Liam Twomey (Fine Gael)

I welcome the Minister of State to the House. In his reply, perhaps he can indicate where Government policy is going. The overall economy is seriously distressed but the Government portion of the economy is completely in tatters. As regards the overall economy, there is an 8% reduction in GNP. In discussing the economy we should use GNP rather than GDP, much of which is just repatriated profits from multinationals. The situation facing the Irish workforce is incredibly serious. We talk about 440,000 or 450,000 people being on the live register at the moment. In addition, we are talking about an unemployment rate of 11.8%. In reality, however, 440,000 people represent 20% of the workforce. So 20% of the workforce is on short-term work to the degree that they need unemployment assistance of some sort. That 20% must survive on what is roughly the equivalent of the unemployment allowance. Approximately 100,000 people must live on disability benefits or allowances of some sort, which means that 25% of the workforce is surviving on very little at the moment. There is little scope for taxing those one in four people in the workforce, which is a serious situation when one reflects on where we were just a few years ago.

These figures are now showing up in the social welfare budget. People wonder why the Government has not made many reductions in the €56 billion it spends annually. The problem arises from the rapidly increasing number of people who are on short-term work or are fully unemployed which is having seriously detrimental effects not just on the Government's finances but also on the lives of those concerned and their families.

We were told that two reports would form the basis of Government policy for the next couple of years: an bord snip nua and the Commission on Taxation. We would like to see some uniformity of opinion from Cabinet members on this matter. Either an bord snip nua and the Commission on Taxation form part of Government policy or they do not. The Taoiseach does not seem to think the Commission on Taxation is part of Government policy while a number of other Ministers do not seem to think that an bord snip nua is part of Government policy. These mixed messages have a negative effect. When the Opposition criticises the Government we are told that it has an effect on what investors think. Nothing will have a greater effect on investors, however, than watching the Government in total disarray sending out mixed policy messages. They clearly do not support either report, yet we are told there are two ways out of this problem: more taxes or expenditure savings, which are cutbacks.

The Minister of State said we cannot tax ourselves out of recession, although this may or may not be Government policy. We are not really supporting tax increases at this moment in time, which means we have to make more cuts. The scale of the cuts needed to bring our economy back to a manageable level is of the magnitude of somewhere between €5 billion and €6 billion. That is the sort of figure involved, so I would appreciate it if the Minister of State could outline how that scale of cuts can be implemented.

We can see from the Comptroller and Auditor General's report the waste of money that occurred over the years and the cavalier attitude to millions of taxpayers' money, often at the behest of Ministers. They clearly did not know what they were doing in their portfolios except that they were happy to waste money. The Minister for Health and Children announced yesterday that she will make a 10% cut to the health budget, but who will pay for that? Will it be through reduced pay scales for those working in the health services? I presume that if it affects people in the health services, it will affect all civil and public servants. Will it be applied to health service staff or patient services? The Government will have to stop talking in general terms and address the issues. A 10% reduction in the health budget is substantial and will seriously affect patients or health workers. The Government needs to be honest in the messages it sends.

The social welfare budget is approximately €18 billion. The cost of unemployment benefit has rocketed from €3.5 billion last year to an estimated €6 billion this year. The estimated increases in the cost of payments relating to people with a disability, the elderly and families with children who receive a benefit are not major. However, the social welfare budget is not funded entirely by taxation. Much of the funding is generated by PRSI which has two functions. The first is to cover day-to-day costs, while the second is to supplement the social insurance fund, an investment account, when PRSI revenue is in surplus. Between 2006 and 2008 this investment account contained in excess of €3 billion. At the end of July only €500 million remained; therefore, the Government had taken €2.5 billion out of the account to fund current spending. I do not know how many kitties the Government has to raid but it has raided one or two and taken substantial sums. This is in addition to the funding required for NAMA.

Will the Minister of State outline the Government's policy on the social welfare budget? The Government cannot repeat its raid on the social insurance fund in the past 12 months because that money is gone. Many businesses, particularly those run by the self-employed, will pay less in taxes at the end of next month because their trade contracted in 2008 and will contract further this year. Trade for a number of these businesses has contracted so much that Revenue will probably have to make refunds to them because they will probably have overpaid their taxes for 2008. Since it is the Minister of State's business to understand the figures, he must know how serious is this issue. He made his contribution in the same way he would have done in 2007 before we were hit with a sledge-hammer because of incompetence at national level and a crisis at international level.

The Minister of State should refer to NAMA because I am frightened by the proposal and was not filled with confidence by the Minister for Finance's comments in recent weeks. The valuation of loans at €47 billion is made up and not accurate. Approximately 30% of this money will be used to take on loans relating to land, 36% for those relating to development, while 34% is for commercial loans that are supposed to generate cash flow. The land will not generate cash unless it is rented to farmers to grow barley. The developments will not generate much cash because many of the properties are not finished and the residential property market is slow. That means commercial loans are expected to generate most of the cash flow, yet the Minister did not give a clear indication about how solid the loans were and the potential risk to the businesses involved. They may well be hit by the economic downturn in the next year or two. In other words, the income generated by NAMA could reduce significantly, while interest rates have the potential to increase.

The Government must outline the operating costs of the agency and the cost of interest payments. The banks, developers and others involved in this sector before the collapse will be paid to manage the loans and the Government needs to be honest with the people about the cost. The market potentially has not bottomed out yet and prices could drop further. The State's exposure may not be the €7 billion referred by to the Minister but a substantial portion of the €47 billion. That would have a huge impact on Exchequer finances in the future, in addition to the refinancing of the banks which the Government will have to undertake and the billions that have to be borrowed to meet current spending. How will the Minister control these unbelievable costs? Will the Minister of State be more honest about how the Government will deal with NAMA? How much is needed to recapitalise the banks? From where will the money come? Billions of euro will be necessary. While many do not understand what this is about now, they will understand the consequences in ten weeks when the budget is announced. If the Government does not get that right, we will be in the stew by the end of 2010.

Unfortunately, the economy continues to contract and nothing gives me confidence that it will improve next year. The Government is not facing up to the crisis. If the economy is to pick up, radical surgery will be required, not tinkering around the edges. Our competitiveness, cost base and so on must be restored, yet the Government has done nothing to address these issues in its recent budgets. The Minister of State should give an honest appraisal when he responds. The economic crisis is so bad that the Government parties are damned if they do and damned if they do not. That is how bad is the situation in which they have landed us. They might as well be damned for doing the right thing for the country and start making the hard decisions they have been expected to make for some time.