Marc MacSharry (Fianna Fail)

I welcome the Minister of State to the House and thank him for making himself available. I am glad to have the opportunity to make a few points in connection with the budget. I completely understand the levels of frustration, regret, anger and worry that exist. I also understand the frustration and anger with some of the measures in this budget — they are perfectly understandable — but to fully appreciate the context of this budget we must look at the environment in which we find ourselves. There are unprecedented economic conditions internationally as well as in our economy. Against that background we had to take the appropriate action. Many things could be made available to the public in the past that can no longer be made available. We are trying to pay for a level of service we cannot afford and appropriate action was necessary.

The budgetary measures are severe and I realise people are frustrated and that there will be pain for all sections of society. The context of this budget was not just to cater for the domestic audience but, as the Taoiseach pointed out, to send a signal to the international audience.

There were limited options available to Government, considering the pace and scale of the economic decline in the past year. Draconian measures were necessary. The aims of the budget were to stabilise the public finances, restore our banking system, regain our competitiveness and protect the jobs we have and cater for those who have lost theirs by way of social payments, training and education opportunities.

A snapshot of the economic situation in 2009 shows that activity is set to contract by 8%, the consumer price index will fall by 4%, unemployment will rise to 12% and total spending on public services will cost €60 billion, with a general Government balance of -10.75%. These are serious figures. To stabilise the public finances, the budget has been framed against the background of the most challenging fiscal and economic situation for generations.

The Government has introduced this budget to assure the Irish people we have the capacity and the will to bring us out of this period of severe economic distress. The Government is committed to introducing essential steps to bring the economic renewal that is required — stabilising our public finances, restoring the damaged banking system, regaining competitiveness, protecting the jobs we have and retaining people in education and training. We must support and stimulate economic confidence and restore our good reputation abroad, which has been damaged in recent times.

I welcome the contributions from Peter Sutherland and Peter Bacon on "Morning Ireland" this morning. Their message was positive and it was good to hear from someone like Mr. Sutherland, who has such international experience in all aspects of public service.

We have seen the doubling of the income levies and the PRSI ceiling raised to €75,000. The health levy had to be doubled to 4% and 5%, with duty on cigarettes up 25 cent, although I have no difficulty with that. It could have been more, as was recommended by the Irish Cancer Society. There is an increase of 5 cent on the price of diesel but no increase in the price of beer and spirits, although I believe there was scope to do something there.

With regard to social welfare, from 2010 the early child care supplement will be replaced by a free preschool education year at an estimated cost of €170 million. It is intended either to tax or means test child benefit but we should closely examine that. I believe those who are in a position to pay a little more would happily do so to secure our children's future. Our children should be ring-fenced from this and we should do all we can to enhance the services available to them. I believe those who are lucky enough to be employed and earning appropriate levels of income would not have a difficulty with paying a little more to secure our children's future and to protect the more vulnerable in society. As this year progresses and notwithstanding the measures that have been taken, we should seek to avoid adversely affecting the level of child care supports.

The jobseeker's allowance for new claimants under the age of 20 years will be halved to €100 per week. Unquestionably, this is severe and the various youth groups have expressed their concern, as I have. However, I hope it might encourage more young people to engage with the education system. A total of 24,000 additional places in education and training have been made available. I hope that when resources are available this measure will be examined again.

Payments under the rent supplement scheme will be reduced to reflect prices and rents. It will be interesting to see how that will be implemented because rents vary in different parts of the country. Will that be discretionary for the local authorities or will there be a clear set of parameters? There is talk of an average of 6% or 7% up to a maximum of 10%, but I would like a little more information on it. The December bonuses will be discontinued. Again, this is a very severe measure and I can understand the pain it will cause. I have received calls from people who are very concerned about the level of pain this will create at Christmas, a time they would have earmarked it for other expenses. However, as the Minister, Deputy Mary Hanafin, said, it was necessary to use these funds to avoid cutting the basic social welfare and jobseeker's allowances.

With regard to reform in the use of public sector resources, there are some measures in terms of the proposed reduction in the number of Ministers of State, ministerial pensions not being paid and so forth, but there is more scope to refine further the delivery of service in governance and to reform the Oireachtas. Perhaps over the next few months we could examine areas where even more savings could be made. However, I am not interested in pandering to media interests or engaging in tokenism or gimmickry. If we are to tackle the public service pay bill and secure efficiencies in the public service, we should take a comprehensive approach. I have no interest in focusing just on judges, Deputies or Senators. If there were a proposal, for example, to cut public sector pay by a certain percentage in the national interest, I would be far more supportive of that than simply pandering to a particular interest. Senator Twomey referred to the ministerial cars and spoke about cutting this and that. That is fine and if it is part of an overall package of measures, there is scope for that.

The various task forces that have been established to review public sector numbers and to seek efficiencies are due to report over the coming months. I look forward to tangible actions being taken as a result of those. The public service has served us exceptionally well through the decades and the Celtic tiger years but there is always room for improvement. The numbers have grown a little too much in some areas and there is some duplication. When one considers that of the approximately €54 billion in expenditure, a total of €20 billion goes on public sector pay it is a no brainer. It is something we must tackle. It will be painful but we will have to do it.

I am pleased that we will continue to spend approximately 5% on capital projects, which is still approximately double the EU average. However, it is important to focus our capital expenditure on labour intensive projects and projects that will contribute most to our competitiveness. It is vital we address this issue because, in recent years, we have become uncompetitive. Overall, there are savings of €576 million in gross capital expenditure. Obviously, there are reductions in schemes which will cause pain, especially for farmers. There is a proposed reduction of 17% in the rural environment protection scheme and the fallen animals scheme is to be abolished. A sum of €200 million is to be saved in the areas of social housing and water services. I would like more detail on the housing aspect. The €150 million saving on roads mainly applies to regional and local roads.

