Before calling on the Minister for Finance, I remind Members that the budget documents being circulated remain confidential until the Minister has announced them. They should not be taken or sent by any means from the House before the conclusion of his statement.
Budget Statement 2010.
One can read it on the websites of The Irish Times, the Irish Independent and RTE.
It is one of the most leaked budgets.
I call on the Minister for Finance, Deputy Brian Lenihan, to make his Budget Statement.
When I presented the supplementary budget to this House last April, I said we could work our way through this period of severe economic distress. Today, I can report that notwithstanding the difficulties of the past eight months, we are now on the road to economic recovery.
(Interruptions).
It is of enormous benefit that the main political parties in this House share a common understanding of the extent of our difficulties and even if we disagree on how to solve our problems, our agreement on the amount of savings required sends a powerful signal to the rest of the world that we are able and willing to put our own house in order.
Today, I want to tell the Irish people that even though our economy is still in a weakened condition, and our self-confidence as a nation has been shaken, the Government's strategy over the past 18 months is working and we can now see the first signs of a recovery here at home and in our main international markets.
We have taken bold, decisive and innovative steps to manage our way through this crisis. In all our actions, our concern has been to protect jobs, to provide a functioning banking system and to return this economy to the path of sustainable growth. We have sought to do all of this in a manner that is fair and that protects the most vulnerable.
The measures we have taken have been commended by international bodies, such as the European Central Bank, the European Commission, the IMF and the OECD. They have also won the approval of the international markets. Tangible evidence of this is the reduction in our premium on borrowing in recent months.
We now have the confidence of knowing that our plan to return this country to prosperity is working. Yes, we have had to make some very difficult choices in framing today's budget and in doing so, we have tried to be as fair as possible. However, by taking the difficult but necessary measures now, we will rebuild our nation's self-confidence here at home and our reputation abroad.
NEXT STEPS TOWARDS RECOVERY
The Government over the past 18 months has made budgetary adjustments of more than €8 billion for this year. Had we not done so, the deficit would have ballooned towards 20% of our annual wealth, a level at which the very financial survival of this country would have been at risk. As a result of these decisive actions, we are now in a position to stabilise the deficit.
A total of €4 billion is the scale of adjustment that we planned for 2010 in the supplementary budget where we set out details to reduce the deficit over the coming years. The European Commission approved that plan but recently recommended a revised deadline of 2014 by which to reduce our deficit below 3% of GDP. We welcome this revision, but it does not change what needs to be done in this budget. The amount of €4 billion is still the right target and our strategy is on track.
In this next phase of the Government's plan we must stabilise the deficit in a fair way, safeguard those worst hit by the recession, and stimulate crucial sectors of our economy to sustain and create jobs. The worst is over.
(Interruptions).
The international economy has exited recession. Recent indicators suggest that economic activity in this country is turning the corner, and my Department expects a return to positive growth within the next six to nine months.
GDP has fallen by approximately 7.5% over the past year, which is the largest fall since records began. Average GDP for 2010 as a whole is projected to be down by approximately 1.25% from the average level in 2009. Consumer prices have tumbled this year, and a small decline is forecast for next year. By helping to restore competitiveness, falling prices will allow us to take advantage of the improving global economy. Falling economic prices will also cushion the effects of reduced pay and social welfare payments
The effort demanded of every citizen in this budget is substantial, but it is the last big push of this crisis. Further corrections will be needed in the coming years, but none will be as big as that being introduced today. Having already provided for an adjustment of €1 billion in capital spending, we have pencilled in an adjustment in day-to-day spending of approximately €2 billion for 2011, as strengthening economic conditions begin to assist in closing the deficit.
Our overriding objective has been to strive for fairness. Unpalatable choices will always be met with opposition. The job of Government is to distinguish between the common good and narrower sectional interests. The response to the recent flooding throughout our country has shown what we can achieve when we all pull together in times of adversity.
That is a laugh.
If we work together now and share the burden, we can deliver sustainable economic growth for all.
The Minister should be given more garlic.
The economy went into reverse for three reasons: first, a steady loss of competitiveness during a prolonged boom; second, the bursting of the property bubble; and, third, an international banking crisis which triggered a worldwide recession. In the past 18 months we have put in place a range of far-reaching measures to stabilise the banking system. We took those measures not for the sake of the banks but for the sake of our economy.
We have gone through a severe and painful correction in the property market. I know this has dealt a heavy blow to individual homeowners, many of whom are now in negative equity and some of whom are experiencing difficulties meeting their mortgage repayments. However, the collapse of the property bubble has also impacted on our public finances by greatly reducing the tax take and increasing the demand for welfare payments. In the two most recent budgets, I sought to address this shortfall by introducing a highly progressive income levy and various other taxation measures. A key feature and focus of today's budget is regaining our international competitiveness.
RESTORING OUR COMPETITIVE EDGE
Unless we regain our competitive edge, we will be unable to return to the tried and tested strategy of export-led growth that ushered in the boom in the early 1990s. We must be able to compete and win again in the international marketplace.
In the recent referendum on the Lisbon treaty, the people reaffirmed Ireland's place at the heart of Europe. This was the right decision for our economy, for our future and for our children. The single currency has provided huge protection and support to Ireland in the current crisis. It has prevented speculative attacks on our currency and provided funding to the banking system. However, membership of monetary union also means devaluation is not an option. Therefore, the adjustment process must be made by way of reductions in wages, prices, profits and rents.
Some progress has already been made. Consumer prices in Ireland are now declining at the fastest rate in the entire euro area and the European Commission has forecast that — uniquely in the euro area — our unit labour costs will fall this year. However, our prices are still among the highest in Europe. During the past decade wages have gone up 70%, well above the euro area average. Put simply, we have priced ourselves out of the market. We will not be able to stem the haemorrhage of jobs until our prices and the costs of doing business here move down in line with those of our main trading partners.
WHY BORROWING MORE IS NOT THE ANSWER
Some have argued we should continue to borrow and wait for the economy to grow again before tackling the budget deficit. There are three reasons this is not a viable proposition. First, we know from the 1980s how large deficits, left unchecked, can lead to a dangerous spiral of mounting debt and ever increasing interest payments. Never again should we return to a position where all of our income taxes go to pay interest on the national debt. Second, international debt markets have become more crowded and more fragile. If lenders were to lose faith in our ability to restore order to the public finances, the consequences for our economic well-being would be profound. Third, only decisive action will restore confidence. Consumers will only start to spend and business owners will only invest and create jobs if they believe we are tackling our deficit problem now.
In our everyday lives we do not borrow to pay our household bills. We cut back and seek to live within our means. The same strictures apply at national level. Borrowing hundreds of millions of euro a week to pay for day-to-day spending is just not on. Stabilising the deficit is the next key milestone in our plan to deliver economic recovery for this country.
WHY WE CANNOT TAX OUR WAY OUT OF THIS
Others have argued for increases in taxes as a means of stabilising the deficit. However, those who demand higher taxes fail to recognise what I have already done. The tax increases contained in the two most recent budgets have placed the heaviest burden on those best able to pay. For example: a single person earning €25,000 now pays €500 more in tax and levies than in 2008; a single person on €100,000 pays around €5,500 more, or 11 times more than the person on €25,000; and at €250,000, the additional taxes and levies amount to almost €17,000 or 33 times the contribution of the person on €25,000. The progressivity of these changes is beyond doubt, but we have reached the limit. We will not create jobs by increasing the penalty on work and investment.
Deputies
Hear, hear.
REFORMING HOW WE TAX INCOME
It is also clear that our income tax system has become very imbalanced. Next year, almost half of income earners will pay no income tax and 4% will pay almost half of the total yield. If we want to sustain high levels of Government services, this imbalance must change. The time has come to transform how we tax incomes and to simplify the position and make it fairer and more broadly based. It is my objective to introduce in 2011 a new system of just two charges on income. A new universal social contribution will replace employee PRSI, the health levy and the income levy. It will be paid by everyone at a low rate and on a wide base as a collective contribution to public services.
How much will people pay?
Income tax will apply on a progressive basis to those with higher incomes reflecting their capacity to make a greater contribution. These changes pose a challenge but we cannot continue with the current system, with its myriad anomalies. I look forward to working with my colleagues in the Government on this reform and the closer integration of the tax and social welfare system.
BROADENING THE TAX BASE
In the renewed programme for Government, we have accepted the recommendations of the Commission on Taxation on the need for a property tax. Considerable groundwork will need to be done before a site valuation tax can be introduced. Work will shortly begin on the registration of ownership and the valuation of land.
The renewed programme for Government also contains a commitment to introduce a system of water metering for homes. Preparations are under way in this regard. Water charges, when introduced, will be based on consumption above a free allocation. Further details will be announced by the Minister for the Environment, Heritage and Local Government.
Pass the buck to the Green Party.
These charges, like the charge on second homes, will finance the provision of local services by local authorities.
High Earners Must Pay Their Fair Share
We have set our face against increasing the burden of income tax. However, the Government wants high earners who avail of tax incentive schemes to contribute more in the current difficult circumstances. Accordingly, for the tax year 2010, the effective rate of income tax for those benefiting from reliefs will increase from 20% to 30%, on top of which they will also pay PRSI and levies. This represents a significant tightening of the restriction and it will yield approximately €55 million in a full year. The entry point to the restriction will now occur at an adjusted income level of €125,000, with the full restriction applying at €400,000. I will examine the curtailment and removal of further reliefs in the context of the finance Bill.
Our tax treatment of non-resident individuals is broadly in line with that of most other OECD countries. However, we must ensure that every wealthy Irish domiciliary who pays little or no income tax makes a contribution to the State, especially during times of economic and fiscal difficulty. For this reason, we will introduce measures which will impose on all Irish nationals and domiciled individuals whose worldwide income exceeds €1 million and whose Irish-located capital is greater than €5 million a requirement to pay an Irish domicile levy of €200,000 per annum, regardless of where they are tax resident.
Deputies
Hear, hear.
Full details in this regard will be set out in the finance Bill. I am also introducing a package of measures to improve the effectiveness of the Revenue Commissioners in tackling the shadow economy, addressing smuggling and excise frauds and dealing with tax avoidance schemes.
Carbon Tax
The economic and social implications of climate change are immense. It is the responsibility of every Government to change behaviour to reduce greenhouse gas emissions. The most effective way to proceed in this regard is to put a price on carbon. This will encourage innovation by incentivising companies to bring low carbon products and services to the market. Changing behaviour takes time but a start must be made. I am introducing a carbon tax equivalent to €15 per tonne. The detail is set out in the summary of budget measures. The tax will apply to petrol and diesel from tonight. Increases in home heating oils and gas will apply from next May.
The application of the tax to coal and commercial peat will be subject to a commencement order to allow a robust mechanism to be put in place to counter the sourcing of coal and peat from Northern Ireland where lower environmental standards apply. A vouched fuel allowance scheme will be developed to offset the increases for low-income families dependant on such fuels. The yield from the carbon tax will be used to boost energy efficiency, support rural transport and alleviate fuel poverty. The tax will also allow us to maintain or reduce payroll taxes.
Carbon taxes will be a feature of economies across the world in the coming years. Today's announcement sends a positive signal to those gathered in Copenhagen — working for an ambitious agreement on global climate change — with regard to Ireland's capacity to show leadership in this area. The tax changes I am introducing reflect my belief that tax can make some contribution to the reduction of the deficit and will make a larger contribution in later years. As we know from our recent history, we cannot rely solely on taxing our way out of our difficulties.
STABILISING THE DEFICIT IN A FAIR WAY
If we cannot tax our way out of our difficulties, and we all agree in this House that we cannot borrow our way to recovery, then the only remaining option is to reduce our spending. No one wants to cut spending but the cost of providing public services has to be reduced to bring it in line with sustainable revenue levels and to help restore our international competitiveness. Since 1997 we have made great strides in expanding the level of public service provision. We did so out of the best of motives and in response to public demand. Indeed many in this House criticised us for not doing more. The current cost of providing public services is not sustainable. Without any correction, day-to-day spending would be approximately €58 billion in 2010, an increase of approximately €2 billion over 2009.
Given that public service pay and social welfare each account for about one third of all day-to-day spending, reductions in these two areas are unavoidable. The measures I am announcing amount to savings of over €1 billion on the pay bill, about €760 million on social welfare, some €980 million on day-to-day spending programmes and about €960 million in savings on investment projects. Combined with other adjustments, this amounts to more than €4 billion expenditure savings compared to pre-budget estimates.
ADJUSTMENTS TO PUBLIC SERVICE PAY AND PENSIONS
In my supplementary budget, I announced my decision to have top level pay rates examined by the review body on higher remuneration in the public sector and benchmarked against those of other EU countries of comparable scale. The Government has considered the recommendations of the review body and intends to apply reductions to all public servants in the higher pay bands including hospital consultants. Based on the recommendations of the review body I propose to apply a reduction in pay of 8% for those with salaries from €125,000 to €165,000, 12% for those earning between €165,000 to €200,000 and 15% for those earning more than €200,000. These are permanent reductions that, in time, will be reflected in pension entitlements. The salary of the Taoiseach will be reduced by 20%. This reduction, together with the pension levy means the Taoiseach's salary will be cut by close to 30% in total.
