Dan Boyle (Green Party)

This morning I attended a briefing by the Irish Taxation Institute. Obviously, the organisation does valuable work, but the briefing revealed the existence of many Irelands. The reaction to the budget was based solely on the tax changes, as that is within its remit. There was no reference to the cuts in social welfare payments and only one vague reference to the cuts in public expenditure in general. What most concerned this group of professionals was that the ability to avoid tax had been seriously compromised by the budget. Whatever else we might examine with regard to the circumstances that have brought us to this position, at least there should be some acknowledgement of the fact that the budget finally eliminates 25 tax reliefs and tackles the tails that have lingered for too long of unnecessary reliefs extinguished several years ago. I hope it has undermined the concept of tax reliefs being introduced on such an ad hoc basis with little thought given to their long-term costs and consequences. This is something that has bedevilled our political system for the last 20 years. The Labour Party representatives will contribute to this debate on their own behalf, but I recall a Government during the 1990s in which a Labour Party Minister for Finance introduced tax reliefs for items such as holiday homes and multi-storey carparks. Reliefs were never logical then and are certainly not now; therefore, nobody should regret their passing. The effect of this and horizontal measures means that those on higher incomes will pay more tax. These are only some of the balancing measures in the budget.

There is a gesture, certainly a small one but a step in the right direction, with regard to ministerial pay. Frankly, the PRSI adjustment for higher level civil servants, Deputies and Senators is not enough. It affects income by a figure of approximately 5%, but it should have been a more honest and across the board pay cut. The budget lacks such gestures to show some affinity with many of the decisions that have had to be made.

Most of the negative commentary will concentrate on the social protection decisions. They are the decisions nobody in public life ever wishes to make. For many of these categories, it is the second year of such changes. Yes, decisions have been made to protect people on the State pension and other social welfare payments for those over 65 years of age. However, in the case of cuts to the carer's payment, disability payment and specific payments such as the blind pension, it is difficult to offer a rationale as to how it could be done. However, how could it have been avoided?

There have been ten years - this applies across the political system - in which we spent too much and taxed too little and the biggest beneficiaries of this were those in receipt of social welfare payments which have more than doubled in a decade, during which the underlying rate of inflation was 40%. Even following two years of adjustments, they are still at a higher level than those in many other European countries. They are also at a level at which the recipients' purchasing power is still greater than those in receipt of social welfare payments in other countries. Following the adjustments in this and previous budgets, the rate of child benefit is still three times what it was ten years ago. This is happening in a country which has lost its ability to be financially sustainable.

Senator Ross can make the argument, as he regularly does in the Seanad, that the banks have brought us to this position. I believe they were only the straw that broke the camel's back. This situation is due solely to the financial unsustainability of the policy mentioned - the constant willingness to spend more and tax less. Even the tax changes which bring those on lower incomes into the tax net and the introduction of the universal social charge will result in the country having an average tax regime, as a percentage of GDP, that is still lower than the European average. This distancing from reality, in which we lived through a period of time when we thought we had it all but were not providing for it or not doing so sustainably and ignoring the future consequences, is something that is as much a societal problem as a political problem.

That said, the circumstances created since 2008 and how they would have been dealt with by any other combination of political parties would not have been substantially different. One could have taxed slightly more, but the more one taxes, the more one undermines the ability of the economy to recover quicker. Some might have been tempted to cut even more, but the more one cuts, particularly in areas such as social welfare, the more one deprives others of the right to spend. Spending more money in the economy also acts as an economic impetus. Getting the balance right will be a challenge for any Government. It is not realistic to claim that whatever budget is produced in these circumstances and the budgets that will follow in the next three to four years can be produced without affecting the 40% of the budget that is accounted for by social welfare payments or the 80% accounted for by social welfare payments, health and education funding.

In the context of the OECD report released today and the critical comments made on the Order of Business both here and in the Lower House, the fact that current expenditure on education will rise this year appears to have been missed by many of those who are critical of the budget. There will be more teachers. Our demographics are such that there are more young people and we must provide more teachers to maintain the pupil-teacher ratio.

On all these grounds, the budget has the right emphasis. Two themes must be conveyed in the budgetary process - to protect and try to improve education and training, for economic as much as social reasons, and to encourage and foster enterprise. We have elements within the economy because it is an open economy and attracts foreign direct investment that will see it grow in any case. We can argue about whether the rate will be 2.75%, but there will be growth. What will make it the necessary and sustainable is if we can add the ingredients of hope and confidence. I hope there will be these ingredients for whoever is in government in the coming years.

One of our main difficulties and the reason we found ourselves in a situation where we had to accept an agreement with the European Union and the IMF is not that we could not borrow money - we can - but that the rates of interest available for that money are utterly unsustainable. One of the reasons for this, aside from the weakness of the euro as a currency, is our ability to talk ourselves into a situation where things are as bad as they can possibly be, are beyond salvation and that somehow we need to be dug out of a hole. The elimination of that attitude is the first requirement. The reality is that when we have a €15 billion adjustment, with €6 billion being front-loaded of €6 billion - I accept that not everybody accepts this - it cannot be done without striking an appropriate balance between cutting capital and current expenditure and increasing taxation. To believe that we can achieve the €6 billion this year or the €15 billion in any year, and not affect social protection, is not being honest with the people. Once the finance Bill and the social welfare Bill that accompany this budget are approved and we eventually have a national debate in the form of an election campaign, then we will have honesty about our economic future, when we have that conversation with the people. It has been sadly lacking today.