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Dáil Éireann debate -
Wednesday, 14 May 2008

Vol. 654 No. 2

Irish Economy: Motion (Resumed).

The following motion was moved by Deputy Joan Burton on Tuesday, 13 May 2008:
That Dáil Éireann,
seriously concerned at the recent poor performance of important economic indicators, including:
the cost of living increases, reflected in the latest consumer price index figure of 4.3%, and the even greater increase in food prices which have severely impacted on families;
the increase in the live register by 1,600 persons per week in the first four months of 2008;
the fall in the CSO construction employment index by 11% in the 12 months to February 2008;
the fall in the ESRI consumer confidence index to its lowest level since the index was first introduced;
the first fall in retail sales since 2004; and
the poor performance of tax revenues which are running €736 million below target in the first four months of the year;
alarmed at the job losses in recent weeks in construction, manufacturing and services;
noting:
that the most immediate cause of this downturn is the collapse of the domestic property boom, with housing construction likely to fall by approximately 50% when compared to 2006;
the deterioration in international trading conditions for Irish firms;
the failure of importers from the sterling and dollar areas to pass on price reductions to both commercial and retail customers;
the deterioration in cost competitiveness for Irish firms; and
that the Government has brought forward no positive policy proposals to deal with the downturn or any of its consequences;
calls on the Government to introduce targeted measures to address the downturn in the economy, including:
give a direction to the National Consumer Agency to insist that all goods are priced in euro and requesting the agency to more actively monitor pricing to ensure fair play for consumers and to protect against rip-offs;
develop a major programme of education, training and re-skilling for people losing their jobs in construction and in manufacturing;
proceed with a substantial programme of school building, to absorb some of the spare capacity in the house building sector, to deliver modern schools for students, good value for money for the taxpayer, and to ease the immediate burden of the slowdown in construction;
the introduction of a "begin to buy" scheme to restore activity in residential construction; and
to shift the balance of advantage within the tax code from property-based investment to high-tech, high-risk ventures.
Debate resumed on amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
"—welcomes the Government's firm commitment to position the economy for sustainable development over the years ahead, while adapting to the reality of more moderate growth in the future;
welcomes the Government's commitment to improving national competitiveness, as demonstrated by its maintenance of a low burden of taxation on labour and capital and by the priority that it has given to investment under the national development plan in the economy's physical infrastructure and skill levels which will enhance Ireland's productive capacity and thereby lay the foundations for future improvements in living standards; and
commends the Government for ensuring that Ireland's public finances are in a strong position to meet the existing challenges with one of the lowest levels of general Government debt in the euro area, general Government surpluses delivered in ten of the last 11 years, net debt forecast to be around 14% at the end of 2008 and a current budget surplus."
—(Minister of State at the Department of Finance).

I propose to share time with my colleague, Deputy Richard Bruton.

I reiterate the point I made last night that the challenge facing the economy is one of competitiveness and the possibility that recent job losses will be followed by large-scale job losses. Notwithstanding the report issued by the ESRI today, problems do not vanish of their own accord. Corrective action is needed. A couple of years ago, house prices in an area adjoining my constituency increased by €80,000 over one weekend. If anyone considered such an increase sustainable, I am in the wrong business. Someone should have recognised the need to act at that time. Having done the right thing and purchased these houses, the home owners faced an increase in their costs and must seek wage increases to fund them. This would not have been necessary if timely action had been taken to curtail the spiralling house prices that drove the economy crazy.

I congratulate the Labour Party on tabling this timely motion. The economy is on the tip of everybody's tongue and the economic outlook has changed dramatically in recent months. The extraordinary complacency of the Government in failing to respond to these changed circumstances has been startling. It did not respond to a call by the National Competitiveness Council for an action plan to address the recent loss of competitiveness. Similarly, a group established to address prices has not met for 12 months, despite inflation increasing at a faster rate than the European average.

Ireland imports a substantial number of food products from the United Kingdom. Despite the depreciation in sterling of almost 20% in the past 12 months, prices continue to rise in the shops. As the motion points out, consumers are being ripped off, with prices for many ordinary household goods as much as 25% higher than the price of identical goods in the UK. It is bewildering that the Government continues to sit on its hands and pretend it does not have any responsibility for this matter. If people are being ripped off, we need an effective consumer agency to address the problem.

I do not favour reversion to the type of price controls used in the 1980s. However, a name and shame approach should be adopted to apply pressure on stores to be fair to consumers. The long-term survival of these companies depends on being competitive. If there is a conspiracy of silence which leaves consumers ripped off, it will damage the economy in the long term. The approach of the Irish Congress of Trade Unions to the forthcoming talks will be influenced by the sight of rising food prices and the mortgage pressures and erosion in living standards being experienced by young people who form the bulk of active trade union membership. It is the Government's responsibility to address this issue.

The motion is also timely because an ESRI report published today noted significant potential in the economy. although its economic growth projections have been scaled down from a figure of 5%. The critical question is whether we can seize this potential coming off the back of a period during which this country, under the leadership of the Government, surrendered its vital lead in many critical areas. Ireland was once the envy of other countries. Having been leading edge in access to telecoms, we are now at the bottom of the league in critical areas such as broadband. Ireland, once the leading country in Europe in the Government provision of electronic access to services, now languishes at 17th place in the league having failed dismally to implement change. The Government will argue that the knowledge economy is key to the future, despite presiding over circumstances in which the application of the knowledge economy in public services and infrastructure is moving in the opposite direction.

Joined up thinking is required. If the Government expresses ambitions, it must drive forward strategies and policies. The tragedy of this regime is not that it lacked ambition but that in many areas, including its health strategy and decentralisation programme, its ambition was not matched by coherent analysis of the problem. Workable strategies must be developed and driven against hard time lines. Management structures must be established and afforded a genuine opportunity to deliver these key strategies, which should not be driven by people who are trying to accomplish 1,000 other management tasks. Private sector organisations undertaking major change management programmes, such as the decentralisation programme or the climate change or spatial strategies, would not depend on people who answer parliamentary questions and meet ministerial delegations to deliver them. They would establish a dedicated team with a budget and the authority to drive the strategy.

The Government believes it can talk about ambitious climate change and spatial strategies without taking action to deliver them. What is the outcome of this approach? Under the spatial strategy, 500,000 additional homes have been built not in the compact, low energy fashion required, but scattered throughout the country in a way that places high demands on transport and creates major dislocation. This also holds for the Government's strategy on climate change articulated in 2000. In the eight intervening years it made no impact on the challenge facing us.

The economy and environment will be so closely interlocked in the coming years that we will look back and ask how we threw away the opportunity to be an early mover on climate change and why we did not exploit the opportunities to create the infrastructure that could have made Ireland a leading player in turning a challenge into an opportunity. The roots of this failure lie not in the Government not being aware of the problem, but its inability and unwillingness to address it in a coherent manner.

While I admire my colleague from County Meath, the Minister for Transport, Deputy Noel Dempsey, for putting his hands up and accepting the Government failed to deliver the climate change strategy, it is even worse that, having made this admission, the Government has failed to change the system that caused the problem. Unfortunately, it is highly likely that the mistake will be repeated as the ESRI report indicates the organisation does not believe the Government will deliver the climate change strategy it has set for the coming years. These are critical issues.