Ministers and Secretaries General of Departments will take a pay cut of 15% or an overall cut of close to 25% when the pension levy is taken into account. The review body concluded that the Constitution precluded it from recommending a reduction in judicial pay. Had it not been so precluded, the review body would have considered a downward adjustment. For the same reason the pension levy was not applied to the Judiciary although many judges have contributed an amount on a voluntary basis. The Chief Justice and the presidents of the courts have urged all judges to make the appropriate pension contribution. I will make provision in the finance Bill to facilitate these payments. Since the review body would have considered a reduction of judicial salaries, I have decided that there will be no increase in judges' pay during the lifetime of this Government. Future Governments may choose, as in the past, to continue this course of action.
Those at the top will lead by example in this national downward readjustment of pay. Legislation to give effect to these substantial reductions in senior level pay will be published shortly. I thank the review body for its work. The report will be published later this week.
It must be acknowledged that public servants have already made a very substantial contribution to the necessary reduction in public expenditure.
Hear, hear.
The pension levy has reduced their pay by an average of nearly 7%. Their numbers have been reduced by the moratorium, the incentivised early retirement scheme and career breaks. Like many workers they have forgone pay increases. Unfortunately, more is required. The country can no longer afford a pay and pensions bill that accounts for more than a third of all day to day expenditure. Any reduction in the pay bill must be sustainable, must be applied in a progressive manner and must address the position beyond 2010.
As the House knows, there were lengthy negotiations with the public service unions in recent weeks. The Government wanted to achieve the necessary reductions by agreement and the unions earnestly sought to conclude a deal.
Until the Minister pulled the rug from under them.
I thank the public service unions for accepting the need to reduce the public service pay bill and for their constructive and strenuous efforts to reach an agreement on how this would be done. Regrettably, a deal was not possible. The reductions we must now make do not reflect any lack of recognition of public servants or of the quality of the work they do for all of us. They are simply a matter of budgetary necessity in these extraordinarily difficult times. Accordingly, the pay of public servants will be reduced with effect from 1 January 2010 by a reduction of 5% on the first €30,000 of salary——
Shame on the Minister.
——a reduction of 7.5% on the next €40,000 of salary and a reduction of 10% on the next €55,000 of salary.
All of it will go to the banks.
The reductions range from 5% to 8% in the case of salaries of public servants of up to €125,000. The pay of Members of these Houses will be reduced in line with that of the equivalent public service grades. Provision for these reductions will be included in legislation that I will publish shortly.
In order to avoid a destabilising rate of retirement among older public servants, the pension entitlements of those retiring in 2010 will not be affected. I accept the recommendation of the Commission on Taxation that pension lump sums below €200,000 should not be taxed. The treatment of sums above this level and the tax treatment of pensions, including the consolidated 33% rate of relief, will be considered in the Government's national pensions framework to be published shortly by the Minister for Social and Family Affairs.
Public Service Pension Reform
Exchequer spending on public service pensions will be over €2 billion in 2010. As life expectancy improves and the population ages, this cost is set to rise. The State's pensions bill will grow from approximately 5% to 13% of GDP by 2050, with two thirds of the increase in spending going on social welfare pensions and the remainder on public service pensions. Cost increases on this scale cannot be ignored by any responsible Government determined to secure our economic future. The Government has decided to introduce a new single pension scheme for all new entrants to the public service. The legislation will be introduced in 2010 and the scheme will be in place by the end of the year. The new scheme will bring public service pension terms more in line with private sector norms. Among other things, it will change the calculation of benefits so that pensions are based on career average earnings rather than final salary on retirement as at present. This will be more equitable than the present system, which favours those with higher earnings later in their careers. The minimum pension age for new public servants will also be increased from 65 to 66 and then linked to increases in the State pension age. More details of the main elements of the new scheme are given in the summary of budget measures.
The link to earnings or pay parity basis for post-retirement pension increases is a feature of Irish public service schemes. The recent special report by the Comptroller and Auditor General estimated that the present actuarial cost of these pensions is €108 billion. A change to a CPI basis for post-retirement increases would reduce that cost to €87 billion, a reduction of 20%. On average, pay increases have been significantly greater than increases in the consumer price index. As part of the reform of public service pension arrangements, I will review the current arrangements and consider linking pensions to increases in the cost of living. Pending that review, I do not intend to apply the pay cuts I have already outlined to existing public service pensioners. These are significant changes. The Government is determined to meet the immediate fiscal problems Ireland faces and, at the same time, to make far-reaching reforms for the future.
ADJUSTMENTS IN SOCIAL WELFARE
The Government is proud of its unrivalled record in increasing the level of social welfare payments. Over the past 12 years, we have increased pension rates by approximately 120%, unemployment benefits by almost 130% and child benefit payments by over 330%. The cost of living has increased by about 40% over the same period. We extended coverage, removed barriers, and increased entitlements such that the level and extent of social support payments has been transformed beyond recognition.
We are determined, where possible, to maintain that progress in inflation-adjusted terms but we can either safeguard the generous system we have by making these savings now or we can put it all at risk by extending it beyond what resources will allow. We did not reduce welfare rates in April's supplementary budget but I signalled that rates of payment might be reduced if the cost of living fell. The overall cost of living has fallen by about 6.5% over the past 12 months, including very sharp declines in the prices of the basic necessities of food, clothing and accommodation.
Not for social welfare recipients.
In the case of working age rates of payment there will be a reduction of about 4.1%. Unemployment among the young is a particular concern to the Government. We want to encourage them to stay close to the labour market while at the same time providing a rate of assistance that compares very well internationally, particularly with payments in Britain and Northern Ireland.
The Government is encouraging them to emigrate as it did before. It is a tax for emigration.
We know from the bitter experience of the 1980s——
We know the bitter experience of emigration.
——how a welfare system out of step with labour costs in the rest of the economy can trap people in protracted joblessness.
That is untrue. That is a complete canard.
That is why we are making the following targeted changes: for new applicants, the rate of job-seekers allowance and supplementary welfare allowance for persons aged 20 and 21 years of age who have no dependent children is being reduced to €100 per week and for those aged between 22 and 24 to €150 per week; and for all other cases, the rate will be reduced to €150 per week where job offers or activation measures have been refused.
Proinsias de Rossa never took money off the poor.
In making adjustments to social welfare rates, we recognised that consumer prices have not declined at the same rate for all groups. Older people have experienced by far the smallest reduction in living costs. For that reason and in recognition of the contribution they have made to the State the Government has decided to leave the State pension unchanged.
The Government was afraid of them after the medical card protest.
Child Benefit
In the supplementary budget, I raised the issue of the unfairness of paying the same level of child benefit irrespective of the level of income of the recipient. Not only is this unfair but it is also unaffordable in current circumstances. Child benefit this year will cost €2.5 billion or 12% of total social welfare spending. I had hoped to be able to introduce greater equity by making child benefit taxable or means tested but there are legal and logistical reasons I cannot do so at this stage. For that reason, the Government has decided to make the changes on the spending side.
Accordingly, the lower and higher rate of child benefit will be reduced by €16 per month, bringing these rates to €150 and €187 per month respectively.
Deputies
Shame.
Welfare dependent families will be fully compensated by increasing the qualified child allowance by €3.80 per week so that they will not be affected by this measure.
What does that mean? Is that not taxing them by asking them to give up €3.80 a week?
Low income families in receipt of family income supplement, FIS, will be also fully compensated.
What about those on middle incomes?
What about the millionaires?
The summary of budget measures gives further details of these and a number of other more limited changes on social welfare entitlements. Social welfare spending rose in 2009 to €20.4 billion. The measures announced today will reduce social welfare spending by €760 million in 2010. Despite this reduction social welfare spending will reach €21.1 billion next year due to the sharp rise in unemployment during 2009. Of the major adjustments I am announcing today across all areas of spending, welfare is making the smallest contribution.
As a result of these deductions, rates of payment will revert to 2006 levels in the case of child benefit and just below 2008 levels in the case of working age rates for those aged 25 and over.
It is the Government's firm intention to maintain the comparatively generous level of social provision we have in this country but we are in very difficult circumstances and everyone must make a contribution. Government is about taking decisions, taking responsibility, and making choices that not all will welcome. Cutting public spending in the abstract is easy; deciding where cuts will fall in reality is an entirely different matter. Those opposite have the luxury of the former. We have the duty of the latter.
The Government could leave.
Deputy Brian Lenihan:
ADJUSTMENTS IN DAY TO DAY SPENDING
Over the last year we have been running to stand still in terms of spending on public services.
The Minister is right about that.
Reductions have been offset by increases mainly due to increased unemployment and higher debt servicing costs.
They were brought about by the Government.
In this budget the Government has decided to reduce spending on public services by almost €1 billion in 2010 compared with the pre-budget estimates. We have sought to make savings through efficiencies rather than through reductions in services, €400 million of these savings arise in the health area where various measures, including a prescription charge of 50 cent per item under the medical card scheme, are being introduced to reduce the State's medicines bill.
The Minister is hitting the poor and the sick.
The Minister for Health and Children will provide details.
The remaining savings in day to day spending will be achieved across other Departments, details of which are set out in the summary of budget measures.
REVIEW OF LOCAL AUTHORITIES
In framing this budget I have been guided by the McCarthy group's report. This group did not examine spending in the local authorities which provide critical services to communities and businesses at local level. Local authorities are a key driver of cost for business. The Government has decided to undertake an efficiency review of local authorities.
A Deputy
Another one.
This work will begin immediately and report by mid 2010. The full details of this review will be announced by the Minister for the Environment, Heritage and Local Government.
INVESTMENT FOR RECOVERY AND EMPLOYMENT
Although public investment spending is being reduced next year, it still will be €6.4 billion or 5% of GNP for 2010 and €5.5 billion each year for the years 2011 to 2016. Tender prices for many new projects have also fallen back significantly thus enabling us to get better value for money.
In 2010, our investment projects will focus on labour-intensive areas such as schools building and maintenance, energy efficiency measures and investment in our tourism infrastructure.
Other key investment priorities in 2010 will include science, technology and innovation; promotion of environmental sustainability; implementation of green enterprise initiatives; housing and urban regeneration; the health sector; public transport and finishing the inter-urban motorways.
What about Mayo general hospital?
I want to draw particular attention to an initiative in the health sector. I am providing for a multi-annual investment programme in important mental health projects which are in line with the strategy set out in A Vision for Change. This investment programme will be funded from the sale of surplus HSE assets and I am allocating an additional amount of €43 million for this purpose in 2010. Further funding for mental health will be provided as asset sales allow.
National Solidarity Bond
I have received a number of proposals to establish a medium-term national savings product as an additional source of funding for capital investment. A product of this kind would enable ordinary citizens to provide money to the State to stimulate economic recovery and create employment. I am announcing today the Government's intention to introduce a national solidarity bond aimed at small investors. The National Treasury Management Agency and my Department are working on the details of the bond and I expect it will be open for investment early in the new year.
SAFEGUARDING THOSE WORST HIT BY THE RECESSION
Some have suffered more than others in this economic downturn: those who have lost their jobs or whose jobs are at risk; those who have concerns about meeting their mortgage repayments; and those affected by the recent flooding.
Helping People back to Work and Protecting Jobs.
Protecting jobs and providing opportunities for those who are unemployed to return to work and avail of education is a key priority for Government.
We have heard that before.
I am providing nearly €136 million in funding to provide an additional 26,000 individuals with training places and supports; €56 million is being made available to FÁS for short-term courses——
They will get a few more trips out of that.
——€20 million will go to an activation fund which will involve an open call for innovative proposals that have the capacity to provide work, education and training; €14 million is being made available, in addition to €26 million from the EU, for supports to redundant workers in eligible companies under the European globalisation adjustment fund; €9.5 million is being made available as support measures for the food industry to enhance the competitiveness of this key indigenous industry; and €36 million will be allocated to an employers job incentive scheme giving PRSI exemption to encourage employers to take people off the unemployment register. The Minister for Social and Family Affairs will announce further details.
This will bring the total places available for the unemployed to more than 180,000. We are already providing substantial supports to employers through the stabilisation fund and the temporary employment subsidy scheme which will cost €165 million in 2010. In line with the Government's commitment to enhance the efficiency of the State's investment in science and technology it is my intention to create a single stream of funding in this area. To advance the smart economy, it is essential that the State secure the maximum commercial return from its substantial investment in research, science and innovation. Details of the new arrangements will appear in the Revised Estimates volume to be published in the early part of the newyear.
Mortgages
All sides of this House share a concern for those who face difficulties meeting their mortgage repayments. It is important to remember that only 20 homes have been repossessed by the institutions covered under the Government guarantee in the first three quarters of this year. Mainstream mortgage lenders have adopted a responsible position towards their customers. Most recently the Irish Banking Federation issued a statement of intent which provides that where a customer in difficulty adheres to a mutually acceptable arrangement with theirlender, the lender will not initiate any form of legal action against them in relation to their mortgage.
