Skip to main content
Normal View

Seanad Éireann debate -
Wednesday, 14 May 2008

Vol. 189 No. 14

Economic Outlook: Motion.

I welcome the new Minister of State, Deputy Mansergh. I congratulate him on his elevation and wish him the best of luck in his new brief. I am sure he will fulfil it with great passion, as did the previous Minister. It is great to see Members of the House get elected to the Lower House and then climb the ladder. In the past we all had those ambitions but some of us took a step forward and others a step back. Sin scéal eile.

The first speaker on the motion is Senator Twomey.

I move:

That Seanad Éireann, in light of

the 10% fall in average house prices in 12 months;

the possibility that 100,000 young families will face negative equity by next year;

the halving of house-building activity and the uncertain future faced by 150,000 workers and apprentices in this industry;

the 45,000 increase in unemployment benefit claimants in the last 12 months;

the threat to public services from the €10 billion deterioration in the Exchequer balance since 2006;

the impact of high inflation on living standards and export competitiveness; and

the continued fall in consumer and investor confidence to record lows;

condemns the Government for:

squandering significant budget surpluses;

its failure to protect national competitiveness;

its failure to control inflation;

its failure to reform the public service;

and, in light of the deteriorating economic outlook, calls on the Government to:

look at further stamp duty measures to stabilise the housing market;

cut inflation to below the euro area average to help restore our national competitiveness and export growth;

adopt a leadership position in the vital national pay negotiations by foregoing the unwarranted ministerial pay increased approved by Government last year;

cut the period before which FÁS meets with new unemployment welfare claimants to find alternative employment or training opportunities from six to three months, in order to prevent a drift into long term-unemployment; and

cut the number of Government quangos, and abandon legislative plans to create new quangos, in order to safeguard diminishing Exchequer resources for essential front-line services.

I, too, congratulate the Minister of State on his recent appointment. I hope he serves that office well. He faces tough times ahead with regard to the economy, how the Government spends its money and what it does for the benefit of the people. The economy has changed dramatically in the 12 months since the general election. Everybody has spoken about the slow-down in the construction industry and its knock-on effects on the economy. House prices are falling, the number of people working in the construction industry has reduced dramatically and the tax take from the construction industry is down significantly. All this serves to show the weaknesses that existed in the economy due to Government policy prior to the boom.

Basically, the Government has squandered resources. It has failed to protect national competitiveness, control inflation and reform the public sector. The Government has no control over vast sections of the economy, many of which are working very well at present. It has no right to take credit for that because its role in that regard is incidental. However, the Government exercises huge control on some sections of the economy. In the last decade, spending in the health sector has increased by at least 75% and spending on education has increased by at least 50%. There have been improvements in some sections of the health and education sectors but other parts of those sectors are in a terrible state and probably worse than they were ten years ago.

It is clear how Government policy has affected those sectors. If one is a private patient who wishes to access medical treatment, one will wait between three days and three months to access most consultants in the private sector. The same consultants also work in the public sector but the wait to see a consultant in that sector is at least three months and can stretch to three years for some specialties, such as ear, nose and throat and orthopaedics. There have been a number of scandals in recent years with regard to nursing home care and last night's "Prime Time" television programme highlighted how children are put at risk. These scandals are happening in the health sector and are due to Government policy and its failure to reform that sector.

The "Prime Time" programme may have taken a one-sided view but if one has dealt with a person who is being abused, be it physical, sexual or emotional abuse, within the home or by strangers, one will know that the abuse has a lifelong impact on the individual. I am aware of its impact from my experience of working as a doctor. To see the HSE and, in some respects, the Government take an almost blasé approach to it means they have learned nothing from the institutional abuse that dominated the newspaper headlines for many years. It is obvious that the Government is aware of what is happening with regard to children at risk. There is a serious need to take control of the situation and to put the required funding in place.

With regard to the economy and how it affects the health sector, one must ask whether the Government knows where it is going with its policy on the health service. We are told there should be a small number of centres of excellence throughout the country to provide cancer services, yet the Government is giving huge tax breaks and policy support to the establishment of small hospitals dotted across the country that will duplicate the services these centres of excellence are intended to provide. That is where one sees resources being wasted. That might not have been too bad during the boom times, when the Government could afford itself the luxury of squandering our resources, but now it must make a decision.

Does the Government believe in the centres of excellence because they will improve patient care outcomes or are they to be a cost containment measure? Is the Government attempting to move health services into the private sector, regardless of where they are being provided? Some of the private hospitals being built that will provide radiotherapy services are far smaller than the public hospitals the Government is attempting to close. That can only lead to one conclusion, that Irish society is actively discriminating because of Fianna Fáil and Green Party policy. Their policy basically states that if one cannot afford private health insurance, one will be subject to serious discrimination.

The situation in the education sector is no different. There has been huge outcry about autism services. If one is seeking a public appointment for assessment of a child for autism, it will take up to 18 months to see the specialist. The same specialist can work in the private sector and can see the child within four to eight weeks but at substantial cost to the parents. However, once the assessment is carried out, the pupil can jump the queue for the provision of public services for autistic children. We are establishing a system of complete discrimination. That is the reason that probably every Member of the House has private health insurance. Perhaps some Members see nothing wrong with that but when the State is providing a service to the public, especially when one considers that this country is a republic, that type of behaviour is absolutely wrong.

A number of factors are at play in the way the Government is running the economy. There is active discrimination, squandering of resources and disjointed thinking in providing services. The examples from the health and education sectors show the Government has huge difficulty in understanding what it is doing. However, that is becoming very clear now that tax revenue is dramatically reduced. I have not even mentioned nursing home care, another pact promised by the Government, or the school refurbishment programmes which have now been cancelled. Those social services provided by the Government are clearly falling apart now that tax revenue is reduced.

The amendment to the motion commends the Government for its management of the economy, but that management is in serious disarray. If current projections are correct, this year's tax take will be less than last year's, which means that the 2008 budget will be the first in 30 years where the tax take has dropped year-on-year. If things continue this way over the next couple of years, the programme for Government will be short by approximately €30 billion in terms of fulfilling its objectives. That is a serious economic problem which would not prompt anyone to commend the Government for its management of the economy.

The Government amendment also "welcomes the Government's firm commitment to position the economy for sustainable development over the years ahead". That might be difficult, however. It is amazing that in a decade of unprecedented growth the Government has failed to connect any of our major cities by a continuous motorway. Neither the national nor non-national road infrastructure is up to scratch. What has happened with broadband is a disgrace and should have been dealt with years ago. Ministers talk about the research and development sector, including the concept of fourth level or high technology development, but they have failed to develop it in a way that people expected.

