have reason to take pride and it is part of Dublin becoming a cleaner greener city. It is good for business in a very real sense.
Another small article reports that firms making a green switch report savings, as a Vodafone survey of 100 companies found two thirds of businesses reported improved operating efficiencies, financial savings and more employment as a result of implementing environmentally friendly policies. These are aspects of Government policy - not the whole of Government policy - to which it is important to refer as they reflect something of which we want to see more, namely, people saving and making life more efficient with more employment and business opportunities.
The causes of the problems are difficult to deal with but they are being dealt with. Difficulties in our planning system landed us with the property bubble. This may be adversarial, but I am sorry to state that in local authorities Fianna Fáil and Fine Gael worked hand in glove. The Labour Party was not involved to the same extent. This had to be dealt with. It has been difficult but I admire the Minister for the Environment, Heritage and Local Government, Deputy Gormley, for having the courage to face head on those vested interests. We have legislation in planning to take corporate patronage out of politics, which has been another cause of the problems we are debating.
The Green Party was right in forecasting problems that were symptomatic of planning corruption of the past. I was assaulted in Dublin County Council for highlighting that corruption back in 1993. It is now coming out in the wash. Unfortunately, at the time it was dismissed.
The Gulf of Mexico spill has cost the United States dearly and the environmental cost is international. It is seen as a BP calamity and a problem of human failure. However, if we were to be honest about it, it is a consequence of the end of the era of cheap oil. Unless we buy into the clear message and act on it rather than stating we cannot afford to act on it we will suffer. We will not win the businesses that will exist in future. Only economies without oil reliance will win those new businesses. The wake-up call is hitting us in a financial way and this is what is being reported, but let us not overlook the consequences and causes of those problems.
It is a disgrace how small and medium enterprises are being thwarted in their efforts to embrace and rise to those new challenges and create the employment needed. I listened to Deputy Varadkar and I agree with much of what he stated. Ulster Bank went into a company in my constituency and thank goodness there was the presence of mind to save the jobs when the receiver was forced to come in. I am afraid this was not thanks to the bank, and 15 farmers are now at a loss of €300,000 and business investors have lost their life work as a result of a bank acting when people were paying their bills. The company was still in business and in a good position to continue in business but the bank decided, in its own narrow self-interest, to enter into the equation. We have to rise above this and ensure regulation will deal with it and that the banks play their parts in getting us out of the problems in which they had huge part in creating.
We can go into the past and point to the macroeconomic decisions made by a previous Administration and the political consensus that existed at the time. We can speak about the lack of an apology for mistakes made or the relationship between builders, bankers, speculators, developers and donations to councillors throughout the country that led to and exacerbated the property bubble. We can speak about the lack of leadership shown by various political parties through their unwillingness to break the link by refusing to take donations from corporations, businesses and trade unions. However, time is limited and reality faces us.
We can speak all we want about the merits of dragging out our pain beyond 2014, even allowing for the extra interest payments we would have to make. However, the reality is that those poorly regulated monsters, the ratings agencies, which have called it wrong for Ireland before and will continue to do so, through the power they have been given to hold us by the throat. We made a commitment to our European partners and the European Central Bank to cut our deficit to 3% by 2014. Therefore, to give us a chance to retain what is left of our economic sovereignty we need to introduce a tough budget and front-load it with a balance rightly struck between taxation and cuts. It is a case of slash our wrists or someone will come in and stab us in the heart. Unfortunately, that is not much of a choice. We have a moral as well as a political duty to try to introduce the best budget and best four-year plan possible.
I stated previously that people need to be afraid - very afraid - lest we continue to believe the fantasy economics of those who can afford to hurl from the ditch and say we can stretch it out. This does not mean that as a country we cannot prevail. I believe we can and will get out of this mire. We have done it before and we will do it again. We are a creative and resourceful people. With our export sector continuing to thrive, our agricultural development and our tourism potential we have many jewels in the crown. Most of all, we have our people and their continuing high standard of education, a standard which I must emphasise needs to be maintained.
As Deputy Trevor Sargent stated, in getting through this period we need to be wary of the looming challenges of peak oil and climate change. Peak oil means the global standard of living faces a decline with energy shortages and massive increases in energy prices. We need to prepare for this decline in economic activity and live in a sustainable way. This recession is our opportunity. As a country, we are closer to Spain and Portugal than Germany but we borrowed from German pensioners to max out our credit cards. We can no longer do this. The price of imported fuel will continue to rise from a current price of €6 billion. We need to be able to produce that energy in this country and to store it as fuel to power transport vehicles, heat our homes and export it in order to create an extra revenue source. This is the future way forward, along with agriculture and technology.
The Green Party is prepared to make the tough budget decisions and to do the right thing but the budget still has to be fair and it must be seen to be fair and we must show political leadership. On previous occasions I have called for pay cuts for Deputies and Ministers and I do so again. We also need to scrap the ministerial mercs as soon as possible, reallocate the Garda drivers back into working on the ground and create a pool of junior ministerial drivers. I acknowledge that Ministers need to work while travelling and they cannot be driving; it is very difficult to work and drive. I suggest a pool of drivers to drive Ministers in the Minister's own vehicles. This would send a message that we are not the elite. It appalled me to see Ministers driving into Farmleigh in their mercs as it sent out the wrong message. I, for one, do not agree with it. We need to show leadership. We need to show leadership and vision.
We must protect education. In the programme for Government the Green Party secured major reversals in education cuts and the protection of the education budget at a very difficult time last year. This time there is significant pressure to slash and burn the education budget. This is a regressive step that will cost us hundreds of millions of euro over the years. Finland invested in education during a time of recession. It is a country with a similar population to Ireland and now it is reaping the rewards of that investment. Accepting the pressures to front-load, we must admit it is impossible to avoid a hit on education but the Department of Education and Skills must be seen to perform better than every other Department. In that context, the Minister for Finance, the Minister for Education and Skills and the Taoiseach, must know that some areas are sacrosanct to the Green Party. Capitation must be maintained and the extra teachers promised must be provided. Language support and special needs must be protected. The delivery of school buildings and capital projects cannot be slashed too much as this will affect job creation and make the situation worse.
We must keep teachers in the schools. Education is the way forward. It will reap an economic benefit and therefore it needs to be protected.