The renewed programme for Government includes a commitment to introduce new measures to protect families having difficulty with their mortgages. As a first step in this process I have asked the Financial Regulator to examine the extension of the six month moratorium on legal proceedings already in the code of conduct on mortgage arrears to 12 months for all lenders. Everyone has to play his or her part and I will require the banking industry to engage with Government to find innovative solutions to ease the burden for affected homeowners. In the supplementary budget, I refocused mortgage interest relief on those who bought their homes at the peak of the market. As a support to homeowners who now find themselves in negative equity, I am providing that where entitlement to the relief would expire in 2010 or after, they will now continue to receive it up to the end of 2017.
The Minister would want to pay their arrears.
A Deputy
He needs to do it immediately.
To encourage those who want to buy a house over the next three years, I will provide that qualifying loans taken out before 1 July 2011 will continue to get relief at current levels for seven years, and transitional arrangements will apply to loans taken out in the subsequent 18 months at a reduced level and duration. It is my intention to abolish mortgage interest relief entirely by the end of 2017. Full details will be set out in the finance Bill.
The Government already provides help and support for families in difficulty with their mortgages through the mortgage interest subsidy scheme. A review of the operation of this scheme will be completed early in the new year.
Responding to the Flooding
The recent flooding has brought severe hardship on communities in the affected parts of the country. I am announcing today that in excess of €70 million will be provided in the remainder of 2009 and into 2010 to help those affected by the recent flooding and fund work to minimise the risk of future incidents.
They need more than that.
The review of investment priorities which will shortly be published will also provide for continued substantial investment in flood relief. The Government is keeping this situation under review and will commit further resources as required.
STIMULATING THE ECONOMY TO HELP SUSTAIN AND CREATE JOBS
Those in business understand the connection between fiscal sustainability and business confidence but they also understand that delivering economic recovery is about more than cutting the deficit.
There is no one left in business.
We must invest in every sector to create jobs and secure sustainable growth. Today, I am announcing a number of stimulus measures to aid the economic recovery in the short term and help ensure sustainable growth for the future.
Supporting the Retail Sector: VAT and Excise Changes
Our retail sector has been battling a steep currency depreciation on its doorstep. The main reason for the increase in cross-Border shopping is the currency differential. This is outside our control but it is within our power to reduce our consumption taxes which are among the highest in the European Union. Recent CSO data show that 44% of cross-Border shoppers buy alcohol. To protect Exchequer revenue and stem the flow of cross-Border shopping, I have decided to reduce excise duty on alcohol products.
A Deputy
It is a bit late for that.
The Minister is locking the stable door after the horse has bolted.
The reductions will be as follows: 12 cent per pint of beer and cider; 14 cent per half glass of spirits; and 60 cent per standard bottle of wine.
That means less food for the kids and more money for drink.
All of these reductions are VAT inclusive. I expect the drinks industry to play its part in making the cost of alcohol more competitive. If I find this reduction has not been passed on to the consumer, I will reverse today's reduction.
Call in the regulator.
A Deputy
The Minister should do the same with the banks.
In response to many calls on all sides of the House, I have looked again at the standard rate of VAT and I have decided to reverse the 0.5% increase imposed in October 2008. This measure will take effect from 1 January 2010 and is estimated to cost €140 million next year.
I have decided not to make any changes to excise on tobacco in this budget because I believe the high price is now giving rise to massive cigarette smuggling. My responsibility as Minister for Finance is to protect the tax base. I have full confidence in the effectiveness of the current multi-agency approach but early in the new year I want to explore what further measures we may need to stem the illegal flow of cigarettes into this country.
Improving the Energy Efficiency of our Cars
The Government wants to encourage the increased use of environmentally-friendly electric cars and the development of new technology in this field. To that end, the VRT exemption for electric vehicles and the VRT reliefs of up to €2,500 for plug-in hybrid electric vehicles are being extended by two years until 31 December 2012. We will also provide support to offset the initial battery costs for such cars. This will help in fulfilling our ambitious goals to reduce transport-related emissions.
I am also introducing a car scrappage scheme, to run from 1 January until 31 December 2010. VRT relief of up to €1,500 per new car purchased will be made available under the scheme, where a car of ten years or older is scrapped under certain conditions.
What about 12-year old models?
The Government is next for scrapping.
The scheme will have the environmental benefit of removing some older, potentially less safe and polluting vehicles from the road. Details of the scheme are provided in the summary of budget measures.
Getting Credit Flowing
In light of the massive State commitment to the banking sector, I am determined that there will be a return to the taxpayers of this country in the form of credit which supports healthy Irish businesses and jobs. This is why I am establishing a credit review system. I will use my powers under the NAMA legislation to issue guidelines to all banks participating in NAMA who have an SME business, to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the banks. I hope also that banks not participating in NAMA or covered by the Government guarantee will also decide to participate. My aim is to have a simple, effective appeals process, run by people with experience and credibility. The banks must comply with the recommendations of the appeal process, or explain satisfactorily why they cannot do so.
In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks for all SME sectors. It will pay particular attention to sectors, such as the retail sector, including car dealerships, tourism and agriculture, where particular stresses have been reported. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all.
I have asked Mr. John Trethowan, an experienced banker with a demonstrated commitment to public and social service, to oversee the establishment of this credit review system with initial administrative support from Enterprise Ireland. I expect he will start his work shortly.
Assisting Agriculture and Forestry
Agriculture is an important component of our economy——
It is time the Minister recognised it.
——and this Government has not hesitated to offer this crucial sector support where it was most needed. We responded rapidly to the pig dioxin crisis last year, where we provided some €200 million to save that industry and the jobs within it. We have made a large investment in agricultural infrastructure through the farm waste management scheme. We remain committed to supporting an environmentally sustainable agriculture sector and are in discussions with the European Commission with a view to introducing a new five-year agri-environmental scheme. I have agreed to provide €50 million from within the existing allocation to support this scheme.
I am also providing more than €121 million for forestry and bio-energy. This includes a capital provision of €116 million to plant a further 7,000 hectares of trees next year. This demonstrates the Government's continued commitment to this vital sector as set out in the renewed programme.
Retaining a Pro-Enterprise Tax Policy
Our corporation tax rate of 12.5% has become an international brand, known the world over. It is a powerful expression of our enterprise ethos and continues to attract new business and new jobs to this country. In a time of great uncertainty for international business, it is important that we send out a clear message. The 12.5% corporation tax rate will not change. It is here to stay.
Over the last two years, I have significantly enhanced the incentives for research and development and intellectual property. I look forward to receiving the report of the innovation task force and I will explore its recommendations in the context of the finance Bill. In budget 2009, I introduced a three year corporate and capital tax exemption for start-up companies in 2009. I propose to extend this scheme to new start-ups in 2010.
Significant opportunities exist in the international financial services sector for centralising high value added activity in Ireland as this sector restructures itself around the world after the global financial crisis. Big opportunities also exist for Ireland to become the European hub for the international funds industry following recent European legislative changes. I will bring forward changes in the finance Bill which will strengthen Ireland's competitive edge in this important sector.
Boosting Energy Efficiency to Stimulate the Economy
Boosting energy efficiency is good for the environment and for the economy. It is a growing area of innovation with huge commercial and employment potential. We are allocating about €130 million for energy efficiency measures which will include a new multiannual national retrofit programme in 2010. This will build on the success of existing schemes delivered through Sustainable Energy Ireland and has the potential to create up to 5,000 jobs next year alone.
Some €50 million of the carbon tax yield will be used to fund measures such as help for households at risk of fuel poverty to make their homes warmer. The local authorities will receive additional funding to retrofit the social housing stock. This represents a significant boost to the plan to retrofit over 1 million houses by 2025. In addition, the scheme of accelerated capital allowances for energy efficient equipment is being enhanced to include refrigeration and cooling systems, electro-mechanical systems and catering and hospitality equipment. This measure will improve energy efficiency while also helping companies under strong competitive pressure in sectors such as food and drink, retailing and distribution.
Supporting the tourism sector
The tourism sector is a critical, labour intensive indigenous sector. The overall tourism budget will be increased in 2010 to enable a marketing drive with the objective of increasing tourism numbers and revenue by 3%.
What about the travel tax?
Investment in visitor attractions will be increased threefold to €22 million.
As an imaginative initiative to increase tourism numbers next year, Iarnród Éireann has agreed to participate in a new scheme, to be developed by Fáilte Ireland, aimed at senior citizens visiting Ireland from abroad. This group will be offered vouchers for greatly discounted rail travel throughout Ireland. More information on this initiative will be given by Fáilte Ireland and Iarnród Éireann in the coming weeks when the details have been finalised.
What about the Swansea ferry? There was no mention of that.
CONCLUSION
I want to recall the death earlier this year of Senator Ted Kennedy. Senator Kennedy was unquestionably one of the best friends Ireland ever had on Capitol Hill. Today, in a modest way I would like to honour the memory of a great man from a great family. The Government will provide funding for a project at the Kennedy Homestead in Dunganstown, County Wexford, from which his forefathers emigrated in the early 19th century. The development of this important visitor attraction will be a welcome boost to tourism in the south east.
The inauguration of John F Kennedy as President of the United States in 1961 gave a powerful sense of hope, possibility and self-belief to Irish people all over the world. A recent survey commissioned by The Irish Times found that 84% of those surveyed think Ireland needs to start believing in itself again.
(Interruptions).
Yes, we have endured a traumatic 18 months.
I wonder why.
The speed and ferocity of the recession has knocked us off our stride but the innate advantages that brought us the boom have survived the downturn. We have taken a step back——
Several steps back
——but we have in place a plan to take us forward on the path of sustainable economic growth. That plan is working. Unemployment will not be as high as previously forecast, our tax receipts have begun to stabilise, consumer confidence is beginning to revive and our export figures are the healthiest in Europe.
As we begin to emerge from the unrelenting economic gloom of the last 18 months, we need to rediscover our optimism and our self-belief.
Is this another call to patriotic action?
Now more than ever, we need that confidence on which business and work thrives. The measures contained in this budget, some of them unpalatable, will engender that confidence.
We have taken the hard decisions but we have been fair. We have preserved the real value of social welfare for those most in need. We have protected older citizens. We have reduced the cost of public services. We have taken action on credit to protect borrowers.
Taken action to protect the lenders.
We have cut taxes to protect jobs in retail and tourism. We have maintained significant investment spending to promote future growth. We have announced measures to save jobs, stimulate employment and protect the environment. Our plan is working.
May the Lord have mercy on our soul.
We have turned the corner. I commend this Budget to the House.
Deputies
Stand up, stand up.
Where is the standing ovation this year? Where is the Fianna Fáil choir?
They failed to rise to the occasion.
The statements of the spokespersons for Fine Gael, the Labour Party and Sinn Féin shall not exceed 45 minutes in each case.
This draconian budget should not be happening today. It is happening, however, because Fianna Fáil failed to heed the warnings and drove this economy on to the rocks. Even now, the thinking behind this budget is short-sighted. It is sucking us into a cycle of more job losses and higher debt. People will hurt badly after this budget, people who had no hand, act or part in creating the problem that we now face.
This is a jobless and a joyless budget. It offers no vision that would rebuild confidence, it serves only to get the Taoiseach and his Ministers to the end of this week.
The only way to break out of the cycle that has been created is with a convincing jobs strategy and that strategy is simply missing. This requires real leadership from Government. We saw that sort of real leadership 50 years ago from Lemass and Whitaker, who offered a clear vision of how Ireland could be different, who had the determination and the courage to take action to overcome vested interests, to confront problems with bold vision. Such vision is sadly absent from their successors. That is the tragedy we face today.
Many will feel the force of this budget pushing them down. None, however, will nurture the belief that it will put the country back on its feet. We expected to hear Ministers lead by example. The supposed cut of 15% in Ministers' pay and 20% in the Taoiseach's pay is a sham. It ignores the 10% we were told they were taking in April. The truth is that the real cut Ministers are taking is 5%. By comparison, someone earning €45,000 in the public service is expected to take a bigger cut than Ministers. Those on social welfare with two children are expected to take a bigger proportionate cut than Ministers. This is a deception.
We are still waiting to hear from the Minister what Anglo Irish Bank will suck out of next year's budget, an issue on which he has remained deafeningly silent.
People are approaching this budget with anger and fear. They are angry about the warnings that were not heeded and the prevarication that failed to address problems. They are angry at the negligence that underpinned this and that no one has been held to account for the catastrophic failures that have brought us to this pass. They are fearful for their futures and the futures of their children.
They expected to see in the budget the start of a real transformation, an attempt to transform politics, to transform our economy and public service, all with the purpose of creating jobs. That is what people expected and they have been dismally disappointed by what we have seen today.
Instead of the Minister taking the radical steps to recondition an engine that this Government has brought to a standstill, ordinary people are being told to get out and push. That is not fair and is not sufficiently visionary to address the scale of the problems we now face.
The actions taken in today's budget will do more to prolong this recession than to shorten it. Once again, we see the Minister go back to the old reliable of slashing investment not only this year and last year, but next year and the following year. We have never seen an economy come out of depression by slashing investment, the sort of investment that should be creating infrastructure fit for a modern age. The Minister is standing back and allowing that infrastructure to be neglected.
The Minister is failing to confront the cost problems that are dragging business down. Where is the radical idea to cut PRSI on employers, to give those employers who are hanging on by their fingernails a chance to survive and to see out this Christmas in the hope of something better in the new year? The Minister has failed those employers.
