I propose to share time with Deputies Timmins, Enright and Coveney.
Speaking about the objectives of the budget yesterday, the Minister indicated that one such objective was to impress the international markets and persuade them that he was doing something. While he has certainly done something, the real test is whether he had done the right thing. I fear he has not done so. For instance, if the objective was to restore confidence and encourage the resumption of semi-normal spending in the economy, the budget has already failed. If wallets were zipped up last week, this week they have been put away under lock and key.
The massive increase in the tax take will mean that people will have no money available for discretionary spending. This will cost jobs, as restaurants, shops and small businesses fold. Increases in taxation, whether on work on business, will account for 60% of the entire adjustment, while public expenditure, which was ramped up by the Taoiseach when he was Minister for Finance at twice the rate of economic growth, will account for only a fraction of the adjustment. Public expenditure, which is at the core of the structural deficit, is being left largely in place. Even where cuts have been made, they have been imposed on direct services such as services to parents and are not being introduced in a manner that reforms the public service.
The only example of reform cited by the Minister was the change in work practices in the area of social welfare where an efficiency drive has resulted in the allocation of new staff to meet increased need. If that is the best we can expect in terms of reform of the public service, God help us all. By failing to reform, the budget does nothing to improve competitiveness or reduce costs. It does not mention changes in FÁS or the Health Service Executive, nor does it address the issue of regulatory reform or tackling monopolies in the economy.
If the objective is to restore confidence and get public spending moving again, the budget has been a complete failure. Middle income earners, primarily parents, have been hammered in the budget. Those worst affected will be in survival mode at best for many years and will certainly not be in spending mode. If the objective was to create employment or even sustain existing jobs, the budget has also failed. The VAT increase introduced in the previous budget, which the Minister has since described as folly, remains in place. Moreover, the lower rate of VAT remains unchanged, notwithstanding the Fine Gael Party proposal to reduce it for labour intensive export industries such as tourism, an area which falls within my brief.
The departure tax has been proven to be a counterproductive tax but the Government did not grasp the opportunity to abolish it in the budget. Aer Lingus, Ryanair, Dublin Airport and Shannon Airport are in trouble owing to this tax and jobs are being lost as tourists turn away in their thousands. The departure tax was the final straw because it sent out a message that we do not want tourists to come here.
The allocation to support those who are losing their jobs is a joke. It amounts to 23,000 places for the unemployed, which is less than the number of people losing their jobs each month. The budget does not provide a stimulus to the economy. The capital budget, for instance, has been slashed. Even the suggestion that the private pension funds could be used to fund capital projects has some merit. It came from the construction industry. That idea is completely unformed and there is no idea about how it will actually work. It is simply thrown in as a red herring.
This budget is not about restoring competitiveness or confidence or sustaining jobs. Employers, workers, parents and the unemployed are not happy but the bankers, God bless them, cannot believe their luck. I believe they are the only group celebrating today. Not only have they found a patsy in the form of the taxpayer to take over their bad debts and manage them for them, but this patsy will pay them for the privilege. With one bound our bankers are free to go back to the same old ways. A line is drawn in the sand and it is as if nothing has happened. Their feckless risk taking is forgiven and there is not a single word spoken about the €7 billion the taxpayer gave them to recapitalise the banks which is now worth nothing. It achieved nothing. We are now back to square one, but are now faced with mortgaging not just our future but our children's future to buy these bad debts, at a price of which we have no idea.
Imagine the Minister coming into the Dáil and telling us, "We will buy bad debts. We will send our debt to GDP ratio into the stratosphere and we have no idea how much it will cost us". If that is not enough, the removal of those impaired assets from the banks balance sheets may require, as the Minister has told us, further recapitalisation. Every which way they turn the taxpayers will lose.
I am afraid commentators and the media have fallen for the spin and are reporting this move as a risk-free technical arrangement whereby impaired assets will be transferred to a new agency. Let us be clear. They are not being transferred, rather, they are being bought by the taxpayer. This is not a risk-free solution. It is no device to magic away those best-forgotten loans. It is a time bomb, albeit one with a long fuse.
The Minister accepts the value of these loans may not be realised but tells us not to worry because he has a great idea to put a levy on the banks. What a joke. Who owns the banks? We will own the banks by the time we will know the loans will not be realised. We will be putting a levy on ourselves. We have already half-recapitalised them and we are admitting there will be further recapitalisation, assuming we do not nationalise them. The only solution to recoup those loans is to put a levy on the banks we own. It is circular thinking at its best and the taxpayers lose again.
The reality is that the markets have already realised that is what is being planned here and the bank shares have tumbled again today. I reiterate what Deputy Kenny said this morning. This budget sets out to achieve a lot but what it mortgages and sacrifices the futures of not just one but several generations.