I propose to share time with Deputy Lucinda Creighton.
Some 94 years ago, the people who fought for the independence of this country proclaimed the Irish Republic and the right of the people of Ireland to the ownership of Ireland and the unfettered control of Irish destinies to be sovereign and indefeasible. The Republic also guaranteed religious and civil liberties, equal rights and equal opportunities to all its citizens.
We thought we lived in a democracy which is defined as a political form of government in which the government is derived from the power of the people. Effectively, we did not live in a democracy but rather in an oligarchy. This was a system ruled by a few persons. We were ruled by an elite group whose members were not the wealthy; this was an elite group of trade unionists, social partners, politicians and the wealthy. They made the decisions in this country and this House was left without any powers. Until the powers are returned to the House, we will not live in a democracy. We are answerable to the people who vote for the 166 Members of this House.
These are extraordinarily difficult times for the people of Ireland and the Government has announced that €15 million is required. People are angry with those who created the mess and this anger is tangible. This anger has been inflamed by the fact that the bankers, who contributed to our economic freefall, seem to be walking away scot free while small businesses and ordinary people are being hauled through the courts for relatively small loans.
As public representatives we sometimes spend too much time in the House trying to score points while thousands of Irish people are suffering incredible hardship with, unfortunately, much more to come. The people of Ireland know what the problems are and they want to see credible solutions, backed up by strong leadership. However, right now, they want to see a unity of purpose across this House in order to fix these deep-rooted problems. The least we owe to the people who elected us is for all of us to show strong leadership in this time of crisis. I agree with Deputy Gogarty that we have to get rid of ministerial cars and we should consider the gardaí who guard Leinster House. We are not in a time of war but rather in a time of crisis and we could free ourselves from these trappings of power. We have to show leadership.
Politicians have to review how the business of the House is carried out. Deputy Kenny said he would ask the people to decide in a referendum on the need for an Upper House. If politicians expect the people of this country to take the pain, we have to lead by example. I have no difficulty in saying that we have to take a cut in pay. I have already taken a voluntary cut in pay. I refer to Senator Donie Cassidy's remarks about the difficulty of living on €65,000 a year which is an insult to the people who are worried. We must unite together and we will get out of this mess through hope and leadership.
This situation of economic meltdown in which we find ourselves is a direct result of political failure. Politics in this House and in this country has been cocooned and completely disconnected from reality. It has been driven by populism and has proven itself to be more about self service than public service. The political system has failed us and it continues to fail our people. It focused primarily on individuals being re-elected rather than focusing on political accountability and proper governance of the State. It is time to change.
There has been much talk recently about sovereignty in the context of the IMF coming in to salvage our economy. There has been much talk about sovereignty in the context of the European Union and the European Central Bank. I contend the greatest threat to our democracy and to our economic wellbeing and economic and political sovereignty, is the prospect of Independent Deputies and Government backbenchers holding this country to ransom at the next budget or the following budget or the one after that. I am not prepared to allow this to happen. I am not prepared to allow narrow, local - albeit important in the local context - interests to be given priority by the Government ahead of the national interest and ahead of the political and economic priorities facing this State. Gombeenism and parochial politics have no place in the recovery of this country and the recovery of this economy. My main message to the Government is that we cannot allow Independents and backbenchers to hold the Government or this country to ransom. All Members of this House have a responsibility to ensure this does not happen and that it is not allowed to happen on 8 December.
We now move to the question and answer session which has been provided for. There is provision for the Minister to reply at the conclusion of the session. I invite Members to ask questions. I suggest that questions should be grouped.
I note that everywhere people are angry with those who got us into this mess, the bankers and even politicians. They are angry that these people do not seem to be answerable. After two years, what is the Government doing to bring these people to account for wrecking our country?
I would like to ask the Minister about the deficit target. We know it has to be 3% in 2014, but what percentage targets have seen set for 2011, 2012 and 2013 as we try to achieve the 2014 target? Will those targets be stated in the four-year fiscal plan? The Department of Finance's growth predictions are different from those of the ESRI. The variation between both opinions is significant. Will the four-year plan set out the various growth scenarios? Will it be realistic? Will it consider the possibility of negative growth, as well as the likelihood of positive growth? We hope we will have positive growth, but we do not know.
I am sure the Minister is aware that Germany and France have agreed a pact, the aim of which is to amend the Lisbon treaty. They intend to seek support for the pact within the EU. They would like penalties to be imposed on member states that do not stay within the limits of the Stability and Growth Pact. It has been suggested that voting rights may be withdrawn from member states as part of this new pact. Given that the Stability and Growth Pact is such a fundamental aspect of our current economic circumstances, does the Minister have a position on the proposed pact? Regardless of our disagreements about the target of 3% of GDP, I would like to know whether the Minister has a view on the matter. Can he tell the House what he will say when he meets his German and French counterparts in the near future?
Deputy Feighan expressed public anger about the country's economic position. I am sure he has examined the Watson and Regling report, which traced the causation of the economic crisis we are in. One of the great strengths of this country's economy has been its continued robust export performance. There was a substantial increase in the number of people in the workforce in the 1990s and the 2000s. Much of that strength has remained in the economy. A major crisis was created by the extraordinary property bubble, which was fuelled by and large by the availability of cheap credit after Ireland's admission to the eurozone. It is not just a question of the banks, however. The property bubble made increased tax receipts available to successive Governments. Those moneys were used to finance expenditures which were unsustainable. That is the essential reason for this country's severe economic downturn in late 2008 and 2009. If the Members of the House do not collectively understand the reasons this happened, we will not devise the correct policies that will enable us to emerge from these difficulties. I understand why people are angry with bankers, as Deputy Feighan said. When we talk about the gap between receipts and expenditure that has to be filled, we should bear in mind that the estimated annualised cash cost of the long-term write-offs in Anglo Irish Bank and Irish Nationwide is €1.5 billion. Apart from that, the gap this year between our receipts as a State and our expenses as a State is €19 billion.