The Minister is also pretending the credit problem is solved and setting up a review. The people did not want to hear that; they wanted to see concrete action that would transform the credit situation. The banks came in here last week and told us the transfer of money to NAMA would not make a cent of difference to availability of credit. That is a catastrophe that will destroy strong businesses, businesses that will be sucked down by the failure of credit.
The Minister is ducking the challenges we face by offering an accountant's budget. This budget is a recipe for staying in this hole for the next year, looking to the same people for the same sacrifices — the carer, the family struggling on low income and the public servant on low income. That is what the Minister for Finance has dressed up today as a positive contribution. The truth is that creating and sustaining employment should have been the be-all and end-all of this budget. That is the sole challenge we have to face. It would have been a far more fitting tribute to President Kennedy to have tried to stem emigration from this country——
Deputies
Hear, hear.
——than to come up with a shallow gesture of recognition. In the past two years 12% of Irish employment in business has disappeared, 22% of people, one in five, have taken a cut in their working hours. Some 90% of those job losses have hit people under the age of 30. These are the people who are carrying the can of the bad management of this economy. Those young people are the building blocks for the future. We cannot afford to allow, by the Minister's inactivity, those people fall prey to unemployment and emigration as occurred in the past. This budget is one where his courage has failed him. He has refused to take on the challenge of recreating a strong economy in Ireland. That could have been done by the type of policies our party has put forward, a radical programme to bring in private money to invest in the infrastructures we need to get out of the hole we are in.
We need a modern electricity network, a strong broadband system, a modern water system and we need to put sound energy efficient systems into our housing and building stock. These are things we need and the money is not there to provide them unless the Minister creates a vehicle to drive it. He has stepped back and failed in that area. That is the tragedy.
We should have seen the Minister start to address the challenge of regaining the competitiveness of Ireland and that has failed. He has offered the rhetoric of the smart economy. I heard him use words such as e-enabled, renewably resourced, smartly networked, carefully husbanded. These are words that trip off the lips of Ministers but the truth is that 40% of the water we produce leaks out of the system. We have 5% of the broadband speeds of our competitors. We fail to realise the potential of renewable energy compared to countries that do not have a fraction of what we have available to us. That is a failure of vision. It is possible for the Minister to address those issues if he had the vision to do it but that vision has failed him.
We have to break out of this vicious cycle in the public finances. Slide rule accountancy will not crack it. The Minister has made provision today for €4 billion in cuts but the 75,000 extra people he forecast will be on the dole will cost €1.5 billion in lost revenue, re-impacting the deficit. He has admitted that interest on the debt will rise by €2 billion next year, that is €3.5 billion of the €4 billion that he has pushed people so hard to deliver, has just been wiped away. We are in a vicious cycle that we are not breaking out of because the Minister sees only the narrow issue of correcting the public finances and not the wider issue of addressing the economic weakness and how we rebuild our economic strength. That has failed us in this budget.
The Minister surely had to face up to the situation regarding Anglo Irish Bank. The dogs in the street say that €6 billion will be needed for the bank during the course of this year. Where is that provided for in this budget? One cannot pretend it will come from thin air. It has to be provided for and we have to budget for it. We have to know where it will come from and if it will be added to the national debt? It is not credible until the Minister addresses those issues.
At the end of this budget the Minister will borrow close to last year's amount. We will be funding an incredible 29% of our net current spending on tick, on borrowing, which is an appalling figure. That is what the Minister has achieved having asked so many people to take pain. By 2013 his own predictions say that 71% of our income tax will be absorbed in paying interest, that is 71% of the sacrifices people make to pay income tax will be wiped away. That is a cycle the Minister has to break but it can only be broken if he has a strategy to address economic growth.
Hear, hear.
The Minister talks about having better economic growth and says the worst is over. That is a like George Bush announcing "Mission accomplished" when he went to Iraq. The truth is that these numbers are purely speculative. He has not addressed the strategies that can bring us that growth, create the employment opportunities, give us the competitive infrastructures and bring down costs. That is the tragedy. Restoring confidence is vital to our recovery. People will not invest if they are fearful and they are fearful. The Minister has forecast that next year private investment will fall by 40%, a catastrophic figure. It illustrates that people are not confident the Government has a strategy that will bring this economy on a road where they can see where they are heading and have a credible belief in what is being done. We cannot break the cycle if investors and families do not have the confidence to go out and spend. That is the position we are in. One needs more than vacuous claims that the worst is over, one needs to see action, a strategy, a plan. That is the void that has been left unaddressed.
Front-line services have been hit hard in this budget because the Minister was not willing to face up to the much more radical change demanded by the McCarthy report. That is the incredible part of it. The Minister commissioned a report that demanded that he address issues. Some 43 rationalisations were identified by the McCarthy process and not one of them has been taken on. I suppose that is not surprising because in last year's budget the Minister announced that there were to be 30 rationalisations involving 41 agencies. What happened? Half of them have not been touched. The total savings to date from those rationalisations is €3.4 million, less than 1.5% of the budgets involved. The Minister has failed to create the tools to make rationalisation happen. He has failed to move staff from where they are not needed to where they are needed. He does not have a system for doing that and he does not have the tools to give managers the power to rationalise the way they do their business. He has left it to the 11th hour to try to address those changes. We come back to this budget and see that the focus has been on the front line and not on the changes we should have seen. These changes will be hard on people.
The Minister is asking people on the drug refund scheme to pay €120 per month whereas at the last general election the amount was €85. He is asking people on medical cards to pay 50 cent per prescription. In the UK when such a cost was introduced it exempted the lowest one-third of the income profile. Patients do not decide what is prescribed on their medical chit, doctors decide that. That patients on €180 per week, according to the means test, are being asked to pay up to €10 per month will not save us on our drugs bill. To do that one has to be radical about using generic drugs and look at new prescribing practices, not asking the weakest in our community to contribute.
The Minister is asking carers who are saving the State a fortune to take a cut of €8.50 in the amount of money they receive. Where is the fairness in that? He is asking widows and invalids to take that cut, simply because they are under the age of 65. Why were such people not exempted? The value of the work of a carer, for which the Minister will pay €212 per week, runs to €1,000 per week. That is what a carer means to a family, and it does not mean simply a monetary saving. It means that the patient is in an environment in which he or she wants to be and getting the care they want.
The Minister needed more imagination. He has hit people who are down. The fact that he has hit child payments is very short-sighted because young families have borne the brunt of the recession. They are the people who paid excess prices for houses in the upswing and are now in negative equity. Some 35,000 of them face repossessions. There are 350,000 families in negative equity and the Minister's gesture to them is inadequate, it is pathetic. Where is the work of the Government group that was address these problems?
We were told in the programme for Government that this would be a priority but this has not been reflected in the budget. What other group is more important than families who are under threat of losing their homes? We expected to see provision for them and we expected to see the needs of the victims of this recession addressed. The Minister has provided for 26,000 job placements for the 420,000 who are out of work and this is welcome but far more welcome would be a radical economic plan to drive employment growth. Fine Gael's economic plan to do this builds to a potential of 175,000 jobs after four years. That is the sort of vision we needed, the sort of commitment that was possible for the Minister to take on. He has short-changed people who ought to have been at the heart of this budget. Time and again we have heard the former Minister for Finance, Deputy Cowen and again as Taoiseach, talking about the seismic shift of reform in the public service. We have heard all the rhetoric but it has produced nothing. Today we see the evidence of this. The McCarthy report set out cuts that could be achieved in the area of social welfare and there was a shock and a sharp intake of breath from people who hoped we would not be reduced to such action. The report also looked at areas other than social welfare; it considered efficiencies in the spending system and in rationalisation. The Minister has adopted none of the rationalisation. What is worse, he has adopted 42% of the savings on the social welfare side but only 25% in the non-social welfare areas. This was the difficult area, the area that required Ministers to apply a bit of imagination, to actually invest their intelligence in changing the way they ran their system, to get more with less. The Minister shirked that responsibility to make those reforms and as a result it is the front line, those low-paid public servants who will pay from the very first euro. It is people on social welfare under 66 years who will pay. The Minister has asked them to pony up because he was not willing to confront the sort of change that is needed.
The Government should have adopted each proposal in the McCarthy report as it came, and be seen to be driving a rationalisation programme from the outset, sitting down and negotiating with trade unions from the very start and announcing that this was part of a jobs strategy. It should have appealed for solidarity from all those working in the public service as well as the private sector in order to create an employment strategy. Instead the Government has disastrously mishandled those negotiations and it has left us with the public service that is angry and demoralised. This is a tragedy. Most people I talk to in the public service know that costs in the public service will need to be cut if we are to trade our way out and rebuild a strong economy that creates employment. They know that but they want to be part of a strategy that shows solidarity with something bigger that is being created, a real employment strategy. The Minister did not go to them with an employment strategy in which they could believe, in which they could see that their sacrifice was going to be contributing to a bigger picture, an agenda of change, not just in the public service but reinvesting in the economy and reinventing the economy. The Minister went to them with a demand for pay cuts alone but where was the wider strategy to bring down costs, where was the commitment to confront boardroom pay, the rip-off that we see in our shops every day? Where was the commitment to drive down utility prices, to freeze Government charges? Where was the commitment to cut commercial rents that are killing businesses by the day? The Minister needed to show that the effort he was asking for from public servants — which was valid — was matched by an equal determination to confront costs right across the economy. We have lots of people in the sheltered sector who are not confronting those costs and who are making businesses go to the wall. If the Minister could have enlisted people's support behind such a strategy, they would respond but the Minister lacked the ambition and the determination to take on those interest groups who have been too cosy, too close to Government in the past. This is what has let us down. We have been left with damaging cross-fire between the public and the private sectors. The public sector will never succeed without a vibrant private sector and the private sector will never succeed unless the public sector can be reformed and become more effective. We work together. We needed a sense of togetherness and willingness to confront these problems together and instead the Minister has left a residue of bitterness and division which is doing us no good.
It was vital that people should regard this budget as being fair. We expected much more in terms of asking people who are better-off to contribute to the cost. Fine Gael proposed that those earning over €75,000 would pay the full 4% PRSI levy all the way up but that was not adopted. We proposed radical reform in pension relief, targeted at the higher paid and that has not been adopted. We proposed the wiping out of many of the tax shelters but that has not been adopted.
It has been adopted.
I agree the Minister has adopted the residency rule and set a maximum tax but the figures tell it all. Nothing will be achieved from that measure this year and even next year it will only be €55 million. We were targeting a contribution of 600 million contribution from the better-off in our community. That balance was needed and it has been missed. However, there is a greater unfairness in this budget. Where is the fairness in the way the banking crisis has been handled? How could it be fair that those who created this problem still circle the wagons and appoint two insiders to run those banks that brought us to our knees? How can it be fair to ask the taxpayer to shoulder an extra €7 billion in paying for these impaired assets simply to protect the professional investors in these banks? How can it be fair that good businesses are now perishing because what the banks are doing is using the money the Minister gave them to protect their interests, not to rebuild a strong economy that is conscious of the needs of small business? They say that is what they are doing and that is what one would expect them to do unless the Minister intervenes to make it different.
Who is being brought to book for all this? That is what people ask me every day and I am sure they also ask the Minister the same question. Who is being brought to book for the appalling things that were done in our banks? No one has yet been brought to book. Where is the change so that we can be sure that what happened in the past will not occur again? We still do not see that change happening.
There is a void at the heart of this Government, a void in the nerve centre of this system of governance that should be driving Ireland to have a revitalised public sector at the heart of economic growth. This is a unique time of opportunity for the public sector. It controls assets that are vital to our recovery and it controls budgets that have to be managed effectively. It needs leadership in this budget and it has not happened. Fundamental changes have to start with politics and we have not seen that here. We have not seen it in the way Ministers are dealing with their own pay nor have we seen it in a willingness to confront the fact that the Oireachtas has become too big. Fine Gael has proposed getting rid of the Seanad and reducing the size of the Dáil. We should start by reforming these Houses as part of a bigger, ambitious plan to reform the country.
This is the 50th anniversary of the Lemass and Whitaker economic plan for development. Things were very similar because then as now, Ireland had years of failed policies and then as now, there were powerful interests that did not want to see change. However, what happened then did not happen now; then we had Ministers who were willing to set ambition out to be determined to confront change, to take the actions that were necessary. That is the sort of leadership we need again. The Government has failed to seize the moment. I suspect that because it is the architect of much of what has gone wrong, it has spent too much time in denial, too much time in explaining and pretending it was not its fault, to actually have the courage to make the changes we need. This budget has not started to shape the authentic economy to rebuild this country. It has not started to shape a modern public service that could rebuild the lean, fit and quality public service that is needed for the future. It has not started to mould a social contract which people could believe in, a social contract built around reform in our health system so that the two-tier service could be ended, a social contract around reforming the pensions system so we would not have people abandoned — as happened the workers in Waterford Crystal — with nothing. We need to see that thinking coming from the heart of Government. We need that sort of leadership. History has taught us the folly of many armchair generals who were too preoccupied with themselves to keep up with changing technology and who were oblivious to warnings, who produced moth eaten strategies as if they were a modern way of fighting wars.
