Feargal Quinn (Independent)

I thank Senator Norris for sharing time. The Minister is very welcome, as is her speech and the details it contained. The challenges facing the Minister certainly entail many difficult decisions. It will never be easy to make social welfare cuts of any sort. The headline in this week's The Economist read: "Ireland shows the rest of Europe what austerity really means". The article also goes on to state that without that austerity, we will lose control of our own budget and will have to hand it over to somebody else. The ability to get the budget balanced and to make sure we handle social welfare in a correct manner is not an easy challenge.

I spoke to Colm McCarthy at the Joint Committee on Finance and the Public Service a couple of weeks ago. When I asked him what would happen if all of his cuts had been introduced, he reckoned it would put our standard of living back to the position that applied in 2003. My memory of 2003 is that we were not all that badly off and were doing quite well. Some suggest it is outrageous that social welfare incomes are being cut. However, if we are only going back to 2008 levels, which I gather is the Minister's main aim, then this is something we have to defend on that basis.

The Bill has generated much debate in the other House but some of it can be put down to political posturing. The fact is that we do not have the money any longer to pay the high contributions which we were once able to pay. It is a horrible situation to have to cut welfare of any kind but we need drastic action everywhere to avoid our country going bankrupt.

We have to remember that social welfare recipients will now return to the financial position which existed in October 2008, which was just before a rise in benefits, which was probably not the right thing to do given the state of our finances. I am certain that many people in the private sector would love to have their income similarly only reduced to the level of October last year. We all have to stand up, and everyone must suffer some of the pain, instead of asking someone else to take the challenge instead of us. To say "Not me, please" is a bad habit, left over from the boom times. At the end of the 1980s, our recovery was in large part due to a form of patriotism and pulling together to aim for better times. We achieved a great deal after that. Everybody has been affected by our situation and we have to avoid being a selfish nation.

The majority of social welfare recipients will face a cut of around 4.1% if they are under the age of 66. When one takes into account the cuts in the public and private sectors, such a cut is not unreasonable. We cannot fail to remind ourselves that social welfare payments have increased 130% over the past 12 years. While I accept the Christmas bonus has been cut, the cost of living has fallen by approximately 2.8% over the past 12 months.

Take the situation in one of our EU neighbours, Italy, where new claimants receive just 28% of their previous earnings. Spain is facing a similar problem to Ireland after its construction boom. Approximately €1 in every €2 spent next year by the Spanish Government will go on pensions, welfare payments or unemployment benefits. We in Ireland have to remember that we are not the only ones who are reconsidering the welfare system. The Economist argues that the shocking state of public finances may at last drive through big structural reforms in Europe, especially in labour markets and welfare states, which might mean more means-testing to exclude the middle classes who so often capture the system. It states such drastic axe wielding would be painful but would not cause the depressionary spiral that such a policy would trigger in a country such as Britain. This is a necessary part of Ireland's progress back to its old model: attracting foreign investors to employ a well educated workforce. It has worked for us before and while it will not be as easy, it will work again.

There has been an argument that the reduction in the jobseeker's allowance is forcing young people to emigrate but the fact is they can avoid this by going on training courses or into education, which is hard to argue against in a recession. We all have to face up to our stark situation and this includes social welfare recipients.

I was in the Minister's home town to address the Thurles Chamber of Commerce recently and I have been talking to businesspeople up and down the country on the same topic. It is not politically acceptable to say it but the Government must reconsider the minimum wage now that social welfare has been reduced. The message business people are giving me is that they want to take on people and could even expand their businesses if it were not for the high minimum wage rate. This a particular problem for the retail industry which employs nearly 300,000 people in this country. It is not easy to say this, however. I have mentioned before that the state of Colorado in the United States, for the first time ever, has reduced its minimum wage. This was not a decision of the state government; the minimum wage is linked with the inflation rate and thus will come down in a time of deflation. I am not saying we need to slash the minimum wage, but surely the rate must be reconsidered in a time of deflation for us to become more competitive. On that point of competitiveness, we should also be looking at a reduction in employer's PRSI. We need to encourage the creation of new jobs and I did not hear enough encouragement of this in the budget.

I have been in business close to the Border and know something of the clash between Newry and Dundalk. I mentioned recently a conversation with an unemployed person in Dundalk who, when he was asked if he would work in Newry, replied that they only paid one third of the rate in the North. The same applies to the jobseeker's payment north of the Border. If we are to be competitive, we face a major problem in that taking up work is often less attractive than staying on social welfare.

There was a recent report in Britain by the Centre for Social Justice which suggested a malfunctioning benefits system lay at the root of many social problems. In Britain no adult works in 16.9% of working age households. The report argued that there was a benefits trap where if someone took a low paying job, most of the earnings would be offset by the quick withdrawal of benefits and the imposition of income tax and national insurance contributions. It found that there was an underlying message that "progression into work simply is not worth the hassle". We face a similar problem here. We must look at the system to make sure someone on the minimum wage is better off than on social welfare. Perhaps if jobs were incentivised in that way, we would have more people employed and get the economy moving again. Some jobs are not available at a certain rate. While it is not attractive to say so, if the minimum wage continues at the current rate, we are depriving people of work because we are not making it attractive enough to go out to work.