Our economy is reaching a critical period in which we must recognise that priorities mean something. One cannot promise everything as the programme for Government does, including more hospital beds, more teachers, less tax and so on. That is no longer realistic. If there is to be a new Government, there must be new hard-headed thinking on what is affordable and on our priorities and how we will change things to deliver them. Sadly, I have not seen that thinking in the first week of this new regime. I see it going back to the old way with a taskforce on this, a commission for that and a review of something else. That will not result in the progress we need.

We are leaving a period in which this Government squandered economic success and did not apply it in a way which would leave us robust. We are seeing the consequences of that which are so admirably explained in this motion.

I wish to share time with Deputies Michael Kennedy, Michael Moynihan and Peter Kelly and the Minister of State, Deputy Jimmy Devins.

Tá an-áthas orm bheith ag freastal ar an díospóireacht seo. Aithním go bhfuil cursaí eacnamaíochta ar fud an domhain ag cur brú ar chursaí eacnamaíochta sa tír seo. Ag an am céanna, ba mhaith liom díriú isteach ar na straitéisí atá curtha i bhfeidhm againn chun na faidhbe sin a fhreagairt.

The country has prospered over the past ten years. Investment in the national development plan demonstrates the Government's determination to proceed with the policy mix to sustain the progress already achieved. Without labouring the point, we should reflect that in 1997 some 1.4 million people were working in Ireland while today that figures stands at approximately 2.1 million. Last year, we spent over €1.7 billion on our road network and completed over 200 km of motorway and 624 km of new or redesigned national roads as well as opening the Dublin Port tunnel. We are quite rightly investing significant resources in public transport projects such as the Kildare route project, the Maynooth line upgrade and Luas. Investment in new buses and in quality bus corridors are a clear indication of how our country has changed for the better and that we are laying the foundation for further improvements.

In 1997, total investment in research and development by Government in third level and business-led research was in the order of €220 million. Last year committed expenditure on research and development was almost €1 billion. In NUI Maynooth, for instance, greater focus is being placed on research, the commercialisation of research and on innovation. Colleges are now working hand in glove with industry to ensure the research they are pursuing is relevant. They are being supported in part by the Government-funded Science Foundation Ireland. A recent announcement by Intel that it was appointing NUI Maynooth as its first global education partner is a most significant move for both institutions and reflects the success of policies of both NUI Maynooth and the Government in the area of research and development and innovation.

The Government continues to be committed to low direct taxes to encourage enterprise on the part of investors and workers. We now apply the lowest tax wedge on workers' incomes in the OECD and our very competitive corporation tax rate coupled with a young, educated and committed workforce has led investors to locate here. Companies such as Intel, Hewlett-Packard and Wyeth in my county are a testament to the successful policy mix at play delivering for both the enterprises and our country.

The capacity to deliver strong performance reflects the efforts of many people, especially the working men and women of this country. Investment in our human capital to up-skill our workforce demonstrates the Government's determination to pursue a policy framework which will bed down our success to date. Investment in our people through training and education is a key enabler to optimising the benefit of the knowledge economy.

Oil prices at record levels, double what they were last year, the financial housing crisis in the US and world stock market volatility, all mean that as an open economy we will not be immune to these events. As the Taoiseach pointed out, we will need to make adjustments for the long-term gain. However, despite the global downturn, we are managing well. Today's Economic and Social Research Institute report, which forecasts that the Irish economy will grow by an average of 3.75% per year between now and 2010, will instill renewed confidence in our economy. It also signals the successful management of the economy to date.

As this is my first opportunity to contribute to a debate on financial matters since the appointment of the Minister, Deputy Brian Lenihan, to the Department of Finance, I wish him well. He brings with him not only his very significant intellect but also a rich tradition of public service.

While the Government knows that over the short term it faces new difficulties and constraints, the policies being adopted ensure we are well-equipped to overcome these problems because they ensure the public finances are sound and that we are investing in our human capital and infrastructure to secure future growth. We are also pursuing policies which protect the most vulnerable in society. I commend the Government amendment to the House.

Tá áthas orm caint ar an ábhar seo.

I congratulate the Minister, Deputy Brian Lenihan, on his important role as Minister for Finance. I have no doubt he will continue the great work carried out by his predecessor, the Taoiseach, Deputy Brian Cowen. It gives me pleasure to speak on this subject, especially on the day the ESRI issued a report indicating the Irish economy will grow by over 3.5% in the coming years.

It must be frustrating for Deputy Burton to have moved this motion given the expectations the ESRI report outlined.

I wonder if she will be disappointed as things improve when she will have to look for another stick with which to attempt to beat the Government's policy.

The only person disappointed this week was Deputy Michael Kennedy when he was passed over.

I take umbrage with Deputy Burton's assertion that our policy-makers are belatedly responding to the country's economic situation. There is no denial of Ireland's economic state on this side of the House but merely a steely determination to get on with running the country and not spend our time talking ourselves into a recession.

The one thing Deputy Burton got right is the strength of the Irish economy which she outlined last night, namely, our young educated employees; our hardworking, diligent more mature workforce; our strong education infrastructure; our healthy jobs market which despite detractors still outperforms most European economies; and our improving public transport infrastructure. The Government is investing in these areas, as did the previous one. This is the course on which the former Minister for Finance and new Taoiseach is steering us. These factors will ultimately give re-birth to the economy, according to today's ESRI report.

There is no doubt there has been a downturn in our economy but as the Minister of State, Deputy Mansergh, said last night, this is as a result of our country being an integrated economy. This integration ensured our economic growth and will allow us to grow in the future. Once we steer this ship carefully and spend in line with our growth, we will stay on course to remain one of Europe's most vibrant economies.

Difficulties in the USA have not helped and the UK and other countries find themselves in a similar position. International problems affect us and it would be the height of arrogance to expect that Ireland would be immune. We have been hit by the price of oil, the sub-prime lending crisis in the US and the strength of the euro and the knock on effect on trade. To imply that this Government is not capable of dealing with the issue, or worse not willing to do so, is irresponsible at best.

Fianna Fáil and its partners in Government have presided over the greatest economic growth this country has ever witnessed. Deputy Burton mentioned that when the Labour Party left power in 1997, 1,000 new jobs were being created weekly. I remind her that was at a time when unemployment was over 10%. It is now half that.

Some 1,600 jobs per week are being lost at the moment.

Since the advent of this Government and the previous one, economic growth has averaged over 7% per annum. While this has fallen in recent years, today's ESRI report predicts a return to over 5% growth in the next five years or so. The same economic fundamentals to which Deputy Burton referred are ultimately the same factors which will prevent us from plunging into the economic pit of despair into which my Dublin colleague believes we are headed. I remain confident in this Government's ability to handle the economy. The implication that the Taoiseach is mishandling the economy bears the hallmarks of political sabotage by an Opposition party with nothing to offer the electorate other than reactionary gibberish. Of all the gibberish uttered by Deputy Burton last night, what I found most offensive was her comparison of Ministers' alleged mishandling of the economy with the response of US officials to Hurricane Katrina. That was a cheap shot and the Deputy knows it.

No wonder Deputy Kennedy was passed over if that is the best he can come up with in a speech.

She showed extremely bad taste. Lest she forget, these Ministers managed a period of unparalleled success and prosperity and they are members of a party which was voted into Government by a majority. The Deputy's party and her colleagues in Fine Gael failed to achieve that aim. She should remember that her cheap shots are likely to offend the people who voted for us.

If there was an Oscar for doom and gloom, there would be nominations for several Opposition Deputies but Deputy Burton would undoubtedly receive the award.

Deputy Kennedy will continue to be passed over.

Last night's contribution from her was nothing but a piece of performance art.

