Brian Lenihan Jnr (Dublin West, Fianna Fail)

I thank the House for this timely debate on the economy. We are in very difficult times.

The weakness in tax receipts evident throughout the year has continued and the recently published Exchequer returns show the decline escalated during the month of November, reflecting the magnitude of the domestic and international economic slowdown. We had an Exchequer deficit of approximately €7.9 billion at end of November compared to a surplus of €1.6 billion in the same period last year. Overall Government spending is close to what was planned for in the budget but tax receipts in November were about €1 billion lower than was expected which means that tax revenues are now almost €7.4 billion behind target.

A major gap has emerged between spending levels and tax receipts and a current budget deficit of the order of €3.5 billion is now in prospect for this year. Budget 2009 envisaged that the current budget deficit would be in the order of €4.7 billion next year. However, given recent developments, that target will be exceeded.

The first priority remains to bring our finances under control. We must prove to those who have invested here and who are continuing to invest here that we can manage our way out of this severe downturn. That means difficult choices. The recent budget was a first necessary and essential step. As I have said, there is no great scope for tax increase beyond what I introduced in the budget. Therefore, the focus must be on reducing public spending. However, this is a finely balanced judgement. We will be borrowing substantially next year. We will be borrowing €8.2 billion for our public investment programme. That money will be spent on building roads, schools, public transport projects and water treatment projects.

That is our stimulus package, and it is twice the EU average. It creates employment in the short term and increases our productivity and competitiveness in the long term. There has been much talk about the fiscal stimulus which has been proposed at a European level. We welcome this initiative but as I have pointed out, we have already taken our own steps in this regard.

Of course, we will also be borrowing for day-to-day spending and that is not a desirable position. Next year, we will be borrowing at least €1 in every ten for day-to-day services. That means at least 10% of the salary of every teacher, every doctor, every nurse and every social welfare payment must be borrowed. This cannot continue.

The recent budget is a first step in restoring the public finances to sustainability while avoiding depressing economic growth further. The Government must now look at the public sector to reduce our cost base and to go about our business more efficiently. That is why I announced the establishment of a Special Group on Public Service Numbers and Expenditure Programmes.

The group will review the scope for reducing or re-focusing the existing range of expenditure programmes. It will look critically at the numbers of public servants employed across all areas of the public service to assess the scope for transferring staff to priority areas and for reducing numbers overall, and to identify surplus staff. The overall efficiency of the public service will be examined, including any ways of doing business that are out of step with the needs of a modern, responsive public service. The group will make recommendations for further rationalisation of State agencies beyond the measures I announced in the recent budget.

I note that there was criticism of the group in this House because it contained too many public servants. This is part of a general denigration of the public sector that has become a feature of public debate in recent months. Everybody in this room is a public servant. The public service is not some huge bureaucratic machine. It consists of doctors, nurses, paramedics, teachers, gardaí, the Defence Forces and dedicated professionals who support the delivery of essential services, and who work to support the Government and the institutions of the State.

I deplore the kind of demonisation of the public service that has featured in public debate over recent months. It is part of a wider tendency in some quarters, including, unfortunately, some members of some political parties, to traduce whole quarters of our society which have been the cornerstones of the growth and prosperity that we have enjoyed — whether it be the construction sector, the banks or the public service as a whole.