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Dáil Éireann debate -
Wednesday, 5 Dec 2007

Vol. 643 No. 1

Budget Statement 2008.

Sula nglaofaidh mé ar an Tánaiste agus Aire Airgeadais, meabhraím do Chomhaltaí go bhfanann an doiciméad atá a scaipeadh maidir leis an mbuiséad faoi rún go dtí go bhfógróidh an tAire é. Ní ceart é a thógáil ná a chur ar aon mhodh ón Teach sula gcríochnóidh sé a ráiteas.

Before calling on the Tánaiste and Minister for Finance, I remind Members that the budget documents being circulated remain confidential until he has made his statement. They should not be taken from the House before its conclusion.

We already got them from the Evening Herald.

Today, I present my fourth budget and this Government's first one against a challenging economic backdrop.

INTRODUCTION

Our economy has experienced extraordinary growth for more than a decade. At home and abroad our success has been lauded. That success is down to the commitment and drive of our people. Recent Governments have succeeded in managing the growth of the economy so that it has been sustained for much longer than anticipated.

The global economy is beset by uncertainties, financial markets are highly volatile and the construction sector domestically is experiencing a slowdown. However, we must not lose sight of the fact that the fundamentals of the economy are still good — a point often lost by some. Next year will see our economy growing at a relatively modest pace. In this changed environment of more moderate growth, this Government will manage the resources available so that growth will be sustained into the future. Today's budget is important in that context.

As Minister for Finance, I must place one economic objective ahead of any other — that we do things now that will position our country for sustainable development over the years ahead. This objective does not conflict with our commitment to make Ireland more environmentally friendly.

CONTEXT AND AIMS

Since becoming Minister for Finance, I have reformed the way the budgetary process is operated to enable better transparency and to improve accountability and scrutiny by the Oireachtas and its relevant committees. For example, annual output statements were provided by Ministers earlier this year to accompany their Estimates of expenditure and I published the pre-budget outlook in October. That outlook showed that delivering all that we did this year would mean increasing current expenditure by €2.3 billion in 2008 to almost €51 billion.

Today, I am announcing all new spending and taxation measures in a single unified budget. This reform allows us to focus on the totality of what Government is spending with taxpayers' money. By making spending and revenue decisions in a more transparent manner within the overall economic and budgetary parameters, we will ensure that Ireland maintains a sound and sensible fiscal policy, fully in line with the provisions of the EU's Stability and Growth Pact.

What this means is that the rate of increase on public current expenditure in 2008 has to moderate to take account of the resources available but, even so, I am still providing almost €53 billion, which is a net increase of more than €1.7 billion. This includes almost €960 million for welfare supports in 2008, which is just over half of the total additional spending announced today. I am also providing more than €8.6 billion in 2008 for investment on the capital side. When I compare that with the resources available to me, I am planning for a general Government deficit of 0.9% in 2008, which is the appropriate response at this time. This is the context in which my budget is set. This budget is focused on the future challenges and addresses them now in a way which is sustainable.

Investment in a sustainable future is this Government's top priority. I have consistently stressed the importance of the national development plan in the realisation of this goal. In the past, Governments have reacted to economic slowdown by stalling capital investment. I will not do so. On the contrary, I am providing more than €8.6 billion for capital investment in 2008.

In the proposals I announce today, I will also: protect the incomes of the vulnerable; promote our environmental goals; support ordinary working people; help home-buyers; and boost our economy, while adapting to the reality of more moderate growth into the future.

I will do all this while, at the same time, ensuring that the budgetary outlook remains positive and builds on the improvements in our fiscal position to date.

ECONOMIC AND FISCAL BACKGROUND AND TARGETS

2007 Economy

The pattern of very strong growth, mainly as a result of buoyant domestic demand, has eased as this year has progressed but growth still continues at a rate that is the envy of many other countries. For 2007 as a whole my Department expects GDP growth of around 4.75% is now likely. This is a very good performance in the circumstances. We estimate that an additional 72,000 jobs will have been created this year and that unemployment will be among the lowest in the European Union.

This budget is being framed against the background of significant uncertainty in the international economic environment. Since the summer, global financial markets have experienced considerable volatility and while the impact of such developments on the world economy appears to have been contained so far, we must acknowledge that downside risks remain.

Another issue is the significant appreciation of the euro against the dollar. This partly reflects financial market developments as well as growing concerns regarding the outlook for the US economy. This is of particular concern to us given the importance of the US both as an export destination and a source of inward foreign direct investment.

Ireland, of course, has deep international links and we are not immune from such developments. As I have said before, retaining flexibility and continuing to improve our productivity is the route to enhancing the competitiveness of our economy. The measures I will outline in this budget will help to achieve these goals.

In light of all of these adverse international developments, many of my colleagues elsewhere in Europe are revising down their growth forecasts. In these circumstances, our short-term economic prospects are still impressive.

2008 Economy

Nevertheless, for 2008 it is fair to say that the prospects are for somewhat more modest growth than we have become accustomed to. This reflects developments in the international economy as well as domestic developments. In relation to the latter, the main factor weighing on overall growth is the prospect of somewhat lower output in the new house building sector. Against this background, my Department is forecasting that GDP will increase by 3% in real terms, 24,000 new jobs will be created with the total number at work increasing by a little over 1% and unemployment at 5.5% by the end of next year, inflation will ease and the harmonised index of consumer prices will average 2.4%.

This economic outlook, while still reasonably impressive, means that it is more vital than ever that we retain our flexibility, act responsibly and continue to raise our productivity. If we do this, it will protect and enhance our competitiveness and employment levels.

Responsible Management

Responsible management of the public finances has been one of the prime drivers of our economic success. Our national debt is now around 25% of GDP, one of the smallest in the developed world. It is right and appropriate that we should run budget surpluses when the economy is performing very well. It is equally right and appropriate that we borrow when the growth outlook is less favourable. However, the move into deficit must involve productive borrowing, which will strengthen our economy for the long term.

Accordingly, I have set the following fiscal targets for next year: growth in total spending of 8.6% to maintain and improve the provision of services and to invest in the future; gross current spending growth of 8.2%; capital spending growth of the order of 12%; a general Government deficit of 0.9% of GDP, which is fully consistent with our EU obligations; and a debt to GDP ratio of just under 26%. These targets are realistic and achievable and a reflection of the underlying health and strength of our economy.

SPENDING POLICY

Public Spending Priorities and Value for Money

We must maintain the basic correspondence between spending and resources if we are to avoid piling up debt for the future and if we are to continue to afford the massive capital investment that is vital for all our futures. Obviously, the pattern of income and spending can vary from year to year but the overall trend line must be correlated with the resources available. We must get back to lower single digit increases in current spending as quickly and as prudently as possible, particularly in view of my determination to maintain capital investment as set out in the national development plan. A measured deceleration is required, not a sudden slamming of brakes, especially when we are entering a period of below trend growth by Irish standards.

My priorities are clear and straightforward, namely, to protect the weaker in society through maintaining a high level of social spending, deliver better and more effective public services, seek value for money at all levels of public spending and continue to invest heavily in public infrastructure. Our priorities for current spending remain health, education and social welfare, which account for almost 80% of total current spending.

At the core of all this spending must be the search for quality of service and value for money. As the pre-budget Estimates showed, we need nearly 5% more in 2008 compared to 2007 to stay as we are with existing levels of service. This requires all Departments to continue to monitor closely and examine carefully how efficiently and effectively resources are being utilised in the provision of all public services and this is what I intend to do using appropriate value for money initiatives.

The Government has agreed to an efficiency review of all administrative spending across the whole public service. I have set out in the summary of budget measures my intentions as to how the review should proceed. I refer colleagues to B.24 in the budget summary.

INVESTMENT FOR THE FUTURE

National Development Plan

The national development plan is an ambitious programme of investment in the future. Nothing on this scale has ever been attempted before in our history. It will transform our country socially and economically and I am determined to roll it out as planned and thereby secure our future. The national development plan is my top priority. Postponing or delaying it would be a major policy error. It would damage activity next year and impair our quality of life in future.

The new multi-annual capital envelope for each Vote group, which is published today in the budget documentation, provides for total capital expenditure to be maintained at an average of 6% of GNP during the next five years. All Departments have had their capital allocations increased from the pre-budget Estimates levels by more than €1 billion in total.

The main elements of our capital investment programme for 2008 will concentrate on transport, education, housing and environmental services, with significant spending in other areas such as health, agriculture and enterprise.

Transport

I am allocating €2.7 billion for investment in rail and bus services, national and secondary roads, regional airports and ports. Of this, nearly €1.7 billion will be invested in our national roads network, thus continuing this Government's unprecedented levels of investment in this key piece of infrastructure. We are building high class roads, which are absolutely integral to economic activity and long-term economic and social prosperity.

During the coming year, this massive investment will deliver significantly on the M50 upgrade as targeted, resulting in four lanes between the N4 and Ballymount and a transformed and fully functional Red Cow junction. The West Link bridge will also have four lanes by the end of next year and we will have barrier free tolling.

Elsewhere around the country, almost 30 km of dual carriageway will open between Kilbeggan and Athlone, 37 km of dual carriageway will open between Cashel and Mitchelstown and almost 20 km of dual carriageway will open to bypass Carlow town. All these are key components of the major inter-urban routes between Dublin and our main regional cities and the National Roads Authority is working to ensure that they are delivered on time and within budget.

Will they all be toll-free?

Through a combination of Exchequer and local government funding, more than €600 million will be provided for regional and local roads. This will continue the commitment which the Government has shown over the past decade to the renewal of this vital network.

I am also investing almost €1 billion in our public transport system next year. This significant level of investment means that right across the country we will continue to make real improvements. Key projects such as the Cork to Midleton commuter rail line and phase one of the western rail corridor, which will link Ennis to Athenry, are through planning and the year ahead will see them readied for service in 2009. Construction is also due to begin on phase 1 of the Navan rail line, linking Dublin to Dunboyne. Irish Rail will also continue to introduce its fleet of 183 rail cars into service across the intercity network.

In Dublin, too, we will build on the great success of the Luas by adding much needed additional capacity on existing lines. By the summer, the capacity on the Tallaght line will have increased by 40% and construction work will continue on the line extensions to the Docklands and Cherrywood in south Dublin.

Water Services Infrastructure

Huge effort and resources have been devoted in recent years to the upgrading of our water services infrastructure. The €4.7 billion for water services in the national development plan, of which more than €471 million is allocated for 2008, is an unprecedented commitment to the provision of the infrastructure needed to support development and economic growth while, at the same time, ensuring environmental sustainability.

We have made huge strides over the past few years in expanding the scale and coverage of water and sanitary services infrastructure across the country. Virtually all major cities and towns now have modern wastewater infrastructure in place and we are pushing ahead with the remaining schemes at top speed. In national terms, some of the more significant achievements include increased compliance with the requirements of the EU urban wastewater treatment directive from 25% in 2000 to some 92% at present; and the completion of more than 350 schemes, including exceptionally large wastewater projects in Dublin, Cork, Limerick, Wexford, Galway, Drogheda and Dundalk. Other large water projects in the 2008 programme of works include those at Ballymore Eustace, Limerick city, Donegal Bay, lower Liffey Valley, Portlaoise, Waterford and Dungarvan, Castlebar and Roscommon.

Education Infrastructure

Total expenditure on education in 2008 will be €9.3 billion including €828 million for capital investment. Over the last three years alone, more than €2 billion has been invested in educational infrastructure. With this funding we have delivered 28 new schools, with construction underway at a further 16 new schools. We have delivered 77 largescale refurbishments or extensions of existing schools, with construction in progress at a further 44 schools. This is in addition to over 1,300 small scale projects delivered in 2006 and over 1,500 in 2007. Construction work this year alone will deliver over 700 classrooms to provide permanent accommodation for over 17,500 pupils. Given that there are 4,000 schools and that 9,000 building projects have been funded in these schools since the beginning of this decade, the Government is proud that the existing building stock has been substantially renewed.

However, the next challenge, and I believe the first priority for educational expenditure in 2008, must be to provide additional new accommodation to cater for the 13,000 additional children who will be seeking school places next year. This rate of increase in enrolments poses a major challenge for the education system. Accordingly, I am allocating an additional €95 million in capital funding for the primary school building programme in 2008. This will bring to €594 million the total budget that will be available for infrastructural investment in schools in 2008.

Other capital funding for education includes €184 million for infrastructural investment at third level and €50 million for various smaller programmes.

Housing

The Government is firmly committed to addressing housing needs and through targeted measures, providing an appropriate accommodation solution for lower income groups and people with special housing needs. I am making available a total housing package of some €1.7 billion in Exchequer resources, which together with non-Exchequer financing will bring the total overall housing package to some €2.5 billion. This will support the delivery of the ambitious Towards 2016 commitments entered into with the social partners, with some 9,000 new social housing units to be commenced or acquired in 2008 and the provision of 5,500 new affordable homes. Further households will be assisted through the continued roll-out of the rental accommodation scheme and support for homeless services. All in all, our aim is to address the housing needs of some 20,000 households in 2008.

The funding being provided for housing will support the important quality improvements in social housing, particularly through regeneration programmes successfully under way for example in Ballymun and Fatima Mansions and now being developed in other urban centres. I am particularly impressed by the work of John Fitzgerald and the Limerick regeneration agencies and I am pleased that today's package will support their initial work in developing a new vision for the socially disadvantaged areas of Limerick.

CLIMATE CHANGE AND ENVIRONMENTAL MATTERS

Carbon Report

There is growing and incontrovertible evidence of the challenge to us all posed by global warming. The Stern Review together with the recent reports from the UN's Inter-Governmental Panel on Climate Change illustrate the seriousness of the issue if things do not change. That is why we must act now. That action will require changes in the lifestyles we all lead and the choices we make on whether to consume or conserve resources. This should not be seen as a defensive strategy but as a forward looking, proactive response to this challenge.

The programme for Government undertook that I would give a carbon report in this budget. This is the first such report. Our current greenhouse gas emissions amount to some 70 million tonnes based on latest data. We will have to reduce that over the period 2008 to 2012 to an annual average of 63 million tonnes to meet our Kyoto commitments. An even greater effort will be needed to achieve up to a 30% cut envisaged by the EU for 2020.

All sections of the economy contribute to carbon emissions. Transport, for example, represents about 20% of emissions. This has been growing quickly due to increasing car use. Energy accounts for 22%, industry around 17% and agriculture 28%. Every element in our nation has a part to play. Some have already made significant strides and some are in a position to take more effective action than others. All must contribute as best they can to the necessary reductions.