These cuts are highly regrettable, but necessary. The options available to the Government were limited. A difficult balance was sought and, to the extent possible, I am pleased the Minister has come close to achieving that balance. When preparing and commenting on a budget such as this, we must acknowledge the level of obvious frustration and disappointment it will cause but we must also acknowledge the reality and the fact these measures had to be introduced. Governments operate in a real-time environment, without the benefit of hindsight. As the Minister, Deputy Brian Lenihan, said in the Budget Statement, some people predicted a soft landing for the property boom and others did not. No one predicted the pace and scale of its demise, which is highly regrettable. However, we are where we are and we must take the appropriate actions that will take the country out of the recession.

To return to public sector pay, I welcome the fact that our salaries will be benchmarked against those of our counterparts internationally. However, they should also be benchmarked against the private sector and, just as they went up with the private sector salaries, they should also come down with those private sector salaries. In that context, I hope the process of social partnership can continue and that we can achieve a consensus on how to continue to meet the challenges presented by this crisis. No stronger message can come from this country than a social partnership agreement. I believe the social partners are realistic. An element of realism has come into all sectors of society in recent months. We are in very difficult times and we must take appropriate action.

I wish to comment on the proposed national asset management agency. The banks provide the lifeblood of the economic system. Without them to lend money to households, individuals and businesses, the economy would contract even further. I welcome the establishment of the national asset management agency. I like the proposal and believe it will be a template that will be replicated throughout Europe. I like the way it will operate. However, I have some concerns. The first is how we will determine the asset values. Reputable firms and expertise will be sought and engaged to do this. I am involved in the property business as an auctioneer and it must be pointed out that if one went to 20 auctioneers in the current environment for valuations, one would be guaranteed to get 20 different valuations. It is very difficult to determine asset values at present. The Minister should take a number of different valuations and arrive at an average because it is impossible for one individual to get it right. A sample of valuations will be required to determine the valuation appropriately.

My other concern, which has been expressed by many people, is about the non-Irish assets. I have concerns about us managing a property portfolio that includes properties all over the world that are subject to a series of different regimes and government policies over which we do not have control or influence. That will have to be examined. The European Central Bank would probably like to see this replicated throughout Europe. If that is the case it will signal the turning of the corner for the European economy in terms of dealing with the toxic debt.

Following on from the painful measures that have had to be introduced, we must remain constantly alert to the difficulties of the less well-off and the most vulnerable. As certain cases emerge through the media or anecdotally from Members, we must seek to make adjustments where appropriate to help them. There is no question that unique cases will arise. It is very difficult for people at the moment and more will have to be done. In terms of protecting jobs and helping people without jobs, I welcome the enterprise stabilisation fund of €100 million. Unlike Senator Twomey, I am happy that Enterprise Ireland will administer that fund. The work of Enterprise Ireland and the IDA needs to be supported in any and all ways possible.

The announcement of the previous budget re the smart economy has been enhanced further by the investment incentives to reach a research and development target of 2.5% of gross national product, GNP, by 2013. In that context, as the Minister of State is aware, I previously referred to the cut in Science Foundation Ireland's funding by a small percentage. I would not mind paying a little more to ensure organisations such as Frank Gannon's Science Foundation Ireland would have the appropriate resources. The research in which they are engaged is of consequence. It is not just a case of PhDs that do not produce tangible results. It will help the economy. The more we can do in that regard the more we will lay a foundation that will take our country on a sustainable growth path.

I welcome the enhanced access to the back to work enterprise allowance scheme that will facilitate an additional 1,400 places. That may not sound very much but anything is a help at this point. I also welcome the earlier eligibility for the back to education allowance and the new work experience programme for graduates.

One other thing I would like to see is a focus on revenue-neutral measures. I have been working on some in the area of entrepreneurship, especially the introduction of entrepreneurship from primary education through to third and fourth level. In terms of entrepreneurship we focus too often in this country on the person who is an entrepreneur rather than on it being a way of doing things. I have called for a debate in this House on the issue and I will bring forward some suggestions myself. They are the kinds of improvements on which we need to focus. I refer to a quotation that is relevant to this time, which I will identify later:

We have the essential resources to get out of the depression that has enveloped the country in recent years and to open up new possibilities for growth and employment. We simply cannot afford to let opportunities slip. Optimism does matter. We must provide the best conditions for the inflow of capital into the country ... and for higher investment.

This budget is the first step in providing the right balance for a new outlook ... New possibilities for steady economic growth and employment are being opened up. The policies being implemented this year will be continued and developed over the next few years in line with the Government's programme and ... direction. The public finances will be managed prudently; there will be a better distribution of the tax burden and the economy will become increasingly competitive.

We must not be intimidated by the difficulties or give way to defeatism. Let us take the opposite course. Let us talk of opportunity. Let us work together in a new spirit of co-operation, determined to get things right. This requires a contribution from all sections of the community. The essence of consensus is that the various interest groups will each make some contribution to the public good.

As things come right, success will become self-sustaining. Jobs will become [more] available . . . We will have a stronger economy that will allow us to improve social conditions. These are the rewards for exercising the necessary discipline and restraint in the short-term.

That is the concluding paragraph of the budget in 1987, which is very relevant today. If we go forward in the same manner from this budget the rewards can be reaped here as well. We saw the 20 years that followed it when economic conditions in this country flourished following the appropriate fiscal rectitude measures that were taken at that time, although I accept mistakes were made in our over-reliance on the property market. Let this be the beginning for us to do the same, namely, to lay the foundations for the years ahead.