The biggest impropriety in the banking sector was the degree and pattern of reckless lending. NAMA has established that such lending took place markedly in the case of Irish Nationwide and Anglo Irish Bank and to a lesser extent in AIB and EBS. The pattern of reckless lending was the core problem in the banking system. At the time of the nationalisation of Anglo Irish Bank, I pointed out that in addition to all the difficulties at the bank, there were serious issues of corporate governance. The Garda Síochána and the Office of Corporate Enforcement have initiated a full investigation into these matters. My understanding is that a large number of personnel from the Garda and the office are involved in these investigations. I understand the relevant interviews have taken place, or are to take place, as part of this wide-ranging inquiry. I also understand that the relevant files are being prepared for submission to the Director of Public Prosecutions. That is how criminal investigations are conducted in this jurisdiction and in neighbouring jurisdictions. I accept that inquiries on the other side of the Atlantic tend to be much sharper and quicker than they are here. The nature of our criminal justice system is such that investigations in this jurisdiction, like those in the UK and France, which are not any different, take a substantial period of time. I refer to complex cases involving commercial wrongdoing with criminal implications. I assure the House that those investigations are well under way and well advanced.
Deputy Flanagan raised the question of the 3% target of GDP, as our borrowing requirement, which has to be reached by 2014. With the exception of Sinn Féin, all parties in this House have signed up to that target. He then asked about the targets for 2011, 2012, 2013 and 2014. Of course the fiscal plan will set out those targets and the growth scenarios. The Deputy mentioned negative growth. There is no question of negative growth being a scenario in the four-year plan for growth and budgets.
The Taoiseach indicated yesterday that the annualised average growth that is predicted for the four years in question is 2.75%. Greater clarity will be brought to that matter in the plan, which will set out the target figure for next year. Work is under way in the Department of Finance to examine the various assumptions. A great deal of information has already been shared with the Fine Gael, Labour Party and Sinn Féin spokespersons on finance. I am doing everything in my power to expedite my Department's efforts to ensure information is put at the disposal of the Members of this House in a way that enables them to make judgments about what is possible in this year's budget.
Deputy Morgan mentioned the Deauville pact between France and Germany. I have participated in the Van Rompuy task force. This country's position is that the fiscal rules need to be tightened. Indeed, Ireland is the best example of why that needs to happen. Throughout the period when the asset bubble developed in Ireland, we were in full formal compliance with the Stability and Growth Pact. If one examines the Irish report on the Stability and Growth Pact for the years leading up to 2008, one will see that Ireland complied with the borrowing requirements and the rule about the size of the national debt. It is clear that the Stability and Growth Pact was-----
I am talking about the EU Stability and Growth Pact. It was not fit for its purpose of assessing the degree of risk to which Ireland was exposed. Issues like the competitiveness of unit labour costs and the development of asset price bubbles will be part of the revised Stability and Growth Pact. I have argued strongly for that at EU level. To date, the task force has focused on questions of fiscal rules and practices, such as the example I have just given, which would strengthen the pact and the practices associated with it. It is keen to provide for greater scrutiny and surveillance of national budgets in a Community-wide and eurozone-wide framework.
Deputy Morgan rightly referred to the recent declaration by France and Germany of their wish to see treaty changes. We are examining the implications of the proposed changes in our own domestic legal order, as well as in the European legal order. We have not yet expressed a firm position on the proposals, which lack clarity despite the impressive venue at which the declaration was made. The Government is formulating a position in this regard. I have made it clear that we are not, in principle, opposed to all treaty changes in these matters. However, we would take issue with any treaty change that would involve a fundamental change in the character of the Union itself.
I will keep my questions short.
In preparation for the budget, has the Minister any indication as to the ratio anticipated in the correction between current spending cuts and tax increases? In regard to the reforms under way under the Croke Park deal, what savings have been made through reforms to date and how are they benchmarked? What savings are envisaged in 2011 and how will they be assessed?
What specific measures does the Minister anticipate or are at least under consideration in terms of stimulating the enterprise economy, in particular the SME sector? If the Minister is to achieve his target growth rate of 2.75%, the SME sector will need quite a degree of stimulation and that has not happened to date. Effectively,the SME sector has been ignored in the past three budgets.
In regard to wobbly backbenchers and Independent Deputies, does the Minister envisage a scenario where the Government will do bilateral deals with these individuals to keep them on board in order to pass the budget?
I am sure the Minister will have seen the following article but I would like to refer to it. In today's edition of The Irish Times, the economics editor stated in an article that: "Given all the factors [analysing the economic crisis] it is hard to avoid the conclusion that it is now as likely as not that the State will have no option but to resort to a bailout." Will the Minister comment on that statement? The economics editor gives a very detailed analysis. Does the Minister share it?
This morning a Deputy referred to our country as a banana republic. While this country needs much reform, it is not a banana republic; it is a democracy. My party is willing to go into Government to sort out the ills that have beset the country. This is not some African country; it is a mature democracy and a member of the European Union.
The Minister acknowledged, by way of a reply to a parliamentary question tabled by me, that the bondholders in Anglo Irish Bank which matured at the end of September, the anniversary of the guarantee, were repaid in full on the evening of 30 September. Does he agree it was tactically foolish not to disclose that information to the Dáil and, therefore, allow and encourage a debate in regard to those bondholders, or that element of them which I believe is approximately €9 billion, and negotiation with them? In fact, he knew they had been paid in full. Had that statement been made-----
Why did the Minister not tell the Dáil and stop that speculation? In fact, the speculation he allowed to run on, tactically, enabled the markets to take a worse view of Ireland than was justified.
I would like to ask the Minister about his tactics and those of the various organisations under the remit of his Department. I ask him now, because time has elapsed, how was the redemption of those bondholders funded because I understand they were not rolled over under the ELG and were repaid in full? What was the rate of interest of that redemption? Was it current market rates which at that point I believe would have been approximately 6.25%? Is this along with the further €6 billion that the Minister proposes to issue in promissory notes by the end of the year which on today's rates would be at 7.25%?
Does the Minister have any strategy to rebuild confidence in our country which is not, and will not become, a banana republic if the Labour Party goes into Government?
I am not aware of who advised that this country was a banana republic. I agree with Deputy Burton that it is not one. However, I am concerned she raised a question which seems to be based on a story that appeared in a newspaper this morning. I am in correspondence with that newspaper. Obviously, I would not have been aware of the repayment of the bonds because they were a commercial matter between the bank in question and the holders of the debt. As I understand the position, they were guaranteed instruments and, therefore, the scope for negotiation, to which Deputy Burton referred, was not open.
