The speeches of the Taoiseach and of the Leaders of Fine Gael, the Labour Party, the Green Party and Sinn Féin, or persons nominated in their stead, who shall be called upon in that order and who may share their time, shall not exceed 40 minutes in each case. I call on the Taoiseach to speak.
Financial Resolution No. 5: General (Resumed).
Debate resumed on the following motion:
THAT it is expedient to amend the law relating to inland revenue (including value-added tax and excise) and to make further provision in connection with finance.
—(The Tánaiste and Minister for Enterprise, Trade and Employment).
In anticipation of having to leave to attend a meeting of the European Council I may not be able to do all Leaders the courtesy of listening to their speeches because of the length of time we had to give to the Order of Business. I apologise in advance.
Will the Taoiseach give our regards to the members of the Council?
I will of course but I wanted to make that clear in case anyone misunderstood my reason for leaving.
We understand that.
This country has to address probably the biggest challenge to its economic independence it has ever had to face, even though this is now in the context of our membership of the EU and the eurozone. The budget will demonstrate to ourselves and to others that we are succeeding in mastering the challenge. It is no time for half-measures, evasion or long-fingering. While others can suggest and propose, or oppose, the Government has the responsibility with the support of the Dáil for taking the measures that the public interest requires at this time.
Even in these most difficult financial circumstances, we need to keep moving forward, and to provide a targeted stimulus to support and create employment. There are many projects and programmes under way or near completion that will improve our competitiveness and quality of life in the years ahead. We also need to open up new areas of enterprise and jobs in the smart economy.
Fairness is a key criterion of the corrective measures. The main burden of adjustment has to be borne by those who are in a better position to bear it, even if some contribution is sought from most sectors of society. Over a number of years now, particularly since 2004, the income tax system has been made steadily more progressive. Ireland can come through these testing times, strengthened for the future, having absorbed the lessons of the unexpected full-scale crisis, both domestic and global, that we have had to face. Realism and solidarity, qualities which exist in abundance among our people, will help us through the difficult times, and renew our confidence for the future.
The Irish economy has been particularly badly affected by the present crisis, and is going through an adjustment of a magnitude that has few modern international parallels among developed countries. We will have lost more than 10% of our national income in a two-year period. In a relatively short time, we have gone from a thriving economy with budget surpluses regarded as a model to a sharply contracting economy that has opened up unsustainable budget deficits. Even though we prudently put a lot of money into the National Pension Reserve Fund, and reduced the national debt to a low level, we did not have the safety margins we imagined. Competitiveness was eroded, and with the international loss of confidence resulting from the banking crisis and our vulnerability at the end of a construction boom, suddenly a huge gap opened up at frightening speed in 2008 and early 2009 between what we spend and what we borrow. Now for every €30 of income, we are spending more than €50. That has to stop. We have to stabilise it, we have to correct it, and we have no time to waste.
Our tax revenues have fallen back sharply to 2003 levels. This means that next year, if we did nothing, we would have a deficit in the region of €22 billion in our public finances. To bridge this gap, we are borrowing more than €400 million per week and that clearly cannot continue. The choice that confronted us in this budget is that, if we take the correct policy choices, we can emerge from recession, despite its breadth and severity. If we tried to duck the choices, to wait it out, or to postpone the pain, it would be worse in the long run. In any case, the loss of confidence in that approach might be such, that decisions would be rapidly taken out of our hands. Even if that did not happen, the pain would be prolonged, and it could be the 2020s, before Ireland saw any gain.
Our strategy over the coming years is to bring back expenditure to 2006-07 levels. As the world economy recovers and demand for our exports increases, there will be more people in jobs, and our tax revenues will rise. This combination of cutting expenditure and increasing revenue has the aim of restoring our deficit to a sustainable level by 2013. In order for this strategy to work, we must take resolute action to increase Ireland's international competitiveness. Since the crisis erupted 18 months ago, we had to make adjustments amounting to €8 billion. Inevitably, out of short-term necessity, at least half of them came from raising taxes and levies. Next year, 2010, we are making adjustments of €4 billion. In 2011, an improvement on our last April's forecasts, reductions of €3 billion will be required.
Acting decisively now will bolster confidence in our capacity to climb out of the crisis. Our actions in the budget are already improving international perceptions of Ireland, and will help us continue to attract the investment on which we depend. Equally important, it will help bring back domestic consumers' confidence that we are getting on top of the problem — increasing consumption and helping to create jobs again. Our recovery will be also underpinned by the recent enactment of the NAMA legislation. This Oireachtas debate was the most extensive and intense I have seen over a quarter of a century in national politics. We are now among the first countries in the world to address impaired assets systematically, and to make the banks face up to the scale of their problems.
This budget is one of the most crucial steps on our road map to recovery. It is not an ordinary budget in ordinary times. On the scales it is nothing less than our whole economic future. Confidence is the gold standard in today's global economy, as we can see, if we look about us. Whether we like it or not, we have to show the international markets that we are capable of getting our economy back on track, and our fiscal house in order. This budget is a defining moment for Ireland. However, it does involve decisions, which for obvious reasons will be unwelcome to many people around the country.
As the Minister stated yesterday, this budget has three key objectives: to stabilise the deficit in a fair way; to protect those worst hit by the recession; and to stimulate the sectors of the economy that will lead to additional and sustained employment. Reducing our deficit, curtailing expenditure and restoring balance to the public finances will not come easy. This budget is difficult for everyone but these steps must be taken, and taken now. It would certainly not be fair to saddle future generations, our children, with more debt burdens, even assuming the markets would grant us that latitude.
I am acutely aware of the difficulty and the pain cuts will cause people, but Government has had to take these decisions so that we can move forward again. We do this, not because we want to, but because we must. The Government's approach in framing this budget was guided by a number of questions, such as, is it necessary, is it fair, and will it assist recovery? The answer in each case is, yes.
I have seen with my own eyes what happens when a Government tries to put off necessary action. I entered Dáil Éireann in 1984, at a time when the public finances were under similar strain to that being experienced today. The Government of the day had initially planned to phase out the deficit in a four-year period, but soon backtracked. The result was that by the time that Government's term came to an end in early 1987 the budget deficit was as high as it had been four years previously. Delaying recovery is just spreading the pain over many more years. We did that in the 1980s and the short-term unemployed became long-term unemployed; there was a lost generation. To repeat that would be the most unfair policy of all.
Membership of the eurozone limits our options for making the adjustment. We cannot devalue our currency, which would conveniently disguise a loss of real income. Instead, the logic of the single currency compels a country overtly to reduce its costs, including incomes, to restore competitiveness. As against that, the value and purchasing power of money will hold. The only difference between keeping the same nominal income in devalued money and income reduced by the same real amount in a strong currency is psychological. We have had many periods of falling incomes before, but we have yet to adjust to the more transparent way it is now happening. The Consumer Price Index, the cost of living, has fallen by 6.6% in the 12 months to October. There also has been a large fall in construction costs, which is reflected in lower tender prices under the capital programme and housing costs. The reductions in this budget are part of this general adjustment. Social welfare, public service pay, professional fees, public spending and capital allocations are being brought closer into line with the new level of prices.
It is tempting to claim that all our problems can be solved simply by increasing taxes on the wealthy, without the need for contributions from others, or expenditure cutbacks. It ignores the reality that taxes on higher earners have been increased very substantially over the past year. As my record as Minister for Finance will show, I am a strong supporter of a progressive system of taxation. It is estimated at present that the top 4% of earners pay some 48% of income tax, while half of income earners will pay no income tax, although they may pay the income levy. The top marginal tax rate is 52%. To raise, for example, an extra €1 billion from high earners would mean the marginal rate would have to rise to more than 65%, a level it last stood at in the mid-1980s. As experience has shown, such a move would be counterproductive. All of the available evidence suggests that high marginal tax rates will discourage high-skilled workers from remaining in Ireland, as well as discouraging high-skilled workers from locating here in the first place. It is not a good policy.
While we are committed to broadening the tax base, the Commission on Taxation has independently established that there is no pot of gold through the curtailment or abolition of tax reliefs and incentives. Nevertheless, we have raised the minimum threshold for the effective rates of income tax for top earners from 20% to 30%, on top of which come PRSI and levies, and this will yield an additional €55 million in 2010.
We have also decided on an annual domicile levy of €200,000 on non-resident Irish nationals with substantial worldwide income and valuable assets here to ensure they make a substantial non-discretionary contribution to the Exchequer, particularly at a time when everyone in the country is so hard-pressed. Past experience here and the international evidence are clear. Economies recover more quickly from a fiscal crisis by cutting expenditure rather than increasing taxes.
Three years ago, Ireland could boast full employment. The most recent live register figures show there are now more than 423,000 of our citizens without full-time jobs. We must do everything we can to stop this trend and reverse it. The Department of Enterprise, Trade and Employment will spend more than €900 million in 2010 protecting jobs and providing training and activation supports, and more than €200 million in enterprise supports through IDA, Enterprise Ireland and other agencies, making a total package of €1.1 billion.
We will directly and indirectly support approximately 80,000 jobs through the employment subsidy scheme. Through the social welfare system, we are helping more than 73,000 people to maintain part-time jobs or casual work, at a cost of well over €600 million. Altogether, this comprehensive package will enable 180,000 individuals to receive training or supports in 2010.
A key goal of this budget is to put Ireland firmly on the road to recovery. Within the financial constraints we face, we are providing for a stimulus which will create job opportunities and lay the foundations for developing the smart economy. This stimulus contains the following parts: a €40 billion investment over the next six years in infrastructure that will provide jobs and support economic growth — at 5% of GNP, this is twice the European average; a €6.4 billion spend next year to support more than 60,000 jobs; a national energy-efficiency retrofit programme and tax incentives for energy efficiency, creating 5,000 jobs next year; a car scrappage scheme and tax incentives for electric and hybrid vehicles which will support up to 2,000 jobs; reductions in excise duties on alcohol and lower VAT to assist hotels, catering and the retail sector; support for a marketing drive and investment in visitor attractions in the tourism sector; assisting agriculture and forestry; retaining a pro-enterprise tax policy; continuing to invest in research and development, science and technology; and measures to get credit flowing to support businesses and jobs.
The Government's framework for sustainable economic renewal has the objective of creating a smart, high-productivity economy. Increasing productivity is the key building block for economic growth. A key driver of enhanced productivity is investment in infrastructure that stimulates the economy and improves the competitiveness of Irish business. Investments in infrastructure support employment and stimulate economic activity. There is still a strong pipeline, with projects being completed and coming on stream over the next couple of years.
The Government has revised its capital programme, and will invest close to €40 billion between now and 2016 to enable a return to robust economic growth over the medium term and advance the goals of the smart economy framework. We are prioritising projects with the most immediate positive impact on the economy and employment which also lay the foundations for sustainable growth. Next year, the level of public capital investment — at about 5% of GNP — will be proportionately the highest capital investment programme in the EU.
Our consistent approach over many years has been to prioritise the social benefits of investing in our social infrastructure as well. Despite the difficult economic circumstances we face, we are committed to continuing to invest in areas such as health, education, public transport, housing and urban regeneration as part of our overall approach to serve people's needs. Investment projects will include more than €500 million on school building and maintenance and more than €800 million on local authority housing, including special needs accommodation and the retrofitting of public housing. Some €625 million is being invested in key public transport projects such as the Luas extension to Cherrywood in South Dublin, phase 1 of the western rail corridor, the completion of the Kildare route and phase 1 of the Navan line.
At nearly €500 million, the investment in our health infrastructure next year will achieve continued, sustained improvements in the quality of our health services despite the ongoing budgetary adjustment we have to make in current economic circumstances. It will enable us to continue projects already under way and to start a number of new ones, including the development of the new, single national paediatric hospital as a key priority; the development of substantial additional radiotherapy capacity as part of the national cancer control programme; the construction of critical care facilities in the Mid Western Regional Hospital in Limerick; the opening of a new accident and emergency department in Drogheda and the construction of new ward accommodation during 2010——
And some in Kenmare as well.
——equipping and operation of new cardiac and renal facilities in Cork University Hospital; the planning of a new facility at Sligo General Hospital, using the public private partnership funding model, to include a new surgical department, intensive care unit and other developments; the major development of a new Mater adult teaching hospital; St. Vincent's phase 2 development, including new cystic fibrosis facilities; the upgrading of paediatric critical care facilities at Crumlin Hospital; the planned upgrading or replacement of many facilities, including many public long-stay nursing homes and community hospitals, such as Kenmare community hospital——
A Deputy
Good man, Jackie.
What about Tullamore?
——Loughrea, Navan, Fairview, Farnlea and Ballincollig in Cork——
There is no mention of Monaghan.
——and the development of new primary care centres through lease arrangements to include Kinnegad, Moate, Gorey, Waterford, Carlow, Callan and Trim early in 2010, with a further 37 centres during the remainder of the year.
More dreams.
All of these developments will support new services and better patient care, at the highest international standards, and continue the progress we are making in improving outcomes for patients.
Other key investment priorities will be science, technology and innovation, the promotion of environmental sustainability and the implementation of green enterprise initiatives. All of these initiatives will help to drive productivity improvements. Within this envelope, we are reallocating funds to provide an immediate stimulus in several key areas.
A new national energy retrofit programme will create an efficiency fund to stimulate investments in energy efficiency and greenhouse gas mitigation. We are allocating €130 million for energy efficiency programmes in 2010. The scheme will also focus on providing information, via the utilities, to all households on the possibilities of reducing their building energy rating, BER. This way, the grant investment will leverage further investment from higher-income households. The carbon tax will provide a further incentive, as will the impact of an improved BER on house values. This will, in time, allow more funds to be targeted at fuel poor households and the elderly. Some €90 million will be allocated directly to the programme in 2010 with a substantial proportion of the funds ring-fenced for those suffering from fuel poverty. This will be augmented by approximately €125 million in private investment. We expect this to result in 60,000 homes and several hundred commercial and public sector buildings being upgraded in 2010.
The programme will provide an estimated economic dividend of more than €400 million net benefit to the economy in 2010; an employment dividend of around 5,000 jobs next year; a health dividend in that warmer homes will reduce deaths and illness from cardiovascular and respiratory diseases, which have a particularly negative effect on the elderly; a fuel poverty reduction dividend; and an environmental dividend of CO2 savings of 115,000 tonnes per annum, which will assist Ireland in meeting its greenhouse gas reduction targets. In addition, a scheme of accelerated capital allowances for energy efficient equipment is being enhanced. This will improve energy efficiency and help companies under competitive pressure, such as food and drink, retailing and distribution businesses.
