Ivana Bacik (Independent)

I welcome the Minister of State. I also welcome the opportunity to contribute to the debate on the budget.

Previous speakers referred to Ireland's economy as suffering from an illness. I want to use a fruit analogy and state that it has gone pear shaped. The latter is, of course, an understatement. The Government has introduced a supplementary budget which might be described as being as bitter as a lemon. Ordinary taxpayers will be squeezed in this budget until the pips squeak.

The new measures announced by the Minister for Finance, Deputy Brian Lenihan, this week focus on reducing income, through increasing taxation, and cutting public services. The cuts in income through increases in taxation are stringent. The income and health levies have been doubled, the PRSI ceiling has been increased and restrictions have been introduced in respect of mortgage interest relief. As previous speakers indicated, all of these measures will impact severely on low and middle income earners, particularly those with heavy outgoings relating to mortgage commitments and child care payments.

As the Minister of State may be aware, crèche costs in the private sector in Dublin amount to at least €1,000 per month per child. Therefore, a couple with two pre-school children is currently paying €24,000 per year in child care, which is a whopping sum, before any other bills are met. For parents such as this, the warning that child benefit will be taxed next year and that the early childhood supplement will be abolished represents a double whammy. I wish to be constructive and I welcome the Minister's announcement of free pre-school places for young children. The provision of such places is long overdue. However, it is difficult to see how enough places can possibly be provided for 70,000 children by January next. This announcement seems like a mere concession to parents who have seen such a significant drop in their incomes and who are aware that there is more to come.

The cost of the swingeing reductions in income are particularly bittersweet when we consider the ongoing bail-out being offered to the two main banks. The Minister for Finance remarked in passing that the bad assets of the banks — this is the figure upon which there has been so much emphasis since the budget was announced — will amount to €80 billion to €90 billion on book value. This massive figure is way above the previous official predictions and could be enough to sink the country financially. Figures I have seen indicate that taxpayers will enjoy a 15% discount on the book value of these assets and will only be obliged to take on 85% of the risk. The bulk of this risk will be taken on through the proposed national assets management agency, NAMA, in a gamble of monumental proportions. It is particularly monumental when one considers the context.

The total public expenditure figure for this year is just over €60 billion — €20 billion for public sector pay, €21 billion on social welfare and the remainder on non-pay programmes and public investment. As we are aware, the total revenue take will be substantially below this figure. Predictions are continually being revised and the amount involved has dropped from €40 billion to €37 billion, and to an even lower amount in recent weeks. We have allowed the banks to gamble a colossal amount of money. On the basis of bad assets, they have lent out more than twice the entire annual revenue income for the State this year.

The €80 billion or €90 billion in bad debts to which I refer relate to approximately one fifth of the total debts of the banks. Media reports indicate that one third of the total bad debts relates to property outside the State, namely, apartments in Bulgaria, Dubai and other locations in which Irish people have invested.