He must be capable of more. Does he plan to stand in Dublin West?

I welcome this opportunity to commend the Government's amendment to the House. I congratulate the Minister for Finance, Deputy Brian Lenihan, and the Minister of State at the Department of Finance, Deputy Mansergh, on assuming their new roles.

The national development plan is one of the cornerstones of the Government's strategy for the future. It is vital that we continue to develop infrastructure in rural as well as urban areas. We must progress the decentralisation programme because it brings development to smaller towns and allows public service thinking to expand beyond the confines of Dublin, thereby providing a balanced input into the development of policies and regulations.

The developments that have taken place throughout the country belie the Opposition claim that the Government squandered the boom. Examples of these developments are the not-for-profit child care facilities which have been built at enormous cost to the taxpayer and which provide important supports for young couples with children. In recent years, 45,000 additional permanent places in primary schools and 22,500 places in post-primary schools have been provided, along with enhanced facilities. This is no mean achievement. The Government has spent money wisely on building child care facilities from scratch.

Ten years ago the unemployment rate was 15% or more. Twenty years ago we were exporting 40,000 to 50,000 young people to England and America. Some of these are now living undocumented in America. For the first time since the Famine, we are providing for our own people and long may that continue. It is not correct to say that we have squandered the boom. The fundamentals of our economy are strong and, while challenges undoubtedly lie ahead, the Government will be able to meet them. The lessons of history must be learned and we must keep a tight rein on public finances. We must ensure, however, that the decentralisation programme continues to be rolled out. Despite the doom and gloom merchants, today's ESRI report augurs well for our economy. I commend the Government's amendment to the House.

There is no doubt that the Irish economy is experiencing challenges during what has been an extremely turbulent year on global markets. Oil prices have soared and the repercussions from the US sub-prime issue have been felt across the Atlantic. These are global issues and global problems. The Taoiseach stated at the launch of Fianna Fáil's Lisbon treaty campaign that Ireland is the most internationalised economy in Europe. That is why the effects of these global problems, most of which did not originate on Irish shores, are being felt by certain sectors of the economy.

However, the concerns expressed about the Irish economy are premature. Today the ESRI published its assessment of the medium-term prospects for the Irish economy. The assessment was for the most part positive, with real GDP growth of 3% predicted over the medium term. This is much higher than the growth experienced by many of our European neighbours. The ESRI and the Minister for Finance agree that growth is likely to increase from 2010, which is the reason the Minister will be pursing sensible economic policies as we face more challenging economic times.

The fundamentals of our economy are sound. We are a small and open economy with a young and educated workforce. The policies pursued by Fianna Fáil-led Governments have ensured that Ireland continues to be an attractive place to do business. As the only English speaking country in the eurozone, our attractiveness to North America is unparalleled. Our physical proximity to Europe and our engagement with the European Union have been key to our economic success. It is not an exaggeration to say we have benefited more than most from the Single Market. Access to a market of almost 500 million consumers on our doorstep has transformed this country. This was emphasised today by the new Minister for Finance, Deputy Brian Lenihan, when he addressed the American Chamber of Commerce in Brussels. The Minister cited a few very impressive statistics there that I would like to mention. Foreign direct investment in Ireland exceeds €30 billion compared with €16 million in 1973 and is higher on a per capita basis than in any other European member state. Trade has increased 80-fold with consequent benefits for the number of people at work and the choice of products available to consumers. Our economy has been transformed with over 128,000 people employed in over 1,000 foreign-owned companies based in Ireland.

A "No" vote in the forthcoming referendum is the greatest threat to our economy in the long term. A "No" vote would damage our pro-European image and is not what investors around the world want to hear. There has been condemnation in the House about the recent slowdown in the housing market. The same people were talking about affordability in the marketplace and the problems faced by first-time buyers not so long ago. Approximately one third of the houses in this country have been built since Fianna Fáil came into office in 1997 and this rate, unfortunately, is simply not sustainable. We are experiencing more normal levels of construction in line with other European countries. However, after last year's general election and in the last budget the then Minister for Finance, Deputy Cowen, put in place a series of measures designed to support the housing market.

Globalisation presents us with challenges but also with many opportunities. To ensure lower-skilled workers are not left behind we are investing in upskilling and training. Providing further education, skills and training will enable those in the low-skilled sectors to move to the growing high-skilled sector. Through investment in human capital we will continue to advance along the value chain. The national development plan is providing €2.8 billion for the programme to upskill the workforce. This year some 67,000 people in employment will receive training through FÁS or Skillsnet funded programmes, an increase of 43% over the last two years. We are investing in graduates and are further developing a fourth level in our education system. Infrastructure is key to competitiveness. That is why we are investing so much in infrastructure. If we want to remain a competitive place to do business it is vital that the projects under Transport 21 and the NDP are implemented.

I welcome the opportunity to restate our economic priorities which have helped make Ireland one of the wealthiest nations in Europe, enabled us to ride out a downturn already this decade and left us well positioned to maintain respectable growth rates during the current economic turbulence.

Maintaining the capacity of the economy to consistently generate new employment opportunities requiring higher skills and providing higher rewards is a key policy of this Government. Our policies have a strong competitiveness focus. On our overall competitiveness, Ireland stands out in a number of important categories. The UN ranked Ireland fourth in the OECD 28 for quality of life in 2007. The Centre for European Reform ranks Ireland sixth in the EU 27 for overall competitiveness in 2008. WTO data show that Ireland is the 12th largest exporter of commercial services in the world.

This Government is emphasizing the correct economic priorities. Seeking low inflation, promoting competition, pursuing a sensible incomes policy and keeping public spending growth at sustainable levels in the medium term are all important factors. Doing this will allow us to keep the burden of taxation low, maintain competitiveness and maximise our economic potential. These are all part of the Government's strategy, improving the cost environment and enhancing competitiveness. It is imperative to ensure labour costs are intrinsically linked to ensuring productivity, thereby supporting employment creation and safeguarding competition.

Regarding international price competitiveness, because much of Ireland's trade is outside the eurozone, our enterprise development agencies are providing specialised assistance to Irish exporters to focus on developing into the eurozone and emerging markets to win new export sales. Our export promotion policies are exerting a direct and positive influence on the ability of Irish exporters to grow their overseas business. Active measures are also being taken to improve the capabilities of indigenous firms in meeting global competition by greater investment in innovation and other value enhancing activities. Becoming more innovation-intensive on the basis of a clear market and customer focus leads to products and services that are better able to withstand purely cost-based competitive pressures.

Cost competitiveness is a key component of the work of the Competition Authority from its enforcement and merger reviews through to much of its advocacy work. The authority has completed a number of important studies of competition in areas such as banking, insurance, including private health insurance, professional services and public transport, all of which have instituted much-needed reforms in these sectors. Strengthened resources and a firm mandate for the Competition Authority are helping deliver more competition in the economy, particularly as the authority's investigation activities begin to make an impact on sectors where competition is not as keen as required by a modern economy.

It sounds as if the Competition Authority wrote that speech.

The anti-inflation group is actively engaging with the CSO, the Competition Authority, the National Consumer Agency and the Commission for Energy Regulation with a view to co-ordinating and driving the fight against inflation on an informed basis. The Government is very conscious of the need to control costs to maintain competitiveness. Through the national development plan and our taxation and regulatory policies, the Government is committed to putting in place an environment for enterprise that remains among the most favourable in the world. We have the advantage of still being one of the most competitive small countries in the world.