We have introduced a 12-month car scrappage scheme from January 2010. Subject to conditions, VRT relief of up to €1,500 per new car purchased will be made available under the scheme, where a car of 10 years or over is scrapped. It is estimated that this will safeguard approximately 2,000 jobs and provide a net benefit to the State in terms of tax revenue and reduced social welfare of between €30 million and €100 million. Moreover, it will provide a significant net environmental dividend in terms of reduced CO2 emissions, assisting Ireland to meet its international obligations regarding climate change.
To assist the retail sector in competing with the sterling area, we are reducing excise duties on alcohol and are reversing the 0.5% increase in VAT imposed in October 2008. The British Government has confirmed that it will raise its VAT rate by 2.5% from January next.
The tourism sector, which is employment intensive, has been under great pressure as a result of the global downturn. Investment in visitor attractions will be increased three-fold to €22 million, and the overall tourism budget is being increased in 2010 to enable a marketing drive to increase tourist numbers and revenue by 3%.
We continue to be committed to the agriculture sector as a vital part of the economy. We have made a large investment in agricultural infrastructure through the farm waste management scheme. We are committed to supporting an environmentally-friendly agriculture sector, and are in discussions with the European Commission with a view to introducing a new five-year agri-environmental scheme. We have re-allocated €50 million for this scheme. We are also providing €120 million for forestry and bio-energy.
Central to our smart economy vision is that Ireland will become an innovation hub, a country that is an attractive home for innovative multinationals as well as being an incubation environment for the best entrepreneurs at home, from Europe and further afield. We must get more for less across all sectors of the economy, public and private.
We are continuing to invest heavily in research and development and are establishing a single funding stream for the strategy for science, technology and innovation to maximise the efficiency and focus of our investment and ensure that Ireland's effort is strategically targeted on those areas where we can achieve greatest impact, including through close alignment with industry needs and a strong commercialisation effort.
As a first step, it will involve combining the funds currently administered by Science Foundation Ireland, research funds administered by the HEA, the research funding of the HRB and, as appropriate, funds related to research calls of sectoral Departments. We will retain and enhance the significant incentives we introduced in the past two years in research and development and the intellectual property environment. We have committed to retaining the 12.5% corporation tax rate and we are extending to new company start-ups in 2010 the three-year corporate and capital tax exemption.
We are retaining the patent royalty exemption, which is an important support for research and development intensive indigenous and multinational companies. The Government looks forward to receiving the report of the innovation taskforce on its recommendations in regard to further measures for creating a positive environment for entrepreneurship, innovation and intellectual property and the Minister for Finance has committed to considering these in the context of the Finance Bill.
We are establishing a credit review system to ensure a flow of credit from the banks to support healthy Irish businesses and jobs. In a small open, economy like ours, we must trade to thrive. That is how we will protect existing jobs and create new jobs. The Government will continue to support the enterprise sector as it adjusts to the severe competitive pressures it currently faces, in particular, from currency movements against our main trading partner, Britain.
Much of our effort in the past year has been on stabilising the economy, with short-term measures to help business survive and support those who lose their jobs. We have already introduced a range of measures to support firms through the crisis including the enterprise stabilisation fund, the temporary employment subsidy scheme and interventions to apply downward pressure to energy costs. We are also introducing a new employer PRSI exemption for new employees, which will reduce the cost of creating new jobs, helping to get the economy moving again.
This budget is the start of a new phase where we begin to create sustainable jobs as the global economy begins to pick-up. Last week, we published a report showing how we could create 80,000 new jobs in green enterprise in the coming years. It contains proposals for green enterprise zones, renewable energy and a green IFSC. The innovation taskforce is developing ideas for job creation by making Ireland the best location in Europe to start a high potential innovative company.
We already have one of the best concentrations of high-tech multinationals in Ireland. Our plan is to incentivise them to invest further in high-value research and development areas, and in the convergence of technologies that provide well-paid jobs that will stay in Ireland. We will publish a new action plan on trade and investment early in 2010, prioritising our links with new and fast-growing markets in Asia and elsewhere. We will continue to pursue new opportunities in international services, including financial services. Following the budget, through the Cabinet committee on economic renewal, I will drive forward our efforts in all these sectors, ensuring that all Ministers, Departments and agencies prioritise these opportunities so we can get people back to work as quickly as possible.
The recent floods have further underlined the necessity of building better flood defences, where appropriate, and undertaking other non-structural measures to mitigate the risk of flooding. An increased allocation of €50 million has been provided, so that planned works in a number of towns can be completed, new risks addressed and better warning systems put in place, with a particular focus on some of the worst affected areas, including Cork, Galway and the Shannon, Lee and Liffey river catchment areas
Where is Clonmel in that list?
The second and third phases for Clonmel are due to start in March of next year thanks to the Minister of State, Deputy Mansergh. I will ask the Minister of State to keep the Deputy informed.
Another element of stimulus is to the housing market with not only the extension of mortgage interest relief for those who brought in 2004, 2005 and 2006 when the market was at its peak, but the incentive to buy a house in the next two years for anyone still anxious to avail of mortgage interest relief before it is abolished in seven years' time.
This budget has been framed at a very difficult time for Irish families. I fully understand the needs of those who depend on social welfare, and the Government has done its utmost to protect the most vulnerable people in our society. The reductions in many social welfare payments are a regrettable but necessary part of this adjustment. The reason we are reducing payment rates is to ensure that we have a sustainable welfare system which can continue to protect the most vulnerable. A State that is insolvent would be of no support to those who rely on it for their incomes.
Reductions in pay and welfare payments must be seen in the context of falls in prices. The CPI fell by 6.6% in the 12 months to October. In 2010, we expect the CPI to fall by 0.8%. Year-on-year, food is down by 6%, energy by 11% and clothing and footwear by 13%. The reduction in social welfare payment rates is less than the fall in prices. The value of the payments in people's pockets will, if anything, be higher than it was previously.
The support provided by the Irish State to those on welfare is one of the best in Europe. In recent times, there have been record increases in the level of social welfare. Welfare rates have doubled since 2000. In the past 12 years, we have increased pension rates by almost 120%, unemployment benefit by almost 130% and child benefit payments by more than 330%. It is worth pointing out, over the same 12 years, the cost of living has increased by less than40%. In the same period, Government also extended coverage, removed barriers and increased entitlements such that the level and extent of social support payments has been transformed beyond recognition.
Given that social welfare accounts for about one-third of all day-to-day spending, reductions in this area had to be found. The scale of savings required from public expenditure as a whole means that savings in the welfare bill are unavoidable. What is most important now is that we can sustain a strong welfare system into the future. If we do not cut back slightly, there might have to be more drastic cuts in the future.
Bearing in mind that we increased welfare rates by around 3% in Budget 2009, the net reduction is minus 1.1%. This brings social welfare back to around 2008 levels. However, the cost of living has come down by around 6% in the past year, and is back at what it was at the beginning of 2007. Child benefit is back to 2006 levels. Therefore, the changes we have made have ensured that, viewed over a three year period, the spending power of people who received welfare and-or child benefit remains broadly stable.
We have not touched the State pension. Older people do not have the same option of going back to work to supplement their income. They have worked all their lives and should not have to rely on their children to live in dignity.
Our tax revenues are at 2003 levels but we have left welfare rates at 2008 levels so, in cutting back on spending, we are still prioritising those on the lowest incomes.
Turning to broader issues, in the past year, I have made it clear that I would wish to continue the positive relationships with the social partners, which played a central role in our economic and social progress over the past 20 years. Good progress was made in developing a framework last January which set out shared perspectives on how the present crisis should be approached.
It is disappointing, but not wholly surprising, that it has not been possible to continue the pattern of wide-ranging partnership agreements we have seen in recent years, given the scale of the challenges and the speed of the economic and social deterioration which has overtaken the country. I would not rush to conclude that the social partnership model is dead, because we have failed to reach a formal agreement on this occasion.
There continues to be a social partnership agreement in place in Towards 2016, which sets out the medium to long-term objectives and principles for economic and social development. There is scope for that agreement to continue to shape the process of social dialogue, which inevitably will continue between the Government and the social partners, just as it characterises the overall European way of doing business, both at the level of the European Union and within individual member states.
The strenuous efforts made last week to conclude a pay agreement in the public service did not, regrettably, result in success. This was not for lack of effort or good faith on the part of the participants. I set out in the House on Wednesday, 2 December, the criteria which would have to be met if agreement were to be reached. Unfortunately, these were not met, not least because the certainty about the scale and permanence of the measures in reducing the cost of the public service pay bill were not sufficiently clear given the need to demonstrate that the measures taken in the budget would represent clear and structural change. However, I welcome the fact that the talks were marked by an acceptance of the need and the capacity to generate significant reductions in the public service pay bill in 2010.
It is also significant that the negotiators were able to identify agreed approaches to effecting change and increasing productivity in the various sectors of the public service. Ultimately, it is only through real and lasting change based on constant renewal, redesigning how we do our business, applying to the full the potential of new technology and challenging accepted ways of working and organisational structures that those who work in the public service will be able to sustain their standard of living. Unless public service workers demonstrate the same productivity growth as their private sector counterparts, inevitably incomes will fall behind over time. The surest route to secure and stable income levels, and to avoiding future pressures for further reductions is the embracing of change. Greater flexibility and new ways of doing our business should not threaten us; on the contrary, it should provide confidence and assurance about the viability of employment and living standards in the public service for the future.
For that reason, while recognising that the current situation of breakdown is an unhappy one and that we do not have an agreed basis for moving forward, I would urge public servants and their unions to reflect on the potential to build on the progress made last week, and to recognise the direct and immediate benefit of a positive approach to public service reform that liberates the talents of those who work in the public service, secures their incomes into the future, and provides a more efficient service for our citizens. Dialogue on this basis is the best way to deal with concerns about pay and conditions for the future.
I acknowledge and welcome the fact that both Opposition parties have put forward budget proposals. In particular, I am glad that they agreed with the Government on the need for a €4 billion adjustment in 2010. However, both parties differ sharply on how to make up the €4 billion.
On a point of order. There are three Opposition parties in this House. I note the Taoiseach continues only to refer to two.
My apologies. However, both parties, in this respect, based on what I am talking about, differ sharply on how to make up the €4 billion. Fine Gael want headline salary cuts imposed on the public sector. The Labour Party is strongly opposed to such a measure. The Labour Party also wants to see an extra €2.3 billion in taxes in a full year. Fine Gael tells us that it is not possible to tax the way to recovery. As they were on the banks, the two Opposition parties are fundamentally divided on how to stabilise the public finances.
That is according to the Taoiseach.
This is at the core of the issue facing us.
(Interruptions).
We need quick decisive action to put our public finances back on track. It is unclear whether — even in Government — the Opposition parties would be able to agree a coherent and credible economic policy for the country.
Could anybody do any worse?
We do not want a repeat of the 1980s with the necessary action being deferred.
The Government has failed.
The Fine Gael assertion that it is not possible to tax the way to recovery is an empty mantra, given that the party proposes large hikes in employee PRSI to fund reductions in employer PRSI, and extending the health levy to incomes over €13,000, which is the same as a tax increase.
The Government cannot bluff its way out.
The Labour Party advocates a new top rate of tax which would mean an effective marginal rate of 59%, which is a reversion to the failed policies of a more socialist past.
Over the next two years we will be spending over €100 billion in this country. Money will be invested in providing services from health to education to enterprise and jobs. We still have 1.8 million people at work — developing industries, producing the exports and services which will make our nation thrive.
External confidence in Ireland is returning. It is that same confidence that Intel has shown in investing more in Ireland through its Open Lab initiative a fortnight ago. It is that same confidence shown by those who invest in our capacity as a country by buying our Government bonds. They would not be buying these if they did not have confidence in our capacity to recover and did not believe we possess the will to do so.
At the Global Conference in Farmleigh, speaker after speaker expressed confidence in Ireland to trade her way out of this recession. These were not starry-eyed returned emigrants; they were hard-nosed business people who have seen the ebbs and flows of economies all over the world. We live in a competitive global environment but we also should not forget that our Irishness gives us a distinct selling point in the world today. With an Irish diaspora of over 80 million people claiming Irish descent, we have a natural worldwide network to tap into. We have experienced people who have dealt at the highest level of business internationally and built companies, developed products and opened markets the world over.
We must support these people now as they are the ones who will create the jobs we need to get our country moving again. We have the ability to turn the corner. The older people among us will have seen many ups and downs in their lifetime and know that, for all our difficulties, the vast majority of us are much better off today. With appropriate adjustment and proper appreciation, new opportunities and new ways of working, we have the assets and the ability to spring back and to move forward again. The economic and social progress we have made is something to be proud of. Our collective job is to restore momentum with the stimulus to go forward on a new and sounder footing.
Deputies
Hear, hear.
No cheers, not even a clap.
I wish to share time with Deputy Kieran O'Donnell.
Is that agreed? Agreed.
At the end of his response the Taoiseach said that we have the ability to turn the corner. The Minister for Finance assumes we have already turned the corner, according to his dissertation yesterday.
The budget may or may not contain all the answers to our economic problems but it has the appearance of an honest and credible attempt to meet the country's need, that is, to kick-start the restoration of stability, opportunity and competitiveness. Nevertheless, Deputy Richard Bruton's accusation that the Government has leaned too heavily on a set of tax increases rather than concentrating on cutting the costs of running Government could yet prove correct. In such volatile times, nobody can be certain that the Government has found the complete solution to the crisis in the public finances. Nevertheless we now have a number of things we did not have last week. We have a five-year plan for economic recovery, a strategy to clean up the banks and a firm declaration of intent for public service reform.
We can only hope we will be able to look back on the Supplementary Budget of April 2009 as the first step in our recovery from economic disaster. That was the view of the editorial of the Irish Independent on the budget on 8 April 2009. That editorial set out the pious platitudes, the hopes and aspirations of the Government through the Minister for Finance on that date. All of these criteria have failed in the intervening period. If we were to believe all the Taoiseach has said we should go home and hope for the best.
The budget is one of figures and is not for people. It is a budget of necessity and not of choice. It is a budget of desperation, not of conviction. This a budget for an election day but like St. Augustine being made pure, it is a case of not just yet. A political choice was made by Fianna Fáil and the Green Party, backed by the Independent Members, in the hope that the fallout from the budget would pass over and that in 12 to 15 months, or some time within the next 100 weeks, they might have an opportunity to be judged by the people. Just as the Minister is unsure about having turned the corner I am equally sure that when the Government faces the wrath of the electorate in the next 100 weeks it will get its answer in no uncertain terms.