The programme for Government also states that the Minister for the Environment, Heritage and Local Government will follow the carbon report in the budget with a report providing more detail on the progress being made towards meeting our targets for emission reductions. The Minister, Deputy Gormley, will give further information about this report tomorrow.

The programme for Government commits the Government to seek an all-party approach on climate change targets but in advance of such agreement to target a reduction of 3% per year on average in our greenhouse gas emissions. The target requires everybody to play a part.

The Government too has a role to play. We have put climate change at the heart of decision making by setting up the Cabinet committee on climate change and energy security. In previous years I announced tax and spending changes in this area. For example, in 2006 I introduced the favourable tax treatment of bio-fuels. Last year I provided for new grants for growing and harvesting bio-fuel crops and increased funding for an expanded range of energy conservation grants.

This year I am announcing a number of additional spending and tax measures to continue to support the Government's efforts to meet our greenhouse gas emissions targets.

Environmental Taxation — VRT

As I announced in last year's Budget Statement, a public consultation process was carried out by my Department in relation to rebalancing vehicle registration tax to take greater account of CO2 emission levels. There has been broad support for a fundamental reorientation and rebalancing of that tax. I am bringing forward today a series of changes that constitute the most fundamental reform of VRT since its inception in 1993.

The revised VRT system will be enacted in the Finance Bill and will be introduced with effect from 1 July 2008. The main features of the new scheme are: the VRT rate applicable to cars registered on or after 1 July 2008 will be determined by the CO2 emission rating of the car and will no longer be related to engine size; a seven band CO2 emissions system — A to G — will apply. It will be underpinned by a new CO2 emissions labelling system for cars, on the lines of the energy efficiency labels for white goods, to be introduced by the Department of the Environment, Heritage and Local Government and seven VRT rates, ranging from 14% to 36%, depending on the car's CO2 emission level, will continue to be applied to the open market selling price of the car.

Let me be clear that this measure is not about penalising people for their reasonable lifestyle choices. It is about providing them with opportunities and incentives. By explicitly linking VRT rates to carbon emissions on the basis of a new and highly transparent labelling system, we are providing individuals and families with the opportunity to make choices to help the environment and with financial incentives to do so. Of course, the higher emitting cars will pay more, but by making sensible and informed decisions, many families could see their VRT bills reduced.

Since this measure is not aimed at raising money but rather to assist the environment, the intention is that it will be broadly revenue neutral. I will continue to give recognition to the efforts of vehicle manufacturers to promote new technologies. Existing incentives for certain hybrid electric and flexible fuel cars are being extended to 1 July 2008. Thereafter and in addition to the benefit of the new CO2-based VRT system, I will be providing for a further top-up relief up to €2,500 on the VRT payable on such cars.

In an effort to foster the use of electric cars and electric mopeds I am also introducing an exemption from VRT. This exemption will apply from 1 January 2008. Further information on the new VRT system and related changes to the car capital allowances scheme are set out in the summary of budget measures and in annex D.

Motor Tax

Motor tax is an essential contributor to local government funding. Motor tax has not been changed since 2004. Since then the CPI has risen by around 15%. It is proposed to increase the existing motor tax rates by 9.5% for cars below 2.5 litres and 11% for larger cars from 1 February 2008. Details are contained in the summary of budget measures.

To complement the changes in the VRT system, the Minister for the Environment, Heritage and Local Government also intends to bring forward proposals that will link motor tax to CO2 emissions for new cars from 1 July 2008. These measures will allow consumers to act in an environmentally responsible way.

Other Environmental Tax Measures

The programme for Government has as an objective the introduction of a carbon tax in the lifetime of this Government, on a revenue neutral basis. This will be part of the terms of reference of the forthcoming commission on taxation. I intend to establish the commission very shortly and it will begin its work early in the new year.

I also intend to reduce VAT on certain seeds and bulbs for bio-fuels, and to amend the business expansion scheme so that recycling companies can have easier access to that scheme. Details of these measures are set out in the summary of budget measures. In the context of the forthcoming Finance Bill, I will examine, with my colleague, the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, the feasibility of providing businesses with targeted incentives to support the installation of certain energy efficient equipment also.

Increased Spending on Energy Conservation and Research

Our energy use has grown by 70% in the past 15 years and we are especially reliant on imported gas and oil to meet our energy needs. Energy security and climate change are challenges that face all countries and that shape our energy policies. It is important that we balance our objectives of keeping energy costs down, ensuring security of supply and keeping our greenhouse gas emissions to a minimum.

The White Paper, Delivering a Sustainable Energy Future for Ireland 2007 to 2020, which was published earlier this year, sets out the Government's strategy for achieving these aims. The Government, through the resources provided in the national development plan and the resources of the State's commercial energy companies, as well as through policy measures, is committed to meeting the strategy set out in the White Paper.

The key goals of the White Paper include energy security, energy diversity and energy reliability. To help achieve these goals, there will be expenditure of €8.5 billion in the energy programme of the national development plan. The State energy companies will invest over €7 billion of that amount, mainly in the electricity and gas transmission and distribution networks, in new and modernised power generation and in wind energy projects. Next year, these companies will invest approximately €1.7 billion in these areas.

The Government has created gas and electricity markets that are fully open to competition. From 1 November this year, there has been an all-island electricity market, facilitated by the North-South electricity interconnector and other existing and planned interconnectors.

Exchequer investment in energy has increased significantly in recent years — next year, at €86 million, it will be over twice the level it was in 2005. This reflects the increased importance the Government attaches to the energy sector.

The NDP provides almost €150 million for energy research. In this budget, I am allocating €13.2 million for that purpose, an increase of €7 million on last year. The additional allocation for 2008 will go in particular towards measures to develop renewable energy from ocean sources. It is an area where we as a country could make a very significant contribution if the research is successful. If the research looks promising, as I believe it will, I will consider making considerably more resources available in future years.

The best way to reduce our dependence on imported oil and gas is, of course, through energy conservation. In this budget, I am allocating an additional €13 million to energy conservation. Of this, €5 million will fund a pilot programme of home insulation. In addition, there will be funding for a variety of measures which include the building energy rating scheme and a variety of technologies whose application will ensure that we use energy more efficiently.

That is disappointing.

Supporting Farming and the Rural Economy

The Government is firmly committed to the rural economy. We plan to build on our investment in rural life.

What about the farm improvement programme?

Farming plays a major role in conserving our environment. It is already contributing significantly through more effective nitrates control and waste management. Thankfully, the economic prospects for farming have improved with higher producer prices and increased food exports.

That is for Brazilian beef.

There are some problem areas such as sugar, where special supports are needed. I will announce tax changes in a moment to make those supports more effective.

The Government closed down the sugar industry.

The sugar industry is dead.

The farm waste management scheme was put in place to help farmers adjust to the new environmental conditions and standards required by the EU nitrates directive and to support the competitiveness of Irish agriculture. In response to the very strong take-up of this scheme, I am now providing for a further increase of €35 million in the 2008 provision to bring total grant aid next year to almost €150 million.

Deputies

Hear, hear.

In addition, the rural environmental protection scheme, REPS 4——

What about the farm improvement scheme?

——will continue to underpin the Government's commitment to protection of the rural landscape, increased biodiversity and improved water quality. In 2008, I am allocating €370 million to REPS 4——

Deputies

Hear, hear.

——to cover grants for approximately 60,000 farmers.

Farm Taxation

I am making a number of changes in the farm taxation area arising from reform of the Common Agricultural Policy and the recent growth in the adoption of innovative farm business structures. The payments to farmers under the EU sugar beet compensation package include an element for diversification aid. I am providing that the income from these diversification aid payments will be spread over six years for the purpose of calculating income tax liability. This measure follows on the Finance Act 2007 provision which has already provided for similar treatment of the restructuring element of the package. It will cost approximately €9 million next year.

The Finance Bill will include a provision to avert a claw-back of income tax when a farmer who has opted to avail of the special income tax averaging arrangements subsequently enters a milk production partnership. I am aware that, on occasion, the break-up of a farm partnership may be necessary because of changed personal circumstances. To facilitate developments of this nature, I intend to introduce a new relief from capital gains tax on the dissolution of farm partnerships. The relief will run for a period of five years and full details will be contained in the Finance Bill. This measure is estimated to cost approximately €5 million next year and in a full year. The farmers' flat rate addition for VAT is being retained at 5.2% for 2008.

The House will recall that in last year's Finance Act, I extended stamp duty relief for farm consolidation. I am pleased to state I have recently signed the order to commence this relief following the receipt of the necessary EU state aid approval.

It is 12 months late.

I believe this will provide significant assistance to the farming community in improving the viability of holdings through consolidation.

Fishing Industry

The fishing industry in Ireland is facing major challenges at present. Earlier this year, the Cawley report provided a blueprint for the future of the fishing industry. It confirmed the need for restructuring of the industry, including a significant reduction in the number of boats in the white fishing fleet. My colleague,the Minister for Agriculture, Fisheries and Food, Deputy Mary Coughlan, successfully secured EU state aid approval for a decommissioning scheme for fishing vessels. Given the importance of the fishing industry and the role it plays in our coastal communities, I am allocating €21 million for this scheme to begin next year.

Deputies

Hear, hear.

I can indicate today that the tax code will be amended to assist in maximising the take-up of the decommissioning payments. Full details will be provided in the Finance Bill.

PROTECTING THE VULNERABLE

Social Welfare

As the economy begins a period of below-trend growth, our first priority as a Government is to ensure that the poor and vulnerable within our society are protected.

Deputies

Hear, hear.

This budget provides significant resources to allow us to address the needs of those most disadvantaged. This approach has enabled us, as a society, to deliver significant improvements for people on low incomes in recent years and this continues to be the best way to deliver future social welfare enhancements in a sustainable way.

The Government is committed to working closely with the social partners to achieve even more. We have already met the important thresholds that we set ourselves some time ago. We are determined to consolidate these substantial achievements and continue to make progress. In line with this overall approach, the improvements in social welfare benefits and child care payments that I am providing for today will amount to an additional €957 million in 2008 and €980 million in a full year. This is over half of the increase in total current spending compared to the pre-budget outlook.

Pensions

The Government is conscious of the need to protect and improve the income position of our older people. In recent years, significant social welfare increases for pensioners were delivered and key targets were achieved. Today, the Government will further build on these achievements by increasing the full personal rate of the State contributory pension by €14 per week and the State non-contributory pension by €12 per week.

Deputies

Hear, hear.

That is a long way from €300.

It is a long way from €30,000.

This will bring the State contributory pension to €223.30 per week and the State non-contributory pension to €212 per week.

What is €14 compared to €30,000 a year?

In addition, I am increasing the social insurance qualified adult allowance rate for people of pension age by €27 to bring it to €200 per week.

Deputies

Hear, hear.

I indicated last year that I intended to bring these qualified adults up to the full personal social welfare non-contributory pension rate so that a husband and wife with a single social welfare non-contributory pension rate would have an increase of €41 as a result of these decisions. I intend to complete this process next year.

Carers

The Government also recognises the huge contribution to society made by carers and will increase carer's allowance and carer's benefit by €14 per week. I will also raise the income disregard for carers by €25 for a couple to €665. I increased the respite care grant last year from €1,200 to €1,500. This year, I am increasing it by a further €200 to €1,700.

What about the abolition of the means test?

Other Social Welfare Supports

All other personal weekly social welfare rates will be increased by €12 per week. This will bring the lowest full adult social welfare rate to €197.80 per week.

Child Income Support

The Government has significantly increased financial support for children in recent years. It intends to continue to do so by increasing child benefit by €6 per week for the first and second child, bringing it to €166 per month, and by €8 for the third child and subsequent children, bringing that payment to €203 per month. It will also increase the early child care supplement, payable in respect of all children under six, by €100, bringing that payment to €1,100 per year. These increases mean that families with two children under six will receive a tax free payment of €6,148 in 2008.

Other Social Welfare Measures

The budget summary contains a range of other social welfare improvements, the full details of which will be announced by the Minister for Social and Family Affairs. I particularly welcome the €2,000 increase in the widowed parent grant to bring it to €6,000, which will come into effect today.

Health

In recent years health has been by far the largest beneficiary of new resources available for public services. The Government is committed to keeping health as a key priority area. It is equally committed to working to protect Ireland's economic and fiscal situation as the key prerequisite to providing the funding required to develop and improve health care.

Much of the public debate about health services is focused on the increased cost involved. While there are valid concerns about the growth of health spending, both nationally and internationally, the proper context for this debate is one which views health spending as delivering benefits as well as accruing costs.

We are determined to see that the extra budget resources now being made available by the Government to the Health Service Executive secure the optimum improvement in the quality and delivery of health services. To achieve this objective, the Government will work in partnership to overcome any obstacles to change in the health system and to continue to improve policies and practices in all areas of service delivery. My colleague, the Minister for Health and Children, Deputy Mary Harney, and the Health Service Executive will advance this work through the health forum established under the social partnership agreement Towards 2016.

Despite budgetary constraints, the Government is providing nearly €16.2 billion for health next year, an increase of over €1.1 billion on this year's provision.

The Deputy is the Minister's cheerleader.

Of the total €16.2 billion, over €700 million will be for the capital programme in health. An additional €276 million over the pre-budget Estimate is being provided for a range of health developments, including further provision for cancer care, the elderly, people with disabilities and children.

Co-location has been forgotten.

(Interruptions).

The Tánaiste, without interruption.

Details of these measures will be announced by my colleague, the Minister for Health and Children.

Medical Card Eligibility

The question of medical cards for vulnerable families is a priority for the Government. The programme for Government contains a commitment to double the income eligibility limit for parents of children less than six years of age and to treble it for parents of children with an intellectual disability less than 18 years of age. At present, the Department of Health and Children is carrying out a data collection exercise and review of the eligibility criteria for medical cards, which are expected to be completed by autumn next year.

The thousands of extra cards have not come yet. They were promised a year ago.

The Government is committed to making progress in this area as soon as that review is completed.

Drugs

Since the pre-budget outlook I have added €12.5 million to fund the implementation of the recommendations of the national drug strategy's rehabilitation report. This additional funding will allow for the development and strengthening of local drugs task forces and the roll-out of services to new commuter-belt towns. That is a priority in light of recent events.

