Dan Boyle (Green Party)

We are in an evolving situation with regard to the international economic crisis. Many people, particularly in the Opposition, have criticised a piecemeal approach on that evolving basis by the Government. However, that approach is mirrored in the approaches of governments in the United States, the United Kingdom and throughout the world. We must take the opportunity on 7 April to try to advance our situation, which is as much influenced by international factors as by the policy mistakes that have been made in this country previously.

It is a fair criticism to state that the partial responses to date have not had the desired effect. On 7 April we must try to advance a number of areas. A number of people have talked about our ability to borrow and spend our way out of the crisis. However, that does not take account of the nature of the international economic crisis, which is a credit crunch and little availability of capital. Our ability to borrow money is compromised by our ability to keep our public finances in check. If people do not think that the first step is to get the public finances in order, they are not dealing with the economic reality. Our options in doing that are very limited — we must curb public expenditure and increase taxes.

We have a number of advantages despite the difficult decisions we must make, particularly in controlling public expenditure, to help us through this crisis. We are fortunate that, through the efforts of agencies such as the National Treasury Management Agency, we have a low level of State debt when compared with other countries. This gives us one mechanism to get us through the difficult times ahead. It has also been mentioned that the splurge of the Celtic tiger years has resulted in a level of indebtedness for individual citizens that has never existed previously in this State. The year 1987 is always referred to in the House as the benchmark for how we approach times of economic difficulty. At that time, we had a very high national debt in international terms. It was €37 billion, which was 130% of our GNP. Personal debt at the time was €30 billion. Twenty-two years later, through the efforts of the National Treasury Management Agency, the national debt is only 43% of GDP, which is quite good in international terms. However, the figure for private debt in this country has risen in those 22 years to €400 billion. It is an astronomical sum. Even as we control the public finances, there are difficulties for our citizens, families and communities that must be examined as well. This is an added challenge for 7 April.

Other speakers in this debate are correct that in using the few mechanisms available to us through either increasing taxes or curbing public expenditure, we must be mindful of keeping the economy going and inspiring people to engage in further economic activity. One ingredient that has been lost, which I believe was one of the bigger factors of our success during the Celtic tiger economy, is confidence. People were confident that money was available to acquire goods and services, and that confidence generated tax revenue for the Government and new jobs and services in other areas. That ingredient is missing now. The challenge for the Government and the political system is to ensure that confidence, as well as hope, is restored.

We are starting to see some indications that this is possible. However, we must be honest about what lies ahead. It will be five, and possibly seven, years before we can return to what was enjoyed previously, even if that was a level of ephemeral wealth. We must start the process by being honest with the people we represent. There will probably be two years of difficulty before we start moving in the opposite direction. That means a real decrease in the levels of wealth that individuals enjoy. It also means holding firm the levels of public service and an inability to increase them to the levels to which people aspire. All this is happening in a climate where the third vital ingredient for our economic recovery is how other economies are able to recover. Ireland has an open economy. The United States, the United Kingdom and the European Union, together, make up the majority of our trading partners. Those entities are in recession and the longer they stay in recession and do not recover, the more difficult it will become for Ireland's economy to recover.

However, we cannot stand aside or be idle. We must get the other elements right. We must get our public expenditure right. The budget on 7 April should be an opportunity to fix many of the other damaged slates on the roof of our economy. There must be clear statements about the future of our banking system and how it will be regulated. We must put aside the corruption that has bedevilled the sector and use that as one of the first elements in increasing hope and confidence among citizens. Part of that entails putting in a new system of regulation. Another part of it is addressing the issue of bad toxic debt and whether that should be done through an asset management agency or a bad bank. We are coming closer to the type of thinking we need and we are learning from the experience of other countries in making important decisions in this area.

People must also be told what level of public service can and should be maintained. Of the €55 billion that is likely to be spent in 2009, approximately €22 billion will be spent on social welfare due to unanticipated increases in the number of unemployed. It will also be spent on people with disabilities, lone parents and pensioners. There is a huge temptation, particularly from international pressures, in this regard because if one is controlling public expenditure, one controls the area where most of the public expenditure is occurring. This will be extremely difficult politically. It is important that everybody in politics states the areas that cannot be touched. I believe that even though we are currently experiencing deflation, the rates of social welfare cannot be touched. We must examine social welfare payments that are given for specific needs, but on top of that we must address the effectiveness of universal payments in the social welfare system. I still believe they should be universal, but my party has long advocated an integration of the taxation and social welfare systems so that if a payment is universal then at least one can lessen the benefit through the taxation system for those who already have an acceptable level of wealth and target it more at the people who are in real need of income maintenance and support from the State.

I look forward to 7 April which I think will be only a partial process because of the difficulty of us being in the middle of a taxation year. I think there is an indication of bringing forward short-term measures in terms of taxation in particular and indicating what those taxation measures will be from 1 January 2010. I am especially looking forward to the report on the Commission on Taxation which looks likely to be published in July. That could be one of the most important documents that will come to the Houses of the Oireachtas in this term. It will set out a template for what we mean by taxation, the range of taxation instruments, how taxes can be collected efficiently and fairly and how we can ensure they are used as an economic tool that is sustainable so that we do not go back to the situation where we depend so much on receipts from spending taxes such as VAT or one-off taxes such as stamp duties in the middle of a construction boom.

When we get an opportunity to examine that report in this House, after the Government decides what action to take on it, that will be one of the more important debates we will have because we have lived through a kind of fool's paradise in recent years. Because the resources existed we have paid ourselves too much and taxed ourselves too little and we need to get that balance right, beginning on 7 April, for the benefit of those in our country who have suffered most because those decisions have been avoided in the past.