The national skills strategy is an essential component in achieving the full transformation of the Irish economy into one of the world's most dynamic, knowledge-based economies. The skills strategy is set against a background of an education and training system which has served Ireland very well. This system has played a key role in attracting and retaining foreign direct investment and ensuring we have the ability to meet the skills needs of enterprises. The strategy will help us to target specific skills and sectors that will become increasingly important in the next few years. It will allow us to address gaps in our skills base. It will help us to build an education and training system that will allow us to quickly adapt and respond to the changing global business environment.

The Strategy for Science, Technology and Innovation 2006-2013, SSTI, is a key mechanism for addressing the challenges facing Ireland across the research spectrum. It embodies our sustained commitment to the research agenda and the importance of successfully managing the transition to a knowledge economy. The SSTI represents a major ramping up of Ireland's commitment to the knowledge economy and our engagement with it. As we all know, global competition has increased the pressure on quality, efficiency, productivity and innovation.

The SSTI will shape the future of Irish research and enterprise policy, building on our known strengths in the high-tech sectors, such as ICT, bio-pharmaceuticals and medical devices, to ensure quality employment and social advancement. The SSTI is clear about the types and levels of support that must be given to the most significant drivers of our economic well being, namely, manufacturing and internationally-traded services firms. While different challenges face enterprises in both sectors, our development agencies are committed to bringing about a transformational change to company attitudes to research and development and to grow business expenditure on research and development to €2.5 billion by 2013.

As we become more innovation-intensive on the basis of a clear market and customer focus, we develop products and services that are better able to withstand purely cost-based competitive pressures. Developing successful entrepreneurs and world-class enterprises are essential ingredients in any economy based on innovation.

Go raibh maith agat, a Aire.

It is just the last paragraph.

This Government will continue its firm commitment to implement policies to drive economic growth, to build on the higher value sectors of the economy, particularly in the knowledge-based areas, and to enhance productivity through investment under the national development plan, the strategy for science, technology and innovation and through the skills strategy.

I wish to share time with Deputies Liz McManus, Mary Upton, Joanna Tuffy, Seán Sherlock and Leo Varadkar.

Perhaps the Leas-Cheann Comhairle will tell me when I have almost taken up the first minutes.

I commend my colleague, Deputy Joan Burton, for tabling this motion and giving us the opportunity to debate the economy at this crucial time, particularly in light of the information we have been getting on a downturn in the economy in recent years and in light of the fact we have a new Taoiseach.

Sadly, despite what Deputy Kelly stated earlier, that one third of all the houses in Ireland were built since 1997, we heard on the news tonight there has been a 25% drop in new mortgages over the past year. Clearly, those good times in the construction industry have come to a sharp end, without any kind of planning on how we might deal with this. One minute we are up and the next we are down.

There does not appear to have been any concern whatsoever for the construction workers whose jobs are at stake. My office, as the Leas-Cheann Comhairle will be aware, is in the Mechanics Institute in Limerick, a building owned by construction unions. I talk to the people coming in and out of that building and there is a real fear for jobs in the construction industry. I am sure this relates not just to my constituency but throughout the country. As I stated, there does not appear to have been any planning for this or any attempt to address the real needs of these workers and the fact they have families who depend on them.

The same is not true of the developers who have made big bucks in the construction industry. In many cases there has not even been monitoring of the tax breaks they were given. I will cite two examples. There is a student accommodation unit close to where I live which was built on tax incentives for student accommodation and as far as I can see, there is not a single student living in it. They got the tax breaks for student accommodation and they are letting it out to workers. Similarly, I know people who deliver child care who have not benefited by any reduction in their costs from the tax breaks for child care. Those tax breaks have gone to the people who developed the buildings, not to the people to delivered the service. There has not even been monitoring of the kind of tax breaks that were available.

In the short time available, I want to refer to the way in which we should be developing tax breaks. Tax breaks should be used to provide incentive to those who offer opportunities to develop small indigenous industries. I particularly refer, for example, to campus-based companies. There are many campus-based companies in ITs and universities. Generally, they lack capital but they have plenty of ideas, in the IT area and in many other inventive areas. There should be tax breaks for such companies rather than for people making vast sums of money in the construction industry. Energy saving construction areas should also enjoy tax breaks.

My colleague, Deputy Michael D. Higgins, last night spoke of republicanism and patriotism. We should be asking our rich people to put their money into such indigenous small industries rather than into making money for themselves. Now that they cannot make it in the construction industry here at home they are turning their attention to Spain, eastern Europe and other places to make the fast buck. We should have leadership from the top — from Government — encouraging people to invest their money here in Ireland where we can expect to have growth rather than just spend it in ways to enrich themselves as opposed to their community and society.

The Deputy has one minute remaining.

We need to invest here at home in infrastructure such as schools, as was stated last night, but also, for example, in the health care area. There is a verbal commitment to community care teams. We could invest in buildings where we could have GPs, physiotherapists, social workers, public health nurses etc. in their communities working in multi-integrated teams. That is how we should be spending our money.

If there is a reduction in tax revenue, there is also a reduction in the amount of money to spend on services. That is a real concern, particularly when we see the kind of cutbacks evident in the public health services, in schools not reaching targets on class size etc. There is much more I could say but I will leave the time to my colleagues.

I welcome this timely debate. We all listened to the Taoiseach in recent days setting out his new approach that would be fair and inclusive. He has been put to the test and, frankly, listening to the speeches from the Government side, I will not hold my breath for a change of approach.

When one looks at the unemployment figures, there is a serious problem. Nationally, there are approximately 1,600 being added to the live register every week. In my constituency, which is not a particularly remarkable one for job losses, 25% have been added to the live register in a year. That has a significant impact on people's ability to look after their families and to keep going. I am already hearing of people emigrating and that indicates we are in a very different place than we were a year ago.

I welcome the fact that in this motion there is reference to the cost of living and food prices. There is a particular problem with the rise of fuel prices, which are affecting people significantly. Petrol rose by 28% since 2005. The price of diesel has for the first time risen higher than that of petrol even though the time of year would dictate that it would be reduced. I have written to the National Consumer Agency requesting it investigate why this is happening. I listened to the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, being fairly wimpish about the issue of petrol and fuel prices and stating what can we do. Perhaps we cannot do anything, but I note that in Australia they have just appointed a petrol commissioner who is to sort out the oil companies and their different approach is interesting.

Today we heard that Bord Gáis Éireann is looking for a 17% to 19% price increase. Electricity prices will follow suit. While that is hitting the householder, and particularly the low income householder severely, the coffers of the Government are bulging with VAT returns. In only four years the amount of money coming from fuel alone in VAT returns has increased by 50% to €970 million, which is phenomenal growth. That money is coming into the Exchequer and meanwhile it is not being returned, particularly to tackle the issue of fuel poverty or to assist people who are trying to reduce their fuel costs in ensuring better energy efficiency. In fact, one statistic I came across today which comes from the Money Advice and Budgeting Service is that two years ago the amount of money owing to utility companies by their clients was €864,000 whereas last year the amount almost doubled to €1.5 million. That is the hidden experience of people on low incomes.

My last point relates to skills development. There is a shortage of qualified people to install energy efficiency changes in houses or commercial buildings. People who have worked in the building sector are ideally suited to carrying out this work. If there was a really good effective scheme to ensure energy efficiency in our buildings and if we retrained these people as installers, we would ensure the Government would meet its climate change targets. Clearly, the Government will not do so and the ESRI has confirmed that today. It also would ensure that people develop new skills that give them the chance of work. It is important that there is less talk about energy and more action. This is an example of an area where the Government can development new skills where they are needed, but what we actually see from the Government in terms of the price of fuel is a fuel poverty strategy. We have nothing at present to protect people on low incomes and it is time that we did.