Increased Duty on Tobacco

From midnight tonight, I am raising the excise duty on cigarettes by 30 cent per packet of 20, inclusive of VAT, with pro rata increases on other tobacco products. This increase serves to underline the desire of us all to curtail the consumption of tobacco in the interests of improved public health. I believe this measure should be welcomed generally.

It has also been suggested to me that there might be public health benefits arising from a switch to lower alcohol beverages. This will require some study and, indeed, some adjustments by industry. I am giving notice now that I intend to bring forward measures in this area in my next budget.

Development Aid

In addition to our commitments to the vulnerable here in Ireland, the Government recognises our responsibilities as a rich country to the poorest of the poor in developing countries. I am providing for an additional €84 million in the Vote for international co-operation in 2008. This will bring our total ODA allocation for next year to €914 million, up to 0.54% of GNP. This amount is three times that spent in 2000.

SCIENCE, TECHNOLOGY AND

INNOVATION

Significant and sustained investment in science, technology and innovation is an essential part of the drive to make Ireland a more knowledge-driven economy. Ireland must be at the forefront in generating and using new technology. This requires us to strengthen the national innovation system, in particular by focused interventions to support the development of our research and development base. This base has grown significantly over the past few years, with total gross expenditure on research and development growing from just over €800 million in 2000 to an estimated €2.3 billion in 2006. While the Government has contributed significantly to this increase, I am pleased to note that private sector investment has also grown from under €500 million in 2000 to over €1.6 billion in 2006. This investment, both by Government and private companies, will help secure the economic future of the country.

In 2008, I am increasing the capital provision by €36.5 million to a total of almost €300 million for continued investment in basic research in centres for science, technology and engineering and in strategic research clusters. Research and development activity, innovation management and collaborative effort between industry and the third level sector will attract significant support next year. This will be matched on the current side by an additional €12 million for higher education research, bringing the total STI expenditure on the current side to €133 million nextyear.

Research and Development Tax Credit

Ireland is now viewed by multinational companies as a location for research and development activity and the changes I will announce today to the research and development tax credit scheme will help to further embed these companies in Ireland around such high value-added activities.

I propose to enhance the research and development tax credit scheme. The base year for expenditure used to calculate expenditure on research and development is being fixed at 2003 for a further four years to 2013. The change will provide an additional incentive for increased expenditure on research and development in future years and will offer more certainty to industry concerning the tax credit scheme. This improvement will cost €60 million in a full year and is an essential complementary measure to Government spending on STI.

REWARDING WORK

Income Tax

I now wish to turn to the income tax code. In the last decade, the income tax system has been made fairer, friendlier, more progressive and more rewarding for working people. The express purpose of the programme for Government is to build on and further progress that tax agenda over the next five years. Today, I will take a positive step down that road by presenting to the House the first of five instalments in our income tax agenda. The various measures proposed constitute a well targeted income tax package that protects and enhances the income position of those in employment and supports those who find themselves in difficult circumstances or on fixed incomes. It will meet the Government's priority to use tax credits and bands to keep low income earners out of the standard rate band and average earners out of the higher band. The protection of more vulnerable groups must remain my priority in addressing income tax decisions and that is what I am doing.

I am increasing the personal tax credit by €70 for a single person and €140 for a married couple, while the employee tax credit will also be increased by €70 per annum. This will keep 32,600 income earners out of the tax net. For a single person on PAYE it will move the entry point to the income tax system from €17,600 to €18,300 per annum. The employee PRSI and health levy entry points are also being increased in line with these changes.

The 20% standard income tax band is being widened by €1,400 per annum to €35,400 for a single person and €44,400 for a married one-earner, while the band for married two-earner couples will be €70,800. With the projected average industrial wage for 2008 being about €34,000, it means that we will protect people on average earnings from liability to tax at the higher rate.

Other Tax Credits

With the needs of certain more vulnerable groups in society in mind, I propose to provide further increases in the value of a number of other personal tax credits. The tax credit for an incapacitated child will be raised by 22%, or €660 per year, to €3,660. The level of the married personal credit and the home carer tax credit is being increased by almost 17% to €900 per year.

The age credit will be increased by €50 to €325 for a single person and by €100 to €650 for a married couple, with the age exemption limits also being increased by €1,000 and €2,000 to €20,000 and €40,000 respectively. I am also providing for significant real increases in the credits for widowed persons and widowed parents. These are targeted and concrete measures that underline the Government's resolve to look after the needs and welfare of those most deserving of our support. I also intend to increase the allowance for trade union subscriptions from €300 to €350 per annum.

Deputies

Hear, hear.

The cost of all these income tax——

We will look after the trade union movement.

(Interruptions).

Mostly Fianna Fáilers. The Deputy need not claim credit.

——PRSI and health levy measures is estimated to be €432 million in 2008 and approximately €585 million in a full year. Following the budget the total number of earners who are outside the tax net in 2008 will be more than 878,000.

The increases in credits and bands mean that about four out of every five income earners will continue to pay tax at no more than the standard rate of income tax and that about two out of every five income earners remain outside the tax net, as outlined in the summary of budget measures.

HELPING BUSINESSES — TAX

MEASURES

The capacity of the economy to grow and develop largely rests on the ability of the business sector, both large and small, to prosper. It is the wealth creator and generator of employment in this country.

I am pleased to announce the following further tax measures aimed at the business sector.

Renewal of Section 481 Film Relief

I am renewing section 481 film relief until 2012 on the current basis. Any adjustments to the relief will depend on the outcome of a study of the relief that I have had commissioned. Any such changes will be announced in the Finance Bill.

Small and Medium Employers

In term of supporting small and medium enterprises I will introduce the following measures: the small company tax liability threshold for the payment of preliminary tax on the simpler prior-year basis is to be increased from €150,000 to €200,000; the tax liability threshold for new start-up companies at or below which they do not have to pay preliminary tax in their first accounting period will be increased from €150,000 to €200,000; the small business VAT registration thresholds will be further increased from €35,000 per annum for services and €70,000 per annum for goods to €37,500 and €75,000, respectively, from 1 May 2008 — this measure will take about 2,700 businesses out of the VAT system. These measures will support business and enterprise and will cost €16.5 million in 2008 and €27 million in a full year.

Details of certain technical but important VAT simplification measures are set out in the summary of budget measures.

Payment Cards

Modern commercial financial and retail transactions should increasingly be electronically based for reasons of efficiency and security. This will benefit not just businesses but also the ordinary person in the street. The Government is willing to make its contribution to the delivery of this desirable policy objective. In this regard, I propose to reduce the stamp duty charge on financial cards as follows: a 25% cut in the duty on credit cards, reducing the charge from €40 to €30; a 50% cut in the duty on combined cards, reducing the charge from €20 to €10; and a 50% cut in the duty on ATM and debit cards, reducing the charge from €10 to €5. This change will be part-financed by an increase in the duty on cheques from 15 cent to 30 cent per cheque.

This is consistent with a shift in the balance of transactions from paper to electronic methods. Overall, the cost of individuals' access to payment systems will be significantly reduced by these measures.

As a once-off measure, I propose to include provisions in the Finance Bill 2008 to require the financial institutions to make a preliminary payment equal to 80% of the stamp duty liability on financial cards for the previous year. This will assist the budget to the tune of €60 millionin 2008——

They will pass it on, legally or illegally.

——but will not add to costs for card-holders.

Deputies

Hear, hear.

A hit for the consumer.

They will pass it on, legally or illegally.

SUPPORTING HOME OWNERSHIP

Mortgage Interest Relief

In the programme for Government we signalled that the first-time buyer, and recent purchasers, would benefit from further increases in the ceiling on mortgage interest relief. Today, I will honour the Government's pledge by increasing the ceiling on mortgage interest relief for first-time buyers by €2,000 for a single person and €4,000 for a married couple or widowed person to €10,000 and €20,000 respectively.

Deputies

Hear, hear.

It is a lifebuoy——

This will increase the maximum monthly relief available by about €33 and €66, respectively, bringing it to €166 per month for a single person and €333 per month for a married couple or widowed person. These moves are appropriate in ensuring additional support for a hard-pressed segment of the housing market and should provide the necessary direction and certainty.

Housing Market

Taxation policy must always take account of market conditions and it should be designed to support, rather than hinder, the achievement of policy objectives. This is a matter for consideration by any Minister for Finance in respect of every budget.

Over recent months, the dynamics of the housing market have changed fundamentally. A natural and welcome slowdown in property price inflation has been compounded by higher interest rates, tighter credit control and changing consumer sentiment as well as uncertainty about the global economic outlook and turmoil in international credit markets. I have made it clear on many occasions that any stamp duty reform which I would contemplate would have to be affordable and would have to support, rather than potentially destabilise, the market.

Any number of proposals have been mentioned in the past that have ranged from the illogical to the impractical. They have included proposals that were overly complex and costly, that sought to push an additional stimulus into a market that did not need it at that point, or sought to introduce changes over a number of years that would simply have created further uncertainty.

Barring exceptional circumstances, there is only one time when it is appropriate to make significant tax changes and that is when they can be properly integrated into overall fiscal planning at budget time. Conditions are now such that there is a better balance between seller and buyer in the housing market.

That is the third position in as many months.

Price corrections are taking place. Activity is slowing somewhat and there is some uncertainty as to where prices will settle.

The Government has caused the slump in the market.

(Interruptions).

The housing market is an important aspect of our overall economy and the sustainability of economic activity can be assisted or impeded by the efficiency of that market. What I am not prepared to do is to introduce a set of small changes that would make the system more complex, but would do little to improve the functioning of the market. I decided that if this Government were to act, it would introduce something that would represent a step change in the operation of the tax system on residential property transactions. For that reason, I am today announcing fundamental changes to the current system of stamp duty for residential housing.

New Stamp Duty Regime

Purchases of residences with a value of less than €1 million will be charged to stamp duty on the basis that no tax will be payable on the first €125,000 of the consideration, and the balance will be charged at 7%. Only those houses valued in excess of €1 million will pay at a higher rate of 9% on the portion of the price which is in excess of that figure. There will be no losers and no anomalies will be created by this banding system.

There will be no winners either.

It will be extremely simple and considerably less expensive for both buyers and sellers. More importantly, this regime will also provide for a highly progressive stamp duty system whereby those buying the more expensive houses will always pay a higher effective rate than those buying the average house. That is equity at work.

Deputies

Hear, hear.

What if one lives in Dublin?

Since the percentage rates concerned will be paid only on the balance over the relevant threshold, rather than on the whole amount as under the current system, the effective rate paid on most homes will be well below the headline rate.

Did Tom Parlon tell the Minister to say that?

For example, a couple buying a new home for the national average house price of almost €370,000 will pay just over €5,000 less than at present. The effective tax rate falls at all levels — the duty paid on a €350,000 home will fall from 6% under the current stamp duty regime to about 4.5% under the new system and the duty on a €500,000 house will be reduced from 7.5% to approximately 5.25%. No transaction under €1 million will be charged much more than approximately 6% duty. This measure will take immediate effect and it will cover instruments that are due to be presented to the Revenue Commissioners no later than 5 December.

The exemptions that apply in the current system — for example, for first-time buyers and buyers of new homes — will be retained. In addition, the current five-year rule, which requires a full claw-back of the stamp duty exemption where the owner-occupier moves out and lets the property, will be reduced to two years. This will allow for the retention of an important control in the system, will better reflect the increased career and residential mobility of our population and will give potential young house buyers greater flexibility and certainty in their choices.

These progressive reforms will lead to a simplification of the system that will increase the efficiency of the housing market, boost confidence and support employment and overall economic activity. They are the right reforms, introduced for the right reasons at the right time.

Deputies

Hear, hear.

(Interruptions).

They are too late.

They are too late.

The gross cost of these measures in 2008 is €190 million. Details are in the summary of budget measures.

The Rental Sector

I also recognise the importance of the rental sector and the cost pressures on those renting. Accordingly, I will increase income tax relief on rent payments by 11%. I also propose to increase the threshold for the rent-a-room scheme from €7,620 to €10,000 to ensure the continued supply of this type of rental accommodation.

There was not a word about decentralisation.

CONCLUSION

Budget 2008 has been framed against the most challenging backdrop experienced in a considerable number of years.

Growth is moderating, the international financial markets have been turbulent and the global outlook is uncertain. Rather than adopt a conservative, cautious stance, I believe we must respond to the challenge by taking determined action and pushing ahead with renewed vigour.

Deputies

Hear, hear.

Today's budget meets the challenge head on. It supports the incomes of the vulnerable. It keeps taxes low for working people and it helps home buyers and the housing market. It protects our environment for the future. It keeps the national development plan on track and it borrows modestly to invest ambitiously. It will sustain our development as an economy, a society and a nation. I commend the budget to the House.

Deputies opposite are clapping in the same way they clapped about decentralisation.

(Interruptions).

The level of applause would indicate many backbenchers wish there was a regime change.

The truth is this budget represented a very stern test of the leadership of the Minister. It was a test to see if he had the courage to break down the patterns of incompetence and indifference which has surrounded this complacent Government and the vision to embrace real reform and see real change in the way we spend money. This is what the country has been crying out for. The bleak answer today is that he is not willing to face those challenges. He has bottled the challenge; he is all bark and no bite. He cannot see that the reason our public finances are in the diabolical state they are in is the sloppy, self-indulgent and wasteful way this Government has spent money.

The Minister is a back seat passenger in the Department of Finance just as he was a back seat passenger in other Departments before this. He is avoiding the imprint of failure by simply not facing up to the challenges which ought to be addressed. As a result of his behaviour, we have seen that the gains of the Celtic tiger have been frittered away. The tax bonanza has been spent but we do not have a world-class infrastructure, a world-class health service or efficiency in the public sector. The money has been spent but we have not delivered the change for which the country was crying out. We trail every league in service delivery. Whether in infrastructure, health or waiting times, we are at the bottom of the league.

The Minister's reign in the Department of Finance has been characterised by leaving problems to fester until it is too late, when the damage is done and the benefit of action has been impaired. We see that again today. He waited for the housing market to collapse before he addressed the needed reform in stamp duty. As a result of his obstinate refusal to reform that tax, we have seen housing sales diminish month by month to half what they were at the beginning of January this year. He is a great man to have six months after a crash in the housing market.

The same is true of the environment. This Government promised it would reform VRT in 2002 and here we are six years later. It is six years during which 600,000 extra cars went on the road — 600,000 extra cars with more carbon emissions now than six years ago. That is the reality. It is too late to address these issues. The time to address them was much earlier so we would not face huge fines for which we will have to borrow to pay in the year ahead.

