Alex White (Labour)

I agree with many of Senator Boyle's comments in the context in which he made them and the tone of his statement was acceptable. As the Minister of State is aware, the Labour Party has stated it adheres to and agrees with the objective of reducing the deficit to 3% of GDP by 2014. I also accept that it is not enough for us to assert this and that we must face up to the consequences of achieving this objective. One cannot have one without the other. One cannot rhetorically say something is a good idea without facing up to the consequences of how it is to be done. We will face up and are facing up to the specifics of what is entailed.

The Minister of State will excuse not just the Labour Party but all of the community for pausing for a moment to come to terms with the shock; it is ten days or so since the figure of €15 billion leaked out before being confirmed yesterday. That figure is precisely double the amount we understood the adjustment would be some few months ago. It is not enough for the Government to tell the Opposition parties or anyone in the community that this is the position everyone must accept. It must allow the people to absorb and understand what is involved. It must allow them space in which to question how there could be such a disparity between what it told us six months ago about the implications of reaching a figure of 3% of GDP by 2014 and what it is now telling us. The figure of €7.5 billion was considerable. The Minister of State listed the reasons for the drift, but they are astonishing. People have difficulty in comprehending the reasons for the disparity between the original figures and that which we must face in the next three or four weeks, namely, the adjustment necessary to reduce the deficit to below 10% of GDP next year.

Two substantial but different figures have been mentioned. It has been suggested by the ESRI that a figure of €4 billion is required to reduce the deficit to single figures in 2011. That is a psychological factor all of us can understand as a useful objective. However, there is a suggestion abroad that in the Department's view a figure closer to €7 billion is required. I make these points about a big global figure to illustrate the genuine difficulty people, including politicians, economists and expert commentators, have in getting their heads around precisely how we can reach our objectives within a short time, as we must. If the Minister of State is fair, as I believe he is, he will accept there is a level at which, rather than demand the Opposition parties come forward with their proposals, the Government must demonstrate, precisely and not in a press release, the provenance of the figures. It must give its forecast for growth for next year and make clear the main economic indicators that underlie the decisions it will take. The Minister of State agrees the Government has not yet made these decisions but faces having to make them in the coming weeks. Therefore, it is a bit rich for it or anybody else to demand that the Opposition parties should have the answers within a short period when it has not come forward with its own figures.

That said and without resiling from my point, we all have a responsibility to look at the implications and possible consequences of the onerous requirement that essentially has been dictated to us. There is a view that a requirement has been dictated to us and that we have no option but to adhere to and accept it. We must look at how we can achieve this.

I did not hear all of the debate, but I heard what Senator MacSharry said, to which I shall return. If we look across the board at what needs to be done, obviously there are limits in terms of categories. It is inevitable that capital spending will have to be reduced again. My party believes a reduction of the order of €3.5 billion in the next three years would probably bring us to a capital spend of just under 3% of GNP which would bring us close to the level of the average European spend or the eurozone average, as we understand it. However, there will have to be compensatory mechanisms. I was interested in what Senator MacSherry had to say about the use of the National Pension Reserve Fund which chimes with what the Labour Party has been stating about the leveraging and usage of some of the funds through a strategic investment bank. There is a role for a strategic investment bank in order that we could have a form of State intervention and investment to support small business and achieve growth. Unfortunately and regrettably, the capital programme is one that must be looked at in the context of the budgetary plan.

I would like the Minister to address a related point. I understand the rationale for making contributions to the National Pension Reserve Fund, but surely that rationale must be revisited. We are now borrowing at a rate of 6% or 7% on the international markets to obtain funds to be placed in the NPRF. At the very least, there is an irony in that we are borrowing money at a very high rate in order to put it into the NPRF. Surely, there is a case to be made for suspending that practice, at least for the period of the four-year plan.

