Martin Mansergh (Tipperary South, Fianna Fail)

The budget for 2009 needed to be formulated against the backdrop of a strong downturn in the domestic and much of the global economy and the recent worldwide crisis in financial confidence. Decisive Government action has been needed to arrest the deterioration on both fronts.

With regard to the banking crisis, the Government's leadership in giving guarantees of liabilities under a scheme now approved by the European Commission and the co-ordinated reduction in interest rates by central banks around the world, together with the framework declaration by leaders of the eurozone in Paris last Tuesday, whereby member states may also, depending on circumstances, provide greater liquidity and, where necessary, capitalisation, have all been focused on underpinning the financial institutions without which modern society cannot function and which are essential to the viability of this or any other independent state.

The budget is designed to stabilise the public finances in the interests of securing jobs, living standards and essential public services where a large gap has opened up between income and expenditure as a consequence of the fall in growth of 1.5 % of gross domestic product in 2008, reflecting the sharp decline in housing construction, weakened consumer activity and rising unemployment. For the first time in more than 20 years, even after budget measures, borrowing will amount to more than €12 billion, which is 6.5% of GDP, while the debt to GDP ratio will rise to 43%. The aim is to bring the deficit back within agreed EU parameters of less than 3% of GDP by 2011.

The right balance needed to be struck so as not, on the one hand, to allow our debt to balloon rapidly to unsustainable levels through lack of action, requiring far more severe measures later, but equally not to exacerbate the problems by driving the economy into a deep depression. Even so, more action and follow-ups will be needed in the future as signalled in the budget on a number of fronts. In macroeconomic terms, we are allowing automatic stabilisers, such as increased social welfare payments, to operate, but we have no scope, outside of a few targeted interventions, to stimulate the economy across the board.

In the current situation, every sector of the community, but especially those better placed to do so, is being asked to contribute something. While individually and in isolation most of the tax increases and most of the cost-saving measures are to be regretted, they are necessary and parties who criticise or complain about them need to put forward a coherent alternative concept. We have been through a period of exceptional growth, exceptional increases in employment and for many people exceptional improvements in living standards and the range and quality of public services, notwithstanding remaining gaps. Our objective is to hold on to as many of these gains as possible, even where one step backwards may be needed to take two steps forwards later.

On the specifics, there is a social welfare package of more than €500 million, with spending increased by 8.4% to €19.6 billion, which includes State pension and jobseeker's benefits and allowances increasing by 3% or more, just ahead of the anticipated rate of inflation. In much better times, the welfare increases in the 1995 budget of the rainbow coalition were only2.5%. Next year's increases include a €7 per week increase in the State contributory pension to €230.30 per week. There is also a two-week extension to 32 weeks in the fuel allowance and a €2 per week increase in the payment. Payments to carers are also being increased. The phasing out of child benefit over the age of 18 and the trimming back of the early child care supplement by six months with compensating measures for social welfare and low-income families are reasonable changes pending a more fundamental review of child benefit payments.

The provision without means test of medical cards to all pensioners over 70 unfortunately has proved a bridge too far in current financial circumstances. The medical organisations demanded and obtained conditions which are unsustainable. However, as the Taoiseach told the Dáil this morning, the majority of people over 70 will be eligible for a medical card, GP-only card or annual grant payment.

On income tax, people on the minimum wage stay outside the tax net and those on the average industrial wage remain on the standard rate because of indexation. The income levy is only a token contribution at lower income levels and excludes social welfare payments. In infinitely poorer times, people contributed for a patriotic purpose a penny a month to the Catholic Association to help achieve emancipation. The levy, which rises to 2% on gross income at higher levels, will collect much larger amounts from those on higher incomes and has precedents under different Governments in the 1980s and 1990s and is less permanent than a rise in income tax rates. Capital gains tax has risen to 22% in tandem. There is a tax on second homes and on more expensive cars. No one can say that the higher paid are not contributing more, and the highest reaches of the public service — secretaries general, Ministers and Ministers of State — are taking 10% pay cuts. The public service, as broadly defined, will be included among those paying €200 for city car parking spaces.

The 8 cent on a litre of petrol in a context of falling prices will raise revenue but also encourage a switch over to more environmentally friendly diesel. A 0.5% increase in the standard rate of VAT is marginal compared with very large increases of up to 5% at one time in some budgets of the 1980s. While excise duties on cigarettes and wine are being increased, the 50% reduction in excise on lower alcohol beer and cider is very welcome from a social, safety and employment point of view.

An important strong statement for inward investment was made by the Minister against this backdrop that there would be no upward shift in the rate of corporation tax in the lifetime of the Government. The improvement in research and development credits will in fact lower the effective rate for companies. The three-year tax exemption for start-up companies will also help create employment in small businesses. In these circumstances, the once-off shift in the preliminary tax payment dates for large companies is reasonable. In terms of the tax and social welfare system, the cost of employing people and of conducting business in Ireland remains very competitive.

The continued priority given to education, research and infrastructure is very welcome, and a high level of public investment is being maintained even if some elements in the national development plan will take longer than originally envisaged.

The fall in house prices, the recent reduction in interest rates, the restructuring of interest relief to help more new and recent purchases, improvements in the local authority mortgage scheme and perhaps the tax on second homes should all help young buyers. The reduction in stamp duty from 9% to 6% will help the commercial end of the market.