The Minister can talk the talk but he does not walk the walk. Prudence and reform are new sound bites he has picked up in the Department of Finance and he delivers them in sombre tones as befits his hoped for new status in Government. The truth is that it is all about sound bites. There is no action to back it up. It is simply not enough to change the rhetoric while perpetuating the bad practices of the past. The public will look back on this budget as one where the opportunity to take real decisions, which would change the way money is spent, was fluffed and the soft option was taken instead.

It is a hit and hope budget — persisting on the same path but hoping for a better outcome this time. However, we know what will happen when that hope is not realised. Ordinary families and small businesses will have to pick up the cost. It will not be the 16 Ministers who have trousered their huge increase in public pay, who are happily insulated in their State cars from any changes to motor tax and who are free from any risk to their pensions while many in the private sector are seeing the collapse in the value of their pensions as we speak.

Under the Minister's stewardship, the high promises trumpeted earlier this year are all gone. Nothing has been done in this budget in respect of tax reform. The prudent surpluses are gone. In terms of Ireland being a debt free country, we are heading in the wrong direction. The 8,000 extra frontline staff are not being delivered. Instead we are seeing obstinate refusal in the face of all evidence to adopt some serious-minded reforms, to stop the big pay increases to senior people in the public service until results are delivered, to demand efficiency and performance from the big spenders, to stop the creeping growth in bureaucracy and to face the flaws in decentralisation which is manifestly failing in so many areas. None of this serious reform has been addressed.

They say that if one gets the reputation for being an early riser, one can lie in bed all day. That could be said of this Government. In the early years, it was alert and ready to face changes. It felt the throb of the economy and it moved to deal with issues and real challenges but that day is long gone.

They are jaded.

They have got used to lying in in the morning, bingeing on junk food and not exercising. The result is what we see today. At the slightest hint of deterioration in the economy, we see the public finances plunge from a €4 billion surplus to a €2 billion deficit. That is some achievement for a Minister — to have squandered all that money and to have so little to show for it. It is shoddy spending habits.

Under the guise of this debt fuelled tax bonanza, the Government has thrived. We have seen Government spending grow by an alarming six percentage points of GNP. That is three percentage points extra on income tax and three percentage points extra on VAT. That is the reality of the extra costs this Government has loaded on in the space of seven years. Now the property boom bonanza is gone, those realities will come home to roost. Those tax bills will have to be met and that is why we have not seen proper indexation of the tax code today and no proper provision for tax reform which was trumpeted from the hill tops a few months ago. That money has been spent and there is little to show for it.

The changed economy has brought new rhetoric. We hear this bleating about productivity, reform and equity. However, it is like listening to a chain smoker talking about the threats and dangers of smoking. He has known it for years but he has done nothing about it in the past and is doing nothing about it today. There is no reform in this budget and there is no willingness to face up to the changes we need to make to get efficiency and delivery at the frontline from the huge budgets that have been built up. It is a hit and hope budget and it is simply not sustainable.

Today's budget presents us with €3.9 billion extra in spending and €1.6 billion extra in tax. In any man's language that is spending more than double the revenue coming in. That is not sustainable. One cannot go on plugging the hole by borrowing, as the Government plans to do this year. This time last year we were told we would have a surplus of €1.8 billion in 2008 and yet the Minister told us today we would have a deficit of that amount.

That is Fianna Fáil competence.

That is because the soft options are being taken. The money is being spent but it is not delivering and the soft option of borrowing is being taken.

Looking ahead, the prospects of those who cheered the Minister a moment ago, seeing their great programme for Government being delivered are nil. If one looks at the figures the Minister projects for taxation for 2010, one will see it is €6.3 billion off what was forecast when the manifesto was published. That blows the entire manifesto out of the water.

We now have no strategy from Government. Its programme for Government does not stand up to any scrutiny. The promises, such as the 2,000 extra gardaí, the 4,000 extra teachers or the 2,000 extra consultants, have gone in a puff of smoke because the money is spent.

(Interruptions).

The tragedy, of course, is that it is not just these manifesto promises that will be broken once again. We have seen it time and again from this Government. The tragic truth is that if the economy continues to be managed the same way the Minister is managing it today in this budget, we will quickly be unable to afford the investment in infrastructure that we need. We will see serious threats to this economy emerge if he continues with this approach.

We need reform in the way public money is spent. We needed it seven years ago. Even now, it would be welcome but there is no serious reform being delivered here. This Minister has spurned the opportunity of reform every time it has been presented to him. He spurned it when benchmarking was there, a huge €1.3 billion increase which could have leveraged change. He spurned it most recently when his own big pay increases were coming up for scrutiny when he could have demanded performance before they would be paid to senior managers.

He failed to bring in the sort of scrutiny that the Committee of Public Accounts recommended to this House in a very good report less than two years ago. He has failed to bring in that scrutiny because he is afraid to see people scrutinise the way public money is spent. He has run away from that measure, which could have leveraged reform.

Instead, he has taken the easy option. In the last period when this Government was in office, it created 178 new agencies. This is the sort of new outsourced Government that is unaccountable. They all have their own public relations and human relations departments, as well as their own glossy annual reports and personalised Christmas cards. We will see them all flowing in during the next few weeks. However, they are not delivering value and need to be rationalised. Many of them duplicate work done elsewhere. We need serious change.

It is not good enough for Ministers to join the solemn chorus of calls for wage restraint and reform when they are like the army generals sitting in their armchairs way back behind the line asking others to go over the top into machine gun fire. When it comes to their comforts, there will be no change.

A Deputy

Hear, hear.

Their four new parliamentary committees, their three new Ministers of State with their entourages and their own huge pay increases, which include €38,000 for the Taoiseach, have all been paid and it is others, such as pensioners, who we ask to make do with so much less. Ordinary workers on the average industrial wage are asked to pay tax at 41%, the same rate as that paid by a millionaire. Where is the sense of priority or justice from a Government that approaches issues like that?

Deputies

Hear, hear.

Deputy Finian McGrath is happy enough.

A Deputy

Has he not left the House?

The tragic truth is that we would have a resilient economy today that would be capable of dealing with the challenges if the programme of reform had been started. We have only to look across the water to see what Gordon Brown and the Labour Party in the UK did when they demanded annual efficiency changes and over the period in question were able to release what would be the equivalent in Ireland of 6,000 extra frontline staff to frontline positions to deliver services. We could have already resolved the question of our need for 2,000 extra gardaí, 2,000 extra consultants or 2,000 extra teachers. That could have been resolved by a proper efficiency approach along the lines of the approach taken not only in the UK but in many other countries. However, this Government just wanted to throw money at problems. The tougher the problem, the more it threw money at it and the more it did not face up to reform. That is the sad situation.

Who will be the casualties of this unreformed Government that is spending money freely and not delivering results? It will not be Ministers, that is for sure. It will be older people waiting for care, children with special needs abandoned to dropping out of school early and the vulnerable communities that are prey to drugs and the violence of organised crime. They will be the victims who will pay for a budget that will not face up to the realities of an economy which is working superbly in the private sector but which has not addressed the issue of productivity, efficiency and reform in the public sector. Most of the problems we face as a country come directly from Departments controlled by the 15 Ministers across the floor. That is where the high cost and our loss of competitiveness is coming from. We have a Government complacently whistling its way along and not addressing this crying need for reform.

Again, we see a huge disappointment in the area of taxation. Indexing bands and credits to simply meet the cost of wage increases was a core commitment and one which, above all, the Minister said he would honour but he has not honoured it. He has not honoured the 4.5% increase in wage thresholds which he said he would deliver. To meet the cost of inflation now, one would need €90, which he has not delivered.

We have also seen that, once again, more ordinary taxpayers on modest incomes will be plunged into the top rate as a result of not indexing. Next year, 750,000 people will be on the top rate of tax of 41%. That is the reality. Even people on the average industrial wage will find themselves on the top rate. Is this not an extraordinary situation? Here was a Minister who promised in the last programme for Government that only 20% of taxpayers would be on the top rate. Instead we see a massive 750,000 of them on the top rate. He has reneged on that promise in respect of 250,000 people. We still see ordinary people being asked to pay tax at the same rate as multimillionaires, which is not acceptable and must change.

Again we see that many people who need a leg up are frozen out of tax relief.

For example, over 600,000 people in the private sector do not have any pension whatsoever. We were promised that we would see a one for one scheme. Indeed I believe the Green Party was the first to advocate having such a scheme to help the lowest paid people invest in pensions for their retirement so that they would not be solely dependent on social welfare pensions and would not be plunged into poverty in their old age. Nothing is being done about that. We have had two huge reports, no doubt at huge cost, and nothing is being done to address the needs of those with no pension cover.

I suppose that even during straitened times, families would have looked for some support to cope. What do they find? The sum total of €1.38 per week is offered as extra child benefit at a time when the price of all the basic food items — bread, butter, milk and eggs — is increasing by 15% or 16%. What Minister could say that a child could be supported with an extra €1.38 per week in such a climate of rising costs?

A slightly better increase of €2 per week in the child care supplement is being offered. One might say this is extraordinarily generous but the reality is that out of their pre-tax income, people must find an incredible €18,000 per child to support children in child care. That is the reality in the tiger economy of today. Families where both parents are forced to work face that obstacle of €18,000 for each child. This issue must be addressed and has been persistently ignored by this Government.

It is closing community child care.

Instead of trying to address this, the Government is, once again, penalising people who opt to drop out of the workforce to provide care at home for a period. The penalty they face has been ratcheted up once again today. An extra €1,400 penalty is being imposed on people who opt to stay at home. The combination of the bands and the PAYE allowance they will give up by dropping out of the workforce is now an astonishing €8,500. That is the tax penalty the Minister thinks should be imposed on a parent who decides to opt out of the workforce for a period to care for a young child. Where is the justice in that and the commitment that we would see home carer's tax credit doubled? That has disappeared and a measly tax credit increase of €130 was offered. These issues have been festering and have not been addressed.

Another hidden element that will affect children and young families is that there is no improvement in the medical card.

Deputies

Hear, hear.

We were told there would be a major increase in the supplement in respect of children and that it would be indexed in accordance with the industrial wage. A family with two children is deemed by the Minister to be too wealthy to receive a medical card if the parents are on the minimum wage. At €17,800 they will be deemed too wealthy to receive a medical card. What sort of planning for the future is that if low income families cannot be permitted receive care for their children from a doctor when needed? It is so shortsighted and such an abandonment of the sense of equity that the Minister said would inspire his budget that I cannot understand the thinking.

Children will be affected by the decision to provide no extra psychological assessment services in the coming year.

Many children with special needs have been dependent on psychological assessment and many school principals must play God in deciding which children with serious problems will be allowed have a psychological assessment. That situation will continue in a budget that was supposed to address the situation with equity. We will continue to see children accommodated in temporary accommodation. There is no squaring up to the needs of families. Despite difficult times we should have found space to address families. There is no greater long-term investment than investing in the future of our children, particularly those in low income backgrounds. We want to see them progress, not drop out of school because their needs were not diagnosed in the early stage of their education.

There is little for older people to cheer about in this budget. The sum of €14 is not bad, compared to what Ministers might have given out, but it compares poorly to the €700 the Minister awarded himself. Older people are facing high increases in costs at present. Basic foodstuffs, which take up much of the older person's budget, are increasing extraordinarily rapidly, as is fuel. At least €12.50 of that €14 will be absorbed by meeting the increased cost of products. There will be little spare cash for people to make any slight improvement in their lifestyle.

Other areas forgotten in this budget include the living alone allowance. Why do we decide that 121,000 people who live alone should not get more than €7.70? This has not been changed in decades. Why do we decide that widows, who live alone with children, cannot access the free scheme unless they are aged 60? These are small changes that could have brought the equity that the Minister said would inspire his budget.

There will be an extra 60 cent per week in the fuel scheme to meet the higher fuel costs for older people this winter. It will not go very far.

It will buy a sod of turf.

The tragedy is that making ends meet is not the only worry facing older people. They have been waiting for proper standards of policing of nursing home care and other care facilities. They have been waiting to see the high chance of picking up infections in hospitals addressed. They continue to wait. They have seen home care packages axed because the bureaucracy in the HSE ran out of money. They are part of the 200,000 unrecognised people waiting to see a consultant for the first time, waiting to join the queue of 41,000 for a medical procedure. This budget is letting old people down at a time when major increases in health budgets were committed to by the taxpayer. The results that would make a difference to their lifestyle have not been delivered.

The conversion of the Minister to changing stamp duty is something I must welcome. I argued for it before and during the election. I tabled an amendment in June to implement it. Who opposed it on every occasion?

It was Deputy Enda Kenny, who wanted it phased in over three years.

It was the Minister for Finance, Deputy Cowen, who told us it would be inequitable and would spook the market.

Deputy Fleming got it wrong.

If there was one thing about which he was consistent it was that reform of stamp duty was not on his agenda. His agenda was full of good things, including a reduction in the tax rate from 41% to 40%, PRSI was to be reformed and home care tax credits were to be reformed. The list of tax reform was lengthy. The one thing he would not reform is the one thing he has changed today, a victory for the persuasive argument of the Fine Gael Party.

When will they see the light?

It is welcome but it is coming too late, after stamp duty revenue and sales have halved in the past nine months and confidence is at a low ebb. It does not represent a proper housing policy and we must examine the detail of a dysfunctional housing policy over which the Minister and his colleagues preside.

I welcome the increase in mortgage relief, a concession of €800 in cash terms. It will go some of the way to meet the €3,000 extra that young families have faced in the past 12 months as a result of increases in interest rates. It will be a welcome assistance.

However, I part company with the Minister on the matter of rental relief. Why has he decided that those who rent should get only €1.50 extra in rent relief? These are among the poorest families, who cannot get on the housing ladder, are in a weak position and cannot get loans from mortgage companies. They are not given anything. The total of the subsidy they will receive from the Minister is less than €15 per week. Rents in Dublin are €500 per week, as the Minister knows. What sort of contribution is this towards those in the weakest position? Rents have increased by 20% in most cities over the past 12 months and the Minister can only come up with €1.50 per week extra in rent relief. The Minister is out of touch with what is happening in the housing market. Other schemes are similarly out of touch. Regarding the rental accommodation scheme, why must low income families wait 18 months, being unemployed, before they can qualify for support from the public sector? What is the sense in that and what sort of poverty trap is it creating? That is the big idea from the Department of the Environment, Heritage and Local Government to address the housing crisis.