Not only has the Government failed in what it was supposed to do over the last decade, it has also failed to provide for the next decade when things will not be as good. The foundations that were laid during the past ten years, not just for social services but also for economic services, are extremely poor for a country that was doing so well. It did well not because of what the Government did, but because of what the people did. Many of those aged under 40 who have worked hardest will be ill served by the policies pursued by the Government in recent years.

The most amazing part of the Government's amendment "welcomes its renewed commitment to reform the public service". I would like to see a report from any Minister outlining what reforms have been undertaken in the past decade. I have seen little or no reform of any substance in that period that would impress the public. Our competitiveness has gone from first in the world to 17th, so there has certainly been no improvement in that regard. My fear is that the Government will make a bigger mess of it now since it has acted so disastrously in the last few years.

I ask the Minister of State to respond to our concerns by acknowledging the weaknesses. They are not caused by a foreign power or extraneous events, such as the credit crunch but by the manner in which the Government has run the country. We will return to this topic regularly.

I second the motion and welcome my old sparring partner, the Minister of State, Deputy Mansergh, back to the House. We spent four years debating financial and economic issues prior to the last general election. I am glad to see that he has been elevated to his new position. As Senator Twomey pointed out, the Minister of State and his senior colleague, the Minister for Finance, Deputy Brian Lenihan, will have a serious job on their hands over the next few years or for however long they remain in those positions. Nonetheless, it is nice to see one of our own returning to the House as a Minister of State.

The Government amendment to the Opposition motion responds in the usual back-slapping manner. It is clear, however, that the economic outlook for the country has changed since Deputy Mansergh left this Chamber for the other House. Economic forecasts by various agencies all point to significantly reduced economic growth figures compared to recent years. The ESRI forecast is somewhere under 2% for this year and many economists would say that we will be lucky to have economic growth of 1% or 1.5%. That is a significant downturn from where we were during the past eight to ten years. As a result of that situation, difficult decisions will have to be made by the Government. I remain to be convinced, however, that those decisions will be made.

We are facing into what will possibly be the weakest economic performance by the country since 1986. We often hear references by Government Senators to the 1980s, but I never thought we would be returning to those kinds of figures in 2008. There is no satisfactory explanation from the Government as to why we are now at this juncture. Nonetheless, we are being offered the usual token excuses about factors outside this country, including the global economy.

The recently appointed Taoiseach has been, at a time when he was Minister for Finance, the key to our economic downturn in recent years. He has overseen a large part of that recent downturn. We have seen significant disimprovements in most economic indicators, particularly in the last six to 12 months, including unemployment and inflation. We have had a number of debates on the latter subjects during my time in the House. Those and other indicators across the economy all point in a very poor direction.

On television yesterday, the Minister of State and another newly appointed Minister of State referred to the ESRI's mid-term review which pointed to the fact that a recovery may be just around the corner. The review did state that, furthermore, it was not mentioned that the Government would have to take a particular course of action. However, I have seen no indication that the Government is prepared to do so. We must see a reduction, in real terms, in the number of vanity projects that have been promoted by various Ministers in recent years. The Government must make a concerted effort to keep its costs down while delivering key infrastructural projects. Senator Twomey mentioned a number of them. The biggest scandal in my time in the House has been the appalling broadband infrastructure across the country. It is vitally important for the economy to have next-generation broadband but large tracts of the country do not even have first-generation broadband. If the new Minister of State, Deputy Mansergh, can do something to rectify that situation he will have done a good day's work.

There has been a significant deterioration in our overall competitiveness and in the balance of payments. Over the past year, the live register figures have risen by over 41,000. Some 1,500 people have been joining the dole queues every week since the beginning of this year, which is a big turnaround from where we were. The biggest increase was in the Taoiseach's home town of Tullamore where more than twice as many men are currently on the dole than at the time of the last general election. I hope that brings the message home to him in a stark manner.

The housing market has been mentioned and it played a crucial role in the development of the economy. Numerous Opposition spokespersons, economists and other commentators have said the Government is placing too much emphasis on moneys derived from an artificially inflated housing market. We had continuous rows in this Chamber about stamp duty reform and the Government did its famous U-turn in the run-up to the last general election. If action had been taken sooner and more heed had been paid to advance warnings, we might not have seen the significant downturn which is currently under way in that sector.

This year, it is expected that housing units will be down by 50,000 from over 90,000 a couple of years ago. Many people, including myself, would say that over 90,000 units was an artificially high figure at the time. However, the Government did nothing to try to ease the blow that such a significant reduction will have for people employed in the construction sector and, more crucially, for the revenues from construction upon which we are so dependent to keep our public services afloat. Revenue from housing output in 2006 was €23 billion. That figure will fall to €18 billion by this year, a 22% decrease, which significantly affects tax revenue. As Senator Liam Twomey pointed out, there has been a significant reduction in all Exchequer revenue in the first quarter of this year, not just in VAT and indirect taxation but in income tax too. This will have obvious detrimental effects if it is allowed to continue and something significant will have to be done. Senator Liam Twomey referred to the public finances and the shortfall in tax receipts. We have seen a reduction in tax receipts of 5.9% in April.

I have not yet mentioned the issues regarding the cost of living and inflation. There has been a small reduction in inflation this month and the annual rate is now 4.3%. However, so many of the services that the Government is responsible for providing are those that most influence the inflation rate. The factors influencing inflation for which the Government is not responsible are often those driving inflation down.

The average European figure for health inflation is just more than 20%; in Ireland it is 60% at present which represents a difference of 40% between our rate and the rest of the European Union. There are similar figures for housing, water, energy and education. These are all sectors for which the Government has direct responsibility. I urge the new Minister of State, Deputy Martin Mansergh, to ensure the Government does something to address this. It is easy for the Government to blame economic factors which are outside its control, but there are measures the Government can take which it has not heretofore. There has not been a need for these measures heretofore because there has been sufficient money. That abundance will not continue in the coming years and this is a time for a renewed stringency in economic policy.

I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

"commends the Government for its management of the economy which has delivered unprecedented levels of prosperity and employment growth throughout the country over the last decade;

welcomes the Government's firm commitment to position the economy for sustainable development over the years ahead, while adapting to the reality of more moderate growth in the future;

welcomes the Government's commitment to improving national competitiveness, as demonstrated by its maintenance of a low burden of taxation on labour and capital and its investment under the National Development Plan in the economy's physical infrastructure and skill levels;

welcomes its renewed commitment to reform the public service with a focus on the needs of citizens;

notes that house-building output had reached unsustainable levels towards the end of the recent catch-up period and recognises that the current slowdown in housing construction is a prelude to its reverting to more sustainable levels in medium term;

and notes that the period before which FÁS meets with new employment welfare claimants to find new employment or training opportunities has already been cut from 6 to 3 months.".