What did they do? They sent young people over the top into the teeth of gunfire which mowed them down. In many ways, we are in an economic war. Our defences are weak, our equipment is not modern and our generals have failed us. We need real leadership from Government. At its core, what is wrong with this budget is that leadership has been lacking. It is further proof that those who got us into this mess do not have the ability to fix what they have broken. They do not have the vision, authority, courage or policies.
The other day, Goldman Sachs circulated a note about the Irish budget which referred to the remarkable degree of consensus in Ireland about the necessity for budget adjustments. I will cite one sentence from the document. It states: "Although the government, the opposition and the trade unions continue to debate where and how the knife should fall, there is little or no dispute about when and how much the budget should be cut". The Minister had a remarkable consensus available to him, from the Fine Gael Party and Labour Party as well as the trade union movement. One could never have imagined one's party giving such an advantageous start to any Government. This could have been a consensus budget as it was a classic "all jump together" moment, an opportunity for burden sharing by everyone but the Minister blew it. The budget is straight out of the Leona Helmsley school of thought in which burden sharing, like taxation, is only for the little people. Social welfare payments have been reduced by €8.30 per week for carers, widows and widowers aged under 66 years, lone parents, people on disability and even blind people.
The Minister has some nerve quoting Ted Kennedy, the champion of the poor and fairness in America who, like Warren Buffet and Bill Gates, was not afraid to say that rich people in a republic should pay their fair share of tax. He estimates the contribution from the wealthy will be €55 million or approximately 1.5% of the total budget adjustment package of €4 billion. That is the fairness and burden sharing in the budget. It is the cleaner with two children working in the public services who will carry the bulk of the burden, although she will undoubtedly be delighted to have a job, as I am sure the Minister will not stop reminding her.
The Minister barely mentioned the National Asset Management Agency or banks. Last month, we had the establishment of NAMA which was, in many ways, the bailout of the guilty who, aided and abetted by the Fianna Fáil Party, drove the economy to ruin. Today, we have the slaughter of the innocents. This morning, I heard Ryan Tubridy ask listeners to suggest titles for a Christmas hit single. Fianna Fáil's hit single for Christmas will be, "I saw NAMA killing Santa Claus". Parents should know that child benefit is being cut to pay for the bailout of the banks and developers. That is where the hole is in the budget. The Government had to borrow €7 billion extra this year, €4 billion of which was given to Anglo Irish Bank while €3 billion from the National Pensions Reserve Fund was given to the two largest banks. Let us not be under any illusion; the ghost at the feast, the unmentionable, is the bailout of the banks and developers.
I am glad the Minister came into the House with his tail between his legs and reversed the 0.5% increase in VAT, the single most disastrous action he took in the early budget for 2009. His half point VAT mistake sent shoppers scurrying over the Border to queue in ASDA in Enniskillen and Sainsburys in Newry.
The Minister also reduced excise on alcohol and introduced a scrappage scheme for cars. Reading the leaked details of the budget in newspaper reports, I concluded that the Minister's decision to cut the cost of drink and cars makes his budget a kind of "Top Gear" budget for lads, of which Jeremy Clarkson would approve.
The measures relate to green cars.
It is not that these measures will not act as a stimulus, it is that budgets are about choices and the Minister chose to impose the burden of pain on families with children and those on social welfare aged under 66 years. As I stated, the burden sharing introduced in the taxation measures for the higher paid amounts to less than 1.5% of the total €4 billion adjustment.
It is a heartbreaking time for parents of young graduates and apprentices in many trades. The saddest aspect of the Minister's pre-budget outlook was his acceptance that unemployment would increase by a further 75,000 next year. Employment in agriculture has declined by15%, whole classes of nurses, all of whom were trained at considerable cost to the State, have departed to work in hospitals in the United Kingdom and elsewhere, and newly qualified architects, solicitors, civil engineers, trainee teachers, construction apprentices are finding it impossible to find jobs at home. If this is the fate of those with qualifications, how much worse is it for the early school leaver and young unemployed person? This is a nightmare scenario for the individuals affected and their families and no less a nightmare for the whole country.
History teaches us the lesson that youth unemployment and unemployment among people aged under 25 years causes permanent scars, its effects last a lifetime and economic recovery does not guarantee that the scars will be healed. Employment must, therefore, be the main focus of policy. The Labour Party accepted the €4 billion adjustment so as to protect our country's international credit rating and make the cost of borrowing as cheap as possible. We added an additional €1.8 billion in our document to allow scope for a jobs initiative. The Minister is so obsessed with rescuing banks at any cost that he cannot face the awesome jobs and employment challenge that should engage his attention night and day.
John B. Keane wrote a great play titled, "Many Young Men of Twenty Said Goodbye". Today, many young men and women will say goodbye after Christmas because they must take the decision to leave, as people all over rural Ireland and every town and city know. Is this the legacy the Minister wants from his time in office?
The Minister claims to have a smart economy strategy. Where is it now, a full year after its launch? He devoted enormous energy and resources to protecting the property economy through NAMA but has not devoted a fraction of that energy to the knowledge economy. Where are the internships that can offer a bridge for young graduates and apprentices? If a newly qualified person becomes unemployed for a long period, it is difficult to reintegrate him or her in the labour force when the recession ends two or three years later. If they are unable to secure job experience on leaving college, younger graduates will take up the opportunities to acquire experience when the recession is over. The way the Minister is treating young, unemployed people is a real problem and the measures in the budget today hardly touch the surface of the issue.
I refer to child benefit. The Minister flagged this issue very well and has decided to make this cut in respect of women and children the centrepiece and the heart of his strategy, aside from the reduction in public service pay. I recall the day early in May 2007 when the professor, Deputy Bertie Ahern, called an election. The Minister, Deputy Brian Lenihan, had an early morning job to do. It was a Tuesday morning in May 2007, the monthly child benefit payment day, but there would be no ordinary payment that day; it would be a bumper payment day. The previous December, the other Brian, the then Minister for Finance, Deputy Cowen, had made a special budget day announcement that child benefit was to increase in 2007 by €10 per month per child. This would not happen immediately and mothers would have to wait for several months. They would have to wait until May to get the increase which, by coincidence, would be the election month. Mums in the post office queue in Blanchardstown were looking forward to a bumper payment, and to make the day extra special, there was the then Minister of State with responsibility for children, Deputy Brian Lenihan, walking along the queue shaking hands and kissing babies — I am unsure about that part of it as I did not see him doing that — and reminding everyone that Fianna Fáil was the party that looked after child benefit.
That is because it never happened.
It would be something for them to remember on election day some weeks later, and they did so. That day in May 2007 the Minister, Deputy Brian Lenihan, was top of the Blanchardstown post office walk. Today, what has the Minister to say to those mothers? I can inform the Minister, Deputy Brian Lenihan, that mná na hÉireann are not fooled that easily. It was exactly the same five years earlier. The Minister and other Fianna Fáil Deputies could boast to senior citizens over 70 years that they would automatically get medical cards.
That is right.
Hear, hear.
That promise helped the Minister to win power in the 2002 general election. Later, he figured he could play ducks and drakes with those people but, as it turned out, that was not the case. Perhaps it will not be the case with mná na hÉireann either but we will have to wait and see. Women might think about this matter at some length and let us see what they decide to do.
We are parents as well.
I hear sports shops are doing a roaring trade in single golf clubs this Christmas. With a possible election next year, one never knows when a club might come in handy to deal with men who break their promises. The Minister should ask Tiger Woods about it.
If the Deputy was playing golf, she would have just scored an albatross.
Deputy Gogarty should come back; he is so funny. He should not go.
I have read scores of articles by people who argue that child benefit payments are of little importance, including journalists and academics who argue it would make no difference if the payment were restricted. Most of these articles were written by men, none of whom could state absolutely that he spoke for his wife or partner. I have yet to meet a mother of young or teenage children who says casually that child benefit has no importance to her. Perhaps I do not mix in circles where this benefit is a trifle. Certainly, I do not represent a constituency that places no value on the advantages of universal child benefit.
Almost every day I hear the voice of Marian Finucane on radio advertisements for the Simon Community, as I am sure everyone here does. She tells us that the current crisis has brought community services to breaking point. I hear the same message from Professor John Monaghan of the Society of St. Vincent de Paul. Are these societies lying? Is the Simon Community faking its message this Christmas? Is the Society of St. Vincent de Paul out of touch? Are they saying social welfare in Ireland is so generous that it can be cut? I have yet to hear a person who is genuinely in touch with ordinary families in the community who will say up-front that social welfare in the Ireland of 2009 is excessively generous and ought to be cut.
The Minister, Deputy Lenihan, should note that in this budget he looked for soft options and he believes child benefit is a soft option. He believes the recipients of social welfare are soft options. The Minister had a choice. There are thousands of tax exiles in Ireland, super-wealthy individuals. They boast of their contributions to charity and good causes. That is all very admirable but in a republic it is no substitute for paying one's fair share of income tax. I welcome the measure but I note the very careful phrasing of the reference to the possibility of a levy on tax exiles. We will know more when we examine the finance Bill.
There are poor bankers — God love them — struggling through the business pages with the awfulness of €500,000 per year. They do not have to contribute anything extra as a result of this budget in so far as I figure it. I am not aware of from where their extra contribution comes. The Minister, Deputy Lenihan, had a simple choice today of who to face down. Would it be the tax exiles, the poor bankers on only €500,000 per year or the mothers of Ireland? He made the choice and it says a good deal about the Minister, his values and his priorities.
Child benefit has been a success story, lifting the most vulnerable group of children out of consistent poverty. I congratulate Fianna Fáil on past increases in child benefit, as does everyone in the Opposition. Child benefit has succeeded in lifting children out of poverty because there was no means test. Ireland did away with tax allowances for children many decades ago. Universal child benefit has been the principal policy to help families with children and the principal recognition by society that raising children deserved financial support and recognition by the Government. As Members are aware, in the tax code a person with two children pays the same tax as a person with no children. A family or couple with three children pays the same tax as a couple with no children. However, we recognise children and the cost to their parents of rearing them through child benefit. I am perplexed that every time in the recent series of crises, budget adjustments and emergency measures that the Minister appears to pick on children.
The Minister increased class sizes. He slowed down the building of schools. He slashed support for child care. He abandoned plans for preschool education. We know that during all the years of our prosperity, we succeeded in lifting one child in every five who lived in consistent poverty in Ireland out of that poverty, from just below the poverty line to just above it. That is an important success in this country, because we are not a very equal society. Income is distributed very high up and there are very many people congregated at very low levels of income.
Why did the Minister dump a winning formula? Those who advocate social welfare cuts have it back to front; instead of cutting social benefits, we should protect them, especially for those at the bottom of the benefit scale. In this crisis, precisely because it is universal and efficient, social welfare offers an immense advantage in a recovery strategy. This is acknowledged by people in the Treasury and the Federal Reserve in the United States. Social welfare spending in European economies is a unique stimulus package that allows people on the very bottom to be able to spend. Today, the Minister has cut their spending power across a significant spectrum. The sum of €8 a week does not sound too much to people in this House but it is an awful lot to a widow. Likewise, a €4 cut in child benefit does not sound too much in this House but it is an awful lot to people who are buying sliced pans and sausages as the mainstay of their shopping trolley to feed their children. When one goes shopping, one can see the differential in different trolleys; who has the fresh meat and who has the sausages and the sliced pans piled up in the trolley.
It is not a good day for the people with the cheaper trolley. Let us not fool ourselves that it is; it will be tough on them. They will have to make hard choices about their children. Protecting benefits is simple, direct and progressive. It is a highly efficient way to prevent poverty and sustain purchasing power for the vulnerable in our population. Reducing benefits will save money. A rough calculation of the budget indicates that €778 million of the €4 billion cut is from the social welfare package and approximately €500 million has been cut from education. Those are the headings that are taking the brunt of today's cuts. It cannot be good for the economy that the Minister has cut purchasing power and it is certainly not good for the health of our society at this point.
One thing that scares me about the Minister is that he seems to be crushed by economic dogma that essentially comes from the right. He is a pleasant man but he seems wedded to a right-wing view of society and recovery. I prefer to think outside the box. The dogma that is coming at us, day in day out, is from the same people who cheered on the calamitous building boom for years and ignored the early warning signs of a banking collapse. I cannot understand why so many economists in this country deride the idea of stimulus. Why are many European economies showing some modest signs of recovery while ours continues to lag behind? The Minister promised the previous Fianna Fáil Ard-Fheis that, on his watch, Ireland would be the first country out of recession. That has not happened and it is not going to happen.
Why are we still in deep recession with growth prospects stubbornly elusive? It is because the Government's policies are very much at variance with the formulas pursued by many others. Unlike countries that have poured money into consumer demand and public projects, the Government has preferred to give our money to banks in the hope that some of it trickles through to the general economy and to businesses and enterprises; trickle down, that old favourite tune of the right wing. It has not done so and there is no prospect of any change in bank policies. Good luck to the new committee set up by the Minister. We met with Mr. Boucher and Mr. Sheehy for several hours approximately two weeks ago and they stonewalled on every single demand from Deputies on all sides about credit flow. Mr. Sheehy was the most frank because he is close to retirement. He just said that it is not going to happen. All that has happened is that bank debt has been converted into taxpayer debt with catastrophic effect on our sovereign debt capacity.