The background to this budget had been well set out and we should not forget why we have arrived at yesterday's decision. We have arrived at it because the three amigos, former Taoiseach, Deputy Bertie Ahern, the Taoiseach, Deputy Brian Cowen, and the Minister for Finance, Deputy Brian Lenihan, ignored all the warnings set out in recent years about the direction in which this country was heading, about the way we were heading down the slippery slope of putting all our eggs in one basket, and that a day of judgment would come followed by a day of necessity to make decisions. The good thing about this budget is that the main Opposition parties, the Fine Gael Party, the Labour Party and to a lesser extent Sinn Féin, now absent, did set out and agree on the broad parameters of the requirement for cuts in current spending of €4 billion.
The point made by the Minister for Finance in his pre-budget outlook was that the advice from the IMF, the OECD, the ESRI and every independent commentator was that it would be far better to deal with the deficit in the public finances by current spending cuts rather than taxation. What did the Minister do? He imposed €6 billion worth of tax on people's pockets last April with a consequential loss of €8,000 million in revenue up to the end of the year. He also got it wrong in respect of VAT which he reversed following persistent pressure from ourselves and others. His projections, and those of the Taoiseach when Minister for Finance, were wrong despite the fact that he had all the evidence from the Central Bank, the Office of the Financial Regulator and the Department of Finance that to proceed down that road was fraught with danger.
This budget neither deals with nor answers the questions of fairness, jobs or competitiveness. The Achilles heel of the Government is not just contained in yesterday's projections but is to do with Anglo Irish Bank. This is the fundamentally weak spot. I do not agree with the Taoiseach that the extent of €4 billion, €5 billion or €6 billion which he will come back looking for next year for recapitalisation of Anglo Irish Bank is a separate matter from actions taken yesterday. This is real money from the pockets of real taxpayers and it is going down a black hole. The problem is that the golden circle is still complete. While people are imprisoned in America we still have no evidence of any prosecution pending here——
For Ireland's Madoff.
——either from reports of the Director of Corporate Enforcement or the fraud squad or anybody else. It is worse when it transpires that in some cases the developers were the bankers themselves. The circle is very complete here. Yet the Taoiseach expects to come back to the Irish taxpayer as a separate entity as if it is not money out of their pockets and say, "Sorry, but we need another €4 billion, €5 billion or €6 billion to bail out Anglo Irish Bank". That is the Achilles heel.
The other leg will be NAMA. I listened last night to the Minister for Finance speaking on RTE television and talking about nationalisation. The reason for setting up NAMA was to prevent nationalisation and now massive transfers of resources of wealth are being transferred to speculators and bond investors in these banks. It may well be that the Government may be faced with having to implement nationalisation. If that is the case, it is a catastrophic failure on the part of the Minister for Finance. In a small number of cases it appears as if the developers themselves are also bankers. I am getting reports every week of the extent of rolled up interest from Anglo Irish Bank that in some cases is up to €300,000 per week. I wonder if the Taoiseach appreciates how a person who is a full-time carer looking after a person with Alzheimer's and who will have €8.60 cut off their weekly payment feels about this. This is where the unfairness is and where this budget does not measure up from top to bottom. Those at the top have walked away scot free, as in the case of Mr. Neary and Mr. Molloy, with pensions of €100,000 or more, untouched, while the people who clean out the Taoiseach's offices — as has been pointed out today — take their 5% cut as the case may be.
Worse than Zimbabwe.
The choices being made yesterday had to be made. The good aspect about this discourse is the Fine Gael Party, in accepting the parameters of €4 billion, set out a very different alternative strategy and a very different kind of budget where those vulnerable people, the carers, the disabled, the blind, the widows, the pensioners and the children, were protected and those in the other area of welfare who are available and able to work and willing to work, will be provided with challenges and training opportunities and jobs.
The Taoiseach has made a clear political choice. He may believe that the private sector which represents 60% of taxpayers, may feel that they have been left untouched by this budget simply because there is no increase in income tax. The levies now appear to be permanent and they will become permanent because the Taoiseach has not put in sufficient stimulus to create jobs in the way the Fine Gael Party presented its alternative budget. The difference between the two approaches is that the Fine Gael alternative budget was much fairer towards those working in the public service, particularly those at the lower end of the public service where every single one of the 55,000 employees working for less than €30,000 would have no cut and with proportionate cuts above that. The Minister's budget means that those on the lowest wages, earning the minimum wage, are now being forced to take the same proportion as the deception brought in by Ministers when they say they are taking a 15% cut in their own salaries to share the pain and to show leadership. This morning on radio the Minister for Social and Family Affairs said it would formalise a legal agreement of Ministers taking pay cuts of 15% when in reality this is only a 5% cut.
This budget is a blunt instrument. It is about figures and not about people. There is to be only a 1% reduction in the administration budgets of most Departments and the FÁS budget has actually increased. This is evidence of retrenching within all Departments, a regrouping, a case of getting back to the basics of self-defence in different Departments. Over the past four months, Ministers were working in parallel lines as to what contribution they were being required to make in order to meet this demand for a cut of €4 billion, to see what they could lop off and what could not be lopped off under any circumstances, without any view as to how they would get the country back to work, of how jobs could be created and how we can trade our way out of this mess the Government has led us into. They have arrived at the same conclusion which Fine Gael has been preaching for the past five years, that they cannot tax their way out of it and that we must trade our way back. A jobs stimulus package must be implemented. It is not just a case of lowering the price of drink or such like.
The Taoiseach could have used a broader and fairer approach. In respect of the public service he could have decided last April to promise to look at the question of effective reform in order to bring about a leaner, more efficient public service and the delivery of that service. Fine Gael will see to it that managers down the line are given the responsibility and the opportunity to account for and be rewarded for what they do and if they wish to be transferred to whatever Departments might need them. The Taoiseach did not do this and he now has a sullen, deeply resentful public service. I do not believe that a rash of strikes will solve anything but there are people who are very vociferous on this issue.
Deep down within the public service there is now a realisation and an understanding that the structure of social partnership, inadequate though it was in many respects, is now dead and buried so far as Fianna Fáil, the Greens and the Independents are concerned. The retrenchment taking place in every Department is clearly seen as an act of self-defence, of regrouping and a hope that the difficult days will pass.
The message being sent abroad will be accepted by the international markets because it is about figures and not about people. It is not about fairness or otherwise. The Taoiseach has used a blunt instrument to reach a saving of €4 billion and this will be accepted by the international markets. What the Fine Gael Party proposed was so much stronger in the context of the private sector because it provided more stimulus for job creation, for young people, for those who have jobs and for those employers who want to want to hold on to those employees and for the rewarding of new initiatives and opportunities to create new jobs.
This is the way we will get out of this situation, not by talking about the Irish diaspora who are emigrants from our country and will work in Canada, America and Australia and Britain, like 100 nurses from the western region who have recently received letters of relocation to Whipps Cross Hospital and the Royal Berkshire Hospital in London and other places in Britain. The taxpayers have paid €90,000 to train each of those nurses and they will be giving their services abroad. There is no one to beat the quality, compassion and capacity of an Irish nurse and this is with due respect to other nationalities, yet they are being sent abroad because the Government presides over a health system which the Taoiseach knows does not deliver efficiency either for the patient or in terms of value for money. The system works very well once one is inside it but all the problems are associated with getting into the system.
I disagree with the view expressed in The Irish Times today that this budget is above sectoral politics. When we all talk about accountability and transparency then I say, good luck to the people in Kenmare. The leopard has not changed his spots. In this regard the former Taoiseach, Deputy Bertie Ahern, said in effect, “We get in here and we stay in here and we do whatever we have to do to stay in here and I will write whatever cheque I have to write for banks and I will do whatever I have to do to keep this going”. The community hospital could be in Kenmare, Sneem, Barraduff, Killorglin, Dingle or it could be in Dundalk, Cashel, Monaghan or wherever else. What the Taoiseach has done in the middle of the deepest recession this wonderful democracy has ever experienced, an economic crisis caused by his party, is send his Whip up the steps to speak to the Independents and do secret deals. This is about politics and it is the reason I disagree with the Taoiseach that it is above sectoral politics or local interests. In one way the Taoiseach has not changed because this is about holding on to the Independents who, as we all know, are always on the plank waiting for a bigger ferry to come by as it sails to cleaner waters and ready to choose when to jump.
It is known as pork barrel politics in America.
With no stimulus provided, the real problem is the lack of credit from banks to businesses. Mr. Sheehy from Allied Irish Banks informed the Joint Committee on Finance and the Public Service that when his bank receives the bonds from the National Asset Management Agency it will not translate them into credit for business. Since the deposit guarantee was introduced, the Minister for Finance, Deputy Brian Lenihan, has told us we are deeply embedded in the banking sector and he will see to it that the banks deliver credit to business. This is not happening. Day after day, Deputies, including those opposite, are receiving evidence that shopkeepers are unable to secure credit or overdraft facilities and in many cases are having cheque books withdrawn simply because they came close to their overdraft limit. This is not the way our country should be.
A credit assessment procedure is being introduced under which people will be told they may be entitled to obtain credit from a bank but there is no guarantee they will get it. The timescale for introducing the measure means many thousands of businesses which are hanging on by their fingernails will go to the wall. I know of umpteen cases of solvent businesses which have never owed one bob and whose applications will not even be sent into the local bank manager.
There is no leverage on the banks. Ten more shops will close down every day. The belated decision to reverse the VAT increase, a measure the Fine Gael Party campaigned for, is welcome but is too little, too late. The Government had an opportunity to implement the reduction before Christmas. I do not know whether Deputy Perry heard a woman from Sligo speaking on radio this morning about how she made a saving of €500 by travelling to Enniskillen to do her shopping. People are not travelling across the Border to buy drink but to purchase a range of other goods, from prescriptions and medicines to baby products.
The greatest savings are made on nappies.
If the Taoiseach does not get down to business and talk to his British counterparts about levelling the playing pitch, the surge in cross-Border shopping will continue.
Six weeks ago, my party stated that whatever else the Government does, it should not tamper with the universality of child benefit. Every other country in Europe has an in-built mechanism in the tax system to address the cost of raising families. Ireland does not have such a mechanism. Child benefit is of major importance to many mothers. The Government has made a serious mistake in reducing it.
I am reminded of a comment made by Deputy Connaughton, whose antennae are sharper than those of most other people, that there are many mean husbands in this country and some mothers must ask their husbands for every cent they spend in managing their household budgets. Implicit in this is a recognition of the value of paying child benefit directly to mothers. The benefit is not abused. What the Government has done is wrong and will come back to haunt it. The reduction in child benefit for children who need it is a mistake.
What message does the decision to reduce the carer's allowance by €8.60 send out to full-time carers? The message is that the work of people in full-time caring positions is not valued by the State. If carers did not have love and respect for their kith and kin, the people for whom they are caring would be in State institutions at ten times the cost. They provide full-time care for family members in their homes because of their love of family. The Government has sent out a message, through the Minister for Social and Family Affairs, that it does not value this care or the work carers do, which saves the State hundreds of millions of euro every year.
The Government has made a direct attack on the public service as a result of which public servants will hold a deep sense of resentment.
The Fine Gael Party proposed a real stimulus through the establishment of a new economic recovery authority under which progress would be made on water, broadband, green energy, a smart grid, etc. More than 105,000 jobs would be created in the coming years in Cavan, Monaghan, Dublin, Louth, Cork and elsewhere for young people, engineers, tradesmen, graphic designers and manufacturers of all types of products. This is the type of stimulus we need and it is not evident in the budget.
The Government may be pandering to the private sector on the basis that income tax has not been increased but the fact remains that levies are here to stay and the economic stimulus is not what it should be.
I note the local government fund will be cut by 12.5% and road maintenance funding cut by 10%. While the road safety plans issued by the Road Safety Authority are very good, we will find that, with no money available in local authorities, there will be serious accidents and the county road structure will deteriorate at enormous cost. If the reduction in the local government fund is not recompensed no local authority will be able to balance its budget. The Government may have done this for political reasons given that the Fine Gael Party controls many local authorities or because the Minister for Transport, speaking on behalf of the Government, indicated that county and town councils will be abolished. I do not know if that is official Government policy.
I listen to people speak of wonderful advances being made in technology and what the Government is doing for schools. Am I to hear shouts of acclamation from across the hills when a laptop arrives in a local school? Schools will be given laptops even though a broadband service may not be available. As they used to say in country and western music, the day Big Tom came to town was a day to remember. In this case, we are all supposed to say the day the laptop arrived in the school was absolutely wonderful.
Training courses must be dealt with. With respect, many of the young people, particularly young men between the ages of 18 and 23 years, who are attending training courses have serious literacy and numeracy problems. Providing training courses will not sort out their problems. My advice, which is given constructively, is that the Government should arrange an aggressive series of educational courses running over 12 weeks and with classes limited to 14 for this category of young people with an identified educational problem. Young teachers should be employed to take the courses which should come under the management of FÁS. This approach would be much more beneficial than placing these young people on useless training courses when there are serious problems with their literacy and numeracy capacity.
I note €3 million has been allocated for a referendum on children's rights. While I support this measure, I suggest the Government accept the Bill introduced by Deputy Shatter on behalf of the Fine Gael Party and use the opportunity, at no extra cost, to have a simultaneous referendum on the matter of judicial pay to avoid having judges deemed an elite group and remove pressure on them to reduce pay as a consequence of not being subject to a normal pay decrease.
The Government should have increased mortgage interest relief, as Fine Gael proposed, for people who bought houses from 2004 onwards and are now in negative equity. These people have a real problem and will come under even greater pressure when interest rates increase next year as the German and French economies grow. If one job in a household is lost, couples will not be able to pay their mortgage. The problem for those who want to buy new houses is not mortgage interest relief but access to credit.
There is no sense of equity in the budget. It is a blunt instrument which was born out of desperation and a failure to agree public service reform. There is no stimulus in this for the jobs we need, there is no sense of capacity to reform or have a more effective public service. The Taoiseach will not get it now because he destroyed the goodwill of the leadership of the entire public sector. The private sector will not get the stimulus it should.
The Taoiseach had a glorious opportunity to bring about a situation inside five years whereby people would think of this country as energetic, vibrant and one that will climb to the top of the ladder again in terms of health, education, efficiency of public service, delivery of jobs and a place where people would wish to be. This should be a country of real vibrancy and energy which can climb back to the top but I do not believe the Taoiseach will be able to do this. He has wasted a glorious opportunity. When the people cast their verdict in due course, they will give a savage verdict on this Government of Fianna Fáil and the Green Party. It has been the worst Government in the history of the State as far as I am concerned.
Hear, hear.
I put on record that we are debating what is probably the most important budget in the history of the State, but we are not holding a proper debate. Many Members wish to contribute but the debate will finish in a short period. From speaking to my colleagues I am aware they are frustrated. We were elected to represent people. In his speech, the Taoiseach made reference to NAMA and the benefit of the long debate on that legislation but I do not see the benefit of a short debate on the budget. This budget is probably the most divisive ever and it will be cruel on young families and the vulnerable. The Taoiseach referred to the Government approach on framing this budget and that it was guided by three questions. It seems the Government puts everything in the form of three questions. It must be the magic number.