I welcome the Minister of State, Deputy Martin Mansergh, to the House. It is appropriate that we acknowledge Deputy Mansergh as a former Member of this House and a revered colleague. I do not believe any other person in the history of the State is so qualified to hold ministerial office on the basis of such a long career in aspects of the public service. It has been a great honour for me to sit beside him in this House in the past. I am sure all Members of the House join me in congratulating him on his appointment and wish him well.

I congratulate the Fine Gael Members on using Private Members' time to discuss the economy. It is prudent to do so and we should have a rolling debate on the economy given these volatile times both nationally and internationally. I welcome the opportunity to make some points.

It is not too often that we have the benefit of a prop such as the headline of the front page of today's The Irish Times in a debate on the economy. The ESRI report predicts economic growth of 3.75%. In case that was a fluke another publication, the Irish Independent, reported the same story. Numerous journalists within each of these newspapers——

In case that was a fluke, I said it as well.

——highlight various aspects of the report and the reasons for genuine grounds for optimism for the future. There is no question we are in a changed economic situation. In recent years, the country has thrived on the back of real sacrifice and tough decisions taken in the 1980s with the support of this Government and, in fairness, the Tallaght strategy too. Credit for these advances can be taken on all sides of the House.

Challenges have emerged largely because of a volatile international banking situation. Banks are no longer lending to one another and it is difficult for a bank to secure 90-day finance from another bank at present, which is most unusual. That lack of confidence had penetrated to other aspects of the economy. This situation presents real dangers for all of us. Mr. Jean-Claude Trichet, President of the European Central Bank, has said that the level of uncertainty resulting from this global turmoil remains unusually high. I ask the Minister of State, Deputy Mansergh, to speak to the Minister for Finance, Deputy Brian Lenihan, to see if it is possible, along with other European finance ministers, to convince the European Central Bank to consider the wider economic picture, not just inflation.

The euro is overvalued against the dollar and sterling currencies at present. It is 100% more expensive for a tourist from the USA to come to Ireland than it was some years ago. For someone going from Derry to Letterkenny it is 20% more expensive. A friend of mine works in a cross-Border agency, is paid in sterling and his salary is worth 20% less than before. These are real concerns. While I recognise it is not the direct function of the Government, I would like to see the Minister for Finance raise at the Council of Ministers the issue of the strength of the euro. Perhaps the European Central Bank could then begin to focus on improving the economy of Europe rather than focus only on inflation. I recognise this is a difficult balance to strike but it should be addressed nevertheless.

The Opposition has raised several issues but I have not heard many suggestions. Much has been said on the issues with which the Opposition is dissatisfied, but let us have the tangible solutions it would provide. The new Government sets out, with the Taoiseach, Deputy Brian Cowen, to reform the public service. I welcome that the Taoiseach will establish a task force in the coming days for the implementation of the recommendations of the recent OECD report, which is welcome. The same level of discipline displayed by the Government in 1987 will have to be adopted by Ministers now in managing current expenditure. Modest borrowing should drive the delivery of the capital programme under the national development plan. This is a prudent approach and fits the predictions of the ESRI report, which is a revered organisation with a proven track record of accurate predictions. It predicted the Celtic tiger at a time when few could see it happening. Professor John Fitzgerald and his colleagues have done exceptional work and have given grounds for confidence in the economy in the future.

There is a sentence in the 1987 budget speech pointing out that optimism does matter. The Opposition should embrace these three words. We should think positively and look to our strengths while acknowledging that we have weaknesses and challenges. We must focus on limiting our flaithiúlacht and expectation.

Given the ongoing national social partnership talks, we must be realistic in our expectations for the future. I am confident that the Government with renewed vigour and enthusiasm under the new Taoiseach and his new team can play an important role in ensuring we create a scenario to allow us to reap the benefits in the future by being prudent and disciplined at this time. We must be cautious in our approach in staying within the budget on current expenditure and through modest borrowing maintaining momentum on the national development plan.

I commend the amendment to the House. We should frequently use Private Members' time and other time to debate the economy because there is a very volatile international situation of which we must be cognisant. I remember many days in recent years when Members of the Opposition were all to ready to say to us that the reason things were going so well was because of a favourable international environment. Equally they must now be cognisant of the international environment when criticising any performance of Government or any changes in our economy.

I have listened to a large number of debates similar to this one over the years in this House. They take a predictable pattern. The Government blames international global players and markets, and the Opposition blames the Government. The Government claims the credit when things are going right and the Opposition claims it is because of international markets. This debate has not taken a greatly different course and I do not expect it to do so. However, within those two views it is fair to say it is not just international markets that have gone wrong. There are certain things the Government could and should have done, but did not do.

I have been a long-time supporter of the Government's economic policy on the whole. While I have not supported everything I have supported the broad thrust of the kind of market-led actions it has tended to take, which have encouraged the prosperity that has blown internationally and globally in our direction. Particularly under Mr. McCreevy, the Government managed that extraordinarily well and derived benefit to the extent that it fuelled the Celtic tiger and made us considerably more prosperous than we would have been otherwise. I also take the point I am sure will be made by the new Minister of State, Deputy Mansergh, that there are many things about which we cannot do much. We cannot do anything about the fact that the dollar is at an all-time low, which is bad news for us. We cannot do anything about the fact that sterling is plunging almost daily and has fallen further today. We can offer these as legitimate excuses that create real difficulties for the Government, particularly in the realm of exports. It is only fair to say that is something it must accept and take on board. It needs to ride it out and hope it turns. We are at the mercy of international global markets, including bank markets to which Senator MacSharry referred.

I am not a great believer of following where investment goes around the world, which is a moveable feast. However, international markets are indicating one thing about Ireland at the moment. They are giving it the thumbs-down in a forensic manner. The people who must decide the countries in which to invest around the world have decided to pull their money out of Ireland. The Irish Stock Market which in recent years has been the guardian of billions of dollars, euro, yen and other currencies, and the beneficiary of that money, has plunged this year because international investors have said there is something much more wrong here than there is anywhere else.

I forgot to welcome the new Minister of State, Deputy Mansergh, because I am so used to seeing him here that he looked like part of the furniture. It is great to see him and I congratulate him. I also congratulate him on what must be the first time he has not interrupted me in a speech as he did when we were in the same House for five years. I thank him for that also.