I agree with a point made by Senator Boyle that others may have expressed. We must get away from what Deputy Gilmore described yesterday as lurching from budget to budget, when during a period of several weeks leading up to a budget we look at what we can grab. There was much talk about grabbing low hanging fruit and so on, although there is very little fruit to grab. There is a danger that when the pressure is on, decisions will be made that will not be right in the long term. I agree strongly with what Senator Boyle said and what the Minister of State said on structural reform. I wish the Government would tease out in greater detail what it means by this. In this day and age is it necessary for us to have an annual budgetary exhibition that lasts three, four or six weeks? Surely, if we are addressing the budgetary situation of the country, future public spending, where savings can be made and taxation measures and strategies, this should be a year-long practice. I know the Department of Finance has a section which deals with these matters all year round, but there should be ongoing public debate on the proper budgetary strategy to be adopted, especially when it comes to public expenditure. Rather than it being a matter of asking what we can cut, we must try to engender a debate within the community and in the political system on the services we wish to provide. Perhaps we should go back to the beginning and ask what are the services and payments we want to provide and make. We might ask, for example, what was the point of child benefit. I do not propose we remove this benefit in case there is anyone who will jump in immediately and claim the Labour Party wants to talk to people about their child benefit being removed. I am simply trying to illustrate my question as to whether we could start again from scratch and evaluate and assess each item of expenditure and ask what are the services we want to provide across the system in education, health and welfare.

I have no doubt that if the Croke Park agreement is pursued and those responsible for ensuring it is implemented get on with it, substantial savings can be achieved in the public sector. This should be done. I advocate and agree with it, in case anyone thinks I am jumping around the point. It should be driven forward. It is a matter of regret, therefore, that, as we heard from the Minister of State's colleague, there has been such slow progress in that regard. All that appears to have occurred is that a national body was set up, while each Department has set up its supporting committee. The process must move forward. Otherwise we will again have a clamour from some quarters that reform of the public sector means swooping in and cutting pay. Sometimes there is a case to be made for cutting pay, but that is not tantamount to public service reform. These are different matters. Reform is not designed to take money from people who work. I understood we were talking about work practices, flexibility, transferability, possible mergers of tasks or tasks being done more efficiently in different ways. It is regrettable that we have returned to this cycle again as we approach the budget in which people claim that what they mean by public sector reform is a smash and grab to reduce pay.

I have made the point ad nauseam in this House on reform. It should not come as a great surprise that 80% of the health budget, if my figures are correct, goes on pay. Why would that not be the case? Doctors, nurses and administrators are the people who run the health service. What happens when someone goes to hospital? He or she sees people with expertise and training who are in place to look after him or her. The process is labour intensive, as is education. Therefore, this should not be a source of surprise. If we can reduce costs and still provide the service we do, that will be fine. However, let there not be a ringing of hands and complaints that 80% of the health budget goes on pay.

There is scope for a voluntary redundancy scheme in the public service. We can identify areas in which there is overstaffing, as many have, anecdotally and otherwise. I agree with those who say there is still scope in the health budget, for example, to address the issue of generic drugs. An estimate my party has seen which I believe is that of the IMO indicates a potential saving of €300 million. An bord snip nua estimated that GMS fees, a slightly different aspect of the same argument, could be reduced to the order of €370 million.

What has been done as regards that in the year and a half since that report came out?

As regards tax relief on pensions, I am certainly in favour of a curtailment in that area. We believe there could be a saving in the order of €500 million. We should limit the amount of relief that may be claimed by any individual. There is still scope for money to be saved on the property based tax reliefs. People say that area is less impressive now as a source of revenue, given the way the property market has gone, but I still believe there are options in that regard. Last year we proposed a new tax rate of 48% for people earning more than €100,000. Department of Finance figures estimated that such an initiative would yield €355 million, and my understanding is that the valuation on that now stands at €410 million. That certainly should be addressed.

There is room in relation to the tax on second homes to be addressed. I do not believe, if we are serious about broadening the tax base and re-ordering the Revenue base in the medium term, that this can be done without a property tax. We shall have to address that and people who argue it can be off the agenda for all time are naive. If we are talking about figures of the order of €15 billion in four years and people are serious about broadening and re-ordering the tax base, property tax must feature in that.

As regards the sale of State assets and so forth that Senator MacSharry referred to, we seem to have spent most of the last two years taking assets into public ownership, for example as regards the banking system, rather than the other way around. Hopefully, a time will come when we shall be able to off-load some of those assets, which we should remind ourselves will essentially be State assets before too long. I do not believe we shall find too many buyers for Anglo Irish Bank, but perhaps in due course we may be able to get some return from the sale of AIB back to the private sector.

This is a useful debate. There is much to concern us in the coming weeks and months and it is important to have the opportunity to address these issues.