As I said, I am in correspondence with the newspaper in question and I would prefer to leave the matter at that other than to correct the Deputy. She was not as inaccurate as the article but she implied in her question that, in some way, these bonds were ones which were capable of having discussions with the institution in question. They were, in fact, guaranteed bonds. She also implied that I had an awareness in regard to these matters. As I understand the matter, they were redeemed in the ordinary course of business.
I was not made aware of the fact. I am not made aware of the routine operations of such organisations. There was a very large amount of redemption of guaranteed bonds in all the institutions coming up to the guarantee date. There was nothing unusual in that. The effect of the guarantee was that institutions were able to raise finance on the markets with the benefit of a sovereign guarantee and those instruments generally were expressed to lapse as and from the lapse of the guarantee itself. These instruments were no different in character. The suggestion that I would have a special awareness of it or issue a special sanction or a special approval in regard to this matter is entirely inaccurate and not in accordance with the facts. I am glad the Deputy has given me an opportunity to put that on the record.
In regard to the views of particular journalists on the question of whether Ireland needs a bailout, the whole purpose of what we are engaged in is to ensure that we do not need one. The position is that the National Treasury Management Agency was in a position to raise funds in October and November but the interest rates in the secondary markets were very high. On ten year money at the last bond auction, they went to 6.4%.
I will check that for the Deputy. It is on a very thin market. On the interest rate of 6.4%, the view was taken by the National Treasury Management Agency at that stage that the best course of action was not to go to auction in October and November but to do so in January 2011. That remains the position, as the Deputy is aware.
I asked two further questions. The balance of the promissory notes which are to be issued by the end of the year for Anglo Irish Bank and Irish Nationwide Building Society is approximately €6 billion. Under the terms arranged by the Government, the notes will have to be issued at the prevailing rate of interest, which stands at more than 7% today. Has the Department factored in the interest rates at which they will be issued?
The senior debt in Anglo Irish Bank was redeemed on 30 September. How was the debt redeemed? Was it done with further borrowings?
As I indicated, I am not aware of the normal commercial operations of the bank. On the question concerning the promissory note, I have not received any submission to date regarding the precise terms surrounding the execution of this note. Therefore, I am not in a position to advise the Deputy at this stage as to what precise interest rate will be charged or how it will be computed.
I answered the Deputy's question when I indicated I had not received a submission in the matter yet.
On Deputy Creighton's question, the ratio between expenditure, both current and capital, and taxation, will be set out in the national plan. It is, however, a matter of general economic wisdom that a correction is more effective if it leans on the expenditure rather than taxation side. Budgetary corrections which rely to an excessive degree on the imposition of taxation have generally not been as successful as budgetary corrections which lean on the expenditure side. That is not to say the Government is not examining both taxation and expenditure options in the context of the plan and budget. While everything has to be examined, my general assessment is that a correction which relied, for example, by as much as 50% on the taxation side would do much more damage to the economy than a correction that would lean to a lesser degree on taxation. The economic literature bears out that contention very strongly.
On the question regarding Independent Deputies, while I am not engaged in any bilateral discussions with Independent Deputies, they are entitled to make their views known about the general direction of budgetary strategy. I am sure they will do so with me.
On the Croke Park agreement, I do not have a figure to hand. The various matters raised in the agreement are being implemented through the relevant bodies. The agreement contains an assurance that there can be no compulsory redundancies or pay reductions for those who are taking the benefit of the agreement. However, I have made it clear to the staff side that the savings that must be secured under the agreement must be more ambitious than those provided for and agreed therein.
On the issue of stimulus, there has been a substantial element of stimulus in the economy since 2008 through the extensive borrowing that has taken place to sustain the operations of the State. If this borrowing had not taken place, much more radical adjustments would have been required. The difficulty for the State is that we cannot rely indefinitely on this stimulus. It has brought too much pressure to bear on us in the financial markets and exposed the unsustainable character of our expenditure and taxation base.
Other countries have held debates similar in nature to this one. The British and German Governments also attempted to introduce legislation to curtail the activities of bondholders and hedge hunters who may have had recourse to secret bank accounts in Switzerland. Both governments were concerned to proceed in this area. Has the Government or Minister initiated any inquiries arising from a similar concern to those expressed by the British and German Governments?
When I asked a question concerning the identity of bondholders the Minister, as a shy individual, was modest about imparting information in the matter. Will he indicate whether it would be advantageous to the debate if the identities of some of the bondholders with an interest in this jurisdiction were to become known?
Having listened for two days to the helpful views expressed in this debate by all sides and given that budget day is only four or five weeks from now, will the Minister give a clear idea of what the Government will propose in terms of front-loading in the forthcoming budget? In the context of the Hallowe'en horror that is the savings announced for the next four years, will the Minister be more transparent than the Taoiseach has been about how the €15 billion figure was reached? Many decisions will emanate from the change in the figure.
Does the Government have a view regarding the threat from the French-German alliance to introduce a new treaty to impose penalties for breaches of the Stability and Growth Pact? Is the Minister aware that Germany and France breached the pact in the early 2000s and action was not taken to penalise them?
The HERMES computerised model for the economy used by the ESRI is the only economic model that is accepted. The Minister has taken a strong position on the need for the adjustment over four years to be €15 billion. Achieving this target is highly contingent on the growth rate applied in the model. As far as we can ascertain, the Department of Finance does not have a well developed economic model.
I draw the Minister's attention to remarks made by Professor Philip Lane of Trinity College Dublin when he appeared before the Joint Committee on Finance and the Public Service recently. He stated:
Macroeconomic models are of limited value if there is an insufficiency of adequate macroeconomic data. While the Central Statistics Office has a very good reputation for high-quality statistics, it is also the case that limited resources and inadequate coordination across State agencies means that there is a scarcity of timely data in relation to a number of key areas. For instance, the earnings data are insufficiently detailed to provide clear guidance on the full distribution of wage dynamics across the economy. The lack of a survey of consumer finances until now means that key financial dynamics at the household level are not adequately tracked. Similarly, the inadequate data on the distribution of transacted housing prices and commercial property prices has restricted analysis of the macroeconomics of the boom-bust cycle in the property sector.