The Irish market is indicating we are doing worse than was anticipated and worse than anybody else. That is coming from cold people with no emotional or personal involvement in what is happening here. They are simply people who analyse whether it is a good place to put investors' money and they have given the thumbs-down. Why was Ireland one of the worst stock market performers in the world — if not the worst — last year and still a bad performer this year? It is because those with a clinical interest are saying they do not like what is happening here that much now. They may be exactly the same people who got excessively euphoric about what was happening here during the Celtic tiger years. They got very excited about property and activity here, including stocks and shares. They got themselves overexposed to property also.

However, we must respect their opinions and ask them why they are taking this point of view. Much of it relates to the property slump. However, some of it is to do with the fact that they are not confident the Government at the moment has the political will to manage the economy in those areas in which it has some clout. I take the points made by Senator MacSharry that there are some areas in which it does not have clout or interest.

I date the decline in the Government's management of the economy at approximately three or four years ago. I date it to an electoral timetable, which meant that the then new Minister for Finance — I take the point made by Senator John Paul Phelan that the new Taoiseach was in the saddle as Minister for Finance when things have been going down — was reluctant to anticipate a downturn at any stage. That was because he wanted to do the right thing — first to win the next general election and second to safeguard his position as the heir apparent of Fianna Fáil. Hard decisions are not made by ambitious politicians at a certain time. That does not mean that he will not do them now. Now that he is in the top job he may decide these things need to be done because they are necessary even if unpalatable. The Government is now in a unique position to take unpopular measures that are necessary in a downturn, which will have been forgotten or overtaken by events by the time of the next general election.

I was interested in what Senator MacSharry had to say. He pointed to a very credible report indicating that growth would return to 3.75% by 2010, and upwards and onwards after that. He is right that John Fitzgerald is an almost unique economist in that he anticipated the boom, which was extraordinary. He also called the end of the property market, which is even more extraordinary. He is paid by the Government, which also makes him unique. In other words he was not singing the Government's song all the time. We must respect what he says. On the other hand it is an extraordinary hostage to fortune to tell us what will happen in 2025 — I do not believe anybody can do that. It makes assumptions that the Government will take the right measures.

It is vital for us to recognise that the Irish economy is nothing like what is described in either the motion or the amendment. The engine of the Irish economy is in multinationals, financial services and other areas. That is pointed out in the ESRI report. It is not in the old-fashioned indigenous industries that we are so keen to portray as the Irish economy. It is now a non-unionised, vibrant sector which is going to lead us forward, and that is the sector that must be encouraged. I applaud the Government's recognition of the fact that we must attract those multinationals and that they are the most important part of the economy. We have to give them those incentives because the old economy, which is dominated by a declining trade union membership, is dead. The new economy is the one that must be encouraged. We have to shed all those old shibboleths and recognise the fact that we are in a new situation and that those areas to which I referred are the ones we must encourage in the future.

Senator Brown has eight minutes.

I presume you mean me, Senator Boyle.

My apologies. I welcome the Minister of State, Deputy McGuinness.

The Greens are wilting.

I will portray any colour the Acting Chairman wishes.

Dan Brown is a famous writer of novels. I am sure you are not too upset to be confused with him.

The Da Vinci Code and all the rest of them. Thankfully, the Irish economy is not covered in such a convoluted code as that.

You can crack the code.

I accept the point made by Senator Ross that the issues we should be addressing are probably not dealt with in either the motion or the amendment to it. The Government can take a great deal of pride in the sustained economic activity and the potential for future growth that has been outlined in the ESRI report, but the economy needs to be debated in more realistic terms than we have heard thus far in this debate.

The role of an Opposition is important in a democracy. It must hold the Government to account. The Opposition should highlight where policy failures have occurred and where resources have not been properly applied. It should highlight also where errors of judgment have been made in terms of the application of policy, and the failure to follow through on promises of policy. In the event of the Government of the day not performing its functions properly, the Opposition can present alternative policies. I do not see any sign of those alternative policies in the motion, nor do I see a logical critique of the current state of the economy. Several areas are mentioned in the motion, many of which are not connected at all and all of which are written in a way to portray the economy and, therefore, the Government's management of it in the most negative terms possible. I consider that a dereliction of the role of Opposition.

I would like to hear any alternative policies devised by the Opposition, an explanation of why things are the way they are now and why they should be done any differently. The truth is that in the general election, that analysis was not offered to voters. The projections that were given by all political parties were too high. When one comes down to the type of analysis we should have, no hard or fast policy choices have been offered by Opposition parties in terms of public sector reform and of how resources should be used for the provision of public services. We have plenty of mechanisms for doing so in this House, as we discuss the budget and the Finance Bill. If one believes in the concept of public service reform, which is becoming politically popular again and which we all would agree is necessary, we need to talk about the imbalance between administration and front-line services. We need to talk also about the numbers employed in the public service and then we need to address the costs involved in the provision of those services. I have heard none of that analysis from the Opposition and that is a dereliction of duty.

Ireland is one of the most open economies in the world. In the past 15 years we have benefited enormously from that fact. As an Opposition spokesperson I once raised a note of concern that it was dangerous to be the most open economy in the world and events of the past two years have justified that. An open economy is totally subject to global pressures. The Irish economy began to develop in the mid-1990s when oil cost $10 a barrel and now the economy has to sustain levels of economic activity and growth when that same barrel of oil costs $126. In terms of economic analysis, we have to stress the difference between then and now as regards how we are likely to progress.

Today's ESRI report is an optimistic document but it is grounded in reality. It is couched as well in caveats. It mentions the fact that because we are an open economy we are dependent on when recovery takes place within the United States economy. There are many factors that will determine when that occurs. I believe the change of presidential office holder in the US in November will engender a sense of confidence that will help things recover there, which will subsequently help our economy.

We are also in thrall to decisions that need to be made by the European Central Bank in terms of interest rates. At a time when there have been eight reductions in the past two months alone in the US from the Federal Reserve, there has been none by the European Central Bank, although there was a good case for two such reductions. As and when such interest rate reductions are made in the European Central Bank, they too will have a bounce effect for the Irish economy. We should not be totally bleak about where we stand.