I will address the three questions, the first of which was whether this was necessary. It is necessary because the Taoiseach has made it so. He ran the country into the ground. Before the last election, when the Taoiseach served as the Minister for Finance he informed the people that the economy was fine. He is trying to do the same now and the message is that the business has been done and there is no problem, but he should be honest with the people. He should inform them we are in a major financial crisis. However, we must be fair with people as well.
A person who cares for an individual came to my clinic in the past two or three days. The person for whom he cares gets eleven prescriptions per week. They will now cost an additional €5.50 per week, which is the bones of almost €300 per year. Will such people begin to make decisions such as that they cannot afford to get these prescriptions? Will they end up in hospital with a cost to the health services? There is a complete lack of joined-up thinking.
I refer to the position of a widow. The Taoiseach made reference to the fact that he understood. How can he understand that when someone has lost a spouse——
It is difficult.
——the cost of living does not go down. The Government will take €8.30 per week from a widow or widower. This shows a complete lack of understanding and that the Government is completely out of touch. We all agree there was a need for €4 billion of savings but the problem is the way in which it was done.
Another question put by the Taoiseach was whether the budget is fair. It is not fair. Let us consider the issue in terms of the public sector. Regardless of income, public servants will be paid 5% less straight off. There are 55,000 people in the public sector earning €30,000 or less. When the banks were handing out mortgages it was said these people were gilt edged and many such young couples have 100% mortgages they can ill-afford. They have taken a significant drop in income.
We seek fairness and our party agreed there was a need for public sector reform. We considered savings of €1.2 billion. However, we proposed the first €30,000 of income for a public servant would be exempt and that it would be graduated thereafter. If someone earned €40,000, only €10,000 of their income would be subject to a pay cut. That is fair whereas this is grossly unfair, shows a lack of understanding and it is divisive.
Will the Taoiseach put on record what exactly happened at the pay talks? Why were there talks over several weeks but five days before this critical budget, the Taoiseach walked out from them? The problem is the Taoiseach is eroding trust and to govern properly, one must have trust. The Government has suddenly produced a public sector pay cut that hits everyone from the first euro. Not only that, the Government had the cheek to state that Ministers would take a 15% pay cut. They will take a 5% cut but workers in the public sector will be subject to a 5% pay cut and further cuts thereafter. The Taoiseach did not refer to the cut from pension levy they took previously. If we group these together it is clear the Taoiseach should have referred to a pay cut of up to 10% or 12%. He did not do so, but the members of the Government calculated it this way for themselves. We need honesty and proper, effective joined-up thinking. We do not need a Government stumbling from crisis to crisis and basically engaged in spinning. The key point is this budget is not fair.
The third question put by the Taoiseach was whether the budget would assist recovery. It will not. The fiscal stimulus consists of reducing the excise duty on alcohol and a change to the VAT rate. I repeat that there is nothing in that. The Taoiseach referred to the employers' PRSI exemption for taking on new employees. It is welcome but what about those currently struggling to retain existing employees? Why did the Taoiseach not consider our proposal to cut the lower rate of PRSI by a half, to 8.5% for an employer, and to cut the top rate by 2%? That would have cut costs for employers while retaining the minimum wage for employees. However, there is no joined-up thinking. It appears the Government has carried out a book keeping exercise with no thoughts of bringing the economy out of recession.
I refer to NAMA. The Taoiseach remarked that he took a systematic view in terms of dealing with the banking crisis and that the Government was dealing with the banks. However, the former chief executive of AIB was before the Oireachtas Joint Committee on Finance and the Public Services last week and stated NAMA would make no difference. He also stated AIB would not use the NAMA bonds to access cheaper funds from the ECB to provide a stimulus to the economy. The Taoiseach, the Minister for Finance and their colleagues, came out and sold NAMA to the public as a fiscal stimulus that would get credit flowing. They stated they would make the banks face up to the scale of their problems but it is a case of the tail wagging the dog. There has been no change to top management or the practices of the banks.
We have travelled throughout the country with Deputy Enda Kenny to meet business people. The diaspora are very welcome but the people who will get the economy going are the small business people throughout the country, the person who employes two, three or four people. Many such people cannot take out of their businesses what is necessary to pay their employees. They wish to keep people in employment, to stay alive and they seek supports for existing employees which is not being provided.
The Taoiseach referred to tourism. One of the greatest issues in tourism at present is the travel tax. It did not yield any great income for the Exchequer but the Government did not see fit to remove it. Such countries as Holland realised the error of its way and removed it. The problem with bringing the economy out of recession is that it must be considered in a strategic way. One cannot sell a line to the effect that the troubled waters have passed. 2010 will be a very difficult year for people. We must give people hope but we must also give them a sound basis in terms of policy, to deal with the cost for employers for existing employees as well as new employees.
The Taoiseach referred to reducing the VAT rate, which is welcome but it should not have been increased. Once again, the same mistakes have been repeated. The VAT rate was increased. There is a rule in business that one never increases prices when business is going badly but the Government did that in the previous budget. The logic of that defies description. Now that the Government is reversing the decision, the change will not be effected until 1 January. That gives consumers and retailers no possibility to benefit from the change in the Christmas period. We suggested that the lower rate of VAT should be reduced. That would not be as costly as reducing the top rate and hugely labour-intensive businesses once again would provide a stimulus.
How can the Taoiseach use the words "fairness" and "understanding" in the context of taking €8.30 from widows and people on invalidity pensions and €8.20 from carers? The drug refund scheme has been increased by approximately 40% to €120 since I became a Deputy in 2007. The most vulnerable are affected. Once again, the Government has gone for the easy targets.
I accept that everyone has to pay his or her fair share. An anomaly exists currently in the PRSI ceiling for employees. If one is currently employed and earning €75,000 or less, one pays 4% PRSI on the full income, but if one earns more than €75,000, one pays no employee's PRSI on income above that amount. Why did the Government not see fit to reduce that anomaly and make the higher earners pay their fair share to get the economy moving again?
The Taoiseach made a threat in terms of the public sector in his speech in the context of further pay cuts. The Minister for Social and Family Affairs referred on the radio this morning to further pay cuts for the public service. The Taoiseach should be mindful of the old adage that one catches more flies with honey. Bully boy tactics and pulling out of talks five days in advance of the budget does not inspire confidence. We need to spread the load and get everyone working together. A coherent plan is required to move the economy forward but the budget is sorely lacking in that respect.
If we were allowed to have a proper budget debate we would be able to consider the budget provisions in greater detail. The devil is always in the detail. I note that the Government has introduced cuts across a raft of areas. Deputy Kenny has referred to the local government fund and the roads budget. In my constituency of Limerick a significant cut has been made to the housing budget, it is down from €1.1 billion to €800 million. The Minister of State, Deputy Finneran, is aware of that.
There was an increase.
I question whether the regeneration of Limerick is under threat. The biggest problem is lack of joined-up thinking and a coherent plan which should be focused on jobs. The Taoiseach is well aware that the ESRI has stated that more than half of our general Government deficit is caused by unemployment. If we are to come out of the recession we must ensure that we retain existing jobs. It is difficult to reconcile the Taoiseach's statement that we have turned the corner when we will have 75,000 extra people on the live register next year. Unemployment in 2010 has been projected to be 13% and 12% in 2011. It is important to be honest and upright with people. The Taoiseach should tell it as it is to ensure that trust is retained. The problem with the budget is that the Taoiseach has done neither.
Young families are travelling the length of this country to go to the North because Pampers and baby food are significantly cheaper there, yet the Government is taking €16 from child benefit. That is the one payment that goes directly and exclusively to the mother and it is used for children's clothing and extra costs. While fathers are also important, mothers are the focal point for child rearing.
The Government has got it wrong. It has not allowed time for proper debate and subverted democracy in this House. We should have had time in the House to go through the budget. If the Taoiseach wants to hear our views he should extend the debate on the budget and allow every Member of the House to have an input to what is probably the most critical budget. Does the budget satisfy the Taoiseach's three tests? Is it fair? No, it is not. Is it necessary? Yes, but because of the Government's mistakes. Will it lead to recovery? Absolutely not, because it gives no proper stimulus in terms of retaining jobs, which is what the budget should have been about. The Government has missed an opportunity.
I wish to share time with Deputies Higgins and Quinn.
On what basis?
I will take 20 minutes to 25 minutes and the balance can be shared between both Deputies.
Is that agreed? Agreed.
I agree with one thing the Minister for Finance said yesterday, namely, that the late Senator Ted Kennedy was one of the best friends this country ever had. I am pleased that his memory is to be honoured, but Ted Kennedy's name should not have been invoked to dignify a budget that flies in the face of everything that he worked for and fought for.
Deputies
Hear, hear.
Ted Kennedy spent his entire life trying to get a decent health service for the people he represented. The biggest cut in any of area in the budget is to health services. Ted Kennedy was a man who fought for the poor. He said the poor may be out of political fashion but they are not without human needs. He would never have supported measures that take money from the blind, carers, widows and people who have lost their jobs.
Ted Kennedy was a champion of public servants. He always spoke with pride and with respect of firefighters, police officers, teachers and local authority workers. I wonder what he would have thought of the campaign that was successfully conducted by Fianna Fáil for the past 12 months to denigrate abuse, belittle and demean the people who work in our schools and hospitals. I was saddened over the weekend when a hospital worker told me how she had to meet an abusive tirade from a drunken lout on a night out when she was described as a parasite. The same drunken lout now probably has something to cheer about from this budget given the reduction in the price of alcohol. All of that was done to harden public opinion against public servants to justify the cuts in pay that were announced yesterday, including the savage cuts in the pay of the lowest paid workers in the public service. The budget owes more to the thinking of Ronald Reagan than it does to the thinking of Ted Kennedy.
Hear, hear.
It is a disgrace. The budget is built on bad economics and bad politics and delivered by a broken Government. It will divide the country not unite it. It will destroy jobs not create them, and it will push hundreds of thousands of families deeper into poverty.
Every family is today paying the price for 12 years of incompetent, reckless, dishonest Government by Fianna Fáil and the wealthy interests that backed the party, but some families are paying much more than others. The people who pay for everything must pay again. The wealthy, greedy and feckless have again been protected. The feathers in their nests have been barely ruffled. The macro-economics of this budget were never in doubt. There was support in this House and across political parties for an adjustment of €4 billion. However, choices had to be made. What were the choices made by Fianna Fáil? A Minister will now take a smaller pay cut than an executive officer in his or her Department. The public servant on €50,000 loses at least 4% of after tax income while the banker on ten times that, €500,000, loses nothing at all.
The meagre payments for widows, the blind, carers and people on disability are hammered. A family with two children under six years of age could lose €1,380. Widows of working age will take a cut of €641, including the Christmas payment. A couple on invalidity pension suffers a cut of €1,100. Carer's benefit is cut by €648 per annum. Blind pensioner couples could lose up to €1,455. The cost of drugs for families will go up €240 per year. However, a mere 1% of the adjustment comes from the highest earners in the land, if we ever see it. Children are hit three times in this budget. Child benefit is cut. The early childhood supplement is abolished and for children whose families are on social welfare, the Christmas payment is gone. Earnest lectures on price statistics will not feed a hungry child or clothe him or her for school.
This budget was written by the silver spoon wing of a Cabinet that does not have the first notion of what it is to live on a widow's pension or to live in a house where the father has no work. There are cuts here that break new ground in political stupidity. When one cuts payments for Youthreach and similar schemes, one cuts off some of the most troubled young people in our society. Sadly, the price one will pay will be measured in units of €107,000 — the cost of a place in St. Patrick's institution.
Why has this been done? It has been done because Fianna Fáil has brought the economy to its knees. It was handed a fast growing competitive economy, driven by exports, creating jobs and with a budget surplus. It turned it into a property bubble which has come crashing down on all our heads.
In the past two years, 250,000 people have been put onto the dole queue. Fianna Fáil has created one of the longest and deepest recessions in the developed world since the Second World War. Fianna Fáil has created a structural deficit in the economy which, on its own figures, requires total corrections of €19.5 billion to put right. It has mortgaged our children's future through its gross incompetence in handling of the banking crisis — a crisis that was of its own making. There is a blanket guarantee wider than any other, exposing the taxpayer to €440 billion in liabilities. NAMA, a millstone round the necks of a generation, has created a debt of €12,000 for every man woman and child living in Ireland today. Last night the Minister for Finance finally acknowledged what the Labour Party told him all through last year, that is, that the banks would have to be nationalised. That should have been done upfront in the beginning rather than doing it now by default and probably at greater cost to the public and our economy.
Fianna Fáil has sparked a new wave of emigration. Once again this Christmas, we will witness the scenes of heartbreak and loss at airports and ferry ports as the cream of a generation depart these shores and their families are left behind to live with the void. Some 40,000 people are expected to leave Ireland next year. This is what the silver spoon wing of the Cabinet has brought on the heads of the sons and daughters of honest people who pay for everything and qualify for nothing.
That was the Ireland we should have left behind. That is the Ireland that does that not have to be but always when one puts Fianna Fáil in charge, it will buy votes until there is no money left. Twice in a generation, Fianna Fáil has brought this country to ruin. It is never the wealthy or the greedy who are forced to carry the can. For Fianna Fáil now to describe itself as a republican party is almost grotesque.
This budget is based not on national unity or common purpose or social solidarity but on division, conflict and greed. Fianna Fáil has turned its back on the people and on its own traditions. Seán Lemass believed in public service and in a strong State sector in the Irish economy. Fianna Fáil is no longer the party of Lemass. Fianna Fáil is the Celtic Tories. This budget is a Tory dream come to life. Hammer public services, attack public servants, kick the poor and let the wealthy and the influential off scot free. The ideology that got us into this mess is running riot again.
It could, and should, have been very different. The Government had the opportunity to secure a national agreement to deal with the economic disaster that it created. The Labour Party proposed and would have supported a national agreement to deal with the fiscal crisis and the jobs crisis in a coherent and comprehensive way. We proposed a set of five principles on which an agreement for national recovery could be based, namely, a coherent jobs strategy, protection for the family home, a negotiated reduction in the public sector pay bill of €1.3billion, a fair budget and a guarantee of industrial peace. Just as we supported the Government on Lisbon because it was right for the country, so too did we support a reduction in the deficit of €4 billion in this budget. We did so because we put the national interest first and it is important that, as a country, we demonstrate a collective commitment to dealing with this disaster even if it was of Fianna Fáil's making.
As is clear now, there would also have been support from the trade unions for a national agreement of this kind. We know now that there was an opportunity for major public sector reforms — measures I have been calling for since the spring of this year and which I have called for directly in addressing trade union conferences. Fundamental shifts in the terms and conditions of employment would have given the Government the tools it needed to rebuild and reform our public services.