The budget also contains many environmentally beneficial measures in terms of transport, the home energy saving scheme and the clean-up of large toxic facilities. I was also pleased to be able to inform the Development Committee of the World Bank in Washington this weekend that Ireland is the sixth largest per capita donor of development aid, and will be contributing 0.56% of GNP next year, and also of the Taoiseach's commitment to hold to the 2012 target of 0.7%.

I would now like to review areas for which my office has been given responsibility, in particular a major reform of procurement management in the public service through the National Public Procurement Policy Unit in the Department of Finance and the Office of Public Works. Over the last few years, the main focus of reform has been on construction procurement, with the introduction of new fixed price lump sum contracts and standard conditions for the engagement of construction consultants. All non-commercial State bodies will be required to develop and implement corporate procurement plans.

There is clearly a strong economic reason for North-South co-operation on procurement. The National Public Procurement Policy Unit in the Department of Finance, in conjunction with the Central Procurement Directorate based in Belfast, and the cross-Border body InterTradelreland, have been working together to develop expertise, so as to take advantage of business opportunities on an all-island basis. It is important to build on these contacts for mutual benefit across the island. With an estimated all-island spend on public procurement of €15 billion annually, the pooling of knowledge on more strategic approaches to procurement is essential.

The Minister for Finance announced in the budget that the Government has reviewed the decentralisation programme, and has identified priority elements on which implementation will proceed at this time. A capital expenditure envelope of up to €72 million in 2009 and €90 million in 2010 will be provided for the completion of projects going ahead. Projects proceeding will include a major PPP project to provide, under a single contract, new headquarters for the Department of Agriculture, Fisheries and Food in Portlaoise and the Department of Education and Science in Mullingar, together with a new facility for the Department of Enterprise, Trade and Employment in Carlow. A successful tenderer has already been chosen and full planning permission has been granted in respect of the Portlaoise and Mullingar developments. When completed, the total numbers to be employed at these three locations will be in the region of 1,500.

I am glad to say that work is well advanced by the OPW in bringing to tender stage other construction projects referred to in yesterday's announcement. These involve new buildings in the towns of Claremorris, Roscommon, and Tipperary. Also, and very importantly, this next phase of the programme will include construction of new headquarters for the Defence Forces at the Curragh and for the Department of Community, Rural and Gaeltacht Affairs on a site to be acquired in Charlestown.

To date, expenditure of approximately €250 million has been incurred on the programme. This covers the acquisition of development sites, construction of offices and the leasing of accommodation. Against this expenditure, the OPW has realised approximately €575 million for the Exchequer through the sales of surplus property to the market, which realised €375 million, joint venture deals to the value of €125 million, and the transfer of properties to the Affordable Housing Initiative which realised €75 million.

The completion of these projects, coupled with the progress already made, will bring 6,000 public service jobs to over 40 locations outside of Dublin. The 6,000 posts that are moving are primarily Civil Service posts, with a small number of State agency posts. They include 2,500 posts that have already moved, together with an additional 3,500 posts, which are in train.

The main arguments for decentralisation remain valid. Decentralisation relieves congestion in the capital. It provides high-quality jobs for the regions. It has obvious advantages for securing a better regional balance. It helps the economic and social development of the chosen centres and their catchment areas, as well as providing a further boost to the provision of infrastructure in the regions. It also has the potential over time, and sometimes immediately, to attract other investment and services, and acts as an incentive to entrepreneurs to develop businesses in the regions, thus creating positive knock-on effects.

Flood events which occurred earlier this year leave us in no doubt about the ever-increasing threat which severe weather poses, both to businesses and to householders. Within OPW's allocation, measures to relieve existing flood risk and to prevent the creation of future flood risk will be prioritised. Provisions in the Estimates will allow the three flood relief schemes, which are currently on site in Ennis, Clonmel and Mallow, to proceed to completion next year, and will also allow the design of the next phases of those schemes to proceed as planned.

Likewise, there is good news for potential flood victims in Dublin, Waterford, Arklow, Bray, Carlow, Fermoy, Mornington, Tullow, Enniscorthy and Tullamore. Our provision will enable the OPW to continue to work with local authorities to deal with problems which, though smaller in overall scale, are nonetheless very significant for the people who are affected by them.

The Heritage Services of the OPW are now responsible for managing and maintaining over 750 national monuments and a range of historic properties throughout the country. We provide full interpretative facilities and guide service at over 60 sites which attract over 2.5 million fee-paying visitors annually. Our heritage is a source of pride and inspiration for all our citizens and a cornerstone of our thriving tourism industry, the beneficial effects of which are felt nationally, regionally and locally.

The future for the heritage service is one of consolidation. It will continue to play its role in tourism, but will concentrate on reinvesting in existing facilities and exhibition, and, where appropriate, as a performance venue, developing links with local communities and interests by fostering greater use, and funding will be available for these most important tasks.

The arts allocation, while reduced, maintains most of the gains of recent years. The Arts Council current allocation, which is only slightly reduced, will help maintain a broad range of cultural activity and employment. There has been tremendous investment in recent years in the national cultural institutions, in large projects such as the Wexford Opera House, the Royal Hibernian Academy, the extension to the Gate Theatre, the Cork Opera House refurbishment, as well as in ACCESS projects around the country, beneficiaries of which include the Excel Theatre in Tipperary and the Strand Theatre in Carrick-on-Suir. Work on the PPPs for the National Concert Hall and the Abbey Theatre will continue as planned. The Government in the budget recognises that the arts are not an optional extra or a dispensable luxury in difficult times, but integral to the well-being and identity of our society.

I look forward to listening to the views of Senators on the budget.