That said, a political analysis and a political criticism could be applied about the failure to anticipate how fast and how deep the economic adjustment could be. I consider that valid. As an Opposition spokesperson I made those same political criticisms. The change of Government and my party's participation has changed some of that emphasis. Again, the ESRI report is predicated on changes in policy that affect environmental policy but that also have economic consequences. That analysis will help us in the years to come. Fine Gael seems to believe that the 10% fall in average house prices is a bad thing. The reliance of 14% of gross domestic product on the construction industry was a bad thing, and there was a need for some economic adjustment. However, that does not necessarily mean that those who have engaged in the construction sector need to transfer from it or lose their jobs entirely. There are opportunities for the construction industry in retrofitting houses to introduce the energy standards that it did not introduce in the first instance. That is an economic activity that has been forgone in the past that should be grabbed in the future and that will deliver economic as well as environmental benefits.

Even though it is difficult for us to be certain of what will happen in the world economy and although we face environmental challenges, there is a series of opportunities for Ireland which will be helped along by the economic growth we have experienced. We are not the economy we were before the mid-1990s. We are now a more diverse economy with different types of economic activity. We are less dependent on individual trading relationships with other countries and we trade with more countries. On those grounds, we have reasons to be optimistic for the future.

I wish to focus on one element of the Fine Gael motion this evening on the OECD report. I consider it an element of negative Opposition for the sake of it, which does not suit the political party concerned. While the OECD report points out many systemic problems that exist in the provision of public services, it stresses that that is due to a culture in this country regarding how decisions are made and implemented. I do not necessarily refer to the political culture but to the administrative culture we have allowed to develop that needs to be tackled in a more holistic way. The fact that an honest in-depth report has pointed that out should be seen as an opportunity for us. In many regards the OECD looks at the economy as one that is strongly performing and with innate strength that has the potential to become stronger in the future over and above many other members of the organisation. When analysing the contents of that report that is the type of message we, as politicians and representatives of political parties, should take from it. Unfortunately, the Opposition parties are choosing not to do that.

I welcome the Minister to the House. I compliment and thank Fine Gael for putting forward this motion, one of the longest since I became a Member of this House. It is urgently needed. I agree with other speakers who said that from time to time we should return to the issue of the economy and debate it. We are in changing times and such a debate is necessary.

To get some of the good news out of the way, until recently we had a diverse and well performing economy. As a country we have had a great history in terms of entrepreneurship. We also have a well educated people with a great work ethic and a great deal of energy, and it is important we acknowledge that. That is the good news but there is a good deal of bad news and, as requested by Senators MacSharry and Boyle, I will make some positive suggestions later on the way we can help the economy.

On the bad news, it is my belief that this Government has been living in a type of cuckoo land in respect of the impact of the recent economic downturn on tens of thousands of people across the country. The thousands who have lost their jobs, the businesses that are in trouble and the home buyers who are facing negative equity, particularly in urban centres, are aware of the current situation. The housing market, as a driver, is obviously dead. While it was booming we were in reality eating our own flesh from an economic point of view as it did not contribute to exports and we were always looking internally. I would argue that in many ways it innured us for a number of years from international competition and affected our competitiveness because we were looking inwardly to such a degree. We did not believe we could compete in many sectors as the migration of the construction industry and the consequent production of mass sprawling housing estates led us into some form of cocoon. Now that we are out of that cocoon and in the fresh air, so to speak, we are to a degree struggling to stand on our own feet. The immune system of the Irish economy was attacked over a number of years and the failure of the current Taoiseach and former Minister for Finance to address that in the past five years was partly the reason for this change in the economy.

Regarding the construction industry, the Minister, Deputy Gormley, recently proposed windfall charges on speculative land purchases. To someone in my party that comes across as a fairly decent proposal but it was shot down by the current Taoiseach. He also shot down the proposal on the section 110 loophole used by property developers to avoid tax. They would be good initiatives if they were brought in but, unfortunately, the patronage given to Fianna Fáil put paid to that.

We also know that the Government is continually pushing down the expected growth rate, despite the admittedly positive report from the ERSI today — we must wait and see if it bears fruit — but the actual level is 2%. Revenue receipts are down across the board, not just in one or two areas. It includes corporation tax, VAT, capital gains tax, etc. Inflation is high. We have seen the largest monthly increase in the live register since 1967 while 1,600 people are losing their jobs every week. The cost of living is increasing at 4.3%. Retail sales are falling. Consumer confidence is low. Cuts in hospital budgets are being imposed this year which in real terms are the most severe since the mid-1980s. There have been significant losses for investors in the stock exchange, as we heard about earlier. Our competitiveness indicator has slipped 17 times. The strength of the euro vis-à-vis other currencies is having a dramatic impact on the potential of our companies to export. The number of house repossessions has increased. As a nation we have the highest level of personal indebtedness in Europe. There is also the issue of the high fuel prices. That is not something that is in the control of the Government but it is a serious issue.

What are the issues and what can we do about them? A serious issue has arisen regarding the cost of living, which has increased a good deal in the past few years. There is a massive problem with rising food prices. I could not believe that the price of flour and milk has increased 40% and 30%, respectively, in the past year. That is amazing and very concerning because it is the people on fixed and low incomes who will be most dramatically affected.

There is also the issue of fuel price increases including diesel and particularly home heating oil, which is affecting the same people referred to earlier. The Minister of State, Deputy Hoctor, congratulated her own Government on extending the fuel allowance by one week in the year. The reality is that if we take off the delivery costs, the VAT and the other tax, what those people are getting is minuscule. That problem must be addressed.

When a currency is strong we would expect a dip in inflation yet our inflation is above the eurozone average. That is a serious concern. At a time when our exporters are taking a hit from a weaker dollar and weaker sterling, our consumers are faced with higher prices. It is obvious that sellers are not passing on the benefits of cheaper imports to the consumers. We should all admit that this is a rip-off. One can see the sterling and euro prices in the stores and it is obvious we are being ripped off. It is a very simple problem in terms of how this is being dealt with by the Competition Authority and it must be addressed. It is one of the suggestions I will make when I sum up my contribution. This is an area that the Competition Authority and the National Consumer Agency must address.

A programme of training and reskilling in education for those coming out of the construction and manufacturing industries must be put in place. We have all discussed that previously. There must be a significant focus on opportunities for those people. The cap on the number of participants in the vocational training opportunities scheme should be removed immediately. That would be a positive move. We should target those people for such training rather than wait for people to fall into the trap of long-term unemployment because we know what that can spiral into.

Including school building programmes to fill the void in the construction industry would be a positive move. The summer works scheme has ended and if this were put in place it would be a positive development and would tie into the area of building up the educational profile of those who are coming out of the workforce.