I welcome the opportunity to speak on this motion, which was put forward by my party. I particularly wish to focus on the sensible proposal for a substantial programme of school building. The opportunity that exists to concentrate on a substantial school building programme that will absorb some of the unfortunate spare capacity in the house building sector. The CSO figures for employment in construction are down 11% year on year and there is a tangible difference in the number of planning applications in my own constituency of Dublin South Central. A number of my constituents have asked me if I know of any major projects that are about to begin in the constituency on which they might gain employment. Unfortunately, when I talk to them about the proposed Luas E line, I have to tell them that we are talking about years, rather than weeks or months, and there is no funding pledged.

There is also a significant lack of school infrastructure and despite what the Minister of State, Deputy Mansergh, told us last night when he trotted out the usual Government response about investment, our schools are facing serious situations where parents are queueing in September to get their children enrolled the following year. I know of teachers taking special needs classes in the corridor. I know of home school liaison officers who are doing their very best to deal with very sensitive issues in a shared space. It is unfair to the officer and very unfair to the children. It is true that there is more investment in schools, but we started out from a very low base and we have a rapidly expanding population of school going age.

I am also aware of the problems facing universities. These are forced to depend more and more for their funding on corporate subscriptions. In effect, this is taking us away from the idea of the classical university and Deputy Higgins would certainly agree with me on that point. I am very aware of the many schools that have been left behind in my own constituency, due to the Government's education policy. The management, staff and parents of Inchicore national school were given promises in 2001. They fulfilled their part of the bargain by joining the boys and girls schools together, but they are still waiting for that funding to be put in place. It is unfair to the teachers, the pupils and the parents. It is unfair to the whole community. I am meeting with representatives of Loreto College in Crumlin about the lack of a sports hall for which they applied years ago. Once again, there is no commitment and the Minister has not given us any idea if these projects will begin, not to mind when.

I welcome today's report from the ESRI, which stated that the fundamentals of the economy remain resilient. However, we are told to watch out for the next two to three years. The warning by the ESRI that society could miss the opportunity to plan for a better future in the next decade is very pertinent to this motion. The Government must seize the initiative and push the school building agenda to the forefront of the economy. The benefits of this are clear. Our children would have better facilities. We would help promote the knowledge economy for the next generation. We would also create employment for the construction workers who have been left jobless by the downturn in the economy. In the meantime, we should put in place a programme for upskilling and retraining of those people who are not out of jobs, particularly in the construction industry. Such investment would also help to stimulate the economy and we could show that politicians in this country have some vision and are able to make an investment which would pay dividends for years to come.

Deputy Higgins last night spoke about our health service being an illness industry for clients, rather than a health service for treating patients. Once again, I have more than enough examples in my own constituency of where the whole health system is falling apart. The short-sighted decision to close down respite care in Cherry Orchard was finally reversed and we welcome that move. However, the issue of physiotherapy students was raised this morning in the Dáil. There is a crying need for physiotherapists. Physiotherapy graduates are coming out of colleges but there are no jobs for them, despite all the promises.

I wanted to raise some issues in my local area and bring them into the debate. In my constituency of Dublin Mid-West, there is a very significant unemployment problem. The Clondalkin social welfare office covers Clondalkin and Lucan. In the 12 months to 30 April 2008, the number of people on the live register at that office rose from 3,522 to 4,442, which is a 26% increase. Of that number, 1,193 or 27% are under 25. This compares to 21% unemployment for those under 25 in the State as a whole. The percentage of unemployed under 25 for the Dublin region is also 21%, which suggests that young people and school leavers in my constituency are finding it even more difficult to get jobs than their counterparts in other areas. In one particular electoral district in Clondalkin, 14% of young males are unemployed. In many parts of Clondalkin, unemployment is at 11%, which is over twice the national average.

In Clondalkin, Tallaght and other parts of the country, unemployment figures have been rising for the past couple of years. There is a need for targeted intervention by the Government to address areas of high unemployment, including Clondalkin. South Dublin County Council recently passed a motion on the increase in the live register in Clondalkin and wrote to FÁS about the issue. Officials from FÁS wrote back with a few examples of specific measures taken by the body. A reference was made to local community training and employment programmes where a specific gap is identified. They mainly referred to steps to make new members of the live register aware of training and interview skill courses. Given the bad situation in local authority estates in north and south-west Clondalkin, that is just not good enough.

We need a new commitment to innovative training and to education programmes that are aimed at unemployed people in specific areas. We need to use the physical accommodation available in some second level schools in the Clondalkin area and in Tallaght. We need to use the expertise that is available in the institutes of technology, such as ITT, as well as the co-operation of employers to deliver focused, high-quality training and support to people who have lost jobs. There have been examples of this in the institute of technology, and I know that because my father worked there. ITT ran a programme with Hewlett Packard where unemployed people were trained for jobs at the company. It was very successful as many of those people were long-term unemployed.

The Government needs a targeted approach. It needs to be more innovative and more proactive, as do agencies like FÁS. Unfortunately, the Government has adopted a laissez-faire attitude towards unemployment. It is not good enough for people who lose their jobs to be told by FÁS to look up websites and be given a few leaflets. We must do much more, getting agencies involved and using colleges and second level schools to upskill people. I call for the implementation of the recommendations of the task force on lifelong learning. We must introduce incentives for people to study part time.

In the past 24 hours we have heard much from the Government side about the ESRI report. If I were a construction worker or a manufacturing worker who had lost his job in the past three months, the ESRI report would not mean a whole pile to me. I would not be able to bring home the ESRI report on Thursday evening instead of a cheque and put it on the table to feed my family. The Government has engaged in a degree of spin on the issue in the past 24 hours. There is a state of denial on this issue.

The Labour Party seeks to lobby the Government to examine this issue positively, take in hand certain aspects of the economy and re-jig its thinking on how to work our way out of the downturn, notwithstanding the potential long-term gains as outlined in the ESRI report. To arrest the decline in the construction industry the Government must come out in favour of infrastructural spending. It is not sufficient that the NRA and other agencies concentrate spending on interurban or intercity projects. The NRA must be adequately funded to develop road networks between towns, especially for secondary roads that are not better, in some instances, than boreens. If regional development, which should be a main plank of a country such as this, is to mean anything, then the national spatial strategy must be returned to the forefront of economic thinking. A typical hub town such as Mallow must benefit from Government policy that delivers infrastructure, as should towns such as Cobh, Youghal, Midleton and Fermoy. These towns have not benefitted from the boom except in the area of construction. Investment in the infrastructure of road networks, business and enterprise parks will encourage local economic growth.

The Government must also find ways to take a punt on innovation. Given that we have €8 billion invested in property overseas we must find ways to claw this back and encourage those who invest in bricks and mortar overseas to take a chance on the commercialisation of technology. We must support venture capital and divert investment in bricks and mortar to innovation. On his website David McWilliams states that out of every €1 we borrowed in 2007, 86 cent went into property. Speculative investment in property, unlike other investment, creates no added value, no products, exports, patents, no skills and no basis for future national wealth. The Government's recent announcement of €500 million funding is welcome but it must go further given the recent downturn we have encountered. Enterprise Ireland's €60 million growth fund to support Ireland's small and medium sized companies is minuscule given the potential in this sector. The cost base to small local family owned firms, through massive local authority charges, is a testament to the contempt in which this Government holds local authorities. Properly funded local authorities would mean fewer charges for business and more output locally. There must be a paradigm shift in thinking towards taking the burden of charges away from small businesses. For too long they have been a soft focus for the Government in terms of overcharging.