All around Ireland businesses are closing. Businesses need customers but customers need confidence to get out and spend. Confidence is the most elusive but most vital ingredient of economic policy. One cannot bottle it or buy it and there is precious little in today's budget that will inject any ray of confidence into the households of this country. I am sure the Taoiseach is aware of an amazing fact, namely, that there are savings in this country of €81.5 billion. The savings have been galloping up, just like in Japan in its lost decade, and in Germany for a long period, which is where much of our cheap credit came from. Germans did not want to buy new kitchens and the Japanese did not want to buy anything new at all. We are doing now what they did; we are saving more.
As a result, customers have stopped going to shops. People are nervous about the future. They have stopped going to shops in the Republic because they know they are being ripped off, for example, on the sterling exchange rate. There is footfall in shopping centres and shopping malls in Dublin and its outskirts and in towns around the country. People walk around the shops but one sees very few shopping bags. In previous years at Christmas time people were laden down with shopping bags. If one walks over to Grafton Street one will see only one or two stores with big crowds. The budget ought to have been directed at those people. Let us imagine if just 10% or 20% of those savings that are building up were released for spending into the economy. It would transform the Minister's take from VAT and other taxes. However, the budget had just one focus and that was just too narrow for the times we live in. The economy certainly needs medicine. The virus injected by successive Fianna Fáil Ministers for Finance into our economic bloodstream has made painful medicine a necessity, but the patient needs nutrition as well as medicine to stage a full recovery. Today's budget is strong on medicine but sadly thin on nutrition.
I wish to address the issue of fairness and tax. Fianna Fáil made a conscious decision today not to in any way change the tax burden, except to a limited degree, on high income earners. Fairness is probably the most vital ingredient that can unite people in the challenge we face to restore national solvency. Fairness unites; the Minister's package will divide. More than ever, we need a one-Ireland mentality, a one-nation vision that can demand burden sharing on the understanding that it is shared by all in proportion to their ability to take the pain.
I have been appalled by the vicious smearing of public sector staff in recent weeks in which Ministers have connived. If there is to be a blame game, they want to have someone else in the firing line. They have let loose the dogs of war on every public employee. Why should the private sector go down this cul-de-sac? It is private sector businesses who benefit most from public spending. It is private businesses that build the schools, supply the hospitals and sell computer services to the State. The State is the biggest customer of indigenous private business. The campaign to denigrate the public sector is no great help to business. In a way, it is biting the hand that feeds one. If one cuts public funds, it is private business that takes the biggest hit. Let us make no mistake; we are genuinely all in this together. The Government that divides our people at a time of crisis does not deserve to govern.
I said in the House recently that there was a lesson to be learned from the peace process. Nothing is agreed until everything is agreed, and we all jump together. The word "all" is one of the simplest in the English language. It means the public sector, every rank and every grade. It means the professions in the law, medicine and accountancy. It means the well-paid executives in the banks, commerce and industry. It means those who did exceptionally well from the boom years, of whom there are many. Did the budget ask a fair amount of sacrifice from all those people? I do not think it did. Many of the tax shelters remain firmly in place. A feature from a recent edition of The Sunday Business Post promoted a holiday home scheme in County Wicklow. It is in a beautiful part of the garden county, however, the focus of the feature is not the gorgeous scenery but the attractive tax breaks that come with the purchase. There is no sign there of any let up in the availability of this and other kinds of breaks that so corrode our tax code of its progressive character and fairness.
The reports of the Revenue Commissioners still tell amazing tales of high earners with incredibly low effective tax rates. The restrictions in the 2006 budget only scratched the surface. I welcome the further restriction today. However, I remind the House of what Mr. Cliff Taylor wrote in the The Sunday Business Post last Sunday.
A study of those who were aggressively claiming tax reliefs — many of them related to property — showed that the €500,000-plus income group [that reference is to persons who each have an income of 500,000 or more] had increased their tax contribution, but just to the bare 20 per cent.
The Minister has proposed to increase that by another 10%, but as he said at the start of his contribution, the marginal rate of tax on the average civil servant or private sector worker who earns above €60,000, €37,000 in the case of a single person, is approximately 53% and their average rate of tax is much higher than what the Minister is proposing today.
It is an ancient tale. When these people call for low taxes, they often mean simply no taxes. If we take the relief for pensions, we had startling and valuable information from the ESRI last week on this topic which revealed a staggering €2.9 billion cost for this heading on its own. That is €2.9 billion per year in tax reliefs for pensions. Deputies should know that the top 20% of earners take two thirds of all the pension-related tax reliefs. A miserable 1.1% goes to the bottom 20% of earners. We allow a pension pot to go as high as €5.4 billion. In the UK, it is less than half of that. Why not reduce the limit to €3 million? It would still be very generous. We allow tax free lump sums up to € 1.3 million. That could be capped at €150,000 or €200,000. The ESRI identified savings of €500 million.
The Labour Party did not go that far in its pre-budget plan. We suggest a yield from savings — reductions for the people at the very top — of €330 million. As long as these tax expenditures remain such a dominant feature of tax policy, the goal of tax justice will remain a fantasy. The measures taken so far to remedy this injustice have been half-hearted in the extreme and this tepid approach has been repeated in today's budget.
This Government has no reputation to lose but it has choices to make. Tax justice decisions are always hard to make — hard choices that Ministers pretend to make but which they never stop dodging. The Minister for Finance dodged many of the hard choices today.
One of the difficulties is that our economy is experiencing the worst recession most people alive have ever experienced or, I hope, will ever experience. It is already worse than the 1980s and it is not over yet, certainly not in this country. Fortunately, the remedial measures adopted by the European Central Bank and other central banks have so far staved off a full slide from recession into total depression. That might change if the ECB takes a harder line on credit or on interest rates. It could also change if we go too fast down the road that the Minister has mapped out today.
The consequence of cutting back on everything in sight is to push the country into a depression. That is a mad recipe for rising unemployment, social disruption, deeper poverty and falling living standards. The philosophy behind this budget has the potential to push our economy into a death spiral of decline. Above all else, there is no clear message of hope from this budget for the hundreds of thousands of people on the live register and the 75,000 additional people who Fianna Fáil plan to have on the live register next year.
Taxes are down and the deficit is out of hand. What does Government do? It cuts spending power in the economy even more. Immediately, consumers spend less and less. By cutting welfare payments and child benefit, families have less to spend and tax yields drop further. That is the death spiral and it haunts this budget like the ghost of Mr. Micawber.
We have an economic crisis on our hands, we have an unemployment crisis and we have a credit famine. However, this Minister is dealing with these crises solely as national debt and banking crises. That is too narrow a focus.
There is a character in Roman mythology called Janus who showed two faces to the world looking in opposite directions at the same time. This Government is like Janus. One face tries to be the responsible and prudent manager of the nation's wealth, stabilising the budget and coming to grips with a new cold financial reality. Then we have the opposite face, the obedient agent of a reckless gang that brought this country to bankruptcy and ruin.
Hear, hear.
This gang has to be rescued and bailed out at any price. The Minister uses every device under the sun to hide the cost from angry citizens of the bailout of his gang. We have NAMA, special purpose vehicles, off-balance sheet borrowings and direct injections of scarce capital with no prospect of return. The National Pensions Reserve Fund has been raided to support the rescue and annual interest payments on the money borrowed runs to hundreds of millions. This is the cost we, the people, must pay in the vain hope of getting this gang back to business as before. This set of Ministers has no notion, no vision whatsoever, of an economic revival that has a focus other than the dream of restoring this small group back to the dominant place it had before. That is the real face on display here today. The Government ran the country pretty much entirely for the benefit of this group. Now it plans the budget entirely to pay the cost of the clean up and restore the gang to its commanding position.
It cost us €4 billion to rescue Anglo Irish Bank in 2009, money we had to borrow and pay interest on. The interest cost alone in 2010 for the €4 billion for Anglo Irish Bank will probably be as high as €200 million. That is almost as much as the amount to be raised in cutting child benefit. Another way to look at the cut in child benefit is to say that it is just to pay the interest on the Anglo Irish Bank injection of €4 billion in 2009.
We know from newspaper reports today that there will be more borrowing for this bank and other banks. We hear the banks could need another €9 billion from the State next year — €4.8 billion for AIB, €2.8 for Bank of Ireland and €2 billion for Irish Nationwide Building Society, which is a tiny building society. We are taking €8 billion in toxic debts and we are talking about putting €2 billion into a tiny building society which was meant to help people get mortgages to acquire a home.
All we got was the two fingers.
It is stunning. All told, the taxpayer could be on the hook for a cool €15 billion over the next two years to fulfil Fianna Fáil's strategy for the banks. This assumes NAMA breaks even and does not become a multi-billion euro drain on the taxpayer each year. The what may be termed the "washing one's face exercise" about NAMA is only for the first few months to the first year of its operation. These numbers put today's horror budget in the ha'penny place.
The Minister should not pretend there is no link between the rescue of Anglo Irish Bank and the budget crisis we face. That pretence is at the heart of his budget strategy. It has those two faces — one is the harsh discipline for every citizens, including social welfare recipients and public servants, and the other is the blank cheque to transfer the debts of bankrupt developers to the taxpayer.
The bond market and not the EU Commission will make the call on our national solvency. Bond investors are fully aware of Government borrowing under every heading. A borrowed euro is a borrowed euro no matter how it is described. The issue for bond investors is the risk of default. Borrowing to shore up a zombie bank commands a higher risk premium than borrowing for reflation. The Government should think about that.
In the past few months, the Government has relied heavily on an echo chamber of sympathetic voices to make its case in the media. This echo chamber has drowned out the voices of anyone who wished to make a sane case for a different approach to economic recovery. It is not healthy in a pluralist society to have only one set of opinions repeated day in, day out as gospel truth. We are paying a ghastly price for allowing this to happen in the boom years when all sanity went out the window and any dissenting voice got short shrift and when a Taoiseach suggested the suicide option to anyone who did not like what was happening in our country.
The echo chamber recycles the same mantras, namely, there is no alternative, it is the only game in town, we are where we are and the blame game will get us nowhere. We hear these repeated ad nauseam and any deviation from the line is rejected out of hand. We experienced it heavily in the debate on the bank guarantee and when we hear the green jersey slogan trotted out by Fianna Fáil, we know something dodgy is afoot; so it proved in the case of the Anglo Irish Bank shenanigans which has cost us so much in cash and reputation.
Let us have no more of this. Cuts are not the only option for national recovery and there is a case for stimulus and an alternative to NAMA. It is time to restate the case for equality as a major force in policy. Societies that value equality and promote it in their economies have succeeded best, and the evidence has been painstakingly collected over 30 years and published in the past year. It promotes better health, a better quality of life, better educational outcomes, a better sense of security and well-being.
This budget does nothing to make Ireland a more equal society. It goes in exactly the wrong direction. It will increase personal stress, erode confidence, and damage social solidarity. Its economic effects may well be calamitous and its social effects certainly will be.
I recommend that the Labour Party vote down this budget. In the examples at the back of the budget we have Eileen and Dominic, one of whom is a civil servant and the other is a house husband. They face a cut in their gross pay of €2,625 a year, or approximately €50 per week. In this example there a child in the pre-school age group so they are credited with a gain from the Government of nearly €2,500. In a second example, of Kate and David, their losses are €2,600 a year, which is over €50 per week or 4% of their income. There is no adjustment at the upper end of the scale.
Many civil servants are willing to make sacrifices but the mantra that everybody wants to hear is about fairness. Those who have the most should bear a proportionate share of the burden that they are better fitted to carry. It is a regrettable budget for carers. The cut of €8.30 a week in respect of them does not mean an awful lot to many in here because Deputies are well paid and we can take our share of any cuts imposed on us. I feel sorry for people like carers and widows. I know the McCarthy report felt that widows seemed to have it easy but many widows, particularly younger widows, do not have it that easy. The reduction of €8.30 a week will come hard to them on top of a reduction of €4 per week in child benefit for each child.
Hear, hear.
We have heard it now. So the worst is over, as we have been told by the Minister for Finance. He did not say for whom the worst is over. It may well be over for the corrupt bankers and the golden circle of speculators protected by the Government. The worst is not over for the almost 500,000 people on the live register. It is not over for those people who are living through the worst every day and struggling to keep families together and buy clothes and food for them. These are people who have lost their job in the construction sector or who were involved in small businesses. The worst is not over for them.
I wonder did the Taoiseach or his Ministers speak with real people to find out what the worst really is in this State. Have they spoken to people in towns around the State, from Cork to Mayo, Dundalk to Donegal and Galway to Dublin to find out what is the worst for them? The worst is not over for those people.
Have members of the Government spoken to people in rural Ireland about how even as we speak they are preparing to head to airports with children or going to meet ferries so that their children can go overseas to find the jobs which the Government has allowed to be destroyed in this State? Have they spoken to parents who are worried about sons and daughters falling into despair and depression because of the hopelessness currently experienced? Where is the hope for them and when will the worst end for them?