However, the Government spurned all that. Whether it was a heave, a coup or a split, all of this was thrown away for short-term political purposes. The system of national pay agreements which Fianna Fáil has lauded for so long is dead. The Taoiseach saying he will re-engage on the transformational agenda is wishful thinking because he has dismissed from the negotiating room those with whom he needs to engage. An unprecedented opportunity for reform has been lost. A signal has been sent to the outside world that Ireland is a house divided against itself. A system of industrial relations that worked well for 22 years has been discarded.
By this time next year, inflation will have returned to the European and Irish economies. That will trigger a round of private and public sector pay claims that there is now no machinery to address. There are many who will cheer that development. Some believe that national agreements were beyond repair while others believe that leadership is measured by a willingness to impose pain on others and that real leadership is measured by a willingness to impose it on the weak. Those voices, the pain brigade, know little of history and care less for the future.
The people who are sent away from the bargaining table now will return only on their own terms because beggar-my-neighbour economics will get one good headlines in the short term but it will store up trouble in the medium term and will undermine confidence in our capacity, as a country, to manage our way through this crisis.
There is a broader agenda here and it is a low pay one. People on low pay in the public sector have taken a severe hit. Young unemployed people have had their benefits cut in half. The next target will be the national minimum wage. These moves are intended to drive down wages at the lower end of the labour market. Rather than train people and support them in finding new skills, Fianna Fáil is creating a new cohort of working poor. A young graduate will jump at a job that pays the minimum wage and a person on €40,000 could find himself or herself replaced by two people with master's degrees who will cost their employer less.
Fianna Fáil had the opportunity of national unity and it blew it. The Labour Party set out how this budget could have been balanced and fair. Instead of cutting child benefit to save €123 million, Fianna Fáil could have made modest changes to capital taxes. Instead of cutting welfare payments to people of working age, Fianna Fáil could have abolished all of the property schemes. Instead of cutting maternity benefit for new mothers to save €11 million, Fianna Fáil could have abolished any one of several minor reliefs.
Instead, Fianna Fáil reverted to the beggar-my-neighbour strategy. The idea that if one isolates one or two groups in society, if one targets them and blackguards them, if one denigrates them day after day, then one can load the problem onto them and others can avoid carrying their share of the load. For the past 12 months, therefore, there has been an unparalleled campaign of abuse and denigration targeted at nurses, teachers, council workers and ambulance drivers. For more than a year, it has been as though it was these people — servants of the people — who caused the economic crisis. It was not Fianna Fáil or the property developers that this budget did not touch. It was certainly not the bankers.
There is a certain irony in the measures announced to cut the long-term costs of public pensions when we consider that the pension fund has already been handed over to the banks. The rich and privileged of Irish society have circled the wagons and Fianna Fáil has ridden to the rescue. They got NAMA and in return the voices of privilege have been out in force. These are the stockbroker economists who do not mention the bank that owns them or the bonds they trade and the tax consultants who do not mention their rich clients. In the run up to this budget we have had a queue of such people at the national microphone — bankers' lackeys, most of them telling us that "you cannot tax the rich –sure they do not have a bob — and it is all the fault of the teacher, the garda, the council road sweeper".
The alternative was to bring forward a budget that contained a fair balance between expenditure cuts and revenue-enhancing measures. It would be a budget based on the principle that those who have the most must contribute the most. The Government refused to do that. It constantly tells us that it is basing the budget strategy on international evidence to the effect that successful fiscal adjustments are expenditure-based.
We can consider the international evidence to which Fianna Fáil is wedded. I tend to agree with Dr. Garret FitzGerald, who has said that the conclusions to which the Government is wedded are generalisations that do not apply to Ireland's case. A paper published by the European Commission last year tends to agree. It indicates that the Government's line is the conventional wisdom but it also states: "More recent studies, focusing on country cases, provide evidence that both expenditure and revenue-based consolidation can be successful." In other words, international evidence is fine if it is leavened with a dose of reality and some basic common sense.
Such common sense was set out by Jens Henriksonn, a key figure in solving Sweden's budget crisis in the 1990s. In an essay for the Bruegal Institute he writes: “If a consolidation package consists of both tax increases and expenditure cuts the distributional effect can be fair.” Fairness is not a luxury or an optional extra; it is the glue that keeps a society together in a crisis. This budget is manifestly unfair as it targets the poor, public servants and children. It lets the bankers, the property speculators and the Fianna Fáil backers off the hook.
This is a financial emergency yet even during the Emergency of the Second World War it was possible to introduce child benefit to promote social solidarity. Child benefit is the only payment through which the State recognises the cost of bringing up children in our society. It is a payment that does not produce poverty traps because it is paid irrespective of a person's employment status. It is the closest this country has ever come to treating all the children of the nation equally.
The biggest gap in this budget is an absence of a coherent jobs strategy. Time and again I have made the point that the banking, budgetary and jobs crises are interlinked. We must deal with them all in a coherent manner. Fianna Fáil has been so fixated with the banks and the budget that it has utterly neglected the jobs crisis. The measures introduced yesterday are nothing more than a laughable fig leaf. They are a series of ad hoc concessions to the pleading of special interests. There is no strategy here to promote the knowledge economy or even the smart economy, only the smart alec economy.
It is necessary to make a major budgetary adjustment to deal with the Fianna Fáil deficit. We will never get out of this crisis until we start to create more jobs. We cannot cut our way out of a deficit and we must grow the revenue line as well. We must lower the cost of this Government's failures — the cost of unemployment.
The cost-benefit analysis here is easy as every person off the dole is one fewer person being supported by social welfare and one more person paying into the Exchequer. In our pre-budget statement, Labour identified adjustments totalling €5.8 billion, which would allow for the €4 billion adjustment in the budget deficit while at the same time creating a jobs fund of at least €1.15 billion. Labour's jobs fund would be a key component in a broader strategy to deal with the jobs crisis. Labour's objective is to retool the Irish economy, wean it off its dependence on property and return to export-led growth.
This country can be a leader in the global knowledge economy if we take the necessary steps now to support that change. There are four actions we must take immediately to make this change a reality. First, we must create a structure of enterprise supports that are both wide and deep. As the world economy begins to recover, new opportunities will open up for Irish business. There is a new and deep pool of entrepreneurial talent in Ireland that we have to support, whether it is a new start-up, an expansion programme or a university research spin-off. We must strengthen the framework of supports available to Irish companies.
Second, we have to do the same for people. It is simply economically and socially unsupportable to have more than 400,000 people on the live register, with more to come next year. We must find the means and resources to give these people opportunities to train, learn and gain work experience. The sums of money involved are not great and Labour has shown how it can be done.
Third, we need a strategy for investment in infrastructure and companies. We need a new national development plan to match more limited resources to strategic priorities. The Government says it has done a review but we need more than that. We need a new, costed, rigorously-evaluated plan. We need to ensure that we are meeting the needs of the knowledge economy. Labour has proposed the establishment of a State investment bank to assist in the financing of public investment and we have to ensure there is adequate growth capital for firms with ideas that need financial support to grow.
Fourth, we need sectoral strategies to deliver jobs. Not everyone can or will be employed in a software firm or a high-tech start-up. We must ensure that job opportunities are opened up across a range of skills and across the regions. I welcome the initiatives on tourism, and I will keep an open mind on what is being proposed for the food sector.
We need strategies that will build comparative advantage on the back of our natural strengths in sectors such as clean technology, food and the creative industries. The native creativity and genius of the Irish people is not just a cultural asset, it is an economic asset. In the UK, creative industries employ as many people as financial services.
Above all, we must rebuild confidence in this economy. The Minister has spoken much about confidence, and well he might because he destroyed it along with the other three horsemen of economic collapse, Professor Ahern, Commissioner McCreevy and the Taoiseach, Deputy Brian Cowen. The collapse in confidence in the Irish economy is both domestic and international. Following the disastrous handling of the banking crisis, Irish Government debt now costs 140 basis points more than the equivalent debt in Germany and at home, the savings ratio has rocketed.
The ERSI estimates that the savings ratio, which in 2007 was 2.3%, will exceed 11% in 2009 and 2010. That is the equivalent of taking some €9 billion out of the economy. If we are to restore confidence, we must do more than just attack the poor. We must reassure families that their home will be safe, there must be greater protection for homeowners, real action to clear out the banks and a firm determination to ensure a flow of credit to business.
The real confidence building measure that the country needs is the one the Taoiseach will not grant us — a change of Government. This Government is broken beyond repair. It is led by a Taoiseach who has been fatally undermined by his Minister for Finance. In the Taoiseach's contribution he spoke of a €3 billion adjustment next year but the Minister for Finance spoke of a €2 billion adjustment in his budget speech. The Taoiseach then has the audacity to suggest there are differences in approach between Fine Gael and Labour when the present Government does not appear to even be on song in what the target is for 2011.
This Government will limp on and will inflict more and more damage as it does so. The Irish economy and the Irish people need a fresh start and a new direction. They need a Government that will put jobs and people at the heart of economic policy, and which will make the hard decisions on spending but make the right decisions on jobs. Fianna Fáil cannot do that as it does not have the moral authority, the imagination or the wit. This budget is a disgrace and so is this Government.
Nothing sums up this budget more than the tawdry proposal to take money from the blind. There are Government Deputies who will return home this weekend after voting for the social welfare Bill and tell their constituents that they did not have any choice in doing so because they were under the Whip. Six Deputies are not under a whip and they have an individual choice to make. Deputy Healy-Rae has a choice to make tomorrow. Does he support taking money from widows? Deputy Lowry has to decide whether he supports taking money from the blind. Deputy Grealish has to decide whether he supports taking money from carers. Deputy McDaid has to decide whether he supports taking money from people with disabilities. Deputies Devins and Scanlan have to decide whether they support taking €1 billion from the health service and if they do, will the people of Sligo ever see the cancer and other services that are being lost in their local hospital?
The Labour Party's alternative budget was based on fairness and solidarity, it was practical and it was active. In meeting all those criteria, what was being proposed could have achieved enormous, widespread public acceptance. That would be different from what we heard yesterday, which was about politics. The Government was well served by those commentators who, for the past few weeks, followed the Mrs. Thatcher recipe, TINA, "There is no alternative", and therefore, we got a shabby discourse, a limited analysis and a suggestion of inevitability that was to be visited upon us. Very little was left to expectation. There is an alternative to TINA, which might be uncomfortable to mention for some Members. It is TARA, "There are radical alternatives".
However, the discourse was incapable of a radical alternative. For example, former Taoiseach, Deputy Bertie Ahern, frequently spoke about his task force on citizenship. This was an opportunity for citizenship. One could in the midst of, and emerging from, a recession define "citizenship" in terms of a floor below which people should not be allowed to fall but that did not happen. The Government could have examined issues of redistribution. Instead of any concept of redistribution and a political economy that would include macroeconomics, which were beyond fiscal adjustment, we got a tawdry notion that certain steps were the only steps and these had to be taken and we got a disgraceful suggestion that, somehow or other, the entire population had created the problem. In more recent weeks, one could not speak at all about how we came to be here. It was as if the position we are in was not the position to which we had been delivered by Fianna Fáil Ministers, those in charge of regulation who failed us and wrecked public trust and those who damaged Ireland's reputation abroad and for which ordinary taxpayers now have to pay more taxes to service interest rates that are above the norm. These are truths and to seek to avoid them was quite scandalous.
The Taoiseach stated that he has been in the House since 1984 but I have been here since 1981. Since then I have spoken about the consequences of inventing the depeopled economy. This refers to the economy as a system where the people do not matter, the blind do not matter, the disabled do not matter or the graduates without jobs do not matter. Suddenly it is all the young people's fault and they are failures before they emigrate but it is not a failure of the economy. That limited thinking is not practical, moral or of any value in getting out us of where we are.
On 26 March 2009, a long time after I entered the House, I asked the Minister for Finance in Parliamentary Question No. 89 what proposals he had for gathering income from wealth. He replied: "I have been informed that no general research has been carried out over the past ten years by either the Department of Finance or the Revenue Commissioners regarding the extent and breakdown of wealth as opposed to income". That was always the case. Opposition to a wealth tax in the old days was not to the yield but to what it would reveal.
Yesterday, it was suggested in regard to the tax breaks, for example, that somehow or other, we have just come to our present position like it was an attack of the 'flu. In 2004 annual tax reliefs cost us €8.4 billion, which equated to 22% of total taxation. That is the year my colleague, Deputy Burton, Labour Party spokesperson on finance, raised the issue of 48 people having a tax rate of less than 5%. The Minister announced yesterday that he has made significant progress because the effective tax rate of those who are at the top of the heap will move 20.45% to 30% but there has been no clawback from those who accumulated and transferred wealth during the McCreevy years. In addition, of those who availed of such tax breaks in recent years, 66% were on incomes of more than €200,000 and 77% were on more than €100,000. Tax breaks were then provided for car parks, spas, health clinics and so on. Those who had money were forking it in to avail of these different tax breaks. In one year, €8.5 billion was invested in property abroad. Are any of these people paying for this so-called adjustment, which is, in fact, a gross management of the economy? Are any of them facing such an adjustment in the name of citizenship, to use the former Taoiseach's phrase, in order that, for example, those who were quickest and deepest into the trough might pay a fair share in getting us into a new concept?
I am sick and tired of people being described as "economists" on television and radio in a public service broadcasting system that does not offer economic alternatives but rather goes along with the drift of the inevitable. What kind of analysis is made by those who are involved in this? When it all quietens down, the suggestion that one should say to the most vulnerable and broken, the widows and children and so on that they must pay for all this because it has to be is bad thinking.
I mentioned economics. It is fascinating when someone from the right wing school, the paradigm that has failed us, comes on television and the subtitle used in the interview is "economist", whereas when someone with the same qualifications offering an equal agenda comes on, the name of a trade union is used as the subtitle. It is as if we have a high priesthood of failure. The same people who could not analyse the property bubble or speak about the Government's dependency on one source of revenue are precisely the people who now say the poorest of the poor must be among those who are pushed to the front to pay for our adjustment.
What a tragedy it is that this recession is not being used to build citizenship and to foster an active politics that would put all the mechanisms for job creation and task forces into the green economy and the creative economy; that instead of cutting carer's allowance would recognise carers at work; that would do a deal with the public service unions and the private sector to share work, create new employment and discuss the working day; and that would have a decent society instead of a society that is deep into a drink problem. One could do all those things for citizenship but the high priesthood of the commentariat, no more than the Minister for Finance, do not have the moral courage, the ability or the commitment to speak about a genuine alternative, the Labour Party's alternative, which was fair, effective, active and in solidarity and it could have offered hope.