When Professor Lane can identify three essential pieces of data that any modern economy would use to measure economic growth, it is difficult for the Opposition to rely on the Minister's figure of €15 billion as that which will be required to close the gap, as it will be based on whatever growth figure the Minister includes. It also is difficult to rely on the Minister's prediction of an average growth rate of 2.75% over four years. I presume that encompasses a growth rate of 2% in 2011 followed by three years of growth at 3%, which averages out at a rate of 2.75%. However, given that the Department of Finance has no sophisticated economic model that I know of, given the ESRI's model is coming up with different answers and that Professor Lane has stated there is an inadequacy in the data coming from the CSO in any model used in Ireland, are the Minister's estimates on growth and on the correction needed something of a punt or a guesstimate, rather than anything that is soundly based?
I cannot recall whether the Minister was present yesterday when Deputy Gilmore asked the Taoiseach what were the assumptions that were entered into the model to produce the projected growth levels and the figure of €15 billion. He received a very dusty answer from the Taoiseach and the Minister might reflect on this in his reply. If he wishes to bring Fine Gael with him for part of the road, it would like to be going on correct, rather than incorrect figures. Moreover, I am highly conscious that practically every figure the Minister has announced in this House over the past two and a half years subsequently proved to be wrong.
Let us deal with forecasting. Let us deal with the forecasts for GDP this year to ascertain how wrong they were. That would be a good point of departure, rather than the generalised statement with which Deputy Noonan concluded to the effect that every forecast was wrong. For example, in respect of GDP forecasts for this year, my Department was wrong because it was too pessimistic. Last year, in budget 2010, it predicted a rate of -1.3% but it now is at 0.3%. The Department was out by 1%. On the positive side-----
No, one should be clear about this. At the time of budget 2010, the IMF predicted a contraction in GDP of 2.5% for this year, whereas there has in fact been a contraction of 0.25%. Consequently, it was wrong by 2% in a negative direction last year. The ESRI predicted last year that GDP growth would be -1.1%. As it now stands at -0.25%, the ESRI was wrong in a negative sense, albeit by a smaller margin. The Central Bank predicted that forecasted GDP this year would be a contraction of 2.3%, whereas we now are at 0.2%. We have turned a corner in the past year, even in respect of the aforementioned forecasts, all of which erred on the negative side.
When discussing the reliability of forecasts, I accept Deputy Noonan's point that there is scope for error but that does not absolve the Government from making judgments and assessments, as it is obliged to do. These were the forecasts made in respect of 2010 but if one considers the IMF's forecast for 2011, it stood at 1% at the time of budget 2010 whereas it now stands at 2.3%. One can discuss forecasts and models and I acknowledge the ESRI has a HERMES model, which, as I understand it, is the single fully developed model in the country. However, I note that in 2009, the HERMES model predicted very substantial growth next year, which will not materialise. Moreover, in respect of the four-year adjustment, the Deputy referred to Professor Lane's observations on macroeconomic models and the adequacy of data. I agree with the Deputy regarding the property market about which our data are somewhat inadequate because of the absence of any transparent information thereon. However, regardless of the forecasting data, the Government must make a judgment and as I indicated to the House earlier, I will endeavour to supply Members with as much information as possible, even in advance of the four-year plan, on such matters in order that they can make their own forecasts and compare them with those of the Department. However, my Department looks at the different bodies concerned, considers the different data available to them and makes an assessment on that basis.
Deputy Costello asked about the extent of front-loading and this is a crucial issue on which the Government must make a final determination and which will be announced, at the latest, in the four-year plan itself.
Deputy Costello also asked about the Franco-German declaration but I already answered that question when it was put to me by Deputy Morgan.
Deputy Durkan reverted to the question of bondholders. I wish to return to this subject because Deputy Burton raised an issue about payments to investors in Anglo Irish Bank. The fact that more than €7 billion of Anglo Irish bonds were maturing by September 2010 was pointed out in the 2009 annual accounts published in March 2010-----
The funding profile of any financial institution is a commercial decision for the institution and is monitored by the Financial Regulator. Bonds are a usual source of funding for all financial institutions-----
Deputy Burton should note that Members will not have a sensible debate in this House if she accepts defamatory stories in particular newspapers at face value.
As for Deputy Durkan's question-----
When an inaccurate story is printed in a newspaper and the Deputy insists on giving it further ventilation in this House, I am at least entitled to put the matter on the record of the House to protect myself.
Deputy Durkan asked about the arrangements regarding the identity of those who hold bonds. As I believe I have pointed out to him previously, there is no register of their identities. Such instruments are traded because they are in a sense tradeable deposits. That is their character. They are issued on a certain basis with the coupon representing the detachable interest claimable in the specified period of years and they are traded as commercial paper in markets on that basis. There are no registers embodying who they are. There can be from time to time speculation regarding their identities and of course those to whom they are issued in the first instance may be listed. However, if they are discounted in the market they are traded and there is no register of the current holders.
As for a double tax arrangement with Switzerland, I will ask my officials to look into the matter. As the Deputy is aware, both the United Kingdom and Germany have concluded a good arrangement with the Swiss authorities.
When does the Minister envisage he will be in a position to tell Members what growth rates he expects for next year? Given his remarks, it is his intention not to tell Members the deficit figure at which he is aiming until budget day? On the figure of €7.5 billion that was projected last year but that now has become €15 billion, I ask him to inform the House what elements make up that €7.5 billion. The Minister for Communications, Energy and Natural Resources, Deputy Ryan, provided Members with a version of its make-up earlier today.
I refer to the sum of €1.5 billion that is the guesstimated cost of the promissory notes to Anglo Irish Bank and Irish Nationwide. The Minister will recall that when Members dealt with the NAMA business, he told them that the cost of the bailout of the banks could be ring-fenced off the national accounts. Members are familiar with subsequent developments in respect of EUROSTAT. However, does the Minister envisage any prospect of the sum of €1.5 billion in interest repayments being financed outside of the national accounts?
Finally, does the Minister not think he ought to summon up the courage to send a message to the Franco-German Declaration that, whatever they are contemplating, the last thing this little country wants is to have another referendum on the Lisbon treaty imposed on it.