What is the situation in respect of the shared ownership scheme? The subvention element in the shared ownership scheme only applies if one's income is less than €28,000 but no one in the country would be considered for a housing loan with an income under €28,000. The shared ownership scheme is a dead letter scheme and is collapsing as we speak. It has ceased to support families who need our support in a difficult time.

I give the Minister one cheer for some reform of stamp duty but I do not endorse his housing strategy that is failing so many people. Even the Central Bank, hardly the source of radical thinking, tells us that half the people in the country cannot afford to buy a house and that this is unsustainable. The tragedy is that the bill for high cost Government has come home to roost, not just for taxpayers but for those trying to compete in the real economy.

The Government and its policies accounted for half of all inflation during the past seven years. In addition, it loaded stealth taxes equivalent to €3,500 per annum onto every family. Inflation in sectors controlled by the Government is running at two and a half times the rate that obtains in equivalent sectors in other eurozone countries. Ireland has become a high-cost country primarily as a result of Government action. I will provide one statistic which, more than any other, illustrates this fact. Price increases in sectors controlled by Government during the past seven years stand at 45%. Manufacturing companies trying to export goods abroad — the Minister for Enterprise, Trade and Employment, Deputy Martin, will be aware of this — have seen their prices fall by 17%. That is the contrast.

Government Ministers are able to impose price increases of 45% but in the real world, people are being obliged to make major cuts, economise, make cost savings and still deliver products on time in order to survive. That sort of culture needs to be introduced in the public sector. However, thinking along these lines is miles away from that which occurs around the Cabinet table.

With his decision to increase motor tax by10%, the Minister is again dipping into the pockets of motorists. This is not a green tax. Any notion that it is such a tax does not stand up to scrutiny. This is more about picking the pocket than about protecting the planet.

That is a good one.

It will, however, generate revenue. The truth is that the average motorist already pays €2,500 each year in tax. It has been estimated that the environmental damage done by most cars with petrol engines stands at 9 cent per litre. However, the Minister is collecting €2,500 per annum from motorists. They are a soft touch and that is what is behind the change in motor taxation.

It is a big change for a party that abolished motor tax some years ago.

The change to which I refer has nothing to do with reforming the position in order to meet environmental needs.

I welcome the changes relating to VRT. These changes are timely and I agree with the Ministers for Communications, Energy and Natural Resources and the Environment, Heritage and Local Government, Deputies Ryan and Gormley, on the need to take climate change seriously. However, people should not forget that the Government produced a strategy in 2000 which advocated introducing a carbon tax by 2002, increasing investment in buses, ceasing coal use at Moneypoint by 2008, rebalancing VRT, introducing integrated traffic management and supplying 12.5% of our electricity needs from renewable energy sources by 2005. Precisely none of this has come to pass.

It is time to reform the system of VRT. Why did we not reform it before we built 500,000 additional houses, put 600,000 extra cars onto our roads and failed to take heed of patterns of energy use? The consequence is that we now face a fine because we failed dismally to meet our international obligations. We must now borrow to pay this fine. In the years since changes to VRT should have been introduced, average emissions per car have increased by 11%. The time to act was several years ago. I welcome the belated conversion of the Minister. However, as with everything else he has ever done, he acts only when he is forced to do so. He does not anticipate change or make changes in a timely manner.

He is eyeing up another job.

It is well past the time for a wake up call. The alarm bells have long been ringing about the way our public finances are being managed. People want to see change. It is not enough for the Minister to repeat the mantra that the Government is committed to the NDP. The latter is important, particularly if it is delivered effectively, on time and on budget and if the projects relating to it stand up to scrutiny. Taxpayers should not be asked to issue a blank cheque. If the Minister is serious about this matter, he should publish the evaluations relating to NDP projects in order that we might say that they will deliver value for money. He should also outline prior commitments to the policy frameworks that will surround capital investment. Time and again money has been invested in expensive capital projects and then mismanaged subsequently.

It is time for the public sector and the Government to face up to real change. What we should have been presented with today was a decision to suspend the big pay increases and make them conditional on performance. We should have insisted that every public body should deliver independently audited efficiencies of at least 2% in 2008. We should also have initiated immediate audits in respect of all agencies. Such audits would have brought about the far-reaching rationalisation of those agencies. Why do we have a taxi regulator, an aviation regulator and a bus regulator? Why not a single transport regulator? Why do we have a health insurance regulator and a financial regulator? Why are the two not integrated?

A Deputy

Jobs for the boys.

The Government engages in too much easy thinking and takes too many soft options regarding the way it approaches its responsibilities.

We cannot afford the cosy practice the Minister, Deputy Cowen, has again adopted this year of allocating money and leaving all existing services intact. That was the purpose of the big book with which we were presented in October. Everything that is already in place will remain intact. The Government is only focused on how to spend the money that is left over. If we want radical change and reform, we must engage in a root and branch examination of what is happening in those programmes. We should not state that existing services will remain in place and that we will tack on a little more funding. It is the latter which has brought us to the point at which we find ourselves, namely, facing into a huge deficit on the back of only a modest change in the way the economy is performing.

People might ask if the Minister is an iron chancellor. In my opinion, he is more like the tin man. When one seeks real achievements or real change, one realises that the Minister, Deputy Cowen, is hollow. He has no heart for real reform in respect of the way we deliver public services. He lives in a fantasy land of soundbites and he has substituted those soundbites for actual change that would make a difference. The time for the pampered indulgence of incompetent Ministers is over——

Deputies

Hear, hear.

——and the days of unwarranted pay increases, big bureaucracy, soft-option politics and loose spending are also at an end. Things must change.

The Government has forgotten what it is to survive in a small open economy. One must be alert, nimble and quick to change. There is a new generation in Ireland, the members of which are ambitious, energetic and creative. These people give their best and expect high standards elsewhere. They will not tolerate the sluggish, complacent and wasteful approach the Government continues to display. They have carried those opposite on their backs for too long. Today was the opportunity to show that the Government has the ambition and capacity to lead in terms of introducing change.

Leadership is not about talking gravely in solemn tones. It involves having intense, driving determination to achieve best practice in the context of what happens in the public service. Leadership also involves demonstrating that one can lead from the front and that one will not seek to protect one's own comforts but will instead shoulder the load and demand the standards of oneself that one demands of others. In this most important test, the Government has failed. It is time to initiate the programme of reform to which I refer. Today, it was already seven years too late to do so. The Government has again failed to instigate change.

Deputies

Hear, hear.

This budget constitutes a frank admission of economic incompetence on the part of the Minister for Finance and the Fianna Fáil-Progressive Democrats-Green Party coalition. That a Minister for Finance should think it necessary to change the stamp duty regime twice in six months is an extraordinary admission of failure. The mismanagement of the housing market is written all over the budget. The increased borrowing and limited tax and social welfare packages reflect the hit the Exchequer and the economy have taken from the property slump. The total allocation for improvements in the health service amounts to the equivalent of six days' spending on health.

On numerous occasions we warned the Government that allowing house prices to race ahead unchecked was making life impossible for buyers and that the economy was over-reliant on construction. However, it refused to listen and the sky is now dark with the chickens that are coming home to roost. This budget is an attempt to muddle through tougher times. It is not the new departure for a new era which the economy needs.

Among the headline changes of the budget, disability services see practically no change. In The Next Steps Forward, pensioners were promised €100 over five years, which is €20 per week. Today they receive €14 per week for contributory pensions and €12 for non-contributory. There is no improvement in medical card coverage and no fundamental reform of PRSI, which was a major element of the Taoiseach's pre-election promise in his Ard-Fheis speech. There is a small improvement in the income disregard for carers, which will be pretty well meaningless in the context of the inflation that faces them when they do their supermarket shopping.

What about the Green Party? In the spirit of Christmas, the Gordon Ramsay of the Government, the Minister of State with responsibility for food, Deputy Sargent, yesterday put up his tasty recipe for sprouts on his Department's website. I do not like them myself, but he obviously loves them. His instructions were to cover the pan and boil them briskly until the water is absorbed, add a knob of butter or margarine and keep an eye on them so that they do not burn at a later stage. What happened? The most green aspect of this budget is the cover of the budget document. The knob of butter is spread thinly over all the little social welfare increases. It is interesting to see that while Fianna Fáil are in hock to the builders, the Green Party seems to be going overboard on the Brussels sprouts.

The Minister was trying to juggle too many balls today. There were nods to the left, nods to the right, nods to prudence, nods to the public sector, nods to tighter spending controls and nods to greater efficiency. From this Government, a nod is as good as a wink. The Minister offered us a lot less in the package than the sum of its parts and an awful lot less than what the public is entitled to, as we enter far more turbulent times than we have experienced in the past 15 years. The Minister wants to reassure his party and the public, but he cannot escape the message contained in last Saturday night's White Paper and the grim message contained in the raw figures of declining tax revenues under almost every heading. Not since the 1980s has the graph of Exchequer revenues shown such a sharp dip, not even in the period of currency turbulence between 1992 and 1993. I am sure the Taoiseach must remember those times well, if only for those close and friendly meetings with his adviser and friend, Mr. Padraic O'Connor. As ever, leaders should beware the ides of March. This is also the first time since 1993 that the national debt to GDP ratio has gone up. Stevie Smith wrote a famous poem 50 years ago about a man thrashing about in stormy waters. Onlookers thought he was having a lark, but as the poem states, he was not waving but drowning. That describes the Minister for Finance perfectly today.

This Government no longer commands the economic agenda. It looks on helplessly as an economic storm looms over the horizon with no idea at all on how to come to grips with the new reality. Only a few short months ago, the same Minister offered voters a rosy scenario of our country's prospects. The Next Steps Forward threw caution to the wind with extravagant claims on tax, PRSI, pensions and living standards. Today's budget is a survey of what survives and a belated acknowledgement that we are in for a bumpier ride than was suggested to the public in May. Economic growth is on the slide. The Minister's forecast is for 3% at the beginning of the budget. I do not think he will be lucky enough to hit 3%, the way the housing market is at the moment. Every forecast is a little lower than the one before and nobody can rely on what the Minister says today. It will be adjusted a dozen times before we have another Budget Statement.

Meanwhile, inflation is set to remain stubbornly high and that is as much the fault of this Government's domestic policies as the fault of international conditions, such as high oil and commodity prices. For most people, the budget is about the cost of living and it has no good news on that front, and little prospect of better news for the time to come. Working families will not be getting similar pay rises to Ministers. Over 1 million of them will earn less in a whole year than the Taoiseach's proposed rise in salary of €38,000. These people will not have the luxury of being exempt from extra fuel and car taxes like the Ministers who are driven around in State cars. There is a wider gap than ever between what Ministers experience daily and the reality of belt tightening that families will have to endure. People in the ordinary economy are living in a parallel universe to members of this Government.

The proposed changes in stamp duty are really a humiliation for the Minister for Finance. In June, he brought in stamp duty reforms which he told us would restore stability and certainty to the housing market. He told us that the changes would be good for certainty, good for affordability and good for society. Today, he had to return to stamp duty for the second time in under six months with his tail between his legs. This is an admission of economic incompetence. The Minister has mismanaged and misjudged the housing market and the Exchequer borrowing he is announcing today is the direct result of that. The bungling of the stamp duty issue has been extraordinary. The flight from the housing market first began with the former Minister Michael McDowell's attention grabbing stunt. He declared that stamp duty could be abolished because the Government did not need the revenue. It was followed by months of inaction by the Government, followed by a badly constructed and inadequate reform last June. The Government did not realise that the problem with stamp duty was not simply about first-time buyers, but more especially about those trading up.

In the reform proposals for stamp duty put forward by the Labour Party in 2006 and before the election, we pointed to the difficulties for those who were trading up. These people had exhausted their first-time buyer's relief on buying an apartment, but five years later had one or two children and desperately needed to buy a family home. We told the Minister that was where one of the critical problems existed, but he refused to listen. Since then, the housing market has slumped and the Minister is now trying to rescue it from the wreckage of his policy.

Old habits die hard with this Minister. Somebody buying a second-hand house for €500,000 in the Dublin area will save €11,250, which is welcome. However, somebody buying a house for €2 million will save €28,750. That is the way all these reforms go. In the June reform, stamp duty for first-time buyers was abolished so that many of those who benefitted were very wealthy families able to spend over €1 million on houses for their children. With this new reform, the more one has, the better one does.

Things happen in the real world. There are oil shocks, climate shocks, wars and a sub-prime crisis. I think I was the first person to mention that latter term in this House. One of the journalists working here asked me what sub-prime meant. Now every junior bank clerk and first-year economics student knows all about it. Stuff happens. As former British Prime Minister Harold Macmillan said: "Events, dear boy, events." Plans for spending and taxation should take into account the major uncertainties that a frothy housing market generates for consumer demand here and across the developed world. One needs a contingency reserve in one's plans for what may happen and I do not see one in what I heard today. The changes in the housing market are a serious concern for many people, not just for the banks and financial institutions which are worried about the quality of their land and property lending.

Before the election the Minister and his party boosted the housing bubble as far as it could go. Now that the bubble has burst the consequences for many ordinary families may be severe. Although Irish house prices are falling, they remain extraordinarily high by international standards. In today's climate of much higher interest rates young people who want to enter the housing market cannot afford the €350,000 to €450,000 that is being demanded in our cities for modest one-bed and two-bed houses and apartments. Funding a mortgage cost of €1,600 per month on a home cost of approximately €350,000 is an enormous financial strain on most young people whose earnings have not kept pace with interest rate rises. The bursting of the housing bubble happened because the Government encouraged house prices to rise to ridiculous levels.

While house construction costs rose, they did not rise as fast as land prices. Crazy land prices for developers speculating in land fed into enormous price increases for modest family homes. Given the close relationship between Fianna Fáil and the developers, we cannot suggest that Fianna Fáil, the Minister for Finance and the Taoiseach did not know about this. They chose to put their heads in the sand and allow the market to be stoked higher. The Irish banks have been willing accomplices in allowing land for family housing to be bid up to crazy prices. Much of that speculation took place in an environment that was not only tax free, but in which the Minister and his predecessor created an endless range of unnecessary tax breaks for property investment.

The Minister talked about the school shortage but could not even force the builders to hand over sites for schools at current use value. He had to allow his friends in the building industry to demand top dollar for school sites.