The local economy will be the key to our future. This, along with entrepreneurial endeavour through knowledge, will sustain us. I call on the Government to acknowledge the potential for venture capital and greater investment in the millions of ideas outside these walls, waiting to come to fruition. For this to take hold, the Government must become an active stakeholder in the process. Section 23 type tax breaks that fuelled construction must now apply to the venture capital sphere, which fuels ideas, where the risks are higher but the potential for the economy in the long run is greater.

I welcome the Labour Party motion tabled by Deputy Burton. It is timely, given that the economy is the most important issue before us. When I thought about what to say in this debate I decided to look back on some of the claims Members opposite made in the past year. It is interesting to do so in view of the first anniversary of the general election, which is Saturday week. The then Minister for Finance told us the economy was at its strongest for ten years, which does not seem to be the case now. Another told us we were heading for a soft landing in the housing sector, which is not the case now. The former Minister for Enterprise, Trade and Employment spoke of rebalancing in the economy, another spoke of welcome correction while the former Taoiseach spent a huge amount of time talking about international factors when he had given up on the housing downturn excuse.

I am not sure where the Government stands on this. It seems to be a combination of deceit and denial. In the case of some it is denial that we are facing a serious economic downturn and potentially, if one believes Moore McDowell, a recession with negative economic growth in two consecutive quarters. The Minister for Social and Family Affairs, Deputy Hanafin, told us on the radio this weekend that everything was fine and that the economy was growing faster than it was in Germany. I do not understand how an economy growing at less than 1%, 0% or potentially in recession can be growing faster than the economy of Germany. I do not know if that is ignorance on the part of certain Cabinet members, denial or deceit.

The Minister for Finance, Deputy Lenihan, is the only Minister I have heard who accepts that we are facing a combination of factors, domestic and international. While we do not have control over international factors, we have considerable control over domestic factors. Any competent Minister must address these domestic factors. In fairness to the Minister opposite he is the only member of his party who accepts that.

It is important to focus on three matters: the housing bubble, the loss of competitiveness and the public finances. There is no question that the Government must accept a large degree of responsibility for the housing bubble by not reforming stamp duty when it should have, by allowing easy mortgages and cheap credit to a greater extent than should have been the case, the cheerleading by the current Taoiseach of growth in prices in the housing market and mistaken supply side economics, where Ministers increased spending and cut taxes by more than they should have, fuelling the economy and driving up prices, particularly housing prices.

No one can ignore the series of national and international reports on the loss of competitiveness by the OECD, NCC and the World Economic Forum, which point to our failure in infrastructure and inflation, most of which is driven by Government services and badly regulated services rather than the private sector. The absence of reform in the public sector is another factor.

We must urgently redress the public finances. It will not be an easy job for the Minister. While the economy is in choppy waters, the public finances are a sinking ship. We have gone from a €2 billion surplus to a projected borrowing requirement of €7 billion this year. That is the worst turnaround in the public finances in the history of the State. In general Government deficit figures we have gone from +2.3% of GDP in 2006 to -2.3% of GDP this year. This comes perilously close to the stability pact criteria.

In respect of public spending, the former Minister for Finance, Deputy Cowen, increased current public spending, not capital spending, by 10.5% or 11% or twice the rate of economic growth. Anyone running a budget, small business or household can understand that is not sustainable.

The past ten years have been a wasted decade, a boom that was squandered and a story of incompetence in economic management by Members opposite. It is important it is understood recovery is not guaranteed. We will only have the type of recovery spoken about by the ESRI in its recent report if the right policies are put in place and this means restoring competitiveness, taking climate change seriously, using social partnership to benefit taxpayers and consumers and not just vested interests and getting the public finances in order, which I hope the Minister will do quickly.

I am pleased to have an opportunity to contribute however briefly to this debate. Last evening, the Minister of State, Deputy Mansergh, outlined the Government's outstanding record on the economy in recent years and the nature of the short and medium-term economic challenges which we face. He emphasised the fundamental strengths of the economy which will enable us to recover quickly from the current short-term setback and to resume normal growth rates. I do not wish to go over the same ground again but, it is important to reiterate a couple of key points.

Since the mid-1990s the performance of the Irish economy has been astonishing and has resulted in average incomes beyond those in most other advanced countries. It has delivered huge increases in employment and has ended involuntary emigration. Unlike Deputy Varadkar, I do not see that as squandered years. As a result our economy is coming from a position of strength into this difficult and uncertain period. The strength of the economy is also underpinned by its flexibility and resilience echoed in the Economic and Social Research Institute's most recent medium-term review published today.

The ESRI acknowledges our sound economic and fiscal fundamentals. It points to our ability to absorb shocks in an efficient manner, to limit the economic fall-out and to return to the trend rate of growth fairly rapidly. The ESRI expects real growth in GDP of 0.75% per annum over the medium term, much higher than elsewhere in the euro area.

In terms of the short-term outlook, I share the view of others that economic conditions this year and next year will be weak and that it will be 2010 before we are back to trend growth. There is no denying that our fiscal position has weakened from that envisaged at budget time with tax revenue some €736 million behind what was expected at end April. It is important to point out however that the current situation is manageable given the strong underlying position of the public finances, which will require to be closely managed.

Notwithstanding this underlying strength, the Government is determined to take the right decisions on public expenditure. We cannot allow any unnecessary loosening of fiscal policy. Taking the wrong decisions now in dealing with short-term problems could have painful long-term consequences. This discipline on current expenditure under all headings will be critical during the next few years given the changed circumstances.

Despite the constraints on the public finances the Government is determined to adhere to its priorities of protecting the weaker in society, delivering better and more effective public services, seeking value for money at all levels of public spending and continuing to invest heavily in our infrastructural development programme. The Government will do what is right but other economic stakeholders must also do so. We need to improve our competitiveness if our economy is to rebalance itself from relying on domestic activity to more sustainable export-led growth. This means employers will have to compete harder in domestic and export markets as there will be fewer opportunities to make easy profits. Pay expectations must take into account the more challenging economic and competitiveness scenario that we face and must recognise the need for improvements in productivity not alone in the private sector but in the public service. The allocation of resources to public service pay costs must not cause a shortfall of resources for other key priorities. Pay increases in the current talks cannot undermine our competitive position and must take account of the budgetary realities.

In addition to corrective action, if we are to keep our medium-term prospects bright, we need to reassert our rightful position at the heart of Europe through a "Yes" vote on the Lisbon treaty in June. I was unable to participate in the debate yesterday evening as I was meeting with Finance Ministers in the European Union yesterday and today. This morning, I took the opportunity of addressing the US Chamber of Commerce in Brussels. I was impressed with the concern and support right across the European Union for a "Yes" vote in Ireland. The volume of positive sentiment available to Ireland throughout the European Union will be damaged by a "No" vote.

I thank the parties opposite whom I know are campaigning as vigorously as the Government for a "Yes" vote. On my return from Brussels this afternoon I saw a picture of Deputy Gilmore on Merrion Square. It may be some time before he gets further into Merrion Square but I thank him for his campaign in respect of the treaty which is important to all of us. It is important in terms of the signal we send to other European countries.