Market analysts tell me and others that if a country is serious about reducing the amount of interest it pays on its national debt it must reduce its budget deficit to under 10%. We currently have a budget deficit in the region of 12%, which is the highest in the eurozone. When the Minister publishes the four year plan in November, is it his intention to give us that figure? Is it his view that in order to reduce the punitive charges we are currently paying on our debt we have got to get our deficit below 10% if the package, in its broadest possible light, is to be interpreted by the markets as a serious one? What is the Minister's view on this?
In his reply to Deputy Creighton, the Minister said the Croke Park agreement would have to show more ambitious savings. Can I take it from the Minister's reply that it is the Government's view that the agreement will be renegotiated? If there are to be more ambitious savings we will require a new agreement or an amendment of the existing one. Is that a correct interpretation of what the Minister said earlier?
I have three questions, all relating to bond markets and the ability of the State to issue bonds in the first quarter of next year. To develop on what my colleague, Deputy Hayes, said, what percentage of GDP does the Minister expect the bond markets to require our deficit figure to be in order for us to issue bonds next year? From the briefings the Minister has given to Opposition spokespeople and from people outside the House and his Department, I take the figure Deputy Hayes cited to be accurate. If so, what level of front-loading will be required to achieve that figure?
Up to what level of interest will the Government issue bonds? What is the cut-off figure that would make it no longer viable for us to raise capital? My understanding is that it is around 6%, and we have been well above that for quite some time. At what figure will the Minister instruct the NTMA not to attempt to sell Government bonds?
Third, and perhaps most important, in an effort to bring stability and certainty to markets at the earliest possible opportunity, has the Minister considered the option of bringing the budget forward to a day or so after the announcement in mid-November of the four year budgetary framework strategy, when that is agreed? This could convince the markets, over two or three days, of real action around a four year budgetary strategy to which the Government is committed, followed by real action in the form of the first instalment of that four year strategy. Is that something the Minister is thinking about? It is being spoken of openly outside the House and the Minister should give some clarity on it.
Most Deputies followed the same ground as Deputy Rabbitte in his first question. The deficit figure will not be postponed to budget day. It will be contained in the four year plan, as will the forecasts for particular years. My Department continues to work on those.
Deputy Rabbitte's second question related to the growth figure being fixed at €15 billion. A number of factors need to be considered in understanding why that additional correction is now needed. First, the overall size of the economy is now smaller, reflecting revisions by the CSO to last year's figures. Second, the level of nominal growth is now anticipated to be lower in the coming years. This affects the fiscal position in two ways. It reduces the ability to generate resources and directly impacts on the debt to GDP ratio. Third, given the outlook for interest costs, servicing the national debt is more expensive, adding to pressure on the public finances.
World growth for this year is now likely to be stronger than was previously expected and this is reflected in the upward revision of real growth for the year. In the last budget, real GDP was forecast to contract by over 1% but is now assumed to be broadly flat, or marginally positive. I gave those figures earlier in reply to Deputy Noonan. The global outlook is, however, more uncertain, with downside risks. In particular, notwithstanding yesterday's very good results, the activity in the United Kingdom economy, a major trading partner, is now forecast to be weaker in the coming years.
All of these factors suggest that the outlook for growth, both real and nominal, is less favourable than a year ago. It means we have to undertake a greater budgetary correction and in so doing there is an additional negative impact on the forecasts. That is why my Department now believes that a central forecast for the period out to 2014 would see average real growth of about 2.75% for the period, with growth being considerably lower than in 2011. Finally, most other commentators have revised downward their view of growth prospects in Ireland.
Deputy Rabbitte then referred to the fact that the cost of NAMA had been ring-fenced outside the national accounts for Stability and Growth Pact purposes. That is correct. This was achieved in regard to the National Asset Management Agency. However, the promissory notes are, in their terms, captured by the Stability and Growth Pact.
With regard to the Franco-German Declaration, I quite agree with Deputy Rabbitte. Were international negotiations to be embarked upon and were the State to commit itself to any fresh treaty relating to these matters, the Government would be anxious to ensure that any such treaty would not entail an amendment to the Constitution. That, of course, would turn on the terms of the treaty itself.
I am sure the Deputy would not be surprised to hear that I suggested it to him as well. Explorations are constant and ongoing in my Department on the accountancy treatment of a wide variety of matters.
Deputy Coveney made a request in regard to the deficit figures themselves. That was the main focus of his questioning. The precise figures will be given in the four year plan for growth and budgets. The required deficit figure is closely related to the question of front-loading and the amount of front-loading, which will be given at the same time.
With regard to the yield levels at which we are prepared to borrow, I am guided by the advice of the NTMA in that matter. I am not prepared, at this stage, to assign a precise percentage beyond which we will not borrow. I emphasise that we were not shut out of the markets. We could have borrowed in October and November. We opted not to. I will take the advice of the NTMA in that matter.
Deputy Hayes also asked about the deficit figure required by markets themselves. That is a matter of very fine judgment. I will be guided by the advice of the NTMA in that matter also.
No final advice has been given to me on that matter. Clearly, views are expressed from time to time but given the volatile state of the markets I will take that advice when the Government comes to make its decision on the issue.
I think I dealt with most of Deputy Coveney's questions. Did I neglect anything?
I apologise, I knew he had raised another issue. The budget is set for a fixed date in December and the only change we made this year is based on the belief that we can give greater credibility to the budgetary process by laying out a four year track whereby projections for anticipated growth, measures to foster growth and employment and adjustments to expenditure and taxation will be set out in advance of the budget. Furthermore, the end of November returns are an important element in the calculation of the annual budget because they allow for as precise a figure as can be obtained in regard to tax receipts.
Deputy Brian Hayes explored the question of reaching the 10% debt to GDP ratio. He rightly pointed out that our current debt to GDP ratio is the highest in the eurozone. However, until August we were able to borrow at attractive rates because the underlying strengths of the Irish economy were recognised by many international investors. These strengths include our robust export performance, flexible workforce and capacity to adjust our wage and price levels and asset values. Above all, we are moving towards a balance of payments surplus notwithstanding the substantial public borrowing required to fund the State. These factors are recognised in international markets and are among the reasons Ireland has been permitted to be an outlier for so long. The fact remains, however, that our current debt level is not sustainable and it is an exercise in judgment as to how far below it we should go. The Deputy referred to the market sources with whom he had discussed the matter but, while I will certainly take account of his, albeit second-hand, opinion, ultimately I will be guided by the NTMA in my assessment.
