Marc MacSharry (Fianna Fail)

I welcome the Minister of State, Deputy Mansergh. I also welcome his predecessor, Mr. Parlon, who is in the Visitors Gallery.

I am glad to have the opportunity to make a few points on the forthcoming budget. As has become customary, I must commence by making a basic rebuttal of what Senator Twomey stated. He always frames his contributions on matters of this nature by stating we got the country into the mess in which it finds itself and that it is important to learn the lessons of the past. To an extent, I agree with him. Many of the gains made since 1987 can and will be made secure as we look to the future. Any objective analysis of what has happened in the past 20 years or so must take account of and acknowledge the fact that as exports began to decline from the mid-1990s onwards, they were replaced by a tax base that was fed by transaction-based taxes such as stamp duty etc. As everyone now knows, such a position was not sustainable. If, however, we are to engage in an objective analysis, it must also be stated any manifesto produced by Fine Gael, the Labour Party, Sinn Féin or an Independent Member during the period in question would have advocated higher levels of expenditure across various departmental Votes.

There is no question that the world is a very different place. There is also no question but that mistakes were made. Senator Twomey has referred to those who predicted what would happen and used the ancient Greek word "hubris" - which relates to someone who is arrogant or presumptuous - when talking about the actions of previous Governments. It would be presumptuous of the Senator to state that had Fine Gael been in power, it would have done things differently. The reality is that a stopped clock is right twice a day. As much as anyone else, in its election manifestos Fine Gael argued for increased expenditure, rates of pay etc. It is arrogant and presumptuous to state matters would have been different if any other party had been in power.

Senator Twomey referred to the former Minister for Finance, Mr. McCreevy, who held the view that if the resources were available, they should be made available. Had we known what might occur, there is no question but that this approach and the expenditure and plans relating to it would have been adjusted accordingly. Circumstances have changed and, like any responsible regime, the Government has changed its mind and is trying to implement the policies that are necessary in order to allow us to meet the challenges we face.

I take the opportunity to suggest a number of items I would like to be included in the budget. I am not stating they will form part of the budget. We can have the debate after 9 December on what we think of the budget.

It is important that people remain positive, optimistic, constructive and realistic. Some €56 billion is being spent, while, relative to this, very little is coming in. There is no question but that serious action must be taken. We are all aware of the difficult challenges and the need to make an adjustment of €4 billion in the forthcoming budget. Decisions that will have a severe impact on every household will have to be taken. As the Minister of State indicated, we must try to spread the pain and difficulties that will be forced upon those households as fairly as possible. We must also do everything possible to ensure those who are most vulnerable and least well off will be protected to the fullest extent possible.

When introducing the pre-budget outlook in the Dáil, the Minister for Finance, Deputy Lenihan, indicated that the scope for increases in taxes was minimal and that reductions in expenditure would be the priority on this occasion. According to Davy Stockbrokers, the budget's only real job will be to outline the split of the €4 billion package to which I refer, not to alter its absolute size, on either side. Davy Stockbrokers also stated a fiscal consolidation focused on expenditure would be more successful and boost competitiveness.

As the Minister of State indicated, the aim in the budget will be to stabilise the public finances and reduce the budget deficit back below the European Union's 3% limit by 2014 in order to ensure we regain international competitiveness. While I agree with Senator Twomey that it is vital that there should be a correction of expenditure and that the tax base should be broadened, it is also important that we do everything possible to restore our competitiveness. It was not, as Professor Colm McCarthy noted, just the cutbacks and reductions in various expenditure streams in the 1980s which led to the high growth rates of the 1990s, it was also the increases in revenue that occurred. There are many differences between Ireland's position now and in the 1980s when we had our own currency, could reduce interest rates and benefited from transfers from the European Union. Currently, there are fewer such transfers, Ireland is part of the single currency and we no longer have full control over interest rates. I do, however, agree with Senator Twomey on the need to restore competitiveness.

It is predicted that the economy will contract by 1.5% next year. This will occur in the aftermath of a 7.5% decline this year. Annual growth is expected to turn positive in the second half of 2010, but this may not occur until 2011. As the Minister of State indicated, the rate of unemployment is expected to peak next year at approximately 13.75%. If corrective action is taken now in order to stabilise the deficit, it is expected the general Government balance in 2010 will be minus 14% of GDP. Ireland's income is approximately equivalent to that obtained in 2003 through tax revenue, while its expenses have increased by 70% in the interim. In other words, we are spending in the order of €22 billion more per annum than we are generating in tax revenues.

On a previous occasion Senator Quinn inquired whether, if it arose, we would embrace the opportunity to return to our lifestyles of 2003.