That is not true.

Deputy Burton should check the record. Free sites were given in Fingal. Deputy Burton knows the record.

A Deputy

That is only one county council. What about the rest of them?

Deputy Kennedy is a great survivor from the old Dublin County Council. Let us not get into tribunals now. I would not advise the Deputy or his party to talk about land values or rezoning. The Government must take responsibility for what happened in the housing market. The short-termism of winning votes in the general election led the Minister, his Department and financial regulators to turn a blind eye to what was happening in the financial and housing markets. The measures he introduced today to offer additional mortgage interest relief are welcome, but we need measures to control speculation in housing land. People's homes are for living in, not for speculative frenzy. If the Government were not so deep in vested interest to land and property speculators, it would already have addressed this issue.

The fall in house prices is accompanied by rising rents. How is that for crazy economics? Only in Ireland — we usually say "only in America". This reflects the impact uncertainty is having on the market. There is a strong underlying demand for housing, but first-time buyers in particular are wary of making such a major purchase in a falling market. It is hard to see where this will end and when prices will level out. There is a substantial downturn in construction. The level of activity and employment in the housing sector was always unsustainable, but the uncertainty on house prices means the number of houses being built is falling rapidly. I did not see in the Budget Statement the Minister's estimate of the number of houses to be built. I do not know if we will get it but it seemed to be falling below 50,000. I could not find it in the book so I do not know what the Minister expects.

Rising rents help only investors. We need houses as homes for families. It is notable that tax relief for people renting increased by 11%, but by 31% for people renting out a room. The Minister is still trying to have it both ways. He is trying to keep the investors, above all else, happy, but he is not prioritising families that want to buy homes to live in. Given the way the market is turning, in favour of investors as opposed to families and individuals buying to live in an area, we have a problem in every new estate in every part of the country with an over-dominance of investors who are churning tenants. The consequence in many new estates is that communities cannot be built up. The Minister should talk to his local GAA club. If the tenants change every year, how does one develop community? The Minister has not got that balance right. He still tries to have it both ways. Last year he promised to close some of the loopholes in stamp duty that allowed property developers to avoid paying stamp duty on some large transactions. He failed to proceed with that. He listens more to the big developers than to the people who want to buy a home to live in.

Today's budget bears more than a passing resemblance to those of 2003 and 2004 after the 2002 general election. It is standard operational procedure for Fianna Fáil to throw money around before an election and then to retrench, cut back and tax in the immediate aftermath. We are to have a revival of that musical from the McCreevy days. The growth rate of the economy has slowed significantly. It is one thing to present an optimistic picture, but another to be in denial. We are coming down from 14% spending growth and pre-election largesse. The Minister said today he hopes to keep growth in current spending at approximately 8.2%. We need a different approach to fiscal policy to face up to such different circumstances. Unfortunately we do not know and will not know how the corrective measures proposed by the Minister will impact. This year we saw the impact of the HSE trying to live more moderately within its budget. The consequences of the cutbacks were not pleasant.

Even as expenditure growth is reduced to a more sustainable level we must have regard to key economic and social objectives. It is unfortunate though not surprising that the Minister failed in that task. Ireland may be heading for a period of slower growth. It will take a number of years for the imbalances built up under this Government's stewardship to unwind. However even a lower growth rate, skilfully managed, should yield a dividend. In most European countries a growth rate of 2.5% to 3%, which the Minister projects, would yield social improvements and a social dividend for families.

What are we getting for the 8% increase in current spending? There is a fairly minimal social welfare budget and most Departments are being told to soldier on for another year, without any extra resources for improvements in service. The allocation to the fire services in the Department of the Environment, Heritage and Local Government failed to provide for a full local fire service in Bray, even after the tragedy that town experienced recently.

The vast bulk of the expenditure plans in this document are devoted to keeping things as they are. In other words, it is the Government's intention to simply plough on, doing things the way it has always done them. There will be plenty of rhetoric about the need for other people to be realistic and more productive, but there will be no serious endeavour to change the way the Government conducts its affairs so that real progress can be seen from this 8% spending growth.

The Minister has provided for a significant increase in capital spending at 12%. We have urged a more ambitious capital investment programme for years, in public transport and research. We welcome the additional resources for the national development programme, but I wish I could have more confidence in the Cabinet's capacity to deliver the projects on time and within budget. I can cite two cases in point. Ireland lags dangerously behind as regards broadband access. The CEO of eBay, a big employer in my constituency, tells of his "embarrassment" when he has to reveal Ireland's weakness in this area to his international colleagues. The percentage of Irish businesses and homes with access to broadband is one of the lowest among Europe's leading states. More importantly, he highlights how this might seriously reduce Ireland's chances in securing new foreign investment projects.

I want to also mention the annual bugbear of integrated ticketing, an essential precondition for the operation of improved public transport. Tens of millions have been spent with no end product to date. It has not moved forward one iota in the past 12 months, so who is in charge? Most major cities operate one, even where there is a mixed delivery of services by private and public operators. Munich, Rome and Lisbon operate smart cards that offer seamless transfer from buses to trains to trams. I wonder whether the Taoiseach has ever used the metro link of his beloved Manchester to get to Old Trafford, or does he get his friends there to lay on a limousine service?

This is where aspiration gives way to cold reality. Extra billions may be allocated to the capital programme, but will it all disappear in extra costs, overheads, consultancy and service charges? The record of this bunch of Ministers in the delivery of services on time and inside budget is hardly inspiring. Capital investment is not the only investment governments need to make. They also need to invest in communities and the people for both economic and social reasons. The Fianna Fáil manifesto at the last election contained a number of worthwhile initiatives, which if implemented, would mark real social progress. I do not pretend that all of these plans can be implemented straight away. However, the budget could have begun the process of implementing the most important of them. We were promised 4,000 new teachers for our schools, a doubling of the capitation grant for primary schools. In the area of health, we were promised 1,500 extra hospital beds and 2,000 hospital consultants. There were to be 2,000 extra gardaí on our streets. In social welfare there were to be further increases in eligibility as regards the carer's allowance. I do not regard what has been done today as coming anywhere near fulfilling that promise. On and on it goes, not to mention all the tax promises that were made in the Ard-Fheis speech, when the Taoiseach threw money around like confetti.

I do not expect the Minister to implement all these plans straight away, as I have said, but he could make a start. Along with most Deputies, I would love to see some of those 2,000 gardaí on the beat in my constituency in the future. I could certainly find work for the 4,000 teachers and the 2,000 hospital consultants would make a real difference to the health services. How many of them will be employed this year and what planning is being done to ramp up teacher training?

The Minister claims his budget leaves a strong financial balance sheet. The jury is out on that claim, but the social balance sheet is not as strong as it ought to be, in any sense. As a country, Ireland must get past the antiquated notion that all capital spending is investment and all current spending is consumption. The knowledge economy we aspire to is driven by education, which is crying out for investment at almost every level. There is an urgent requirement for more capitation funding in primary schools, a need for targeted reductions in class sizes and we need specific measures to deal with literacy and numeracy problems.

Addressing many of these issues will require current spending, but it is ultimately investment in the productive capacity of the economy. Studies show that it is the quality of teaching that most influences the quality of outcome in educational achievement. There is no better investment in the future of our country, for example, than to set out a plan to provide universal free pre-school education. The return on that investment would be enormous, but this budget does not recognise that type of expenditure as an investment at all. I find it surprising that Ministers so consistently refuse to listen to the National Competitive Council's advice on this issue. It is a Government agency that is asked for its advice year in year out. It points out that those countries with enviable records in economic competitiveness set great store by the provision of early childhood education. It is a topic of lively debate in the USA, for example. This winter's headline book from Harvard University Press is called The Sandbox Investment. I would like the Taoiseach to read it with the same care he has devoted to Robert Putnam’s book, Bowling Alone. The Harvard book argues that pre-school investment has a priceless payoff. The author states simply that the kids first policy is smart economics. Putting kids and education first is smart economics, according to Harvard, this year.

There are more than 878,000 workers, as per page C22 in the budget, on such low incomes that they do not qualify to pay tax at all. These are people for whom a winter 'flu without a medical card or a doctor-only card becomes a nightmare, particularly if they have one or two children and must make multiple visits to a doctor at €50 per time, along with another €30 for medication. If any member of such a family gets sick for more than a three-week period, medical costs for just the 'flu could easily amount to €300, the equivalent of a full week's net wages. The Society of St. Vincent de Paul refers to the many people, the 878,000 in this category, as the working poor. These are people in work on low wages. They are not paying much tax or PRSI, but they have to pay doctor's bills, for school trips, rent or a mortgage on an affordable house if lucky enough to get one.

Child dependant allowances are critical for such families. I welcome the increases today, small as they are. However, they should be paid at least on a fortnightly basis. The method of paying them on a monthly basis and the early years supplement on a quarterly basis does not help the budgeting of families on the margin, who need every penny on a regular basis. Family income supplement, FIS, has to be made more accessible for such families. A whole range of Government agencies, such as the National Economic and Social Council, have researched this and suggested, in line with proposals made by the Labour Party a long time ago, a supplementary child benefit payment or a refundable tax credit. The Government has been stalling, perhaps because such a proposal would be costly, and I have no doubt there would be administrative difficulties to be overcome.

Nonetheless, such a payment could make a significant impact on the lives of the one in nine children who live in poverty. In this respect, one of the groups most at risk of poverty is children in lone parent families. The one parent family payment is structured in such as way as to make it harder for people to move into financial self-sufficiency while also making it harder to form long-term relationships.

Social welfare penalises young people who want to get married or live together openly. The penalty ranges from €70 and upwards per week to more than €1,200 per month if rent allowance is involved. Some time ago, the Minister promised to put an end to or modify the co-habitation rule because it makes no sense to encourage parents to live apart when they could be living together and caring for their children.

What about individualisation? The Minister also presides over this tax penalty on a parent who wants to stay at home with children, particularly during the baby years, or on someone who may want to stay at home and care for an older relative. I recall the Minister promised this time last year, as well as in his manifesto, that he would address the issue. At present, a married couple where only one person works pays an extra €6,240 per year in taxation. I did the maths on the changes quickly and after this budget the penalty will increase to €6,270 per year. A two income couple will pay €6,270 per year less in tax if their income is €70,800 or higher. This is the legacy of Charlie McCreevy with regard to individualisation and the penalty on choice for families who may want to care for their children full-time at home.

Last year, the Minister introduced a modified table of who pays income tax at the higher rate. Today's figures show a shift up from 19.8% last year to 21.58% of families who pay tax at the 41% rate. Even on the modified tables the Minister now provides on the people who will drift into the 41% bracket, this is an increase of 66,000 people. This is because the changes in the bands and credits are not and will not be sufficient to provide for the increase in wage inflation expected next year. More and more people, particularly young single people earning more than €35,000, will pay tax at 41% if they receive a bonus or an overtime payment. They will also pay PRSI so they will continue to be heavily targeted by the Government.

The Government proposes to use €50 million of taxpayers money in 2008 to pay fines to the EU Commission because Ireland is above the emissions target. We pay higher electricity prices to the ESB so it can buy emission allowances because it plans to emit so much more CO2 than the allowance it received in the emissions trading scheme. If the Government had developed renewable energy properly instead of frustrating it at every turn, renewable energy would be producing much more electricity than it does at present.

There would be no need for higher electricity prices to buy CO2 allowances and no need for the Government to pay fines to the EU.

What was mentioned with regard to the Department of Communications, Energy and Natural Resources and the Minister, Deputy Eamon Ryan, namely, €13 million for this and €20 million for that, is a demonstration. The Minister will receive little for real changes with regard to how we will reduce our carbon footprints and emissions. The Government's climate change strategy is way behind on what it indicated.

What about today's announcements on motor tax? We support the proposal to give reductions in VRT to people who buy emission reducing cars. This is the proper direction to go. However, last year hybrid vehicles accounted for less than 2% of sales of motor vehicles. A Lexus, which I understand is the model of choice for many people, costs €30,000. How many families will be able to opt for the Lexus to avail of the cut in VRT?

Let us be honest about it and call a spade a spade. The increases in motor tax are about raising revenue and not revenue neutrality.

I must be excused because I am not good on cars. The tax on vehicles under 2.5 litres will increase by 9% and on vehicles over 2.5 litres by 11%. A person with an average car living an hour from Dublin but with no public transport must use that car to get into Dublin.

This will not change people's behaviour with regard to emissions. It will simply tax people because they must drive to and from work in the absence of public transport.

Let us not call this a great green revolution. When we consider the budget with regard to the Green Party, we see €13.27 million has been provided for energy research. This is welcome but not great. A further €13 million has been given to the Minister for Communications, Energy and Natural Resources, Deputy Ryan, for issues relating to energy consumption.

Cycling in front of the squad car.

I do not know where the Green Party members were. They must have been out doing the Brussels sprouts rather than at the Cabinet discussing this matter. They must have been cooking up a storm. The key issue is that in the transport programme, €1.7 billion out of €2.7 billion is for the roads programme. Leaving the M3 and Tara out of this, we were told by the Green Party that we would see a shift from roads in favour of public transport. I do not see it in this budget. I also noticed that while the Minister mentioned existing public transport projects in Dublin, he did not mention the metro to the airport, the interconnector or the new metro line to the north side——

It is called Transport 21 with €34 billion.

——where Deputy Kennedy lives.

It does not include spending on non-national roads either.

Is this a green budget? The quantum leap we need to make to decarbonise our economy and society requires a strength of purpose which comes from a genuine belief that we have a genuine duty to halt global warming. It will never come from a political marriage of convenience where the senior partner went for tax raising on green issues rather than trying to genuinely change people's behaviour. A couple of green Ministers do not a green Government make. The buck stops with the budget. The Ministers for the Environment, Heritage and Local Government and Communications, Energy and Natural Resources, Deputies Gormley and Ryan, can lobby all they want but Fianna Fáil will never let them near the purse strings of the Department of Finance or, in other words, real power. We saw that today. My summary of this green budget is that it has a light sprinkling of parsley, although I do not know whether they will go for the sprouts.

They will not eat the Brussels sprouts.

Inflation was 4.8% in October, which is more than most people's pay increases. Many private sector workers have had no pay increases at all in the past year. Due to Government incompetence, consumers have had to endure large increases in electricity and gas prices which the Labour Party were proven correct to describe as totally unnecessary. Inflation impacts most on those on low incomes and social welfare, for whom food and fuel are significant elements of the weekly budget. Given that the current scenario is likely to continue, it is important that the Government develops a mechanism to protect the living standards of those on low incomes. Today's budget did not adequately address that issue.