I already outlined the basic undertakings given by the State in respect of the Croke Park agreement. The agreement sets out procedures on a definite slate of items but it also provides a framework for the exploration of other issues.
In respect of the €15 billion correction required over the next four years, what was the average rate of interest used in estimating Government borrowing? I am specifically interested in the figure for 2011.
The Minister spoke about the prohibitive level of our bond yields, which today reached a record high of 7.06%. Can he explain why they have reached such an alarming level? We appear to lack credibility in the markets. Will the interest that is accruing on our promissory notes be paid and can we persuade the EU to allow us to keep it off balance sheet?
The Minister and the Financial Regulator both stated it was mutually beneficial to all parties concerned that negotiations be held on the bonds of Anglo Irish Bank. Are such negotiations now underway between the bank and its senior bond holders?
In the past two days of so-called debate, we heard very few positive or hopeful notes from the Government side. Anyone who listened to the debate would want to go to bed and never get up.
In the context of the Franco-German proposals on further restricting member states, has Ireland made any positive suggestions on making available finance from foreign banks which are not at present trading here? Two of our retail banks are not trading and, as a result, people cannot start or maintain businesses. Has the Minister entered into discussions on ways and means of making it easier for people to borrow money from good banks in other member states?
Why do we depend on independent rating agencies about which we know very little to determine the interest rates we pay on our debt? Has there been any debate at European Council level on introducing a European rating system controlled by an independent body that would be accepted as reasonable and fair by member states? This could facilitate grouped borrowing by member states. If one is big and strong, one can get better terms than a small person. Why not allow the EU's 27 member states to rate Ireland? We may still have to pay higher interest on our borrowings than a country with a higher rating but it would not be as high as 7%. We should pursue these ideas rather than continually dwelling on how governments can be further restricted in dealing with their finances. We must come up with positive proposals that will help people start or maintain businesses.
My final question pertains to the talk about Dáil reform. I served on the Select Committee on Finance and the Public Service for three years, during which time I sat through three Finance Bills. Neither the Minister nor his predecessor accepted a single amendment over that period. Is the Government serious about Dáil reform or is it merely conning the people? We sat for days to debate NAMA but every amendment we proposed was rejected.
Does the Minister agree we may be in breach of article 9 of the Lisbon treaty, which specifically protects employment, education and social services? Does he accept that taking €15 billion out of the economy over four years will lead to a dramatic increase in unemployment?
A question of credibility arises in regard to the Government's ability for achieving savings. The way in which expenditure flew out of control in the past decade suggests it will be incapable of meeting its targets. What changes will be made to ensure we make the requisite savings while protecting services? Will new cost accountants and budget experts be brought in? If the plan is not credible, the markets will not believe it.
What interest rate does the Government expect to pay in the coming year? Our interest bill is heading towards €8.5 billion for the next four years and even a small change could add an extra €500 million. We know the UK managed to reduce its rate and we need a plan in place to reduce ours.
As public expenditure was allowed to run out of control, wages and social welfare increased. The Government made decisions based on false foundations, using housing money to set in place spending. When people received increased wages and social welfare, they also put spending plans in place, borrowed money and made commitments. Given the Minister is trying to cut back, they will be caught with commitments made and no money to match them. Will the budget and the four-year plan have some realism in terms of new measures to try to deal with people's short-term debts through deferral over a long period or by some other means to try to close that gap? If we do not do something, people cannot function. It is as simple as that. If the Minister's plan is not credible, interest rates will increase yet again.
All Members agreed in the past two days of debate that people and businesses are looking for hope. I raised an issue yesterday on which I would like a direct answer. A small trader was informed by one of his suppliers last week that the supplier had a letter from his bank cancelling his overdraft of €50,000 and his direct debits. He contacted his local bank manager, who did not know anything about this. When he contacted the business section of the relevant headquarters in Dublin, a faceless official, instead of apologising for what had happened, told him not to try to put him on a guilt trip and that he would sleep easily in his bed that night.
The Minister owns all the banks in the country at present. Will he give a direction that these faceless people treat the business sector, particularly the small business sector, with respect? This case involves a sole trader who is providing 14 jobs. He has reneged on none of his debts and will not renege on any of them but he needs to be treated with respect. There are thousands like him. Given the Minister owns the banks at present, will he tell them to treat the people with respect?
What specific measures will the Minister introduce to stimulate growth and to create and protect jobs? Will this form an element of the budget and the four-year plan? With regard to the travel tax and its impact on the economy of the mid-west, will the Minister give an assurance to the House that he will abolish this tax in the forthcoming budget?
To follow on from Deputy O'Mahony's point that viable businesses are now closing, will the Minister at this late stage not reconsider a bank guarantee, which is the norm throughout Europe? It would get the economy moving, create wealth and assist the retention not alone of existing jobs, but of existing companies as well as the creation of new jobs. It is a no-brainer. Will he consider such a guarantee to ignite the backbone of the country and kick-start the economy? It is about small business.
First, I understand Irish private pension schemes have some €20 billion invested in the bonds of other states, particularly German and French bonds with a return of some 2% to 3%. Obviously, the spread on Irish bonds is much higher than that. Has the Minister proposals to make it attractive for these pension funds to invest in Irish bonds? It would seem that this would be a win-win situation because 75% of our private pension funds are in deficit at present, and a higher return would help to bridge that gap.
Second, personal savings increased by some 13% last year and this increase is continuing. I understand some €100 billion is in private savings in this country. Has the Minister proposals to attract that money into the Exchequer to help with the problem of having to pursue borrowings at very high interest rates?
In response to Deputy O'Shea, the pension schemes have substantial assets and, traditionally, they have not invested in Irish bonds. The NTMA is in discussions with them on that issue.
In regard to personal savings, I will examine proposals put forward on any side of the House as to how to release them. I must say, however, that proposing marginal tax rates in excess of 60% is probably likely to increase further the volume of precautionary savings in the banking system.