Public sector reform is a phrase on everyone's lips. We in the Labour Party would support proper reform that delivers better services but it has become somewhat of a buzz phrase. What does it mean? We do not believe that reform that takes the heart out of public service and tries to turn people, whose jobs are very much vocation led, into machines is the way to proceed. We must examine the area in a more holistic manner and decide where we want to trim the fat. The Taoiseach could have begun by doing something about the 21 Ministers of State. He could have reduced the number to 17 or 15. That would represent the beginning of public sector reform. For example, why does Dublin have four tourism buildings and three tourism agencies?

To sum up, the Government must give a direction to the National Consumer Agency to insist that all goods are priced in euro. That would be a major step forward and simple to do. We should put in place a major programme of education and reskilling. We could introduce a "begin to buy" scheme to restore activity in the residential construction area, a recommendation my party has made for many years.

An issue about which I am passionate, and it is something we will have to do if we want to diversify our economy into the high value areas, is shift the balance of advantage within our tax code from property based investments to high tech, high risk ventures. There are not sufficient incentives available. There is a divine trinity in regard to the whole technology area based on education, which we are fortunate enough to have, infrastructure, which unfortunately we do not, and broadband, about which I will not go on ad nauseam except to say everyone knows it is a disgrace. Eastern European countries with economies much smaller than ours can address that area through very innovative ways but we cannot. Also, we need the investment techniques to be provided by this Government, which it is not doing currently.

I am glad of the opportunity to speak on the economic outlook because we need to take a sense of perspective about the economy. I was prompted to speak to the motion as outlined by Fine Gael and the reference to the 10% fall in house prices and the possibility that 100,000 young families face negative equity. In politics one has to be consistent. Three years ago everyone was giving out about the steep rate of increase in the cost of housing, particularly in Dublin. It was of concern since it was putting housing out of the reach of many ordinary families, and that was not desirable. Equally, it is not desirable that prices are plummeting. That is not the correct term, but the impression is being given that they are hurtling downwards at this point. I do not believe that is a fair description of what is happening.

A correction is being made to the housing market and this is to be welcomed. Most people who buy a home regard it as an investment for an extensive period. They do not do it on a speculative basis. We hear on the airwaves that so many families are in negative equity. It is immaterial, since if it is one's home, one is not about to sell it, so what difference does it make? It is only material if one intends to sell it — and most people buy their first home on the basis that they are staying in it for a while. They do not intend to watch the property market and speculate on their home. It is terrible to give the impression that people are living under this enormous threat.

The notion of negative equity is a burden. Naturally, if people cannot afford their mortgage payments, especially if they are increasing, as is happening at present, they are forced into a sale. That is a different matter and is very regrettable. However, the proportion of people in this position is much lower than the hundreds of thousands who continue to pay their mortgages. I agree that they might well pay less today for a home than, say, 18 months ago. The property pages of the newspapers show that prices are coming down. However, that is the opposite to what the Government was being criticised for two or three years ago.

Inconsistency is one aspect of an Opposition that galls me. I like the discipline of consistency, which is necessary when one is part of a Government. Ultimately, that is what politics is about. I hope I shall be forgiven for saying that Fine Gael did not, perhaps, present itself as an alternative Government party, because it had never been consistent, particularly in the area of economics. It therefore did not present itself as a credible alternative. Having been a Member of the Dáil as a Government backbencher I watched Members of the Opposition get great names for themselves and receive notice because they called for money to be spent in certain areas one week while pulling back the following week. There was no consistency with the result that ultimately, Fine Gael did not present itself as a credible economic party. That is the problem for that party.

Is that why we got 20 extra seats and the Progressive Democrats lost six?

After giving Fine Gael advice, I shall now speak more particularly to the motion.

If the Senator does her sums on the number of seats her party got back, the public will not believe her either.

I do not believe public sector reform is happening fast enough, but I accept that Fianna Fáil is the largest party in Government because it goes about bringing many people on board with it as it goes forward. That has its benefits, but it also has its drawbacks because one is less inclined to fall out with a sector or an area. I was glad to hear Deputy Brian Cowen in his speech last week on becoming Taoiseach speak specifically about the need for public sector reforms, and emphasise they will be delivered. That is what is vital, since we have been held to ransom in so many instances as regards public services which appear to serve the primary interests of those who work in them. I do not believe that is right and I welcome the Taoiseach's emphasis on the need for a shift towards service to the public.

The economic outlook demands that we get changes in work practices. We no longer have an embarrassment of riches which underpins the luxury of being able to throw money at a problem. The Taoiseach also placed the focus on outcomes rather than inputs, and that is something to be welcomed as the new Government goes about its business. What is important in public services is outcomes rather than inputs. Of course inputs are important, but what are they delivering for the people, and what value for money are we getting? These are questions that need to be asked.

I also appreciate the mention of the partnership talks in the motion. It is important that we exercise a level of restraint. It is advisable that the Ministers should lead by example in this regard, but I do not expect the Taoiseach to make announcements as to what he is going to do. As a keen negotiator, I do not suppose he will enter talks by laying his cards on the table beforehand. He probably will negotiate quietly and gingerly, as is proper. We need to be careful, but we should not set in train a scene of misery because that is not where we are at in Ireland.

As I begin my contribution, I want to respond to some of the points made by colleagues on the Government benches. I will start with some of the comments made by Senator O'Malley. The Senator is someone for whom I have a great amount of respect in terms of the contributions that she makes to this House. However, I need to make clear to her and others that Fine Gael is not going to take lectures about economic credibility from a party that lost three quarters of its seats in the last election. I suggest to the Senator that——

We have a good 25-year track record.

——across the period when the Progressive Democrats were in the last Administration, it lost sight of the manifesto which underpinned its existence. The Progressive Democrats talked about the need for reform in Government, yet this was the party that set up the Health Service Executive. It talked about the need for restraint in public spending. In 1997 we were spending €22 billion, while last year it was €56 billion, and we are still here talking about the different social difficulties we have and all the problems the economy faces.

Perfection takes time.

We undoubtedly have a duty in terms of what we have to say in Opposition. However, to be told that we need to take lessons on credibility from another political party, given that Fine Gael implemented the Tallaght strategy and took a courageous stand on the benchmarking agreement, is more than I can take. It is incumbent on me, therefore, to make clear that Fine Gael will not take lectures from the Progressive Democrats or anybody else about the credibility of our policy stances.

I wish Senator Boyle was in the House. He talked about our party having a dereliction of duty in terms of what we are saying about the economy. The second part of the motion lays out different policies and measures that Fine Gael want implemented. If it is the Opposition's duty to highlight what is wrong and should be done differently, then our motion is consistent in that. It is consistent in pointing out the significant deterioration in the public finances and the private economic status of many people. It is consistent in stating what Fine Gael would do differently to the Government.

