Jim Walsh (Fianna Fail)

Cuirim fáilte roimh an Aire Stáit go bpléifimid an t-ábhar airgeadais anseo. To pick up on Senator Mullen's last point, we have a proud tradition of charitable donations and State support for the overseas development sector. It is a pity given the climate that it must be revisited but we must remember that we are in the vanguard when it comes to meeting the 0.7% of gross domestic product, GDP, in 2012. We should remember that while the quantum is being reduced, because our GDP is also being reduced, we are maintaining our progress towards the target. It is difficult because the Government has direct responsibility to ensure that the many thousands of unemployed today and those who will be unemployed later this year and into next year can maintain a standard of living and that it meets the challenges presented by the significant downturn in our economy.

I have never seen challenges of such a scale in my life time. We lived through difficult periods in the past but we never came from such a plateau of success, which makes it more difficult. There had not been the accelerating hole in the public finances that we are currently seeing. With the collapse in the world-wide financial sector, the difficulties have been exacerbated. Ingenuity is required to steer our way through this so we will come back to better days in the future.

We were told in advance that the budget would be harsh but we were told it would be structured in as fair a way as possible. That commitment was made by the Taoiseach on a number of occasions and by the Minister for Finance. It has been both those things. It has been harsh. There is no point in denying that. It is a significant imposition on people's incomes and on families. The consequences of not doing anything, however, would be far greater. The fiscal hole must be rectified as far as possible.

Having done this, at the end of this year we will still borrow €20 billion, although it may even be more. The budget statement stated there would be an impact of a 1% further reduction in our GDP but that is likely to be 2%. We are saying we will see the economy shrink by 8% this year but by December that figure could increase to 10%. This has been a growing difficulty which no country shows signs of emerging from. Only within the past month has the US President's economic adviser stated that the downturn in America was accelerating.

It was important to introduce a fair budget. Those who can afford to pay more have been challenged by the significant levy that has been imposed on their incomes, which is as it should be.

The other side of the equation is expenditure. Our expenditure this year is likely to be €56 billion with an income of €34 billion or less, with some saying it could be closer to €30 billion, a significant gap. I cannot see that gap being bridged without significant reductions in the cost of our public services. As someone who managed businesses in the difficult years of the 1980s, all businesses had to ensure they operated efficiently and cost effectively. Public services operate on income and expenditure and efficiency does not get the same priority as in the private sector because that factor is driven by the bottom line and competition will ensure the private sector must maintain efficiency or the business will not survive. That is not the case in any public service so we must ensure we have the necessary dynamism to address those shortcomings.

I note in the budget speech that there is a review of higher remuneration and that is important. Across all sectors of the economy, we have paid ourselves too much. It was easy to understand that when the economy was booming everyone sought to participate in the increased affluence generally. There are now huge knock-on costs which must be addressed. If prices are falling we must ensure incomes are related to that. When there was inflation, we constantly asked that our wages keep pace with inflation so when prices are falling the corollary must be applied or else we will find ourselves in an irretrievable position.

I have said to nurses, teachers and others in the public service that if we fail to handle this situation, the outcome will be that those decisions will be taken out of our hands. When the International Monetary Fund, IMF, took over the Argentinian economy, it cut public service numbers in half and halved the wages of those remaining. When the IMF went into Latvia, public service salaries were cut by 35%. We must all take an element of the pain to ensure we do not end up in a situation where such draconian impositions are placed upon us.

Efficiency is an idea we should embrace in all walks of life. It is good for morale and people want to be part of an organisation they can be proud of. We have excellent staff across the public service who have made a tremendous contribution to development who in many ways contributed to our economic success. Like any organisation, there are the good, the bad and the indifferent. We must ensure we end up with only the good performers in our system.

I have heard much discussion of the complex nature of the problem with the banks. The approach taken by the Government to date has been sure-footed. It is not without risks but I support the general thrust of what it is doing. If we fail to deal with impaired assets or impaired loans in the banks, Ireland will end up like Japan in the 1990s when its economy just bumped along the bottom and made no recovery simply because the issue was not addressed. However, we must do this in a way that is more than an accountancy exercise. We must ensure that after dealing with these impaired loans and assets we have an economy with people who are prepared to be entrepreneurs and risk takers to grease the economic turbines. That will ensure we get back to growth. The detail of that is something we will examine in the future.

Unemployment is the big challenge. We must concentrate on promoting enterprise in the economy. That part of the equation should be strongly addressed over the remainder of this year. In that regard, the change in capital gains tax, CGT, is a mistake. I have said this previously. The rate has gone from 20% to 22% and is now 25% but the State will get less revenue than it did last year. The result will be that assets will be tied up which otherwise might be employed when the economy starts to move and people start to regain confidence. When there was a 40% rate for CGT there was indexation. Now, there is no indexation. It is quite an imposition. There is still money in the economy, despite the recession. People are sitting on it and waiting. It would be a pity if our fiscal policies focused on Germany and the US for investment instead of Ireland. We need the investment so it is imperative the fiscal policies we pursue do not create impediments that will prevent or discourage people from investing in this country in the future.