Deputy Perry asked on the question of bank guarantee schemes-----
Deputy Perry asked on the question of bank guarantee schemes and whether a guarantee can be given to small lenders. What I say to him and to Deputy O'Mahony is that the Credit Review Office deals with appeals in regard to traders and has power to issue directions to banks in regard to the cancelling of overdraft facilities for small businesses. As to whether there should be a wider guarantee scheme, which is what Deputy Perry has advocated, we must remember that the cause of a great deal of our difficulty has been reckless lending. Any scheme that is designed to extend guaranteed credit to small business must ensure this risk is not repeated.
Deputy Timmins referred to the Croke Park deal and the saving of €1 billion. Clearly, the Croke Park deal permits the redeployment of public servants in many branches of the public service. The jobs reduction programme that can be implemented as a result would save very substantial money to the Exchequer over the programme period.
Deputy Joe Carey referred to the whole question of the need to stimulate growth and protect jobs, and also inquired about the travel tax. Again, I will consider all of these matters in the context of the budget.
Deputy English said we had not much credibility in regard to managing savings in the public finances. As a matter of record, €14 billion is the total amount I have reduced or corrected in fiscal terms in the budgets since my appointment as Minister for Finance, which is a very substantial amount of savings.
The Deputy's party specifically has refused at any stage to look in a realistic way at the structure of public expenditure. They talk about administrative savings and budget managers when we all know what exactly the structure of public expenditure is and where the difficult decisions have to be made.
I am entitled to reply to questions in this House. With regard to Deputy Finian McGrath's question, Article 9 of the Lisbon treaty commits the Union to a number of worthy objectives. However, none of these worthy objectives can be secured unless the basic financial system of the economy of a member state is on a sustainable basis. The Deputy referred to taking €15 billion out of the economy over the next few years. Of course, he is anticipating that others outside the country will lend us all the money in order to keep that money in the economy, which is a very far-fetched assumption and one that is not and cannot be entertained in our current position.
Deputy O'Donnell raised the question of the current very high rates in secondary market. I accept they are very high but it is a very thin market where Ireland is concerned at present. The developments in Portugal and Greece have been negative and there has been a corresponding deterioration in Ireland's position as a result.
-----trying to assist the House by answering a very wide variety of questions.
Deputy Barrett should note the European Investment Bank already provided a substantial facility for lending to new businesses.
The matter of rating agencies has been discussed at European level. There is no doubt that the rating agencies talked up a lot of countries, businesses and firms worldwide on the way up and that they have been talking down many of them on the way down. The reality is that the rating agencies exist and have a right to free speech.
On the question of borrowing on a group basis, as raised by Deputy Barrett, Germany, France and all the countries in the eurozone would be required to agree to borrow at a common interest rate. To date there has been no willingness on their part to engage in such an operation.
-----for any such common arrangement. It has often been advocated by other member states.
I thank the Deputies for their contributions to the debate over the past few days. They have touched on many issues. The main points that need to be made can be summarised briefly.
Over the past two years, the Government has not hesitated to take big decisions to stabilise the banks and the public finances. Despite the fact that we are achieving stability in the financial sector and that Exchequer revenues are also stabilising, it is imperative that the Government demonstrate again that it has the ability to act decisively by making further adjustments. There have been unfavourable developments, referred to in my replies, that have affected the overall economic outlook and market sentiment. We cannot put off decisions to address the €19 billion gap in the public finances. The longer we wait to do this, the higher the proportion of our taxes that will have to be devoted to servicing our debt. Such a delay would be predicated on the unlikely assumption that markets would allow it without at least increasing the interest rates on Irish debt. It is neither credible nor sensible to delay making the adjustments to meet the deficit target of 3% of GDP by 2014.
Making these adjustments will be difficult, but in doing so the Government will be mindful of the economic impact of whatever it will do and will, therefore, seek to minimise any harm it might cause to the economy. At all stages, we must protect the vulnerable in so far as we can but we must not allow any section of the community believe it cannot make any contribution. Everyone must make a contribution and those who have most must contribute most, but everybody will have to contribute something. As a result of the briefing that the Opposition parties have been given by my Department and from the speeches of the Taoiseach over the course of this debate, the Opposition should now have a clear picture of the issues facing us in dealing with the public finances.
It is clear that the adjustments that will have to be made will be painful for living standards but it is essential that we all keep a sense of perspective on this matter. Over the past decade or so, living standards for all, including for those dependent on social welfare payments, have increased considerably. Over the past five years, even the lowest rate of welfare payment rose by some 45%, several multiples of the increase in prices over this period. On the labour market side, while there have been serious job losses in construction, employment in other sectors has held up well, such that we have close to 1.9 million at work earning wages that had also increased above the cost of living. Following the adjustments that have to be made, we will still hold on to most of the substantial gains in living standards that we achieved in recent years.
The four-year plan will not confine itself to adjustments to the public finances. They, on their own, cannot deliver economic growth. A key part of the plan will focus on structural reform, both to increase employment and economic output and income. We must change the way in which the economy works, both in the public and private sectors. The public service has a critical role to play in our economic recovery and in underpinning growth over the longer term. Public service numbers have to fall. The costs of public services have to be reduced and the way in which these services are delivered has to be reformed and transformed. This is why the Croke Park agreement is important as a framework under which these changes can be delivered. In making these points, I do not imply any general criticism of the public service and must say that many of the criticisms miss the mark, often by a wide margin.
In the private sector, we must make proposals to reduce costs further and continue to improve competitiveness. These proposals will be a critical part of the plan if we are to base our economic future on export-led growth. Already, our exports have recovered strongly in response to the recovery in wage and cost competitiveness. We must also support our indigenous companies, especially small businesses, by helping them to reduce their costs and administrative burdens. For all sectors we have to do more than just improve cost competitiveness. We must ensure the workers available to fill future jobs will be suitably qualified and trained. We must take action to ensure that all businesses - whether selling to the export or domestic market - operate in a wider economic environment where all sectors operate efficiently and none acts as an expensive or inefficient drag on another.
In the weeks ahead, the Government will agree a framework and plan for the next four years which will be critical for our economic recovery. Acting on this plan will involve difficult decisions because they will cause pain for many, but we have no choice but to make them. If we make the adjustments now, we will ensure a better hereafter for our economy and our children. If we act resolutely, the reward for all of us will be the securing of a strengthened economy and renewed society for us and the next generation.