Fiona O'Malley (Progressive Democrats)

I am pleased to speak following Senator Bradford. I listened to some of the debate in my office which highlights the manner in which we are all motivated by the same intentions. We are concerned about the very survival of our country and the welfare of our citizens, especially those on fixed or lower incomes. Such people depend on the State for resources and help. This is one of the first debates in which we are getting to the nub of the issue, that is, the economic crisis facing the country. I am pleased this is the case because politics is about seeking solutions to problems.

It is the particular role and responsibility of Government to recognise the priorities given a limited budget. The figures released by the Central Statistics Office at lunchtime show the extent to which the economy is contracting. The budget under preparation must reflect the very significant contraction in receipts. The bottom line is that it will not be pleasant for anyone. There is no pleasure in recognising that fact but we must nevertheless do so. For the first time, people realise the worst case scenario is the very survival of the political independence and sovereignty of the country. This is now somewhat at stake.

Senator Bradford referred to the 1980s. At that time the International Monetary Fund was at the door and almost came in. Unfortunately, we are almost back in that situation at this stage. Senator Bradford also mentioned that, thankfully, the public sector unions recognise the severity of the situation and have called off the strike proposed for next Monday. What signal would such action have sent? It would have indicated a steadfast refusal by public sector unions to recognise the severity of the problems in the public finances or to engage with proposed solutions, regardless of their nature. For this reason, I have mixed feelings about the trade unions re-entering the social partnership process. While it is nice to keep everyone in the tent, one must be prepared to recognise the problems. The fallout from the breakdown of the previous talks was that the trade unions adopted a bottom line of refusing to remain in a partnership process which required them to ask their members to accept salary decreases. I hope their decision to re-engage is an indication that they recognise that no one is exempt from the severe measures that must be taken. No matter how unpalatable these measures will be for individuals, we must stand together and make the required changes and sacrifices to ensure the political survival of the country.

The budget also provides an opportunity to break the long-standing connection between the tax code, on the one hand, and property development and the building sector, on the other. Tax incentives introduced to support construction are the cause of many of the problems which have arisen as a result of the contraction in the property sector. These incentives had little benefit other than supporting the building industry. In terms of investment in the economy, property only generates income for the property owner. Tax incentives were used excessively in the property sector and I implore the Government to abolish them in the forthcoming budget. Many of the severe difficulties with which we are confronted are the result of the downturn in construction. One sees hundreds of buildings, primarily houses, lying empty in smaller towns because local people cannot afford to buy them. Those of us who have served on a local authority will be aware of the problem of housing lists and the difficulties faced by local authorities in providing houses. At the same time, hundreds of houses, many of which were built as part of holiday home schemes, are lying idle and empty. This is a terrible legacy which needs to be addressed.

It would be preferable to introduce incentives in areas of growth such as research and development, specifically in the knowledge economy and green sector which offer significant opportunities for the economy. We need to incentivise business and provide opportunities for outside investment in the domestic sector.

While I accept the need to raise revenue and that the obvious way to do this is to raise taxes, as Senator Bradford noted, the decision to reduce taxes in the 1980s kick-started the economy. I accept, however, that adjustments may be required to broaden the tax base. At the same time, we must not kill incentive. As Senator Bradford stated, we must create sustainable employment and make entering and remaining in the labour force an attractive proposition. We will do this by keeping the costs of labour down. During the week I learned it is 25% more expensive to do business in Dublin than in Belfast. This is a worrying statistic and one which needs to be addressed, if possible, in the forthcoming budget. In framing a new tax code to meet current conditions I hope the Government will give priority to having a fair system for ordinary working people. As I indicated, we must try to keep as many as possible in employment.

I concur with Senator Butler's remarks on quangos. We spent money when we had plenty of it and the difficulty now is one of curtailing expenditure. I have faith in the Government's ability to do this and take tough measures. As Senator Quinn stated in a previous debate, it is easier for those who are unwell to take their medicine early, even if it is harsh, because they will recover quickly. The Government must adopt a similar approach. Listening to the radio at lunch time, it is clear from trends in the public finances that we need a long-term plan. I look forward to the introduction of such a plan in the forthcoming budget.

I will conclude by citing a letter which appeared in the Financial Times on 13 December last and I cut out because it was so good. It states:

Sir, Christmas is when kids tell Santa what they want, and adults pay for it. Deficits are when governments tell adults what they want, and their kids pay for it.

Let us keep these words in mind as the Government frames its budget to curtail expenditure.