The Government has told us it is too complicated to bring in a taxation system to capture those people earning more than €2,000 a week or it is too complicated to standardise tax reliefs. I meet people all the time, particularly in recent months, who are widows, who have disabilities or who have lost jobs and businesses. They wish it could be too complicated for the Government to cut their welfare income, such as the €204 per week or the Christmas bonus. Of course, that is not too complicated and it can easily be accomplished. The Government is shaking ordinary workers and the unemployed to try to get the last few cent from their pockets. It is grossly unfair. The Government is driving people into poverty and into the hands of money lenders. It is driving people to the offices of the Society of St. Vincent de Paul.
This budget goes against young people, who are experiencing the highest rates of unemployment in any sector. Young couples who took out mortgages and bought homes in the past few years are now suffering significant negative equity but the Government has attacked them again in this budget by cutting child benefit.
Young people have been threatened that if they do not take part in education and training, social welfare payments will be cut. Some of those young people have spent three, four or five years in education; some have master's degrees, are engineers or are otherwise well educated but there are no jobs for them. One of the reasons for this is the Government standing by without any stimulus package and allowing those jobs to haemorrhage across the State.
Hear, hear.
No job retention fund was put in place and there was stimulus package to try to deal with the reality. We were told banks had to saved and that was the poor priority.
I will briefly discuss the other measures which have been introduced. The Minister is deluding himself and trying to delude us as well. Funding for primary schools has been slashed by27%, which will have some effect on schools across the State. We should think of how principals will try to manage on 20% less when they were already struggling in their economic position before this budget.
This budget has targeted cuts at disadvantaged communities, and funding for education for the disadvantaged is to be cut by 62%. We should think for a moment about this impact on one of the most disadvantaged sectors in society. That is nothing short of scandalous. The drugs task force funding is to be cut by 11%. I meet people involved in such task forces in my constituency in Drogheda and Dundalk and they need all the help they can get. If this funding is cut, people will be off the rehabilitation scheme and back into a cycle of drugs and robbery to sustain the habit. It will cost the State significantly more in the long run as there will be court cases, imprisonment and pensioners being attacked in their homes and terrified. Nevertheless, the Government believes it is wise to cut those programmes by 11%.
These cuts show us that the poor are being made to pay the highest price for Fianna Fáil's recklessness. The 11% reduction in the local government grant will have serious implications for the provision of local service. Service charges and rates will be forced up, again hitting low-income families disproportionately harder than those who are comfortably off.
The proposed changes to the PRSI for 2011 will see any progressiveness taken from the system. We need a general election and allow the people decide if this Government has the capacity to govern the State. It does not have a mandate for what it is doing in handing over €54 billion to the banking sector and €4 billion in particular to a zombie bank in Anglo Irish Bank. This is crazy stuff. This should not be going on. The Government has no mandate to do it. If the Taoiseach had the courage of his conviction, he would have put the NAMA proposal to the people and let them decide. There should always have been a referendum on NAMA in any event.
This savage budget is the economic equivalent of kicking an injured man when he is down. The economy is on the floor and along come the boot boys of Fianna Fáil to give it another good going over. This budget will cause poverty and deflation, driving our economy into deeper recession because of the selfishness and short-sightedness of Fianna Fáil and its pathetic partners in the Green Party. The huge budget deficit is a result of the Irish economic recession, which was caused by their disastrous policies and gross mismanagement. The deficit is the symptom, not the cause. The Minister has chosen to treat the symptom in the most brutal fashion while doing nothing about the cause. This recession is as much one of ideas, as it is of resources.
Over the past two years the Taoiseach dragged us to the edge of economic doom and today he pushed us over it. I have one hope for this budget — that it will serve as a wake up call for the people. Over the past 12 months, we as a people have witnessed the Government committing a series of con jobs, ranging from the levies and social welfare cuts in April to the €54 billion NAMA rip-off. It is unfortunate that the Taoiseach could not stay to hear the rest of my contribution because I am sure it would have been educational for him.
The Government has been helped by sections of the media and, unfortunately, by Fine Gael and the Labour Party, in convincing people that the savagery of this budget is necessary but it is not. There was another way but we could never expect Fianna Fáil to take us the fair route considering it caused the problems in the first place. This budget was an opportunity to show some vision. Even now it is not too late to put Ireland on the road to recovery. It is not beyond us financially to stimulate this economy. A programme for jobs, an investment in people and a commitment to protect the most vulnerable as we turn everything around is all possible. Sinn Féin has shown that it is possible. Our pre-budget submission, The Road to Recovery, carefully considered by like-minded economists and costed by the Department of Finance, proved here was an alternative to what the Minister has done, a way in which to raise money through bringing fairness to an unfair and unequal taxation system, cutting State subsidies to the private sector and ending the greed among high earners fostered and encouraged by the Government.
The Minister has shown us that Fianna Fáil and the Greens are still wedded to the fiscal policies of Charlie McCreevy. To save €4 billion from the deficit, the Government has shown itself willing to further impoverish low-income families. The cuts to social welfare will deepen inequality in Ireland, already one of the most unequal states in the OECD. The cuts to education make a laughing stock of our so-called knowledge economy. Will the Minister outline how we can build a knowledge economy in damp and freezing prefabs and with inadequate IT equipment? The cuts to health services will be the difference between life and death for thousands of people across this land and that is no exaggeration. A charge for medical card prescriptions is despicable. It attacks the principle of free health care for those most in need and, though the charge may seem low, the worst hit will be those most dependent on medication. Once introduced, it will be increased year on year.
The Minister and the Government are like Robin Hood in reverse in that they are robbing the poor to give to the rich. Shame on each and every one of them. Worse still, the Minister has made sure recovery will take longer than it should because he has hit the lifeblood of the economy. He has hit the spenders in an economy reliant on consumption taxes and he has hit the education system, the building blocks for a turnaround. For a party that has long prided itself on its alleged ability to manage the economy, Fianna Fáil has outed itself with this budget. Had the Minister made even one tough decision, for example, the introduction of a third tax rate, standardising tax reliefs, capping the pay of high end civil servants, he would have saved himself and the State many tough decisions next year. He has done nobody any favours by going after the easy targets in this budget such as welfare recipients and low-income families. His half-hearted gestures of pay cuts for himself and a small number the highest earners do not go far enough in terms of what they should contribute to get the economy up and running. Their high salaries contributed to the deficit, not the payments to social welfare recipients. His failure to see this has only delayed and worsened the inevitable.
It is essential that we develop a fair taxation system in this State. We will have to review the billions spent on tax reliefs. We will have to put an end to the State propping up private banks and the Government's schemes for socialising debt and privatising profit. In addition, we will have to address the economic insanity of partition and the damage it is doing to the potential of both parts of this island. Fianna Fáil and the Green Party have shown themselves completely incapable of tackling any of these issues and, God knows, they have had more than enough chances.
The sad reality is that I have little faith in Fine Gael or the Labour Party handling the State's affairs much better. Both parties have wholeheartedly bought into the Government's analysis of the economy and provided their own proposals for cutting social welfare, public spending and workers' pay. All of this can be expected from Fine Gael on any given day but the Labour Party has veered to the right, bracing itself to get into bed with Fine Gael. It would seem from reading its pre-budget submission that the Labour Party is pro-jobs but leaning towards anti-worker. Perhaps the Labour leadership is attracted by the bright lights of IBEC's annual conference, leaving their former trade union comrades in the dark in these times when real struggle will be required.
Every citizen in this State should be aware that replacing Fianna Fáil and the Green Party with Fine Gael and the Labour Party will make no difference to economic recovery. The Minister for the Environment, Heritage and Local Government is nodding in agreement. Fine Gael and the Labour Party would implement the same policies in a different package, with the same bad results for the economy. While the establishment parties close ranks and display a disturbing uniformity in their policies, we are the only party that stands up for working people, whether they are in jobs or not. We are unique because we are the only party with an alternative analysis of the situation. We address the problems in the economy with the aim of eventually reducing the deficit. The other parties set out proposals to reduce the deficit without ever dealing with the problems of the economy.
With this sentiment, I will analyse what the Minister for Finance has delivered to the House and to the country. I will examine the areas where he chose to slash and burn and explain how it could have been done differently and a better result delivered. I hope the people at home will listen and decide from the contributions to the debate who they would rather have introducing the next budget.
When the Minister introduced the emergency budget in April last, he stated the economy would need to adjust by a further €4 billion over the course of 2010 and he would set out how that figure would be raised and saved in this budget, which he has done. The elephant in the room is that in April the €4 billion was planned as an adjustment to a much smaller deficit of approximately €20 billion. The fall in tax revenue over the last seven months means the deficit is wider now, yet he still maintains a €4 billion adjustment is necessary and other parties agree. Why is €4 billion needed? Why should we believe the Minister when he has go it wrong up to now? The European Commission has had to extend the period for economic recovery offered to the Government by a year. His plan has unravelled before it has even started.
Sinn Féin did not set about raising €4 billion in its pre-budget submission in October. We sat down and worked out how the tax system could be made fairer and how much was needed for a stimulus package. We believe a stimulus package and investment in the economy would not only recover confidence at home, but also abroad. The Government can repeat ad nauseam that it believes international investors are responding well to its plans to slash spending but, in reality, international investors can see a government sinking beneath the waves. The Department of Finance’s forecasts are adjusting downwards by the month, as are Exchequer returns. This does not inspire confidence. The rest of the world is responding to economic woe with ambitious stimulus plans. The response of the Government and the Opposition parties other than us is to return to the constrictive right-wing economic policies of the 1980s. They are determined to make this situation worse and see us waste more years before recovery begins.
Our pre-budget proposals would raise more than €7.5 billion. Our figures were designed to stimulate the economy, not to deflate it. Our tax-raising measures were aimed at high earners to ensure they did not hit the spending power of the middle and lower earners. Let me be clear that by "high earners" I mean individuals — not households — earning in excess of €100,000. People on incomes below that were exempt from our consideration. That thinking is conspicuously absent in the Government's strategy for fiscal adjustment and it is telling. Every measure taken over the past 12 months has further contracted the economy. This budget will be no different.
The Minister has taken €4 billion out of the economy in the most damaging way. The scenario that will be played out in 2010 will be more job losses, further falls in property prices and decreasing revenue returns, and we know that all this will happen because we have seen it happen throughout history. The Minister also knows this will happen so his budget today can only be seen in one light — he is delaying recovery because he wants to protect the golden circle in the State for a longer period. He is also determined to protect those in the silver circle — the very high earning households. That is why he has taken these harsh and vicious measures, such as cuts to social welfare.
A fundamental principle divides Sinn Féin from other parties in the State as we see social welfare as a right and not a luxury payment that can be cut at will, depending on the economic climate. Families depend on it for their food and for survival. They have no other income. When the Government is abandoning those people, it is essential they have this minimum threshold for food and some level of existence. In approaching this budget, there was much talk about the need to reduce the social welfare bill. The Government and some media commentators have acted shamefully towards the social provisions of this State.
Not once, in all the talk about the social welfare bill, was reference made to the possibility of reducing social welfare spend by keeping people in jobs and creating new jobs. Instead the focus was on rates of pay, and the argument was made by Fianna Fáil, the Green Party, the leader of which has joined us in the Chamber, other establishment parties and some in the media that €204 per week is too much for people to live on. I wish some Ministers would try to survive on €204 per week for a few weeks to see how they get on. Then they would get a dose of reality and would appreciate what people are going through. What type of people think it is acceptable to take money off someone on €204 a week but not from someone earning in excess of €2,000 a week?
We do have problems in our social welfare system. There is definitely fraud and ridiculously complicated administration involved. The system is a bureaucratic nightmare. All of this has increased under the Government's watch. There is no area its incompetent hands have not reached into and ruined. However, the problems in social welfare that end up costing the State extra money should be dealt with and rates of payment should not be cut.
Cutting social welfare payments will have a detrimental effect on the economy and society. Social welfare payments are always returned to the economy on a weekly basis. They are not saved or invested abroad. They are spent on rent, mortgages, food, utilities and other essentials. Cutting welfare expenditure is a false economy and one that will ultimately only cause misery for those on the receiving end of the policy. We do not accept the argument of deflation in favour of welfare cuts. The fall in the cost price index this year includes mortgage interest. A number of items have not decreased in price, they have increased and they disproportionately target the less well off. The cost of bus fares, child care, primary and secondary school education, doctor's fees, dental fees, hospital services and insurance have all increased and no one on the other side of the House has addressed this. These costs make a lie of the argument that people on social welfare and low wages can afford to live on less.
We have already seen the effects of cuts made to social welfare payments this Christmas. The loss of the Christmas bonus, a double payment which affected 1.3 million people, is money that would have been spent in our shops on the high streets on Santa presents and Christmas food. The Government's Scrooge measures will come back to haunt it when it counts its VAT pennies at the end of this month and will see a substantial reduction. It will also have an effect on the retail sector, possibly increasing the number of job losses and adding more people onto social welfare queues.