Deputy Varadkar stated that much of the inflation is due to Government-led increases. This is not correct. Government charges are not a significant contributor in the increase in the rate of inflation. Government administered charges excluding independent regulators, account for one twenty-fifth of the total weighting of the basket of goods and services which make up the consumer price index.

I wish to share time with my party leader, Deputy Eamon Gilmore.

Is that agreed? Agreed.

The stream of negative economic data on unemployment, inflation and tax revenues show clearly that the Celtic tiger era has come to an end and that the Government has no worthwhile policies to reverse these negative trends. It has been on auto-pilot so long it does not know what to do.

Since the beginning of this year, consumer spending has slowed, unemployment has risen significantly, redundancies have risen to a level not seen since the 1980s, export growth has slowed, tax revenue has fallen and the fiscal deficit has risen sharply. Surveys of consumer confidence are at their lowest level since the series began. In the past year the numbers signing on for unemployment benefit have risen by 41,000, 28,000 of whom have become unemployed since the beginning of this year.

Television is the most up to date and accurate barometer of what is happening in our economy and society. It is significant that RTE has decided to drop its "House hunters in the Sun" series and has instead during the past two weeks broadcast a sobering programme entitled "Where's my job gone?" This illustrates the human cost of redundancies in manufacturing during the past year. The closure in my constituency of one of Westmeath's longest established manufacturing plants, Iralco at Collinstown was only narrowly averted last month. Had it closed, the consequences for hundreds of families would have been disastrous and many of the firm's older workers might not have worked again.

The Government constantly tells us about the number of new jobs being created but most of these jobs are in high-tech manufacturing or in services. In rural areas, many workers lack the skills to take up such jobs and the decline in construction and low skill manufacturing is leaving many workers with few prospects of finding alternative jobs. While FÁS does some good work in retaining workers, we have never developed in this country the kind of active labour market policies which have been so successful in Scandinavia in reducing long-term unemployment. While we have made impressive progress in educating our young people during the past 20 years, we must bear in mind that a large proportion of people in the labour force aged over 40 years did not complete second level education and that half a million people in Ireland have literacy problems. We need a much better resourced and more proactive labour market policy if large numbers of older workers are not to be consigned to long-term unemployment and eventually reclassified as social welfare dependents.

It is important to remember that many of the jobs lost during the past year were not in older manufacturing firms but in companies such as Pfizer, Boston Scientific, Abbott and Allergan which the Government repeatedly tells us are the industries where most manufacturing jobs will be created in the future. They were in fact the high technology, high value added jobs which we are constantly told are the alternative to low value added manufacturing jobs, most of which will inevitably move to low wage economies.

We should recognise that the Celtic tiger period which began in 1994 ended six years ago in 2002. Deputy Quinn, as Minister for Finance at the time, played an important and pivotal role in ensuring the economy got on its feet. Growth from 1994 to 2002 was based on a tremendous growth in exports, which is the only sustainable way for a small open economy to grow.

Since 2002, despite a lot of idle boasting by the Government about our economic performance, most of the growth has been due to a credit-fuelled housing boom, much of which is a pure bubble. This bubble has now largely burst due to rising interest rates, resulting from the credit and banking crisis and has caused a sharp downturn in housing starts. House starts are likely to continue falling for at least another year because of the large number of unsold new houses and apartments. If there is to be a recovery in the economy, it will not come from housing.

The downturn in the housing market has resulted in a dramatic fall in tax revenue because during the past 15 years the Government has become overly dependent on tax from the construction of new houses and stamp duty on second-hand houses. Stamp duty which was never intended to be a major source of tax revenue has risen from 3% of total tax revenue to 9% since 1998. It must be bitterly ironic for the Government to recall former Deputy Michael McDowell's assertion before the last election that the Government did not need the revenue from stamp duty. If stamp duty receipts were not falling so sharply, our new Minister for Finance, Deputy Brian Lenihan, would not have had to use the phrase "financial discipline" three times in his first interview as Minister.

While I have a great deal more to say I must hand over to my party leader. As we no longer have control over exchange rate or monetary policy and have only limited opportunities for fiscal policy, we must rely on the competitiveness of our exports for growth and on competitiveness based on productivity. Increasing productivity must begin with the education system. Despite the economic downturn, spending on education, in particular on primary education, must be increased. We take too much comfort from surveys that show that Irish teenagers perform well in international comparisons of literacy but we ignore the results of the same surveys that show a mediocre performance in maths and science. If we are to produce workers for the so-called knowledge economy, we need to increase our spending on education and ensure all pupils achieve their potential.

I thank my colleague, Deputy Burton, for proposing this Labour Party motion. I thank all Members of the House for contributing to the debate. However, I regret somewhat the rather half-hearted engagement by the Government in this debate. It shows a lack of willingness on the part of Government to engage in the House on economic debate and have the Government's economic policies subject to scrutiny.

This motion deals with a core task of modern Government, namely, competent management of the economy. As leader of the Labour Party, I have always taken great care in what I state both at home and abroad about the Irish economy. I believe it is never wise for any of us to talk down our economic prospects. I also believe the Irish economy has significant underlying strengths which can outlast the present short-term difficulties.

In this context, I welcome the ESRI medium-term review, which sets out a positive picture for the decade ahead, despite short-term problems. As the economist John Maynard Keynes stated, "In the long run we are all dead". The people of Ireland live in the here and now. We need jobs and a decent standard of living right now, and we need to know that the Government is capable of managing the transition from where we are now to the rosier days that may be further down the line.

What bothers me about the ESRI report is not so much its content but rather that the Government will seize on it as another excuse for complacency and inaction on the economy. Last night, Deputy Burton went through many of the facts about the Irish economy at present and the extent to which a downturn is taking place. That we are in an economic downturn is not in dispute. The core questions that must be addressed are what is causing it, what to do about it and who carries the cost of it.

How do we get through the present difficulties to exploit the opportunities described in the medium-term review? After all, economic forecasting is not a form of soothsaying. Economic forecasts are of their nature conditional and significant conditions are attached to the prospect of getting from where we are now to where we want to be.

On the first question, let us nail the myth that all of our current difficulties are somehow imposed on us from outside. Let us stop blaming somebody else. There is a crisis in global capital markets. Serious threats to the Irish economy arise from the credit crunch and from the appreciation in our real exchange rate consequent on the rise in sterling and the dollar. Inflationary pressures arise from the increase in global commodity prices, not least the cost of basic foods.

However, the slowdown in economic activity that Ireland is now experiencing is the direct result of the collapse in a domestically-generated construction boom over which the new Taoiseach presided as Minister for Finance. Moreover, a pattern of rising costs and deteriorating cost competitiveness has been evident for some time, just as merchandise export performance has been weak for some time. As a result, the Irish economy now faces into the changed global conditions of which I spoke in a disadvantageous position.

The property market is central to what has been happening in recent months. For years, the Labour Party has warned the Government that its refusal to address the house price spiral would eventually cause severe problems. However, it ignored these warnings and allowed both job creation and Exchequer revenues to be overly dependent on construction.

It made a complete mess of the stamp duty issue, allowing one Minister to propose the abolition of the tax, then refusing to address it, then addressing it in a half-hearted manner and then coming back six months later for another bite at the cherry. It is little wonder that buyers fled the property market. Activity remains very low, as buyers wait to see when prices will bottom out. The result of this crisis of confidence has been a collapse in residential housing starts, with knock-on consequences for jobs and tax revenues.