I have been in the House for quite some time and I have listened to various speeches on various occasions in good times and in bad. One word was missing from yesterday's speech by the Minister for Finance and this morning's speech by the Taoiseach. It is a simple Anglo-Saxon word and it is the word "sorry". Not once has Fianna Fáil said to itself, to the nation or to the Members of this House, "Sorry, we screwed up". They do not do apologies in Fianna Fáil but if they did it would be a start. Yes, we have screwed up. Yes, this country has screwed up and some people are more responsible for it than others. The start of a recovery that would embrace the principles of citizenship, to which my friend and colleague, Deputy Michael D. Higgins referred and which was once a mantra for the former Taoiseach, would be fixed.
We will get out of this crisis. We will not get out of it the way the Labour Party wants to get out of it. We will not get out of it as quickly as Fianna Fáil thinks we will get out of it. We will carry for the rest of their lives people who will be the walking wounded because of the damage done to them. I am thinking in particular of the type of person referred to by Deputy Eamon Gilmore, such as a person who, because of a broken home, is looking for a second chance at education in a Youthreach programme. That will now be denied. All of the research shows that such a person will cost the Government, me and the taxpayer far more money when he or she ends up in prison than the miserable amount of saving that cutting the Youthreach programme will achieve. This is not even to count in the cost of the damage to such people, their partners and perhaps to their children.
International surveys show that equal societies are fairer societies.
Hear, hear.
International surveys also show that equal societies are healthier societies and are more competitive. Consider the competitive economies in Finland and Scandinavia. Yes, they are high-tax economies and that is their choice. However, they are also much fairer societies and are more deeply competitive than ours.
I want to say to Fianna Fáil that the exercise in censorship being undertaken in this debate is without precedent. When will we be able to go through the Book of Estimates and ask Ministers what it means?
Deputies
Hear, hear.
What exactly is the impact of this? Why has the Minister for Education and Science, Deputy Batt O'Keeffe, decided to leave the primary and secondary sectors relatively untouched but to impose a 4% cut on the third level sector? We hear speeches about the smart economy, the knowledge economy, investing in third level education and trying to get a cohort of those coming out of secondary schools into third level. In most cases, this is appealing to a generation whose parents never went to third level and who are frightened of it because they do not know it, never experienced it and are scared of taking on debt and borrowing to put their children into that world of experience which they never had. However, we are imposing a 4% cut on third level education. It seems quite arbitrary but I have had only a chance to glimpse at one section. I suspect my colleagues could only do the same for the sections for which they have responsibility.
I welcomed one aspect of the speech made by the Minister yesterday. At last the Government will deal with the tax exiles. The phrase "tax exiles" does them an honour they do not deserve. They are not exiles, they are tax fugitives.
That is it.
I find it hard to reconcile what the Minister, Deputy Brian Lenihan, stated yesterday with what I saw in the newspapers some weeks ago about the President of this Republic attending a function hosted by a tax fugitive. What type of message on citizenship did that send out?
He provided €30 million funding on that day.
We all could provide charities of our choice if we had designer taxes. That is outrageous.
He did not pay tax.
Deputy Quinn without interruption.
One thing about Michael O'Leary is that he stays here and pays his tax.
Absolutely. They are not tax exiles, they are tax fugitives.
Dodgers.
When we see the legislation, and I note the presence in the Chamber of a senior official of the Department of Finance, I will invite the Department to consider the following because it will be very interesting to see how the detail of that provision is written. It will be hard to impose and assess. I suggest the simple additional requirement to the legislation that any tax fugitives who wish to renew their passports, which are EU passports and are of great benefit, would have to do what a taxi driver seeking a licence has to do, namely, provide a tax clearance certificate. It is very simple and is used all the time by the Department of Finance for contractors trying to get jobs of one type or another.
I would like to discuss many other matters but time prevents me from doing so. The House will have to find a way of scrutinising in detail the impact of the damage that this budget will do to so many sectors of our economy. How that is to be done I do not know. Today's business was ordered in such a way that after the leaders of the various parties have spoken the debate will end and will not be resumed. That is an insult to every Deputy elected to the House and who has something to say from their experience and constituency. We will have to find time to bring Ministers before committees to explain how precisely matters will impact on the delivery of services.
There are alternatives put forward by this side of the House.
To the Fianna Fáil and Green Party Members present I state that I know they will not hold an election soon but they could start by saying they are sorry that they screwed up, that they will try to fix it as best they can and that they will take advice when they like it from this side of the House. They receive constructive advice from this side of the House that never in its congenital life did Fianna Fáil offer when it was on this side of the House.
Hear, hear.
The Taoiseach spoke about how he came to the House in 1984. I remember 1984 and I remember the man who sat where the leader of the Fine Gael Party now sits, one Deputy Haughey. All we got was abuse and fantasy from a power-hungry party whose only objective was to get to the other side of the House and use the position of power. We now know that was Mr. Haughey's motivation as it is in the public domain. The House has been blessed with the constructive contributions of this side of the House to the Fianna Fáil Party and the Government. I am sorry they have not had the courage, generosity or decency to acknowledge them and implement some of them.
Hear, hear.
The next slot is for Sinn Féin and there are 40 minutes in the slot.
I understood it would pass to this side of the House after the Labour Party slot.
I apologise to the Minister, my instructions were incorrect.
Sinn Féin understands and accepts the change.
The Minister has 40 minutes which will be followed by the Sinn Féin slot.
I will share time with the Minister for Energy, Communications, and Natural Resources, Deputy Eamon Ryan and Deputy Ciarán Cuffe.
Is that agreed? Agreed.
I welcome the opportunity of contributing to this debate on the budget as leader of the Green Party and as Minister for the Environment, Heritage and Local Government. As leader of the Green Party I want to take this opportunity to set out my party's position on budget 2010. There is no doubt that this budget is very tough but the Green Party worked hard with our partners in Government to ensure it was fair. I believe that taken in the round people will find that it is fair under the circumstances.
Nobody comes into public life to cut the pay of public sector workers. Nobody comes into public life to reduce welfare payments. However, given the scale of the public pay and welfare spending, there was no other option. This is about our future prosperity and independence. My colleagues in the Green Party are in politics to tell people the truth. We believe that is far more important than chasing short-term popularity. The truth is that there is no easy option to fix our current crisis.
In this budget we have succeeded in protecting pensioners and education services, including reversing cuts from last year as well as providing a stimulus for jobs in the green economy. I have stated on many occasions in the House that we must take on board the harsh lessons of the 1980s, for which the people paid so dearly. It is incumbent on us to learn from what occurred at that time. We must take swift, harsh measures to ensure this recession does not continue for the next decade or more.
I am proud that the tax increases introduced in recent budgets have been extremely progressive in effect. A single person earning €25,000 now pays €500 more in tax and levies than in 2008. However, the additional taxes and levies imposed on those earning €250,000 amount to almost €17,000 or 33 times the contribution of a person on €25,000. I am encouraged by that.
The budget increases the minimum effective rate of tax paid by the rich to 30%, in addition to PRSI, the health levy and the income levy. This will be the minimum paid by high earners, regardless of any reliefs claimed. We have dealt with some of the tax shelters and we must continue our work in this regard. The budget also tackles the issue of tax exiles or, as Deputy Quinn referred to them, tax fugitives. I agree with that description. 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, regardless of where they are tax resident, an Irish domicile levy of €200,000 per annum.
The introduction of the carbon levy is a very important step forward for this country in the context of tackling climate change. In the week before Government leaders from across the globe gather in Copenhagen, Ireland is sending out a clear message that it can and will play its part in the battle against climate change. Placing a price on carbon will encourage people to make the switch, be it to lower emission vehicles or improving the energy efficiency of their homes, in order to avoid additional costs. By placing a price on carbon we will also be raising revenue. The latter will be channelled into making our economy and society more energy efficient. Furthermore, by placing a price on carbon we will be encouraging a more competitive economy, reducing our reliance on imported fuels and retaining more money in that economy.
Next year the Government will invest €130 million in insulation for more than 100,000 homes across the country. Some €76 million of this will be ring-fenced for low income families. Fuel allowances for those on social welfare will be increased next autumn by 11% in order to ensure that the levy does not impact upon them. This money will also enable the Government to cut other taxes and promote the economy. Without this extra money we would not be able to provide a PRSI exemption for employers who take people off of the dole queues or to reduce the VAT rate. That is completely in line with recommendations from independent expert groups such as the ESRI and Comhar, the Sustainable Development Council.
This budget is also about offering hope. Over 15,000 jobs have already been created in the green economy since the Green Party entered Government. The budget shows that the stimulus is in the green economy. We will provide the jobs of the future as we fight climate change. In that context, there will be 3,000 jobs per annum for two years in water metering, 5,000 jobs will be sustained and created in the water services investment programme and 6,000 jobs will be sustained and created in home insulation.
I will now comment on some specific aspects of my Department's Estimate. I will concentrate on the principal sectors within the Department's very broad remit. The provision of €508 million for investment in water services infrastructure in 2010 maintains the high level of financial support for this sector. There is no reduction in capital spending here and this reflects the priority the Government attaches to preserving and protecting our water resources as a key element of our environment. Meeting EU standards for drinking water and wastewater treatment is a critical objective and we must continue to invest in new infrastructure that will ensure ongoing support for the economy.
My Department is putting in place a range of measures to ensure that this money will be spent to best effect. Local authorities recently completed comprehensive assessments to determine the key water services projects that should be pursued in their areas during the next three years in order to meet prioritised environmental and economic objectives. These assessments will inform the next water services investment programme — for the period 2010-2012 — which I will be publishing early next year.
The new programme will outline the projects to progress to construction over the next three years and those that will advance through the planning process. While medium to longer term planning on major schemes will continue, there will be a new emphasis on contracts which deliver on infrastructure that is needed during the next two years. In addition, water conservation works will be fully integrated into the new programme to address, where practicable, network leakages in preference to expanding infrastructure provision.
In line with the requirements of the water framework directive, river basin management plans will be completed in the first quarter of 2010. This important work will provide for the first time a complete picture of all of the 4,000 water bodies in the State — their water quality status, the pressures they face and the measures necessary to secure an improvement in quality in accordance with the requirements of the directive. These new management plans will form a key input to the development of the national water services programme and will also identify measures required in other sectors to improve water quality.
There is no doubt that investment in water infrastructure will remain a high priority. The question arises, however, as to how we both assess the real demand for water services and how we fund those services. The Minister for Finance referred to this yesterday. I wish to inform the House that I will be bringing forward proposals, as a matter of priority, for the installation of water meters in households. This will give effect to the commitment in the renewed programme for Government to introduce charging for domestic water use in a way that is fair, significantly reduces waste and is easily applied. Households will be allocated a free basic allowance, with charging only for water use in excess of this allowance.
Metered charges are a common feature in nearly all developed countries and help to provide water users with an understanding of the economic value of what is becoming an increasingly expensive resource. While average water consumption per person in Ireland is difficult to estimate accurately in the absence of metering, our average consumption levels are believed to be higher than in countries where water services are metered. Metering of domestic water use will serve to promote more efficient use of water and will allow consumers the opportunity to reduce usage levels and thereby their costs.
The recently reported results on the levels of unaccounted for water across all local authorities highlights the critical need for enhanced management of our water services. The metering of domestic connections will contribute to greater water conservation by facilitating enhanced network management by local authorities. It will also enable improved leakage detection and reduction in leaks in the local authority water distribution systems and in households' internal pipes. That is why I want a stronger emphasis to be placed on conservation works by local authorities under the new water services investment programme. My Department will now put in place arrangements for the procurement and the installation of meters to commence as soon as possible. We will also be examining the scope to apply smart metering technology in delivering this commitment.
Severe flooding occurred in many parts of the country recently and the damage and distress this has caused has been widespread. I saw the impact on people when I visited various locations. The House will agree that all of the agencies at local level — local authorities, An Garda Síochána, the Health Service Executive, voluntary agencies and the Defence Forces — collaborated very well to limit the effects on individuals whose lives may have been put at risk or who might have been exposed to serious hardship. Local authorities have been using the procedures set out in A Framework for Major Emergency Management, which enables the relevant agencies to initiate and co-ordinate the response to the flooding. We must consider if there are improvements to be made. In that context, I am arranging for a review of the operation of the framework to see if any such improvements are necessary.
Local authorities have incurred exceptional additional and unforeseen costs as a result of their response to the flooding. As a result, I have decided to make some additional financial assistance available to affected authorities this year. My Department is in contact with those authorities and we will be making funding contributions this year. I expect that a sum in excess of €10 million will be available for this purpose. This money will be additional to that announced by the Minister for Finance when introducing the budget. As regards flood impacts on water services infrastructure, my Department has contacted the relevant authorities to ascertain the damage ensuing from the severe flooding, including damage to water services infrastructure.
We may have to examine the need for capital works and we will have regard to this in the new water services programme to be finalised early next year. The Government appreciates the prompt and constructive response to the recent flooding by the local authorities and other agencies. The challenge is to ensure that we take steps to minimise flood risk in future development. We have issued guidelines to local authorities on flood risk management aimed at ensuring a more consistent, rigorous and systematic approach to flood risk identification, assessment and management within the planning system. These guidelines provide that development in areas at risk of flooding, particularly flood plains, should generally be avoided. We will invest extra money in flood protection. These are necessary capital works.
In terms of housing, my Department's capital resources are being scaled back for 2010 but we are overcoming this with innovative restructuring of the social housing investment programme. This restructuring has been under way for more than a year and it involves a progressive shift from acquisition and construction towards more market based delivery mechanisms, foremost among which is the long-term leasing initiative announced by the Minister of State, Deputy Finneran.
While it is fair to say that the shift in emphasis is being accelerated by the current economic and financial climate, it is a shift my Department has been developing for some time on the basis that it is the right approach from a policy perspective. For some time we have been working towards the development of a system of graduated and flexible housing supports to meet the varying needs at the different stages of the life cycle. If we are to achieve this, a homogenous social housing stock, where the response to housing need automatically means a house for life, will not fit the bill. Through expanded roll-out of long-term leasing arrangements, as well as a total Exchequer provision for housing of more than €1.1 billion in current and capital finance — a substantial amount in the circumstances — I anticipate we will deliver 9,000 new social housing units in 2010.
The year 2010 will also see the beginning of a major series of changes to local government. A new mayor of Dublin will be directly elected in 2010. The mayor will bring about tangible beneficial changes across the spectrum of local government activity in Dublin, including for the region's competitiveness and overall economic wellbeing. Local government is an important shaper of the economic environment. Just as better leadership, accountability and decision-making will improve the performance of a business entity, the same dynamics will apply to the governance of the Dublin region. The result will be a stronger economy in Dublin and a positive spill-over effect for the whole country. I will present my legislative proposals in the coming weeks to provide for the election of the mayor.