My greatest concern with this budget is that it says little regarding the threats from a changing world economy. The changes currently taking place in the United States in the area of credit have not yet fully worked out. I would like to know whether the Minister has a plan B should the chill winds we are experiencing become worse. It can be amusing for some people to see the masters of the universe and the bankers sweat but it is not appropriate in this case to feel a sense of schadenfreude. With the credit crunch, ordinary businesses, self-employed people and families on average incomes will suffer. Already, business people are finding that borrowing has become more expensive.

Public confidence in this Government's ability to manage competently is decreasing and the feel-good factor is disappearing rapidly, two sentiments which are more important to sustaining Fianna Fáil in power than any factor of Government personality or policy. While I hope that the times will not be too bad, particularly for those on lower incomes, we may be about to witness a transformation of politics. Today, the Tánaiste played to Fianna Fáil backbenchers in his bid to succeed the Taoiseach when he should have been looking after the wider economy. Only time will tell whether the gamble he took will be successful.

I welcome the opportunity to respond to the Tánaiste and Minister for Finance in this budget debate. I intend to expose the hypocrisy of the pre-election promises made by this and other Governments on tax cutting which grossly misled voters on the state of the finances and the management, or mismanagement, of the economy. I will also give examples of how things could and should be done differently.

Since the summer, the Tánaiste has been beavering away to condition the public for a tight budget. He has been strenuously trying to dampen expectations created by his own party's unrealisable pre-election promises. In advance of the election, Fianna Fáil promised 2,000 additional gardaí, 4,000 teachers, 1,500 hospital beds, 2,000 consultants, tax and PRSI cuts, affordable housing and much more. The deceit on which the election was won was clear for all to see when tax cutting proposals which were never viable had to be abandoned in the face of a €1.75 billion shortfall in tax revenues. Despite the fact that the economy is still relatively strong, the Tánaiste has done such a good job of lowering expectations that people expected nothing from this budget. It suited him to keep expectations low and to foster fears of a harsh budget because it allowed him to present the budget he has delivered as being better than expected.

How should we judge this budget? People will ask whether it lifts them out of poverty and deprivation, ensures a more equal distribution of the benefits of prosperity, puts the economy back on a more stable competitive footing, delivers an improvement in quality and capacity within our creaking public services, reduces the financial pressures on hard pressed families or delivers value for money for taxpayers. These are the question that people across the State will be asking as they examine the details of what has been delivered. In many senses, however, it is too early to judge this budget because we have not yet seen the fine print. We will have to examine its contents, as well as the measures that will be announced by Departments, in the hours ahead. There is a very real concern it contains hidden cuts in public services which will not become apparent until Departments start to allocate their own budgets. I recall the HSE cuts which affected patient care despite the Minister for Health and Children's assurances to the contrary.

Last week, Sinn Féin set out our priorities for maintaining healthy public finances, building the economy and investing in health, education, housing and child care. We also proposed measures to help people return to the workforce. As finances become tighter, we realise it is not possible to deliver the levels of improvement in capacity and quality in public service we want in one or two budgets but the priorities have to be right. Front line services in primary and preventative health care, school buildings and class sizes, pre-school education and child care infrastructure should have been delivered in this budget if the Tánaiste wanted a positive appraisal. Scandalously, no mention was made of improving child care infrastructure or of pre-school education.

This budget will be disappointing for ordinary workers struggling on low and medium incomes and people seeking an improvement in public services such as health and education. There will be widespread disappointment at the failure to increase the medical card threshold, which is set at a mere €184. It is telling that the standard social welfare payment of €185.80 is higher than the medical card threshold. The allocation to the National Treatment Purchase Fund, which is symbolic of the Government's support for private health care, is increased to €100 million despite being of little benefit to most people requiring hospital care. That money should go to the public sector rather than bolstering the private sector.

This is a minimalist budget. I acknowledge that increases are being made to social welfare but these are too low to keep families faced with sharp increases in the cost of living out of poverty. While the gains from widening of the standard rate tax band are welcome, they will be lost again when stealth charges are inevitably imposed by cash strapped local authorities across the State in the form of increased service charges and management charges for residents resulting from the failure by local authorities to take charge of estates.

The announcements on social housing are not adequate to ensure the end of social housing waiting lists any time soon. Doing more in this area would have had the additional benefit of boosting the declining construction sector and helping the 43,600 unfortunate families who have languished on the social housing list for lengthy periods of time.

Where are the long overdue steps towards the creation of a State pre-school system? The measures on child care do not go nearly far enough to assist families who are unable to cope with child care costs equivalent to a second mortgage. The additional €100 per year in the early child care supplement will do little for these people.

The Tánaiste stated that the economic prospects for farming have improved, with increasing producer prices and food exports, but there was no acceptance by him that farm incomes are falling or stabilised at a very low base. Many small farmers, particularly beef and suckler farmers, are surviving on unsustainably low incomes.

Sinn Féin was the only party that argued in the run-up to the election that the Government, in light of the slowdown in economic growth, could not afford to cut taxes and maintain, let alone improve, public services and provide essential infrastructure. It was the only party to oppose proposals from the Government parties and others to introduce tax cuts on the ground that such cuts were not viable. There is now widespread acceptance that this is the case, as the 2008 Estimates of receipts and expenditure have proven.

No one doubts that presenting a budget in the current economic circumstances is more challenging than in previous years. As an open economy, Ireland is affected by international developments, including rising oil prices, the declining value of the dollar and international credit crunch. At home, we are experiencing a slowdown in the construction and property sectors, on which the economy has become excessively dependent, and face increased competition from low wage economies in the accession states, Middle East and Far East. Ireland, as a whole, continues to suffer from significant infrastructure deficits and lags behind other states in terms of research and development capacity within enterprise, while the level of engagement in upskilling and retraining by workers remains too low. All these factors act as a wake up call, a reminder that we need to take action to put the economy back on a solid foundation and ensure we regain competitiveness.

The current account has a surplus of more than €7 billion. The State is also in a strong position in terms of the debt to GDP ratio to borrow for capital projects. More could have been done to improve public services. Projected growth for the coming years, while lower than previous predictions, remains healthy by international standards. The Minister forecast GDP growth of 3%, which is a difficult but achievable target. The problem is not the percentage of growth — GDP growth of 3% is respectable — but that the Government planned its expenditure programme, as outlined in the programme for Government, on the basis of an over-optimistic assessment of growth. This projection was not based on a realistic assessment of future economic developments given that a perceptible change had been under way in the economy for the past five years. It had become flabby and had started to rely on construction and consumption, rather than the exports which had been central to economic performance in the early days of the Celtic tiger.

The slowdown in the construction and property sectors has, predictably, had a substantial impact on tax receipts. Although the Department's tax strategy papers identified this possibility as likely in advance of budget 2007, the Government refused to accept this view and proceeded to make foolhardy proposals to cut tax. We now have the farcical position of the Minister for Finance trying to rewrite history and cover up the reality of the approach the Government took. This will not work.

Delivering a speech as part of the Indecon public policy lecture series recently, the Minister for Finance stated: "In managing our public finances we have not in the past and we will not in the future plan the public finances around the assumption that tax receipts from the property and wider construction sector will continue to grow in future years as they have done in the recent past." The course of action the Minister proposed to avoid is precisely the one the Government chose. The shortfall of €1.75 billion is a glaring reminder that it planned public finances around the assumption that tax receipts from property and construction would continue, despite clear signs of a slowdown in this sector.

We now face crucial decisions on the direction the State must take. My party will hold the Government to account to ensure decisions to raise or reduce overall taxation revenue are made on the basis of what is needed to meet social goals and other spending demands. For more than ten years the Government has pursued a policy of low levels of personal taxation and public service provision, with a growing reliance on stealth taxes. Changes in the tax base in the past decade have involved cuts in income taxes which have benefited the better off and increases in indirect taxes which disproportionately impact those on low incomes.

While the Minister has announced a number of positive taxation measures as part of the budget, these initiatives maintain the status quo and do not constitute a move towards a fairer or more progressive taxation system. Why has he again failed to strengthen the limit on the use of tax reliefs by certain high income individuals introduced as part of the 2006 Finance Act? This should have been done to ensure tax reliefs are not exploited by some high income individuals to reduce their tax bill to the point at which they pay less tax than ordinary workers. This is a ludicrous position which should have been prevented.

While Sinn Féin welcomes the Minister's decision to increase tax credits to keep those on the minimum wage out of the tax net, we remain concerned that the minimum wage is not meeting the benchmark of 60% of the average industrial wage. I welcome the increase in the standard rate income tax band. My party strongly argued that those on or below the average industrial wage must be kept within this band.

I also welcome the Minister's sensible decision not to proceed with the cut of 1% in the top rate of income tax which his party proposed in advance of the general election. This measure would have cost the Exchequer €280.4 million and benefited those on higher incomes most, as was the case with the reduction in the top rate from 42% to 41% in last year's budget. Reducing the standard rate tax band by 2% would have cost the Exchequer €1.13 billion, revenue that is clearly needed to fund our public services.

In the run-up to the budget, Sinn Féin argued that maintaining healthy public finances had to underpin the Government's approach to budget 2008. If public finances are not kept in a healthy state, the Government cannot ensure that everyone's basic rights to housing, health and education are met, nor can it deliver infrastructure to ensure our cities, towns, villages and businesses are served by modern transport and telecommunications infrastructure and everyone has the benefit of a comprehensive regime of social protection.

While Sinn Féin welcomes the changes in vehicle registration tax, we question the reason this step was not taken when it was signalled last year. Why did the Minister believe it necessary to give people a year to purchase their high emitting vehicles without having to face any consequences? Why will this measure not come into effect until July when most other measures will take effect almost immediately?

Sinn Féin also welcomes the increases in mortgage interest relief. Many of those who bought their homes in recent years are being pushed to the limit as a consequence of increases in mortgage interest — I believe there were nine in all — introduced in the past year.

As I indicated, the tax measures announced today do not contain anything radical. We can only urge that the proposed commission on taxation be set the task of determining the best way to fundamentally restructure to tax system to create a progressive, redistributive tax system through which revenue is raised in a fair, transparent and accountable manner in order that Government has the revenue needed to reduce inequalities, improve public services and deliver infrastructure. The commission must also address the recent explosion in stealth taxes and charges.

I will address a related matter which remains largely ignored by Government, namely, the expansion of low paid employment, a development which has serious long-term consequences for the tax take, both in terms of income tax revenue and revenue from spending taxes. Although figures for employment growth for 2007 show a net increase of 78,400 new jobs for the 12 months to the end of June, there was no commensurate growth in income tax receipts because the vast majority of the new jobs were low paid.

Government priorities must also include ensuring that attempts by any employer to depress wages in key sectors of the economy through the exploitation of migrant workers are prevented. The use of agency workers to drive down pay and conditions can be stopped through the introduction of new legislation. I and other Deputies have called for the introduction of such legislation on many occasions.

As we speak, the Minister of State with responsibility for labour affairs, Deputy Billy Kelleher, is plotting with his British counterpart to block an EU directive that would give 30,000 temporary workers the right to the same pay and conditions as full-time staff. This is a disgrace. Nothing in the budget, in terms of adjustments to tax credits and bands, will compensate for the loss of earnings people across the State will experience if the downward pressure on pay and conditions arising from the failure to regulate for equal rights for agency workers is not addressed.

The Minister's increases in social welfare, particularly with regard to pensions, carers and lone parents are welcome, but in the main do not go far enough to tackle poverty in the State. The increases in the main payments may be in line with inflation but given the low rate of existing payments they will not go far towards improving the life of somebody reliant on welfare.

The universal nature of child benefit and the early child care supplement means the minimal increases have the least effect where needed, nor do the increases offer anything substantially different or innovative in terms of encouraging people out of welfare and into work. This was the main social welfare priority for my party in our budget proposals. We recognise the large sector of people in receipt of welfare who would rather contribute to the economy but are caught in welfare traps and poverty.

We called for the medical card scheme to be extended to five years for people returning to work, for family income supplement payments to be increased substantially and automatically flagged and wage disregard thresholds to be raised. Once again the Minister has failed to use the opportunity presented to him to achieve something of note. Instead we are left, as usual, with a piecemeal approach to welfare, with incremental, paltry increases that, weeks into the new year, will be of limited benefit.

We welcome the fact that the proposals to cut PRSI contributions have not been announced as part of this budget. We all want to see the burden of taxes and PRSI on ordinary workers reduced, but it can only happen if it is visible and viable. This is not the case if the cuts will undermine the capacity of the social insurance fund to meet social protections, such as redundancy payments, maternity benefit and social welfare. This was demonstrated by the latest actuarial review of the social insurance fund which predicted that the fund's surplus is projected to be exhausted by 2016 on the basis of the central economic assumptions and benefits indexed in line with earnings. The proposed 2% cut in the employee PRSI rate would have cost €720 million in a full year, while the 1% cut in the self-employed PRSI rate would have cost €220 million in a full year.

A key priority for Sinn Féin is increased quality and capacity within public services. This must involve getting better value for money in public spending. To do that, Ministers and their Departments will have to demonstrate better management of their respective briefs. The wasteful over-use of consultants will have to be abandoned, or, at least, significantly reduced.

Promises to improve the health service are in tatters as the unworkable mess that is the HSE fails more and more of our citizens, most notably in recent times the women affected by the breast screening scandal. Undertakings made before the election to address the crisis in primary education mean little to parents whose children cannot access a place in primary schools. The key question against which this budget has to be assessed is whether it provides the revenue needed to address the deficits in key public services. Has the Minister for Finance, Deputy Cowen, provided what is needed to increase quality and capacity in public services?

The population of the State has grown considerably in recent years from just over 3.6 million in 1996 to 4.2 million in 2006. In some areas, such as the greater Dublin area and the commuter belt, the population growth has been dramatic. Quite simply, public services have not been adequately expanded to meet this demand and the pressure is being felt in schools and in hospitals in particular. Public transport is full to capacity in urban centres, while rural areas lack any proper public transport infrastructure. If one walks down this city this evening, one can hardly walk past the bus stops because there are dozens of people queuing to board grossly overcrowded buses. The public is willing to use public transport if it is provided but, unfortunately, it is not.