Senator O'Malley spoke of the Taoiseach outlining what he wants to do differently. Perhaps there is a hidden disquiet on that side of the House in that all we have seen so far from the new Administration is continuity. There is no indication as to how running the economy will be approached differently.

Many Members referred to this morning's publication of the latest ESRI review of the economy, a fortunate time for the Government. The report laid out a roadmap for how economic growth of 3.75% can be achieved. What is noticeable is that for each of the factors that must be delivered, the Government over the past five years has not done so. The report pointed to the need for fiscal policy to be tightened up when times are good. Over the past several years, current spending has greatly increased at a time when the economy was booming. When economic growth slowed down, the ability to manoeuvre was gone. How is our economy, like the US economy, not technically in recession but front-line jobs are being cut? The reason is that current spending increased from €25 billion to €39 billion when the economy and the private sector was doing well while capital spending did not increase in the same way.

The report called for an efficient delivery of the national development plan. In the last review of Transport 21, a key element of the plan, not only did the Minister for Transport refuse to take responsibility on what he had not delivered, he refused to set targets for those plans behind deadline.

The economy will move from one based predominantly on the manufacturing sector to the services sector. The ESRI report outlined several factors requiring delivery to ensure this transition occurs. Again, these recommendations are not being implemented. The report called for the development of a national broadband infrastructure to facilitate the development of the services economy. Broadband roll-out, as every Member will acknowledge, is not happening. The report pointed out the need for advancing the education sector to stimulate a growing services economy. However, class size is a serious issue and we do not have a world-class university. While many of our universities are trying to up their game for a knowledge-based economy, we still do not have a university in the international top ten.

While I was mildly dissatisfied with the timing of the publication of the ESRI report, I found it helpful in terms of forming a critique of Government policy. The main factors that can help develop and grow the economy have been ignored consistently by the Government. If Senator Boyle were present, he would speak of a dereliction of duty when the Opposition is pointing out facts.

The ESRI report did not refer to China and India when dealing with the international economic context. The template for our economic success is being copied by every other major country. China has revised its growth forecast from 11% to 8% while India has reduced it from 10% to 8.5%. The engine these economies have identified to deliver such growth is the service industry, the very area we want to develop. The dereliction of duty is not recognising that the global economic environment has changed and identifying a solution to this. I am disappointed not to hear this message from the new Taoiseach and his new Administration.

The Administration has spoken for so long on the need for reform of the public service and how the economy operates. The value of the dollar against the euro is falling and our economy is one of the most open in the world, yet inflation is increasing. This is a sign of how the key fundamentals in the economy are being managed. The greatest threat our economy will face in the coming years will be inflation. It will affect our national wage agreements and international competitiveness. The Government, with the opportunity of a new leader, should control those inflationary factors that it can and provide exemplary leadership to the other sectors in society that contribute to inflation.

Our party will not accept this claim of a dereliction of duty. The dereliction of duty is on the Government's part in that it does not recognise the new economic situation or propose new measures to tackle it.

I congratulate the Minister of State, Deputy Billy Kelleher, on his reappointment. I join with other Members who commended Deputy Mansergh, a former Member of this House, for his appointment as a Minister of State.

I support the amendment to the motion. The nature of the Fine Gael motion is negative and was moved in a negative tone. I accept that Senator Donohoe took a somewhat different approach. I always listen to his contributions because they are well thought out and well argued. I would even concur with some of the points he made. He pinpointed some issues which must be attended to.

By any standards, Ireland's recent economic progress has been phenomenal. It is no coincidence that China and many other countries in the former eastern bloc, have applied the same economic template which made Ireland so successful. As one who grew up in the bad old days in the 1950s and 1960s, I recall the only travelling Irish people did was to get the boat to England to get work. I was at the airport recently at 5.30 a.m. There were queues which would take an hour to clear at the check-in desks, which is a remarkable transformation and indicative of the progress we have made.

Some were inclined to dismiss international forces as irrelevant but they definitely play a part. We are probably more exposed to these forces than other EU economies. We have a very open economic template here, which has been to our betterment, but it means that the winds of change have an effect. One of those international influences, the sub-prime crisis in the United States, had nothing to do with us but has rippled throughout the global banking system and has led to a huge increase in the cost of funds. Worse still, it has led to a situation where the liquidity of banks and therefore the funding available for investors has been seriously affected. We cannot ignore this. It is extraordinary that interest rates have increased by quite a bit over the past 12 months whereas the ECB rate has been kept level at 4%. Banking is certainly an issue.

The currency position is another factor, in particular the strength of the euro vis-à-vis the dollar, and to some extent sterling, which has added to the challenges we face. At a meeting two or three years ago I remember raising a question with an economist from one of the banking institutions who was addressing us as to how we would cope if the cost of oil went to $100 a barrel. We were told he did not expect that to happen but that should it happen it would have many adverse economic effects. Many people more expert than I in that area are now saying we could be looking at $200 a barrel in a couple of years, which will certainly have an impact.

However, there are domestic matters which are under our control. The manner in which we accept the challenge in that regard will determine how we meet the projections and expectations as set out in the ESRI report and other reports. I would point to three issues. One is inflation, which has been raised by other speakers. Undoubtedly, we must do what we can to bring inflation back under control because it is at too high a level — we are double the EU rate, which is not sustainable. For the Administration, it is very important that all fiscal policies are feeding into controlling and reducing that threat to our level of competitiveness.

I listened with interest to what Senator Alan Kelly had to say and I concur fully with him. The price of food in many of our stores——

With some exceptions.

Perhaps with some exceptions, although I have not found them. The price clearly indicates that the weakness of sterling is not being passed on to the consumer in any way. This should be having a positive effect but it is not. I recently intended to cross to Britain, travelling from Dún Laoghaire to Holyhead but returning by a different route from Holyhead to Dublin with a different carrier. When I checked, I found the price for the return journey on the Irish Ferries website was approximately €205 when converted from sterling but when I tried to book it through the Irish site the price was €265, which is a significant difference. I decided I would book through sterling only to find I was blocked and could not get through. Eventually, I had to go through one of the agencies and I was able to accept the sterling rate.

I support Senator Kelly's views in this regard. It appears there is a strong case for the Competition Authority to be much more proactive and energised about ensuring we get the benefits of competition and that we are not disadvantaged by people taking currency fluctuation profits at the cost of the consumer. This probably merits a debate with regard to the effectiveness of the Competition Authority. I hope the relevant Oireachtas committee is talking to the Competition Authority about these matters because I would have serious concerns about the extent to which the authority is safeguarding us.