Beyond Dublin, I will publish the White Paper on local government early in the New Year. The White Paper will complement the changes in Dublin by setting out Government policy on local government across the country. Again, better leadership and improved accountability are fundamental concepts that have informed the policies that will be set out in the White Paper. I look forward to its publication and to implementing the Government's policies.
There are significant financial challenges facing central and local government over the coming years resulting from the downturn in the economic cycle. Our goal must be to ensure that we work together to deal with the current economic challenges and ensure that we are in a good position to take advantage of the opportunities presented by the economy as it recovers during the period ahead. For 2010, however, the local government sector must play its part by curtailing expenditure to the highest priorities in common with the approach of central Government.
While I will continue to support local authorities next year through significant general purpose grants from the local government fund towards the cost of providing day to day services, it must be recognised that the financial pressures we face at the centre will have an impact on the grant allocations I will make to individual authorities. The Government must make savings in its expenditure programmes and the Exchequer contribution to the fund is not immune. Notwithstanding this, I am confident that local authorities will have the necessary resources to continue to provide the essential services for householders and the business community alike.
In light of the current challenging environment for business, I have urged local authorities to continue to exercise the necessary restraint in setting increases in commercial rates and local charges. It is important that every opportunity be given to the business sector to remain competitive as a sound business sector is vital as part of the life blood of local communities. Local authorities have responded positively in 2009 in moderating rate increases on commercial ratepayers and next year will be no less challenging for the business sector. Local authorities will demonstrate the same restraint in 2010.
Local government plays a key role in the social, economic and environmental development of this country. It provides a range of services critical to communities and business at local level and is responsible for an overall spend of some €11 billion. Half of this funding comes from Exchequer sources with the remainder being financed from a variety of local charges including the rates paid by commercial business. Given the difficulties faced by the Exchequer and local businesses as well as the need to minimise charges generally, it is essential that local authorities provide the very best value for money possible and continuing to contribute to economic recovery. To further this efficiency objective, I have decided to establish a special group to undertake a new independent efficiency review of local authorities. The group will examine the cost base of local authorities and advance a new efficiency drive to achieve greater value for money, best use of resources, eliminate inefficiencies and contribute to the national requirement to address the imbalance in the public finances. The group will take account of Government policy on local government reform and measures already in train in the context of the transforming public service agenda. The group will be asked to complete its work by mid-2010.
The group will be chaired by Mr. Pat McLoughlin, who was a member of the special group on public service numbers and expenditure programmes. Mr. McLoughlin is a health sector business consultant with a range of business interests in the sector. Until early 2006 Mr. McLoughlin served as the deputy chief executive of the HSE and national director. Mr. McLoughlin is currently CEO of Irish Payment Services Organisation.
I have acknowledged that this is a tough budget but I insist that, under the circumstances, it is fair. My colleagues in the Green Party and my colleagues in the Department of the Environment, Heritage and Local Government, are determined that we will face the upcoming challenges and we will not try to under state them. We will continue to work for a better and more prosperous, more sustainable Ireland. The harsh actions in this budget will bear fruit. It will bring a signal of hope to our young people that they have a future in Ireland. It will send our EU counterparts and international investors a strong signal that we are open for business. We have important work to do and we will get on with it.
I have a sense that the nation is battered and bruised but not beaten. If there was one line in yesterday's speech that gave people hope and lifted their spirits, it was that the worst is over, if I am quoting the Minister correctly. We need a sense of where we are going and of hope. The debate can change. There was a strong sense of the country being terrified until yesterday and I would hate to see us slip into thinking that economic stabilisation has occurred and that it is the end in itself. That is not the goal. The Government must provide financial stability but it is not the end or the purpose. We must do more than that. There must be a sense of vision of what the stability serves and how we work from that. That is important in the debate that continues next week and into the new year on where the country is going. We are at a moment of profound change in the history of the nation, the world and the nature of the globalised market system that has been consistent for the past 30 years. It has changed utterly in the past year. We must develop a different sense of where the nation is going in respect of this new and evolving world.
I will set out my thoughts on how the budget fits into where we are going. What we might call the new republic that we must create must have a number of characteristics. It has to be enterprising. We must take on some of the thinking that has been around for the past 30 years. I am old enough to remember the Telesis report which stated that we should start to rely on our natural resources, not on foreign direct investment. The Culliton report in the 1990s and the enterprise strategy group five or six years ago repeated that advice. We are at a moment when we must start to do that. We continue to be a good centre for international companies but we have evolved and grown sufficiently, and have enough skills to start to be enterprising in our own right, and to trade internationally on the back of those skills.
I understand the Sinn Féin Members' fears about emigration. I fully agree with them but we should have the confidence now, when it is difficult to emigrate, to stay and develop businesses here, rather than look for alternatives. That has to be our goal and our overriding ambition. We will keep our people at home and create the work opportunities here rather than seeing emigration as an alternative.
Where is that in the budget?
That is not the vision or plan of this Government. We need to be enterprising.
Last week at a meeting I heard Enterprise Ireland say that in the past year it has had 70 high potential start-up companies on its books. If half a dozen of those go from high potential to reality, which I believe they will, those companies will create the jobs. It is happening. Irishmen and women are being enterprising and creative and we have set the conditions for that by setting up research grants and research and development tax systems to help those companies succeed.
What about the existing companies?
We must be enterprising. This Government has put the mechanisms in place to make that happen.
I agree with my colleagues in the Labour Party that we have to be equal and with Ruairí Quinn when he says a more equal society is more competitive, successful and cohesive one. A rational analysis of the past two years would show how this Government has amended the tax system to tax those at the high end of the scale and to cut out the reliefs that were part of the property bubble problem. It has happened. We will push it to the nth degree that does not damage our other goal of creating an enterprising society.
On a more profound note, one of the egalitarian questions raised in this budget was whether to cut services. That was a prospect to which I say no. It is better for us to manage our affairs here, taking some of the hard decisions on pay and social welfare to protect the services that are integral to an equal society. To the parent whose son or daughter is going to a special needs school this morning it was important to be able to say that those schools stay open and that in fact we have provided an additional 28 psychologists because that is important for our equal society. I am not sure that the IMF would make a similar call. We are willing to make those hard calls to ensure that those schools stay open and that where teachers are needed they are provided.
What about the carers?
Yes to the carers. When it comes to health services——
The money has not been provided.
——which form a huge part of our budget we have made the hard call. It is difficult.
The money for services is not being provided.
I have received e-mails from dentists, doctors and others around the country rightly saying that we have cut their incomes in a way that is not fair. We did that on the basis that we keep our health services open so that everyone here has an equal right to the health services they are due.
How much is the Government giving the services?
There are no equal rights.
I can understand the anger and upset of the gardaí who have to take a cut in a difficult time. An equal society means that an older person, who might be scared at home at night because someone is acting in an anti-social way, can ring the gardaí at any hour and make sure they arrive. That is a basic essential service that we must keep as we manage our budget. This Government made a call to keep the services we built up when we were wealthy. That is behind the decisions in the renewed programme for Government and in this budget.
We need to be enterprising, equal and green. If we are creating a new and different republic it must be in tune with what is happening in this world. The defining issue is that we are living beyond the means of the planet to sustain life. We must act quickly and firmly to bring our country into tune with nature and live within its means. That will help us to be enterprising. There is a stimulus in our green economy. It is happening, it is real. We are going into tens of thousands of homes to help people lead warmer, healthier and more economically efficient lives.
There is real development occurring in a new digital economy here. My Department is committed to this by putting a new broadband infrastructure into schools, using new fibre optic networks, based on some of the technology coming out of our new enterprising companies. They will provide a hundredfold increase in energy efficiency and the power of communications. It is being built and designed here and we are investing in it in this budget. They are the three things we need to do and we tried to do in this budget, support enterprise, create a more equal society and turn ourselves green. It is a very broad perspective.
We are at the point of change. The first 30 or 40 years of this country were marked by the nation founders; I have seen nation builders, my parents and my generation, who built a very successful society on that foundation. We need a new nation now. We need leadership in the political system and across our country. That comes from a sense of purpose. That is what we need to start debating. We need to move on from this concentration on the budget as one of fear or cutbacks.
It is a matter of real people's lives.
They are difficult but we must come out for our people with a sense of where we want to go and what we want to do. Every section of society has a role. Those farmers dealing with the difficult floods, caused by climate change, need a sense that they have a role. They are the front line of a green economy. As they go into forestry and high value and low-emission food crops, which we do have, they can benefit from that green vision.
Our party has always said that one does not measure success by economic standards alone. The parent who is juggling a job and childrearing should be at the centre of the front line services that we all talk about. We need to support and protect such parents.
How does the Minister justify the cut in child benefit?
It was difficult but I say to the parent that we had to do that to make sure that the teachers were available for her children. That was the decision we had to make.
The Government could have made other choices.
We also have to work with our unions. I do not believe partnership is dead. We will work better as a nation, for the evolution that we must achieve, when we work together. We need to work with our unions and our business people to make that happen. This budget does not address one constituency over another. It gives us an economic stimulus to work towards a new society.
That is fairyland.
Deputy Gilmore stated earlier that this Government does not have the moral authority, imagination or wit to tackle the challenges that face Ireland. I disagree with him because I believe that moral authority comes from leadership and direction rather than criticism from the sidelines. It comes from implementing policies that have been talked about for years, rather than talking about what should be done, implementing policies that tackle climate change, reforming our banking system, and not only tackling the flooding that has affected so much of the country in the past few weeks but also tackling its causes, the flood defences and the proper planning policies that Fine Gael does not have the conviction to implement in local authorities around this land.
This Government has the moral authority and the well-grounded optimism rather than the cynicism of the Opposition. It has the imagination to create the new jobs in energy, agriculture, transport and construction that this green budget will incentivise. It has the imagination because it has new ideas in the form of environmental improvements and efficiencies in using money wisely. It has the imagination to fund education that came from the transformed programme for Government we agreed two months ago. Imagination will help us get through this but not if we put off making fundamental reforms and fail to tackle work practices that are past their sell-by date. The Government has the wit to get credit flowing again so businesses can create new jobs. It has the wit to propose directly elected mayors in our major cities who will drive the knowledge economy. It has the wit to provide grants that give warmer homes and save money. The Government has the moral authority, the imagination and the wit to help us get through this. I take issue with Deputy Gilmore's criticism of what we are doing, not only within the budget but in the programme for Government.
Recently, I asked the Minister for Finance a parliamentary question on servicing our national debt. At a time when many commentators are saying we should not have a short, sharp shock, but should move matters out over many years, it is worth reflecting for a moment on what the cost of servicing our national debt will be unless we take decisive action. This year, we will spend €3.9 billion servicing the national debt, and this will rise to almost €6 billion next year. If we do not make the kind of adjustments that are proposed in the budget before us, this will rise to €9.1 billion by 2013. In other words, it will more than double over a four-year period.
I take issue with Mr. David Begg when he says we should stretch this out for several years. The only thing that will stop us going down the route of Japan's stalled economy for ten years, or from repeating the 1980s, is taking tough steps now that will get us through to the far side of our stalled economy, that will make those new jobs happen. This will involve pain but it will be a pain that will get us through to the far side and create new jobs that will fire up our economy in the future. Those commenting on the challenges before us have to face up to this very real difficulty that lies before us today.
Throughout so many sectors of the budget, we see incentives that have a Green footprint which are helping us to get through this. I repeat the point made by the Minister, Deputy Eamon Ryan, that we are protecting education against what could have been draconian cuts. It is crucial that we invest in young people and give them the kind of teaching and assistance in their formative years that gives them possibilities and opportunities later on. The vast bulk of our teachers are doing trojan work in providing a decent future for our young people. It is right that we protect education and continue to upgrade our school programme to provide new schools and for refurbishment of existing schools so that our children, one of our most vulnerable resources, are protected, encouraged and nurtured. This is a crucial part of getting us through the challenge that is with us at present.
We have to face up to the banking crisis, the jobs crisis and the fiscal crisis, as Deputy Gilmore pointed out. The policies within this budget will get us through to the far side, although it will not be easy. There is no magical new dawn that will come in a week, a month or a couple of months. However, we need to get our finances in order and stop borrowing enormous amounts of money so that money can be better spent on policing our streets, educating our children and allowing businesses to employ more people again through the changes we are making to PRSI. The real jobs that will come through this next period will mostly come from the private sector and from the export-led economy. They will come from small and medium size businesses that are beginning, even in difficult times, to employ more people and find their way through. The kind of work our city and county enterprise boards is engaged in and the kind of training policies we have put in place through this budget are part of the ingredients that will get us through this.
As an example of the kind of initiatives that will help us, I noted recently that over the Christmas recess work will be done in Leinster House to replace gas boilers with biomass boilers. This is a good symbol of the kind of changes needed in the economy. Instead of burning Russian gas, we will use Irish wood to contribute to the heat and, hopefully, light that comes through this Chamber. It is a good example of creating jobs in Ireland, reducing carbon emissions and contributing to the kind of initiatives that are required over the next ten days in Copenhagen as world leaders gather to tackle climate change. It is grounded in reality, in employment, not in the kind of heckling and positioning that came from the Fine Gael and Labour Party benches last night when we debated carbon tax. This is transformational; it is real; it is creating jobs and it will get us through the tough times.
The budget is part of a coherent approach to tackling the huge challenges confronting Ireland at present. It is a time of enormous debate, coupled with the existential crisis we face with recent reports on child abuse. If we can make the reforms in society that can make us proud again in the social sphere and the economic sphere, we can get through this. This is the first step in creating a new Ireland that will create employment, see us through and make us proud again.
Last night, the gulf between Government Deputies and those who elected them grew wider than ever before. The people looked on with horror as the members of Fianna Fáil and the Green Party applauded a savage budget that attacks the poor, the low-paid and the medium income earners. It was a budget cobbled together by economic illiterates.
I was not clapping.
I am glad that has been noted.
The Minister, Deputy Lenihan's, speech must rank as one of the greatest examples of self-delusion we have ever had to listen to. Either that or he is deeply cynical. Certainly, he is trying to delude the Irish people. He told us we are "on the road to economic recovery". Who does he think he is kidding? Like a First World War general, the Minister told us the worst is over and that this is "the last big push". I was expecting him to say it will all be over by Christmas. If it is the last big push, we know who he's sending over the top — the low paid workers and their families, the social welfare recipients, the carers and the young unemployed.
The Fianna Fáil backbenchers last week staged a mock revolt over the talks with the public service unions. However, there will be no revolt when they troop through the lobbies tomorrow to support cuts to the welfare payments of the most vulnerable sections of our society. The Fianna Fáil backbenchers must surely be the greatest shower of hypocrites that ever sat on those benches. Their only hope now is to try to hang together and pray they are not plunged into an early general election, when many of them may hang separately.