Grading the rate of job seeker's allowance by age further to the measures taken in the supplementary budget 2009 is an abuse of power by the Government and shows just how out of touch it really is. The proposal to reduce the rate of social welfare to €100 and €150 a week for those between 20 and 24, which represents a cut of 25%, undermines what should be the main focus of economic recovery, which is getting Ireland back to work. The social welfare bill should be reduced by giving those people the opportunity that they want. They do not want to lie about their homes or scrounge from family and neighbours. They want to go back to work and the Government is doing nothing to deliver this.
Discriminating against young adults in their welfare entitlements is grossly unfair. It is necessary to frame this in realistic terms, rather than from a top-down budgeting perspective. Young people finish college after three, four or five years of education. There is a freeze on public sector employment, little if any employment in the private sector and they have most likely accumulated debt during the course of their studies. Many of these young adults are on the margins. They may not have qualified for a local authority grant and, as such, would have accrued debts through student loans. They are now expected to come out of college and live on €150 a week. Ministers should try it some time and let us know how they get on. The remaining cuts are equally punitive. If there was any justice in this world all Members on the other side of the House would lose their jobs in the next election and then we would hope to see them live on those amounts.
The measures taken on child benefit will do nothing to fix the economy. They are further evidence of a sticking plaster approach displaying the Government's inability to leave any social provision protected from its grubby claws. Child benefit is a universal payment made to every child in the State in recognition that every child is born equal and that the State provides children with nothing after they turn six weeks old, when free health care for children in this State ends. When children are six weeks old the State walks away and they are left without child care, without the financial ability in many cases for their parents to stay at home and without a fully functional education system. The Minister for Finance attacked every child in the State today and I hope he is proud of it.
The cuts to the public sector pay bill offer another unimaginative approach to fixing this recession. In our pre-budget proposals we identified savings in the public sector pay bill. We identified those savings by capping the pay of individuals earning more than €100,000 per annum. That is a reasonable salary for people in the public sector. Deputies, Ministers and Senators should have their salaries capped to the same degree. How can the State afford to pay any civil servant in excess of €100,000 a year when, as Deputy Mary Harney told "The Week in Politics" programme recently, the IMF is breathing down our necks because of the mess the public finances are in? These people need to get real. Brendan Drumm, if one takes into account his bonus last year, received €450,000 for helping to run the health service into the ground. That is 19 times higher than the basic salary of a civil servant at €24,000. The Minister, Deputy Gormley, used to advocate social justice when he was on this side of the House. Deputy Gormley and his party sit there smug, comfortable and happy with this situation. If his party is not satisfied with the current position, it should indicate that this is the case and it should leave Government and give the people what they really need, namely, the holding of a general election in order that the country might obtain some form of leadership.
The Government and some Opposition parties are of the view that canteen workers, ushers and office workers should all bear the pain for this recession in equal measure to Professor Brendan Drumm. The Government's cuts do not recognise this madness. Instead they look at pay across the board and slash it accordingly. Its cut of a further 5% — in addition to the pension levy — on people earning below €30,000 is a pay cut of €1,500 per annum. These individuals already extended their budgets to full capacity when they chose to carry out home improvements, bought additional educational materials for their children or whatever. They have made commitments which they must honour and the Government is now putting its hand into their pockets and taking €1,500 away from them at a time when they cannot afford it, when they cannot seek alternative employment in order to improve their circumstances or when they have no prospect of obtaining part-time work in order to supplement their incomes. The Government is robbing them of €1,500 per week. Shame on the Minister.
Those on €70,000 a year will lose €4,500. It is worth remembering that in its pre-budget proposal, Sinn Féin advocated that incomes below €75,000 should remain untouched. The only penalty we would have imposed on people with earnings above that amount would be to abolish the PRSI ceiling. The real threshold would have been €100,000 in respect of which we would have introduced a new tax band of 48%. Why did the Minister not listen to what we had to say in that regard? When he was on this side of the House he often advocated similar policies. Why did the Green Party collapse into the arms of Fianna Fáil and go along with the whole "jing-bang", Galway tent approach to running this State?
It did so because its members have no backbone.
What has happened in this regard is grossly unacceptable.
What will be the long-term achievement of Government policy in this regard? It has taken away the spending power of a group whose members we need to spend their money in order to turn the economy around. It wants people who have 2009 costs to live on 2004 wages. It has achieved the agenda of Colm McCarthy and company of driving down the standard of living and the rights of the majority. However, it has done little to encourage economic recovery.
As already stated, Sinn Féin's pre-budget proposals would have succeeded in raising and saving in excess of €7.5 billion, a good deal of which would have come from simply introducing more fairness to the taxation system. There are some paltry measures included in the budget. The tax on exiles does not go far enough. The raising of the effective tax rate goes some way towards what is necessary but, again, this will not be nearly enough in the overall scheme of things. There are no wealth taxes or third rate of income tax included in the budget. In addition, the PRSI ceiling has not been abolished. What will be the benefit of the universal contribution, at its low rate, for high earners? The Government and its minions have conducted a great deal of PR in respect of why taxation is untouchable. I believe none of it.
There is still a great deal of inequality in the taxation system. On one hand, the Government informs us that it cannot afford to increase taxes. On the other hand, however, it is informing all and sundry that Ireland remains a low-tax economy and that the latter is one of the Government's greatest achievements. Which statement is correct? This is nothing of which to be proud. We have a €22 billion deficit and the Government is still refusing to create a fair taxation system. We must stimulate the economy and to do that further revenue will be required. Taxation cannot continue to be untouchable and the Government cannot continue to laud our low-taxation economy as being job creation-friendly. If the latter is true, then where are the jobs? Why have we reached a position of stalemate?
I wish to outline the facts. Low taxes at the top are not stimulating the economy and for the bulk of PAYE workers at the bottom, ours is not a low-tax model. The bottom percentage rate of income tax is low, but there is a huge degree of stealth taxation and a lack of service provision that makes Ireland, for this group, a very high-tax economy. These are the people who should not be touched for more tax. However, the Government is determined to have it both ways: high taxes at the bottom; and low taxes at the top. Such a system is not sustainable.
The Government will soon have no option but to address the inefficiencies in the tax system. The Commission on Taxation identified 245 tax reliefs that between them pay back almost as much as is taken in income tax. Many of these reliefs are abused by high earners. The Minister is nodding in agreement. Perhaps he will indicate what he has done about this. I am not a member of the Cabinet but he is. Could he not have negotiated more strongly in respect of some kind of fairness in the taxation system? Does he not realise that people throughout the country, and not merely those in his constituency, expect that of him? What is certain is that the Green Party did not negotiate strongly in respect of this budget.
There is no sophistication in the system. Ireland has two tax bands while most other countries have between three and five. Are we incapable of developing a fair and progressive taxation system or is it a lack of political will to ensure those at the top pay their fair share? The Government claims that there is progressivity in the tax system. There is no progressivity in the system for those earning over €75,000. If anything, one can progressively pay less tax the higher up the earnings scale one goes, particularly if one has access to the services of a good tax accountant, of whom there are quite a few.
The sad reality is that when the Government is eventually obliged to reverse the inequalities it wrote into the tax code, the public finances will have spiralled out of control. I predict the Government will look to lower earners first when it seeks to increase taxes.
The carbon tax will not bring fairness to the system. If such a tax is to work effectively, it should be revenue-neutral in nature. The Government will use the carbon tax in order to raise revenue. Members of the Green Party appear to have lost much of their thinking capacity. Surely, however, they realise Fianna Fáil has only committed itself to this measure as a way of plugging the financial hole. Fianna Fáil is no more interested in saving the world than it is in saving the economy.
Those in Fianna Fáil are only interested in saving themselves.
In all likelihood, this tax will have the effect of inflicting greater fuel poverty on the vulnerable and the country will be no closer to achieving its Kyoto targets.
I welcome the initiative on excise duty, which I hope will save some jobs. However, a considerable number of jobs have already been lost in the retail trade. As Deputy Ó Caoláin is aware, Border counties have been particularly badly hit in this regard. However, it is not just these counties that are affected. People from all other counties are also travelling across the Border in order to shop. The price of alcohol in Northern Ireland is one of the factors which encourages them to do so. I hope this measure will encourage people to adopt a common sense approach and shop in their own communities and support the local retailers who depend so heavily upon them.
It is an inescapable fact that there has been a huge loss of excise duty and VAT as a result of the partition of this island. There is a considerable market of some 6 million people across the island. Since the signing of the British-Irish Agreement, trade between North and South has increased steadily. Progress towards creating a truly all-Ireland economy is being made through the newly developed all-Ireland energy market and the activities of Tourism Ireland and InterTradeIreland, which since 2003 has benefited over 1,300 businesses and created hundreds of jobs. However, much more must be done.
An all-island economy is an imperative. Differences in VAT, corporation tax, excise duties and currency create barriers to economic development on both sides of the Border and cost millions in tax revenue. The removal of such impediments will create efficiencies, employment, wealth and opportunity across this island. Sinn Féin proposes the establishment of an all-Ireland economic committee, comprising Members from the Dáil and the Northern Ireland Assembly and tasked with harmonising taxes across the island; a joint North-South ministerial approach to promote our international food brand; and an all-Ireland agricultural body to implement all standards that safeguard the reputation of Irish agricultural produce.
The stimulus of a couple of hundred million euro contained in the budget is a joke.
It is not even that amount.
The Government has invested €54 billion into the banks and ensured that we will be back here again next year in an even worse position. This eventuality could have been avoided if a proper stimulus package had been put in place in respect of enterprises which are struggling. These are vulnerable but viable enterprises which are haemorrhaging jobs and which would require only a small and temporary injection of financial support from the Government to assist them in overcoming their current difficulties. Such financial support should have been provided in order that the people employed by these enterprises might have remained in employment. I have met many of the employers who could have sustained those jobs with some support from the Government. It is most unfortunate the Government looked the other way. There is no easy way out of this recession but there is a better way. The Government's way is to slash spending. Our way is to save and create jobs and protect the most vulnerable. Our way is better for the economy and better for people. The only jobs the Minister will create with this budget are in debt collecting agencies.
Sinn Féin's pre-budget submission proposed a stimulus package costing approximately €4 billion, roughly 2.5% of projected GDP in 2010. That is a considerable difference to the paltry few millions of euro offered to job creation and retention today. There was not even a decent nod in the direction of what it should have done. The €54 billion allowed to NAMA is approximately 33% of GDP. This makes quite a comparison. Our stimulus is equivalent to the investment made in Anglo Irish Bank, which was some investment in a zombie bank. Our proposals have the potential to save more than 100,000 jobs in 2010 and to create more than 100,000 more, as well as better positioning the economy to increase jobs in 2011. According to trade union estimates, the cumulative cost of new jobs will be €10 billion. If we spend in 2010, we could see positive growth in the Exchequer in 2011. If we do not, we will see further contraction.
There are 425,000 people on the live register. This number is likely to grow and there is no Government strategy to deal with it. The Government claims that saving the banks will fix the economy. Proving them wrong will be cold comfort to the many people who lose their jobs, who face this Christmas in debt, in poverty and with the prospect of the very small payments made to them by the State, being cut. Emigration is already on the rise. This year was the first in a long time that saw emigration outpace immigration. Sinn Féin believes there is a better way forward. We do not have to return to the 1980s. Our suggestions are immediate, and if invested in, should see a return to the Exchequer by way of saved social welfare payments and tax by the end of next year.
We have raised money for our costed proposals and propose transferring some €2 billion from the National Pension Reserve Fund, which should be accessed in this exceptional period of need. Our rationale regarding use of the NPRF is simple. At this point in time, the State cannot afford to keep money in reserve for future pensioners when the current generation of pensioners are being asked to live in poverty. Does this not make sense? Can the Minister not see the sense in it? We could access this money now to help the State recover and when we have recovered, we would begin saving for the future again and implement a new system of decent universal pension provision that does not see billions spent on the private pension industry while State dependent pensioners suffer.
Our proposals include establishing a jobs retention fund available to SMEs worth €600 million per year. We want to reduce the cost of doing business by freezing the cost of State-controlled services for one year. We want to use the public sector and direct public employment to kick-start the economy. The national development plan must be completely redrawn to focus on the more labour intensive and necessary infrastructure, such as schools, hospitals, energy savings in homes and public transport provision. This infrastructure will improve the State and provide jobs in construction, architecture, engineering and all other trades. It will kick-start the economy, which is what we need. We also want to build the State child care and pre-education sector through fully-trained accredited child care workers, infrastructure provisions and State subsidies for employees in this sector.
Just like with the taxation system, the need for a stimulus must be addressed. I do not have any faith in the Government's ability to address it. I fear the Minister and others like him will have run this State into the ground before anyone with vision is in office to turn things around. Sinn Féin has set out its vision. We may have a while to wait before a general election but I am afraid there is much more damage Fianna Fáil and the Green Party can do before then. My party will continue to set out the alternative. I hope this budget serves the purpose of waking up the Irish people. The Government may be afraid to put itself before the Irish people any time soon but they have long memories.
This was a missed opportunity. The Government could have turned its back on its crazy policies of depending entirely on the banks and supporting only the banks while not dealing with enterprises, workers or a proper job stimulus package. Young and old will suffer as a result. The budget has done nothing to help the economic crisis created by the mismanagement of this Government and its failed policies. I look forward to further debate on this matter.
Sitting suspended at 6.25 p.m. and resumed at 6.55 p.m.