Paschal Donohoe (Fine Gael)

I welcome the Minister to the House. Three aspects of this country's economy will be important in the coming years. First, we need to address the question of public debt. The Government expects the budget deficit to be approximately 10% of national income next year. Our national debt will probably equate to almost half of next year's overall national income. The substantial increase in personal indebtedness that is taking place at present is as much a cause of concern as the public debt. People's credit card bills and mortgage arrears are increasing. At a time when there is so much public debt and the public finances are in such difficulty, the same is happening to people's private finances.

Second, we need to take a position on living standards. The ESRI report that was published last night contains an extraordinarily disturbing statistic that should give us all pause for thought. I refer to the prediction that per capita income in this State will decrease by 9% next year. When one refers to percentages, one can lose sight of what one is talking about. If a person had €100 to spend this year, he or she will have €91 to spend next year. That reduction will have immense implications for consumer confidence and people's private finances. Third, we need to consider what is happening to our national competitiveness. Senator Walsh acknowledged the importance of this issue in his contribution. I have spoken about it on the Order of Business over recent days. We need to focus particularly on the impact of currency movements. It is likely that the value of sterling and the dollar will continue to fall, which will mean that this country's cost structures, which are already uncompetitive, will come under even more pressure. The interplay between the three factors I have mentioned will affect this country's ability to move forward in 2009 and beyond.

I would like to make a point about the Government's management of this county's finances in recent years, which has been ignored in this debate so far. I was particularly struck by Senator Boyle's suggestion that all politicians, including the members of the Government, should take time to reflect on the values of the business community. I would add to that by suggesting that the political system — I refer in particular to the Government — should take time to reflect on the values that underpin the management of the public finances. It is apparent that various taxes, particularly income tax, were cut too quickly in the past ten years, to levels that are now unsustainably low. This point has not been emphasised in the debate we are having. As this country enters a period of global recession, it has a structural deficit of at least €7 billion around its neck as a consequence of the mismatch between its income from taxes and the cost of the services it needs to fund. It is a stunning indictment of the Government's mismanagement of the public finances. If the Government now had the ability to deliver the rates of income tax reduction that were so rapidly delivered some years ago, it would have an extraordinary effect on our confidence and the national economy at a time of crisis. The reductions in income tax and many other taxes that were provided at a time when such decreases were not needed by the economy are examples of the appalling manner in which budgets have been managed over many years. Now would be a more appropriate time for the kind of income tax reductions we saw in previous years. The Government has to take responsibility for the fact that such decreases are not possible. It cannot be blamed on the global recession or other international circumstances. This act of economic illiteracy on the part of the Government should be acknowledged and its lessons should be learnt.