What can be done about this situation? I believe the Government faces a genuine policy dilemma. As the ESRI medium-term review makes clear, its pro-cyclical approach to fiscal policy in the boom times means it has nothing left in the armoury when things are not going so well. The fiscal position is deteriorating and sooner or later the public finances will have to be restored to a more sustainable path. At the same time, precipitate action on the part of the Government at this point risks making matters worse, potentially lengthening and deepening the downturn.

I have no intention of making the political aspects of this balancing act any more difficult for the Government. However, as I will spell out in a moment, neither will I stay silent if the burden of adjustment is imposed where Fianna Fáil and the PDs generally impose it. There are significant problems in fiscal policy, but this does not mean that the Government is impotent. Important supply-side steps can be taken and measures can be taken without exposing the Exchequer to undue risk to lessen the immediate impact of the construction slowdown.

In particular, it is important that people who are losing their jobs, particularly in construction and manufacturing, are able to avail of suitable educational and reskilling opportunities. Otherwise, we will see a build-up of people on the live register who will find it difficult to move back into employment when the economic environment improves. It is important to bear in mind that employment in construction increased by 100,000 between 2001 and 2006. Many of those people were migrants, but many were not. I am particularly concerned that construction may have been providing reasonably well-paid employment for people with very limited skills, who will now find it very difficult to find work.

What can be done is to provide training opportunities for people who are leaving the house-building sector to facilitate them finding work in other areas of construction and in the broader economy. Given the scandalously poor building standards in force for most of the boom, there is plenty of work to be done in retrofitting Irish homes to meet better carbon standards and the Government should take the opportunity to train people for this type of work.

It is also important to cushion the immediate blow to employment in the construction sector so as to smooth the adjustment path to lower output levels in house building. The skills involved in building houses are very similar to those involved in building schools, particularly where a small number of classrooms is being added. The Government has been promising since 1997 to provide every Irish child with a world-class school, yet we know it has utterly failed to do so.

Now that there is spare capacity in the construction sector, the State has an opportunity to avail of more competitive tender prices and deal with a long-running educational need. All that is required is a little imagination and some administrative agility. Instead of paying people to be on the live register, we should get people to work building schools that are urgently needed.

I also believe that now is a good time to introduce a "begin to buy" shared equity scheme in housing as suggested by the Labour Party some time ago. House prices may well have dropped, but people still need homes and cannot afford to buy them. Introducing a shared equity scheme has the potential to restore some level of the lost activity in the housing market. Again, this is an opportunity to obtain better value for money for the taxpayer and for people who want to own their own home. The financial markets will not step into this breach, because the banks are anxious to curtail their exposure to the property sector. However, the State can take a longer-term view.

In the short term, it is not hard to predict what the Government is likely to do. Up to now, it has adhered to the Corporal Jones school of economics, shouting "Don't panic, don't panic" in ever more nervous tones and doing nothing. It has not brought forward a single constructive policy idea, and it is clear from the Government amendment that is has no intention of doing so. It will, I hope, stay the course in maintaining high levels of investment though it can afford to be flexible about the composition of that investment.

However, this is not an adequate response to the needs of the moment. Managing the transition from a short-term downturn to a medium-term growth path is a key policy challenge which will not be met by the usual response of blaming somebody else. What the Government should not do is revert to form and impose the full burden of adjustment on to the weakest in our society. We have been here before. We know the pattern — cuts in health services and in home help hours, the "savage 16" welfare cuts championed by the present Tánaiste and cuts in active labour market programmes, all the while maintaining tax breaks for the wealthy and the well-connected to which Fianna Fáil is addicted.

Let me be quite clear. The Government should not come into the House looking for sacrifices from hard working people and their families and from the vulnerable in our society while maintaining stamp duty holidays for wealthy property developers. If social partnership is to mean anything, it means those who have done best out of the boom can afford to take a fair share of the burden of the adjustment. I hope the motion, notwithstanding the likely outcome of the division on the Government amendment, will at least cause the Government to focus more attentively and actively on what needs to be done to address the new economic problems we face.

Amendment put.
The Dáil divided: Tá, 65; Níl, 62.

  • Andrews, Chris.
  • Ardagh, Seán.
  • Aylward, Bobby.
  • Behan, Joe.
  • Blaney, Niall.
  • Brady, Áine.
  • Brady, Cyprian.
  • Brady, Johnny.
  • Brennan, Séamus.
  • Browne, John.
  • Byrne, Thomas.
  • Calleary, Dara.
  • Carey, Pat.
  • Collins, Niall.
  • Conlon, Margaret.
  • Connick, Seán.
  • Coughlan, Mary.
  • Cregan, John.
  • Cuffe, Ciarán.
  • Cullen, Martin.
  • Devins, Jimmy.
  • Dooley, Timmy.
  • Finneran, Michael.
  • Fleming, Seán.
  • Flynn, Beverley.
  • Gallagher, Pat The Cope.
  • Gogarty, Paul.
  • Grealish, Noel.
  • Haughey, Seán.
  • Healy-Rae, Jackie.
  • Hoctor, Máire.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Kennedy, Michael.
  • Killeen, Tony.
  • Kitt, Tom.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • Lowry, Michael.
  • Mansergh, Martin.
  • McDaid, James.
  • McEllistrim, Thomas.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • Moloney, John.
  • Moynihan, Michael.
  • Mulcahy, Michael.
  • Ó Fearghaíl, Seán.
  • O’Dea, Willie.
  • O’Hanlon, Rory.
  • O’Keeffe, Batt.
  • O’Keeffe, Edward.
  • O’Rourke, Mary.
  • O’Sullivan, Christy.
  • Roche, Dick.
  • Ryan, Eamon.
  • Sargent, Trevor.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Treacy, Noel.
  • Wallace, Mary.
  • White, Mary Alexandra.
  • Woods, Michael.

Níl

  • Breen, Pat.
  • Broughan, Thomas P.
  • Bruton, Richard.
  • Burke, Ulick.
  • Burton, Joan.
  • Byrne, Catherine.
  • Carey, Joe.
  • Connaughton, Paul.
  • Coonan, Noel J.
  • Costello, Joe.
  • Coveney, Simon.
  • Crawford, Seymour.
  • Creighton, Lucinda.
  • D’Arcy, Michael.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Enright, Olwyn.
  • Feighan, Frank.
  • Ferris, Martin.
  • Flanagan, Charles.
  • Flanagan, Terence.
  • Gilmore, Eamon.
  • Hayes, Brian.
  • Hayes, Tom.
  • Higgins, Michael D.
  • Hogan, Phil.
  • Howlin, Brendan.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • McCormack, Pádraic.
  • McEntee, Shane.
  • McGinley, Dinny.
  • McHugh, Joe.
  • McManus, Liz.
  • Mitchell, Olivia.
  • Naughten, Denis.
  • Neville, Dan.
  • Noonan, Michael.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O’Donnell, Kieran.
  • O’Dowd, Fergus.
  • O’Keeffe, Jim.
  • O’Mahony, John.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • Penrose, Willie.
  • Quinn, Ruairí.
  • Rabbitte, Pat.
  • Reilly, James.
  • Ring, Michael.
  • Sheehan, P.J.
  • Sherlock, Seán.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Tuffy, Joanna.
  • Upton, Mary.
  • Varadkar, Leo.
Tellers: Tá, Deputies Pat Carey and John Cregan; Níl, Deputies Emmet Stagg and David Stanton.
Amendment declared carried.
Question, "That the motion, as amended, be agreed to", put and declared carried.
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