The sheep will be driven willingly through the voting lobbies tomorrow. Then, at the weekend, they will go home and bleat to their constituents that they had no choice, that there was no other way, that the public purse was empty and that we all have to bear the pain. Shame on them all; shame on their followers in the Green Party. Shame on them for what they are doing to those who depend on social welfare. They have cut a swathe through social welfare benefit schemes and assistance schemes. Jobseekers allowance, farm assist, pre-retirement, supplementary welfare allowance — all cut. Widows and widowers pensions cut. Deserted wife's benefit cut. One parent family payment cut. Disablement pension and invalidity pension cut, as well as the disability allowance and blind pension.
Quite disgracefully and inexcusably this budget cuts both carer's benefit and carer's allowance. They are taking €8.20 and €8.50 respectively per week out of the pockets of people who are caring for elderly and/or disabled relatives in their homes. People on disability allowance will lose €8.30 per week. These are the facts.
The person on carer's allowance will be out of pocket by €34 per month or €408 per annum. The Carers Association has quite rightly pointed out that carers are the only social welfare recipients who have to work for their payment by providing full time care in the home to elderly, sick and disabled people.
It has been estimated that 161,000 family carers provide more than 3.7 million hours of unpaid care each week, contributing more than €2.5 billion to the Irish economy each year. The 40,883 family carers providing full-time care — more than the 39,000 nurses employed by the HSE — contribute €1.6 billion to the economy. This cut is the thanks that carers get. The Minister Deputy Lenihan claims the overriding objective of the budget has been to "strive for fairness". Fairness how are you?
Where is the fairness in the savage cuts to social welfare support for young unemployed people? This budget cuts jobseekers allowance for 20 and 21 year old new applicants from €204 to €100 per week and to €150 per week for those between 22 and 24. This is a further attack on young people who are facing the ordeal of the dole queue. It follows the April budget's slashing of jobseekers allowance for 18 and 19 year old people.
Who are these young people? These are the children who did their junior certificate between 2001 and 2007 at the height of the Celtic tiger and their leaving certificate between 2006 and 2009 as it was coming to an end. They were told they were being educated in a knowledge economy and that if they worked for the best academic results they would reap rich rewards in a State with full employment. Now, however, thanks to the disastrous policies and gross mismanagement of Fianna Fáil-led governments, they are being thrown on the unemployment scrap-heap.
In the past two years the numbers of young people unemployed under the age of 25 has soared by 173%. We have the second highest level of unemployment among 18-24 year old males in western Europe at 26.5%, more than twice the State unemployment rate of 12.5%
It is 25 years since Thatcher was on the rampage in Britain but here in the Fianna Fáil-Green budget of 2010 we find Thatcherism alive and well. The Minister tells us the purpose of his cuts to young people's dole is "to encourage them to stay close to the labour market". I am sorry the Green Deputies have left the House, because the Minister for the Environment, Heritage and Local Government, the leader of the party, a few moments ago told us that it would "bring a signal of hope to our young people that they will have a future in Ireland." What future?
The Minister for Finance claims that the experience of the 1980s was that the welfare system "was out of step with labour costs in the rest of the economy" and "trapped people in protracted joblessness". That type of Thatcherite thinking was wrong then and it is wrong now. It translates as saying that we should not pay the jobless any more than the barest subsistence or they will not want to work.
The same mentality is displayed in the decision to slash the dole to €150 per week for anyone where "job offers or activation measures have been refused". What kind of job offers, what kind of activation measures? There can be many legitimate reasons a person would not take up a particular offer.
There was no real recognition in this budget of the catastrophe of unemployment. There are 423,400 people on the live register in this State, an increase of more than 146,000 in one year. There has been an increase of 63% in those applying for jobseekers allowance since December 2008 but where is the jobs strategy in this budget? There is none. There is a rag bag of mainly training measures amounting to a paltry €136 million. It is an insult.
Let us be real about this. The Government does not prioritise fighting unemployment because it represents the greedy in our society. The greedy have always secretly welcomed a high rate of unemployment because it allows them to hold workers to ransom. The message is simple: accept lower wages and poorer conditions or get out, there are plenty more out there waiting in line.
What of people who are in work? This budget attacks low and modest income families by imposing a 5% across-the-board cut in the wages of workers in the public service earning under €30,000 per year and 7.5% on earnings between €30,000 and €70,000. These public service workers, who make up the single largest bloc of public service employees, are amongst those who will be hit the hardest by this budget.
This budget crucifies those families on modest incomes. They are now bearing the brunt of pay cuts and the disgraceful cut to child benefit. A family with three children loses nearly €50 per month. Many such families have just one pay packet coming into the household and have to meet exorbitant mortgage payments out of that single income.
The cut to child benefit is an attack on children and an attack on families. Net child care costs in this State are 45% of the average wage compared to 16% -17% in EU and OECD states. Child care costs account for 30% of family income in this State as against 12.5% in EU and OECD countries. Over the past decade when people called for a real State child care strategy with proper infrastructure and places that were affordable and accessible to all who needed them, we were told that we had the most generous child benefit system and that this was how child care would be funded.
Once again it is those families bringing in wages and struggling to make ends meet who will be hit hardest. Their child benefit will be cut and if they are above the income threshold they will receive no family income supplement to compensate. It is these same families and others like them who will be hit by the increase in the threshold for the drugs payment scheme, meaning they now have to pay more every month for medicines.
To justify its cuts to pay and social welfare, the Government claims that the cost of living has gone down but this is not the case for the majority of people, especially for struggling families. This year prices went up for a range of essential items such as electricity, gas, bus fares, child care, primary education and hospital services.
In her health Estimates statement, the Minister for Health and Children claims that planned reductions in the drugs bill in 2010 will save €141 million in addition to €133 million saved this year. Such savings could and should have been made long ago and more savings can be made through reduction in price and wider use of generic drugs and the establishment of a State wholesale distributor, as Sinn Féin has long advocated. Why then does the Minister choose to target medical card holders with her prescription charge of up to €10 per month? This charge undermines the General Medical Services and the long term illness scheme. Once established it will remain in place to be increased year on year at the expense of those who rely on our public health system.
The budget has dealt a further blow to the already struggling public health system. The two-tier public private system is hugely costly in terms of inequality and the poorer health outcomes it entails and its inefficiency in using public money to subsidise the private health care industry. Privatised health care will not be affected by this budget. It will still be pampered but the public system will continue to deteriorate. The budget takes €106 million out of current expenditure in the HSE on the so-called economies and reduces capital spending by a further €37 million.
The funding for mental health is too little too late. It is typical of the mismanagement by this Government and the HSE that they have waited until the total collapse of property prices to try to sell the properties of former psychiatric institutions. We have yet to see how much this will realise and when.
With the recruitment embargo still in place, with nurses still in short supply and now going to be paid less, with trolleys and chairs still clogging our hospital corridors, with our primary care system still not properly developed and with hospital services continuing to be centralised we are in for another winter and many more winters of health care misery thanks to this Government.
One of the headings under so-called economies for the HSE is transport. In my home county people rely more than ever on HSE-provided transport since the closure of acute services in Monaghan General Hospital last July. That need will become even greater in the north east with the impending threatened closure of acute services at the Louth County Hospital in Dundalk. Yet we are told that transport is going to be cut. It is an outrage in a region which in recent weeks has seen its already totally inadequate hospital infrastructure further undermined with outbreaks of C. difficile in Our Lady of Lourdes Hospital in Drogheda and Our Lady's Hospital, Navan, resulting in the closure of scores of beds and the cancellation of operations and procedures.
I have a question for the Minister for Finance and the Minister for Health and Children. Will every Deputy who votes for social welfare cuts get a 40-bed hospital facility in his or her constituency? Good luck to the people of Kenmare but let us remember the hospitals across the State that have been closed or have lost or will lose key acute services due to the compliance of the self-same Government backbenchers in pushing through the health policies of this Government to the cost of their respective electorates. Shame on every one of them.
It is scandalous.
The full extent of the health cutbacks in this budget will become clear in time and public patients will pay dearly for them.
I spoke earlier of the Government's oft-repeated claim that we are a knowledge economy. The Minister, Deputy Brian Lenihan, chose not to highlight in his speech the cuts of €200 million to education in 2010. It is an outrage that 27% has been cut from the budget for building, equipping and furnishing primary schools. Children will continue to be taught in dilapidated buildings and millions will continue to be wasted in rents for so-called temporary prefabricated accommodation.
Earlier this year the Government announced a €150 million programme for installing IT equipment in schools, but only those schools which have been newly developed or renovated. This cosy deal with the IT companies leaves all other schools out of the loop. The money should have been spent on providing school buildings for those who need them most, thus putting in place essential infrastructure and helping to provide employment in the construction sector.
The Government's claim to be protecting the vulnerable as well as encouraging people to educate themselves out of disadvantage is exposed as a lie when we see the cuts to student support grants, to allowances for VTOS and Youthreach, the removal of grants from recipients of back to education allowance, the 11% cut in alleviation of disadvantage measures to help people access third level and the 62% cut for the same purpose from the dormant accounts fund. Of course teachers pay will be cut. So much for the knowledge economy that this Government likes to speak about.
This budget has been preceded by efforts throughout the past year to divide and conquer public sector and private sector workers. It has been aided, regrettably, by Fine Gael and Labour and by large sections of the media. The acceptance by the so-called main Opposition parties of a figure of €1.3 billion for the slashing of public service pay in 2010 was a major victory for the Government. Public service workers were demonised and the stage was set for the stage-managed collapse of the negotiations with the public service unions last week. The phoney revolt of the Fianna Fáil backbenchers was the trigger for the collapse and the field was clear for the Government to impose the pay cuts obtained in yesterday's Budget Statement. Yes, the highest earners have been hit and rightly so, but the across-the-board 5% cut for low and modest income earners in the public service is wrong. Those earning top rates can give a great deal more.
Make no mistake, any ordinary workers in the private sector who were misled enough to think that they will benefit from this cut to the incomes of ordinary workers in the public sector are in for a shock. If the Government gets away with this attack on low and modest income earners in the public sector then the private sector will be next for an even worse hit. The next target will be the minimum wage and wages and conditions across the public and private sectors.
While ordinary workers and families have been hit hard the wealthy have been protected once again. This is a typical Fianna Fáil outlook in terms of economic need. There was no tax reform in this budget. There should have been a new third and top rate of tax at 48% for income in excess of €100,000 which would have raised €355 million. Standardising all discretionary tax relief would have raised €1.1 billion but the Government once again turned its back on that opportunity.
The Government has tried to convince us that the wealthy are now over-taxed. In 2007 the top 5% of households in the State held €320 billion in assets. That did not all vanish into thin air with the property price collapse. In 2008 1,447 people or 0.6% of all earners, took in approximately €3.459 billion between them. Most tellingly of all, more than 25% of the top 400 earners paid tax at a rate of less than 25%. The price of not introducing a wealth tax for the few is misery for many.
There were some tax changes. The carbon tax has been brought in as a revenue raising measure that once again will hit those least able to afford it, which is why Sinn Féin voted against it last night in this Chamber. We have been threatened with water charges. The Minister announced a metering system for every household in the State but he did not say how much this will cost before a cent is raised in water charges. The cost of introducing the metres will no doubt be huge and instead of wasting this money on metering and charging for a basic necessity, the Government should spend it on improving our water infrastructure and reducing the massive waste of water in existing systems.
The 21.5% VAT rate was reduced but by not nearly enough and should never have been increased in the last April's budget. The alcohol excise measures should help restore some balance in trade along the badly hit Border towns but this should be seen as a temporary expedient only. Much more needs to be done to help revive the economy of the Border region — and I mean on both sides of the Border. The only real solution will be tax and currency harmonisation on this island as a whole.
The real background to this budget, the herd of elephants, not just a single elephant, in the room, is the €54 billion of the people's money poured into NAMA to bail out banks and developers and to put future generations in debt. The Government's claim of needing to take €4 billion out of the economy to close the deficit and show fiscal prudence is a total contradiction when set against the €54 billion wasted on NAMA. Those young people not forced to emigrate by this Government will have to bear the burden of NAMA for years to come. NAMA and this budget, and further budgets ahead of us, are the legacy of the golden circle of conservative politicians, corrupt bankers and insatiable developers who have wrecked the Irish economy and it is the most vulnerable who are now once again being forced to pay.
The Minister for Finance, Deputy Brian Lenihan and the Taoiseach have tried to put a positive spin on this disgraceful budget. Unbelievably, the Minister invoked the community spirit of the people who rallied to the aid of those hit most by the recent catastrophic flooding. He has some neck, given the lack of urgency in the Government response to the flooding, the inadequate funding made available to deal with the aftermath, and above all, the fact that Government neglect left people across the country vulnerable to this flooding in the first place.
Also invoked by the Minister was the ancestry of the Kennedy family in County Wexford. This was appropriate but not in the way the Minister intended. His budget and his Government's policies are a recipe for the mass emigration of unemployed Irish youth. Last year he charged them €10 per head to leave the country when he introduced that charge for all those leaving our shores by air. This year he is making sure that Ireland is a cold house for jobless young people and that the door is wide open for them to get out.
There was and is an alternative to this disastrous budget. Sinn Féin presented that alternative in our pre-budget submission, The Road to Recovery. Central to that alternative is the provision of stimulus to the economy so that recovery can come about in the only way possible, through the provision of jobs. It is as simple as that. The provision of jobs through sustainable employment. We proposed a €3.218 billion economic stimulus package with a range of measures to get Ireland back to work. We proposed measures and savings amounting to €7.623 billion which would have protected those on low and modest incomes, social welfare recipients and public services. In contrast this anti-jobs budget will depress the Irish economy and worsen our economic woes. Our proposals are not for resting on a shelf. They are campaigning proposals and we will continue to advance them in the months ahead. We welcome the fact that people are fighting back against the disastrous policies of this Fianna Fáil and Green Party Government. People have been on the streets in the past year in unprecedented numbers in demonstrations, strikes and other forms of protest.
We need economic policies founded on fairness and with the ability to succeed in providing a decent livelihood and decent public services for all. Such policies also need to instil confidence. Sinn Féin is confident that the Irish people can emerge from this economic crisis and that we can build a fairer society and sustainable economy. Those are our goals, not only in respect of this State and this economy but for the economy of the island of Ireland as a single economic and political entity. To do that we must reject the policies on which this budget is based and get rid of the politically bankrupt Government which produced it. We demand a better, fairer way. We say to this Government, get out of office and give this country back its dignity, its right to work and its guarantee of fair opportunity for all who have been born on our shores.
Debate adjourned.