Martin Mansergh (Tipperary South, Fianna Fail)

I begin by completing Senator Ned O'Sullivan's quotation from Charlie Haughey, who said that if economics is the dismal science, then politics must be the profession of hope. I thank all Senators for a very good and overwhelmingly constructive debate, which contained some very good suggestions in many areas that deserve to be examined more closely. I will begin by making general remarks and I will then respond to specific points that have been made by Senators.

The Minister in his opening contribution emphasised the financial difficulties but also pointed out that we retained the vast majority of the gains in employment and living standards achieved over the past decade. He pointed out some of the difficulties caused by sterling appreciation, but also that inflation was easing, and he emphasised the need to help those losing jobs in terms of training and education.

It is clear we are facing a very difficult period. The adjustment in the new house building sector, the sharp deterioration in the international climate, ongoing strains in the global financial system and, more recently, the strengthening of the euro against sterling are all adding to our economic difficulties. The economic data that have been published in recent weeks have been weak, confirming that all of these factors are taking their toll. Indeed, one of the most disturbing aspects of the slowdown is the pace at which the turnaround has occurred — GDP will decline this year after recording growth of 6% last year.

The tax revenue data that have recently been published are equally poor. The weakness in tax receipts evident throughout the year continued into November, a key month for tax receipts. We now have an Exchequer deficit of almost €7.9 billion at end-November compared to a surplus of almost €1.6 billion in the same period last year. It is important to stress that overall Government spending is close to what was planned for in the budget but tax receipts in November were approximately €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. Borrowing to fund day-to-day spending is, as most Senators understand, simply not sustainable and this is why the Government is determined to reduce spending.

In the face of these mounting economic and fiscal difficulties, there may be a temptation to follow an inappropriate course of action. The Government is not going to do that. Instead, the Government has taken decisive and appropriate steps designed to put the public finances on a more sustainable path and to position the economy to be able to exploit the global recovery when this emerges. The Government is maintaining capital investment at high levels relative to national income, which will help eliminate bottlenecks, reduce costs and boost productivity over the longer term.

One area in which the Government has a direct role in this regard is the public sector. Notwithstanding the positive role the public service has played in Ireland's economic progress down the years, it is clear that in current financial circumstances we need a root and branch reform of the manner in which public services are delivered to citizens. That is what Government is and will be doing.

We also recognise that a significant global recovery is increasingly unlikely any time soon. This, combined with a further reduction in house building, means that our economy will remain in recession next year, with a resultant rise in unemployment. The Government is addressing this by ensuring that those who lose their jobs have access to various training and upskilling facilities to enable them find alternative employment.

While the challenges are significant, they are not insurmountable. We must not lose sight of the fact the underlying health of our economy is strong, which is the product of policies and reforms undertaken over the past number of years. Our economy is resilient and flexible. We have fostered a pro-enterprise environment, one in which work and effort is suitably rewarded. Substantial improvements in living standards have been achieved since the mid-1990s and the economy now is very different from what it was back then. Income per capita in Ireland is now well above the European average, a transformation of the position that pertained in the early 1990s.

I would now like to turn to some of the specific points made during the debate. As Senators Boyle and Butler in particular mentioned, there is scope for green technology providing and generating activity. When houses come to be energy rated from next January, it will act as a jolt and stimulus which will be helpful to the economy.

Senator Alex White argued that the Government did not foresee what was happening. No Government in the world foresaw the ferocity of the downturn that has taken place compounded by the financial crisis we saw this autumn. Downside risks were identified by the then Minister for Finance in his speech in December 2007 on the budget for 2008. At that time, the economic forecasts underpinning the budget were in line with those being produced by the independent ESRI and the Central Bank.

Senator White also referred to a statement, of which I have been critical, by the former Minister for Finance, Charlie McCreevy, that when we have it we spend it. This statement, which was more of a soundbite, did not reflect fully Government policy at the time. The good financial situation was used to drive down the national debt to an extremely low level, a percentage in the low 20s in gross terms and approximately 14% in net terms. A large amount was put aside in the National Pensions Reserve Fund. We did not simply spend it when we had it. I recall a year when we had a surplus of approximately €5 billion, the Minister asked how large a surplus were we expected to have.

The issue of a stimulus was raised. It is important to recognise that rapidly rising unemployment will mean higher social welfare payments so the Government is putting more money into the economy. The social welfare budget for next year is approximately 14.5% higher than it will be this year and may be higher still. This is what is called in technical terms an "automatic stabiliser". The main plank of the Government's economic policy is to fulfil as much as possible of the national development plan which is running at approximately 5% of gross national product, which is considerably greater than in most other countries.

I agree with the point made by Senator Paschal Donohoe that the primary way to get out of our difficulties is to trade out of them. I also agree with his reference to the importance of exporting high value products at the right price. He appeared to criticise the Minister for leaving——-