Dara Calleary (Mayo, Fianna Fail)

I thank Senators for their remarks in the past few hours.

In the past two years we have seen the most severe economic downturn in the history of the State, with crises emerging in both the public finances and the banking system. Recovery in the economy is uneven and has slowed somewhat this year, but it is important to note there has been a stabilisation in the economy. We experienced growth in the first quarter of the year, after a severe downturn in 2009. Recent data indicate the economy has stopped declining, following the deep recession of last year. The Government acted decisively and swiftly at all times to deal with the crisis as it emerged. This has resulted in stability being restored to the banking system, while our competitiveness has also been restored somewhat. While we all welcome these positive movements, the fall-out of the economic downturn has been severe. It is estimated that in 2008 and 2009 GNP per head fell by over 16% and a further decline is forecast for this year.

The rate of interest demanded on Irish debt has risen and is set to remain high, unless further decisive and credible action is taken soon to stabilise the public finances and establish the basis for sound economic growth in the years ahead. In the light of this and the fact that growth in the economy will not be as robust as previously forecast, the Government has announced its intention to produce a credible four-year plan that will set out how savings of €15 billion can be made in the period to 2014. All parties now accept the need to return to a deficit figure of 3% of GDP by 2014 and all of us agree the target has to be achieved without having an adverse impact on the capacity of the economy to return to growth. This involves many finely balanced judgments. This is the task in which the Government is engaged. The plan, together with the targets for each year, will be published in the first half of November. Its main objectives are to show in a detailed and credible manner how we can correct the imbalances in the public finances, while showing a pathway to sustainable living standards, as well as demonstrating to the markets that we have the vision and capacity to address our public finance problems and resume economic growth. Accordingly, as part of the budgetary plan, we will set out a strategy for underpinning and encouraging sustainable economic and employment growth in the medium term. We will only achieve the necessary targets through adopting policies that will enhance our economic growth and job creation prospects and improve our competitiveness.

People have argued about and questioned the 2014 date for restoring the public finances. It is important to stress that if we procrastinate, it will cost us more. There is a wide gap between what we are spending and our income and such a gap is not sustainable. What we spend on public services must be funded by having an efficient tax system. In the medium term we cannot borrow to fund day-to-day services. For every €1 billion we put off addressing, we must borrow €1 billion every year and pay interest on it. Job creation requires that the public finances be put back on a sustainable path. We know from what happened in the 1980s that unless businesses are confident about the Exchequer's long-term position, they will not create new jobs. There is a need to face the figures with a sense of realism and continue to bring expenditure and revenues towards a sustainable balance.

All EU countries have benefitted from EU membership through access to a sizeable market, Structural Funds receipts and agricultural fund receipts. However, these sizeable financial and economic benefits entail significant responsibilities which Ireland has always taken seriously. Accordingly, since the economic crisis began to emerge in 2008, the Government has continually kept our fellow EU Ministers, as well as the European Commission and the ECB, fully briefed on significant economic and financial developments. We have provided extensive details of our consolidation plans, the measures they include and the results they have achieved. Only last Monday the Minister for Finance updated the Commissioner, Mr. Olli Rehn, on the current economic position and the progress being made in preparing budget 2011. As a result of this constant dialogue with our colleagues, we are confident they have a clear and detailed understanding of Ireland's position and what we intend to do about it. As the Minister for Finance stated, the endorsement of EU Ministers, the Commission and the ECB will be of key importance in demonstrating to the markets the soundness and credibility of our plan.

Many Senators have asked why the adjustment amount has increased to €15 billion. Growth in the economy will not be as robust as previously forecast. Forecasters have revised downwards their forecasts for growth in the next few years. These revisions reflect softer than expected data for the global and Irish economy. In particular, projections for domestic demand have been marked down amidst ongoing deleveraging by households and businesses in the wake of the credit boom. This means future tax revenues will not be as buoyant as previously expected. In addition, targets for the deficit expressed as a percentage of GDP will be harder to attain because GDP will be lower. Economic growth has been stronger this year which is reflected in the export figures released today for the third quarter. The growth figures projected for future years are lower than previously expected. This relates to the prospects for growth in both the Irish and international economies.

Sentiment towards Ireland in the financial markets has deteriorated in recent months, resulting in increased borrowing costs for the State. The markets are looking for a degree of front-loading the necessary four-year fiscal adjustments to bring Ireland's deficit into more manageable territory sooner. It should be noted that under our initial stability plan, a saving of €4 billion was targeted for 2011. This was revised to a minimum figure of €3 billion when the period of the plan was pushed out to 2014. The CSO has performed a downward revision of the 2009 GDP figure for technical reasons. Also, nominal GDP figures have been lower owing to lower than expected price levels. This, combined with the technical revision in 2009, has fed into the need for a higher adjustment.

Increased interest payments arising from the bank rescue will add to spending costs next year and increase the national deficit. It is important to note that the cost of the bank rescue accounts for less than 10% of our annual borrowing requirement and, as stated by the Governor of the Central Bank, is manageable. The argument that the banks are the source of all our problems is simply wrong. If we never had an Anglo Irish Bank, we would still have a fiscal crisis. The bulk of our budgetary problems reflect the large gap between revenues and State spending on public services, which we must address. The borrowing costs in fixing the banking sector amount to €1.5 billion per year, whereas we are borrowing €19 billion per year. Countries across Europe and the world are identifying steps by which they can reduce their budget deficits and bring their finances into order. Ireland is no different. The Government's focus is on securing the adjustments required on which we must deliver in budget 2011. In all public comment since September we have drawn attention to the fact that the rate of global recovery was sluggish and to the difficulties caused by a number of crises.

Reference has been made to the Croke Park agreement. I recall the comments I made here three weeks ago. The implementation plans have since been submitted and dialogue is ongoing. For those who want to see one of the plans, the Department of Health and Children has published its plan on its website. It shows how the Department is planning on transforming its operations. That is the level of detail we want other Departments to match. All of the implementation plans produced will be published. The choir which is suggesting we should throw out the agreement without giving it a chance to bed down is incorrect. It should engage with the process which an implementation body is driving. Politically, we will continue to drive it forward at full speed ahead.

The cost of public services is far higher than the amount generated by tax revenues. On its own, economic growth will not deliver sufficient revenue to close the gap for some years to come. This means the difference between what we are spending and what we collect in revenue has to be met by borrowings. A Government must close this gap to a sustainable level to ensure a prosperous future for Ireland. This means there will have to be cuts in public expenditure and higher taxes. As the Minister for Finance stated, even though those measures will be painful, we will continue to enjoy many of the substantial increases in living standards that were gained in the past ten years or so and they will provide the basis for regaining what we have temporarily lost.

Some have argued that the correction could be delayed. They argue that it would be easier to put off the hard decisions which this action involves until economic growth has become established. We must act now. If we delay action, the problems will not only remain but will get worse and the necessary decisions will become even more difficult to make and will have a worse impact. The increased borrowings will eat into our ability to provide public services, which will have a long-term impact on our country. We cannot and will not backtrack on the commitments we have made to the European Commission, EU ministerial colleagues and institutions worldwide. In summary, in the real world in which we live, it is neither a credible nor a viable choice to defer the action we must take.