Jim Walsh (Fianna Fail)

I listened with interest to Senator Bradford's fair and measured contribution. We have come to expect such contributions from him. I also listened with interest to contributions from Senators Butler, MacSharry, Mullen and others, including the Minister of State. I must admit that I missed some Members' contributions as a result of the fact that I was obliged to carry out other duties.

Senator Bradford's point to the effect that this debate should be held on an earlier date next year - assuming that we will all still be here - is well made. If that were to happen, Members comments could be factored in to the overall debate on the budget. As matters stand, this debate is taking place somewhat late.

Framing the forthcoming budget has presented the Government with a tremendous challenge. Governments across the world - the Administration in this country was no different - were overwhelmed by the scale and speed with which the economic downturn took hold and caused what was, more or less, a global banking collapse. Owing to the fact that the downturn arrived in the wake of a period of unprecedented growth in this country and of general growth in the global economy, it was difficult to come to terms with quickly.

Commentators and politicians on different sides of the House sometimes overlook the fact that during the good years the mantra repeated by the Opposition and backbenchers on the Government side was that we should ensure the fruits of the Celtic tiger would be distributed in an equitable manner in order that those who did not appear to be doing well would benefit. I and others subscribed to that argument.

We have quite an amount to show for what occurred during the good times. Roads and other infrastructure throughout the country have improved dramatically. I was involved with the Irish Road Haulage Association, IRHA, in the early 1980s when times were difficult. At the time, I strongly campaigned for the Government to emphasise the improvement of road infrastructure, especially in the context of constructing motorways on the main arteries between our cities. In the early 1980s, it was estimated that the payback in respect of the Naas bypass, the first section of motorway built in this country, was of the order of 15%. By any standards, even those relating to private investment, that level of payback would be regarded as attractive.

As Senator Bradford correctly stated, there is no one in this country who did not in some shape or form benefit as a result of the Celtic tiger economy. In the late 1990s, for example, huge emphasis was placed on improving social welfare payments, particularly old age pensions. That was the correct course to take and those on old age pensions welcome and appreciated what was done for them.

A serious attempt was made to redistribute the wealth that was created. However, there is no doubt that people involved in risk capital ventures became very wealthy during the period in question. Those who use their initiative and take risks - that they took the latter is highlighted by the predicament in which they currently find themselves - deserve to obtain a reward. These people also created a considerable number of jobs during the Celtic tiger period. Up to 400,000 people were employed in the construction industry at one point. It must be remembered that the large influx of immigrants into this country during the past ten years or so occurred as a result of the need to meet the demand in that industry and in other parts of the economy.

Public servants have stated that they are not responsible for what has happened. All of us in the public service - the pay of Senators and Deputies is linked to theirs - benefited to a tremendous extent from the significant improvements made during that period. Some of those improvements came about as a result of social partnership. In the late 1980s and throughout the 1990s, social partnership played a pivotal role in laying the foundations which gave rise to the success we subsequently enjoyed.

During this decade, probably based on the false premise that we were on an upward curve, a view that was held across the globe, we tended to dismiss the normal dogma that applies in respect of economics, namely, that everything goes in cycles and what goes up must eventually come down. This has exacerbated the difficulties with which we are now faced. Our level of competitiveness has been seriously eroded, a matter about which I am concerned.

In 1998, the public service pay bill, which includes those who are on pensions, was marginally in excess of £7 billion, which today would be somewhere between €8 billion and €9 billion. At present, this bill stands at more than €20 billion. People must recognise that the level of public pay has increased dramatically.

There has been a great deal of navel gazing in respect of this matter. Earlier today, Senator MacSharry highlighted a number of significant failures on the part of the national broadcaster, RTE. One of the most obvious of these is its failure to meet the challenges presented in the context of promoting an understanding among members of the public with regard to the global banking crisis, the economic downturn and the property bubble. That people should have such an understanding is important from my point of view. I have no difficulty with people in the media. They are right to be critical where they feel mistakes have been made. I do not have any difficulty with that and it is up to politicians to defend themselves. The constant drip of negativity, which has almost reached tsunami stage, has damaged to some extent the psyche of the country and the confidence of investors and consumers. Unless those areas recover we will not get back on the path to growth to which we aspire.

This has a global dimension. I saw very good programmes on channels from our neighbouring island, BBC 2 and Channel 4. I would say they were relatively inexpensive to produce but they were extremely informative. They were on the banking situation in Britain and the collapse of Lehman Brothers, which had resonances for what was happening here as a microcosm of what happened in the United States. Other programmes were on the collapse of eastern bloc countries such as Latvia and the effects on the Czech Republic and Poland. It is a pity it was not done here in an educative way which would inform people and allow them to see that we are in a very serious crisis but that we can work our way through it. It would have harnessed a level of cohesion in the population to deal with the serious challenges that exist. Without such national cohesiveness we are very unlikely to rescue ourselves any day soon.

Our banking system did not escape the global downturn. People feel the property bubble gave rise to all our woes but that is an incorrect and superficial analysis. If we had never had a property bubble we would still be encountering serious economic difficulties because of the global downturn in banking. Our banks would still have had credit difficulties. Very definitely, factors were the property market, the reckless banking which went on and the lamentable and disgraceful failure of our regulatory authorities, and I include the regulator and would not exclude the Central Bank. The former Governor of the Central Bank stated that it gave warnings and included them in reports but people who are paid very high salaries need to be more proactive than putting something in a report and significant failures occurred in that area. In mitigation of their failures, the same thing happened in the United States, Britain and other places. We must recognise these failures if we are to ensure we do not go down that path again.

The Government faces challenges on three fronts. One of these is banking, which it has dealt with in the best way it could, given the difficult circumstances. I do not know whether the guarantees given at the time needed to be as all-embracing as they were but I do not know that they were not right either. NAMA was the correct measure to take. On the fiscal side, perhaps our successes have not been as good as the manner in which we dealt with the banking situation. Our public finances fall into three areas, namely, pay and pensions, social welfare and non-pay areas. It is my opinion that Irish pay generally is way ahead of what it should be. We are approximately 30% to 40% ahead in the private sector. Pay in the public sector is supposed to be, according to economists, 22% ahead of what it is in the private sector, which means our public sector wages are probably too high by a factor of 50%. That is extraordinary. I do not think we can correct that amount unless we take €5 billion out of the public pay bill and I suggest we do so through a cut in pay, consolidating the pension levy into a pay cut, and reducing numbers. We must reduce numbers in the public service by 50,000 to 60,000. That will come close to getting the €5 billion.

Unfortunately, we have no option but to cut social welfare. There has been a decline in prices and if this is done there is an onus on the Government to ensure the cost of living also comes down. There has been too much profiteering throughout the economy. Senator Butler mentioned fees. Legal fees in this country are a disgrace and the Government has never tackled them. Medical fees are also a disgrace. They are far too high and exorbitant. This is also the case for a range of other fees. Hotels and the retail sector are feeling the pinch. It would be fair to state that they ripped us off during the good days and this needed to be corrected. People have to become more competitive and whatever price controls need to be introduced should be introduced.

In the next three years we need to save approximately €14 billion. As I have stated previously, the target of €4 billion is too low. We should aim for €5 billion or €5.5 billion this year, a similar amount for 2011 and less in 2012. If we do so it may give us a little scope to provide stimulus and in 2010 we need to target very specific stimuli to areas of the economy that can retain and improve employment. The real blight of the downturn is unemployment.