Social housing output has not been sufficient to meet demands and there are still approximately 43,600 families on social housing waiting lists. Other essential services, including the fire service, remain under resourced. I have a communication from a colleague in Donegal who told me that a constituent of his has been on the housing waiting list for 15 years. She was pregnant when she signed on to the housing waiting list. She has again been promised a house next year. There is a reasonable expectation that she may eventually be housed next year. When her child, probably over a year later, is attending college that will be 16 or 17 years without a proper home.

Shame on the local authority.

Shame on the Government for not providing for the local authority. The Government has never enabled the local authorities to deal with those issues.

Local authority councillors should do their job.

The Government has stood back and hand strapped them.

There is no excuse for somebody being on the housing list for 15 years.

The Deputy without interruption, please.

I am only trying to help.

That is what the Government has done. Some 43,600 people are on the list and the Minister stands over that situation. Shame on you, Minister. You were in that Department long enough and should have dealt with the issue.

It is outrageous for a local authority to behave like that.

It is outrageous of you not to deal with the crisis.

Perhaps the Deputy would address his remarks through the Chair and the Minister might restrain himself.

The people of north Wicklow who experienced the awful tragedy of the death of two firemen are forced to campaign for funding for a full-time fire service for an area which has experienced huge increases in population but no commensurate increase in essential services. Across the State, teachers are forced to teach children in prefabs. In particular, I am aware of a number of Gaelscoileanna which have been forced to operate under these totally unacceptable circumstances. In the Taoiseach's constituency, teachers in Gaelscoil Barra in Cabra have been teaching classes in dilapidated prefabs for ten years. In Clondalkin, Gaelscoil Na Camóige has been existing in second-hand prefabs for 15 years. In the Tánaiste's constituency, Gaelscoil Portlaoise's classrooms are made up of eight prefabs for the past nine years. Gael Scoil Gort Alainn in Montenotte, Cork, has been occupying temporary buildings for the past 14 years — there are many more examples.

In the Dublin commuter belt, there has been a complete failure to put in place the education facilities needed. As a consequence, we have the situation where some schools turned away non-Catholic children. In one area of west Dublin, Lucan, Sinn Féin representatives have been inundated with requests from non-Catholic parents to help get their children into primary school. That is some situation in the 21st century when we are talking about developing high-end marketing.

In areas like west Dublin and in particular Dublin 15, parents are putting their children's names down when they are born and are still forced to camp outside schools for registration in a new term. More and more children are being forced to wait until they are five years of age before admission to school.

The €95 million extra allocated for primary school building is welcome but, as the Minister said, there are 13,000 new enrolments due next year. That €95 million will barely cover the school places needed for them let alone go towards improving the conditions in dilapidated schools right across the State. We will have to scrutinise in more detail the spending plans of the Department of Education and Science.

The programme for Government promised to double the income limit eligibility for parents of children under six years of age and treble it for parents of children with a disability. It has reneged on that commitment. The Government could well afford to help more low income people, to increase it to €250 per week for 2008 as demanded by the Combat Poverty Agency — hardly a radical organisation. Even this would not have gone far enough because all those earning on or below the minimum wage should be eligible for the medical card. They have failed to prioritise access to primary care in this budget.

The state of the health service has been under a particular spotlight in recent weeks and rightly so. Figures from Trolleywatch indicate that whereas there were 159 patients on trolleys and chairs in accident and emergency departments on 4 December last year, yesterday there were 268 patients which is almost a doubling of the number.

Services across the State are overstretched. For example, the Rotunda hospital's capacity was so overcrowded during the summer that women were moved into the hotel adjacent to the hospital for treatment. Children in need of orthodontic treatment in the Kerry area are currently on waiting lists for six years.

In the health service we continue to have end-of-year budget over-runs and the Health Service Executive has imposed cuts in services to patients. In my own region, the latest fallout from HSE cuts is that there will be no elective surgery in Dundalk hospital in December. We have already seen medical and general surgical elective work postponed in Navan and the planned closure of the orthopaedic unit at Navan for the whole month of December. What savings are involved in the closing of that unit? The nurses are still employed on a salary, as are consultants and administrative staff. The HSE has admitted this fact. To be fair, my colleague, Councillor Joe Reilly, researched this matter and got to the bottom of it.

He did not do it on his own.

The only net saving from the closure of that unit for the month relates to the artificial body parts involved — the new hips and knee joints that would have been implanted. We all know that the people who now require those hips and knee joints will still require them in January, February and April. However, they must endure pain and suffering over the Christmas period and then wait in the ever-lengthening queues until that provision is made. In the meantime, I have no doubt many of these people will attend at accident and emergency units over the Christmas and New Year period. Where is the saving? Moreover, the National Treatment Purchase Fund is also getting paid for these operations.

Some 1,700 operations have been cancelled in Our Lady's Hospital in Navan in the past three years due to bed shortages. Up to eight operations per day have had to be cancelled at Cavan General Hospital and many patients requiring rehabilitation after serious accidents and-or major surgery are being denied admission to the National Rehabilitation Hospital in Dun Laoghaire because of the cutbacks. In other cases, we have the outrageous situation where expensive facilities in hospitals are not operational because of staffing caps applied by the Department and the Minister, which prevents additional people being employed to run them.

For example, in Waterford Regional Hospital, a brand new cardiac unit has been built at a cost of approximately €1.2 million and a consultant has been hired to head up the unit. However, the new unit, which is due to open in January 2008, will be left idle as the HSE is refusing to fund another €1.5 million to equip and staff it. Patients in the south-east region must continue travelling to Dublin or Cork for cardiac investigation and treatment. The unit is justified or it would not have been built in the first place, but it will just sit idle.

The accident and emergency ward at the Mercy Hospital in Cork is currently lying idle because of a dispute between the HSE and nurses over staffing levels. When questioned about this on a recent visit to Cork, the Minister's response was that solving the problem was not her area of responsibility. The Minister for Health and Children is not responsible for anything that happens in the HSE. We should have a motion of no confidence in the Minister every week until we get some movement.

And the Government.

And the Government, because it is its policy with which the Minister is proceeding.

The Deputy should hold back. He might get carried away.

In Tullamore, there is still no date for the full opening of the new hospital which has been ready for about a year.

He might remember the last time his party went to the public. They came back with less rather than more.

The Government should be ashamed of themselves for the scandalous, disgraceful condition of the health services in this State.

I have heard this time and time again.

Twice as many people are lying on hospital beds and sitting in chairs in corridors now compared to last year. The health service is going downhill because the Government is neglecting it.

I was in my office listening to the Deputy quote his representative in Lucan. His party does not have a representative in Lucan.

It is the Government backbenchers who are most responsible for it. They are taking it.

I have listened to the Deputy tonight——

Deputy Morgan should refer his remarks through the Chair. Deputy Curran should restrain himself. He will have an opportunity to be involved later in the debate.

He is provoking us.

Backbenchers sometimes need to be woken up.

The Deputy should refer his remarks through the Chair and ignore all other comments.

While an open day was held at the Tullamore hospital before the election, it is only providing very limited day services. The poor conditions in the old hospital have been highlighted in the media. At one stage, patients in the hospital had to go for a week without hot water, yet Deputy Curran is shouting.

Sinn Féin wanted a small number of key commitments addressed as part of this budget. They included delivering the 3,000 beds needed and increasing the medical card threshold to €250 per week for 2008 with a commitment to increase it to the level of the minimum wage over the next two years. This budget should have contained a commitment to provide the revenue to roll out the cervical cancer screening programme State-wide in 2008. We also demanded an end to the misuse of public money in the form of tax breaks for private hospitals and the co-location land gift scheme.

If the cervical cancer screening programme had been rolled out, it would have incurred a cost upfront but we should consider all the savings that could have been made with regard to palliative care, trauma for patients and days taken off work. Even an accountant would have worked out that it would be better to put in place the preventative care rather than let people suffer what they must currently suffer.

A key financial pressure on many families is the cost of child care. In particular, the ability of low income parents to participate in paid employment is being threatened by the changes to the child care subvention scheme which the Government is set to introduce. Across the State, many community child care projects are under threat of closure. It is deeply disappointing that this was not a priority in the Minister's budget speech.

For example, the Larchville and Lisduggan community child care project in Waterford city, which benefited from €1 million in capital funding and which it is hoped will be open in January, will be under huge pressure because of the changes. In the constituency of my colleague, Deputy Caoimhghín Ó Caoláin, child care workers at Farney community crèche in Carrickmacross have predicted that, if this scheme goes ahead, many parents will pull out of the crèche because they cannot afford it, and it will have to double its fees. Like other such child care facilities, it could be forced to close, resulting in loss of jobs and services which allow parents to go to work.

Sinn Féin had two key child care demands it wanted to see delivered in this budget. The first was the introduction of a universal pre-school session of 3.5 hours per day, five days a week for all children in the year before they go to school — the National Economic and Social Forum costed this at €136 million. The second demand was the suspension of the child care subvention scheme and extension of the equal opportunities scheme by six months, pending reform of the subvention scheme and entailing detailed consultation with child care providers using the scheme around the State. These measures should have formed a core part of this budget.

With regard to housing, the property market slowdown should have prompted the Government to do what it should have done a decade ago, namely, shift policy towards funding the local authorities to provide social and affordable housing. This budget does not go far enough on social and affordable housing. If more young working people had access to social and affordable housing, this would create more disposable income, which would stimulate the economy rather than having it paid to banks and building societies. Such a shift in Government housing policy would also keep up levels of employment in construction.

Housing should be seen as part of our essential infrastructure, not just as a market for land speculators and property developers. It is also reasonable to borrow to increase the social housing stock. In advance of the budget, Sinn Féin demanded that 12,000 social housing units be constructed in 2008.

Our economy has come on leaps and bounds over the past two decades — I willingly accept this fact. However, we have failed to use the successes of recent years to build for future competitiveness. We are beginning to feel the squeeze with regard to our lack of infrastructure, knowledge capacity and flexibility, and will find it difficult to adapt our economy for future competition. For too long, the Government enjoyed the benefits of an economy based on low costs and low taxes. Developments in China, India and eastern Europe mean we can no longer hope to compete in that kind of market, nor should we.

While we are still competitive, our rankings are slipping. Since 2002, we have fallen 17 places to 22nd in the World Economic Forum's competitiveness rankings. Our increases in consumption and investment, rather than strong export growth, the slowdown in Irish productivity growth, particularly in high-tech sectors, the contribution of net exports to economic growth being small or negative in recent years and the high reliance on the construction sector for employment have all led to this drop. We have seen a slide-off in both the construction and manufacturing sectors and, worse, we have seen parts of the country become economic blackspots.

East Cork recently lost the proposed Amgen development and in Waterford 470 jobs were lost in Waterford Crystal. In Galway yesterday, we saw the loss of 500 jobs from Abbott Ireland. Recent CSO figures confirm Tralee is one of the State's worst unemployment blackspots. There are 1,300 people out of work in the north Kerry town – an unemployment rate of 14.2%. The Government and its employment agencies have done little or nothing to bring replacement industries to that area. Not one job has been created by the IDA in north Kerry in the past five years, which is some indictment. This neglect of the west and south west can also be seen in the decision to allow Aer Lingus to move from Shannon, which will have a devastating effect on the region.

We need to be more innovative, not traditional, to ensure we are developing the kind of economy we want for the future. Sinn Féin has consistently argued that ending the partition of our country will contribute to the building of a strong competitive economy. Much of the business community, North and South, is behind us in this demand.

Duplicate government and public service structures, an unnecessary administrative burden on those wishing to do business in both jurisdictions and two currencies mean we are competing with ourselves for economic investment and development. Ireland's physical infrastructure, North and South, also remains a source of competitive disadvantage. Successive Governments over the boom years to date have failed to introduce the infrastructure needed to build competitiveness. We built a motorway that could not handle traffic capacity around Dublin and then handed it over to private operators who profited from it. In fact, it took the authorities ten years to cop on that the M50 needed an extra lane.

That is a load of rubbish. When that motorway was built it was losing money. There was no money in it.

The Deputy should restrain himself.

Who introduced tolling? It was some of the Deputy's colleagues, including Liam Lawlor, who introduced it. I would love to see the history of that being teased out on some occasion.

The Deputy is living in the dark ages. That is incorrect.

The Deputy should be allowed to conclude his remarks as there are only a few moments left.

I would like the Deputy's remarks to be factual.

We have a serious public transport deficit both in urban areas, where there is not enough capacity, and in rural areas, which, in many cases, have no public transport at all. For example, in a situation mirrored across rural Ireland there is no Government subsidised public transport available to the people of north and west Donegal connecting rural parishes to larger urban areas. These communities are losing their bus routes one by one due to commercial considerations, as private operators focus on profitable routes. That was always going to happen because they will suck up profitable routes while the Government will not subvent the less profitable ones.

We pay the highest rates for broadband which is the slowest in Europe. The State was recently ranked 17th of the 27 EU member states for broadband access, behind the accession states of Latvia, Estonia and Slovenia. The root cause of this was the decision of the Government to privatise Eircom. Once again, a profitable company was sold off rather than being used to roll out this crucial infrastructure, which has a major impact on competitiveness and economic development across the island.

We came belatedly to research and development and failed to invest sufficiently in it to redress that imbalance. I welcome today's announcement on funding for research and development but I am disappointed that there was little or no mention of the need for investment in ICT in secondary schools. In transport, energy, information and communication technology, Ireland's infrastructure lags well behind that of comparable OECD countries.

I am pleased to see the Minister's commitment to improving infrastructure. However, as the roll-out of projects under Transport 21 falls far behind schedule, there remains some concern that Departments are purposely slowing down the roll-out of capital projects under the national development plan in order to reduce budgetary pressures in the year ahead.

This was not an innovative budget and there was no radical edge to it. The Government welched on the chance to take some exciting steps on child care, education and obtaining real value for money. I had expected significantly more from the budget. Over the course of the summer we all appreciated that the Minister for Finance, aided by other Ministers, was deliberately damping down budgetary expectations, and with considerable effect. Media speculation clearly indicated that a harsh budget was in store, whereas we got a neutral budget. People may think that because it was neutral it is not bad, but we should examine the missed opportunities for innovation and infrastructural development, as well as the educational and health deficits. However, when Ministers and their agencies are not accountable, how can we expect any significant developments from the Government in terms of providing economic leadership? It simply will not happen. The budget was a disappointment and I rest my case.

Sitting suspended at 6.45 p.m. and resumed at 7.15 p.m.
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