We have been speaking for some time about general competitiveness, which is an important issue for the economy. The current wage round will be imperative in building a platform so that we continue the growth rates we want in the interest of all. I have said before in the House that I believe a 12 to 18-month pay pause in the public sector would be highly desirable and, hopefully, the private sector would follow in a similar fashion.

Public finances are a major issue. There will be an increasing reduction in receipts and, therefore, we must trim expenditure. We set up the National Treasury Management Agency to control the Government debt and get the best value we could, and it has been very effective and successful. There is no reason we would not have similar bodies, including one to look after waste in the public service, which I would conservatively estimate is in the order of €4 billion. I have spoken to some people in the public service who say I am seriously underestimating it and that it is much in excess of that figure. There is also a need to promote productivity and rationalisation within the public service. This would mean those who are working would be rewarded, those who are performing moderately would be motivated to perform better and those who cannot be got to perform would be removed from the system altogether. If we tackled the issue on that basis, we will build the economic success we want to see.

I wish to share time with Senator Pearse Doherty.

Is that agreed? Agreed.

I welcome the Minister for Finance, Deputy Brian Lenihan. We are glad to have him in the House on the first occasion since he took up his new post.

I have six points to make. When I opened one of my first shops back in the 1960s, I was on the shop floor and I saw my professor, the dean of the faculty of commerce in UCD, doing his shopping. I introduced myself to him and he asked me what I was doing there. I told him it was my shop and that I had gone into business. He said, "Isn't it wonderful that one of my students has gone into business?" How the world has changed. In those days, there was no belief that people would leave school or university and set up in business. I ask that the Government would make sure we encourage entrepreneurship. A couple of years ago I met the Secretary of Commerce in the United States. Her words to me were that her job is not to create jobs but to create the environment so that others can create jobs. My first point is that we would make sure we encourage enterprise.

On my second point, I have travelled much in the past couple of years and have visited Estonia, Panama, Brazil and Argentina. In each case, although I was there to speak on the grocery business, the first thing I was asked was to explain about the Irish economy and how well it is doing. We are in a very competitive market. Others are trying to take our business away from us so let us do nothing that upsets our competitiveness.

My third point concerns the success of foreign companies. I could not get over the figures when I examined them — 980 foreign companies in Ireland, 140,000 jobs and a corporate investment from the United States of €83 billion, which is more than the €73 billion which India, China, Brazil and Russia combined have made. Let us do nothing to upset the investment opportunities for outsiders coming to invest in Ireland.

My fourth point concerns Northern Ireland. We now have an island community and a new organisation, InterTradeIreland, has been established. Our ability to break into international markets as a combined country, North and South, is huge. There is a surplus of graduates in the North of Ireland and we can make use of the opportunities there. The Small Firms Association is already setting up networking opportunities. Let us encourage that to take place.

My fifth point concerns education. Article 179 of the treaty refers to the research and development opportunities that we will enjoy when it is ratified, which I assume will happen.

Sixth, optimism is required and we must not talk ourselves into pessimism. I was pleased to see the ESRI's report today and to note its optimism. There is a danger of complacency and it should be avoided.

Let us ensure that we encourage entrepreneurship and do nothing to damage it. Let us also ensure we recognise we have a competitive marketplace and do nothing to damage that. Let us encourage inward investment and join Northern Ireland in networking and acting as a unit to penetrate international markets. Above all, we should ensure that we continue to invest in education, particularly in research and development and science and technology. Let us not be complacent and let us be optimistic and realistic. The Minister is the right person in the job. We look forward to what he will say to us and also to what he will do for us in the next few years.

Gabhaim buíochas leis an tSeanadóir Quinn as ucht a chuid ama a roinnt liom sa díospóireacht seo. Cuirim fáilte roimh an Aire fosta.

There is no doubt but that the impact of the economic slowdown and the rising cost of living are beginning to be felt by people across the State. Many of those who borrowed heavily when house prices were at their highest face an uncertain future due to a decline in house values and high mortgage interest rates. Low-paid workers are struggling in the face of rising food and fuel prices while, at the same time, there is downward pressure on their wages.

How should the Government have prepared for the challenges we are now facing? It should have planned ahead based on a realistic assessment of economic vulnerability. It should then have taken pre-emptive action to ensure the impact of any slowdown, domestic or international, would be minimised. The vulnerabilities in the Irish economy were quite clear for many years and were highlighted by my party and economic commentators. These included over-reliance on the construction sector and an over-inflated property sector; the failure to deliver key transport and telecommunications infrastructure, including broadband, in a timely matter; the fact that growth in recent years was driven by domestic consumption rather than exports; and the fact that the level of worker participation in education, training and upskilling in the State was well below that required, and the norms in other European states.

All these factors should have informed a Government strategy and put the economy on a sustainable footing. There was also a drip of job losses in manufacturing in regional towns that was not met with any action to create alternative employment. I know this only too well coming from the north west, Donegal in particular. The Government has failed to take on board the slowdown in economic growth projected by economic analysts and the reliance of the Exchequer on revenue from construction and property warned about by the officials in the Department of Finance. It failed to take any action to put the economy on a sustainable footing.

The Government must now tackle issues such as the growing number of unemployed, the rising cost of living, the dangers of negative equity, rising mortgage interest rates and the fact that tax revenue is well below projections. Sinn Féin is calling for a concerted effort to retrain and upskill low-skilled and vulnerable workers. We call for a focus on creating jobs in regional towns hit badly by job losses, including through increased support for indigenous enterprise. We want the Government to focus on regaining competitiveness. Where Government policies, including the raft of stealth taxes and charges, contribute to increasing the cost of living, they need to be re-examined. Proposed tax cuts, which are clearly unviable and would undermine the State's ability to fund public services, should be dropped. There needs to be a focus on increasing exports, particularly to other EU states, such that exporters will not face the uncertainties associated with exchange rates that they face when exporting to Britain and the USA.

There is merit in the proposal to cut the period, from six months to three, before which FÁS meets with new unemployment welfare claimants to find alternative employment or training opportunities. However, I do not agree with the Fine Gael proposers of the motion that further changes to stamp duty represent an appropriate response to the issues facing the housing market. We would be better concentrating on coming up with measures to assist those on low and middle incomes faced with negative equity and rising mortgage interests rates. While I agree that ministerial pay rises are unwarranted and should be abandoned, we must ensure they are not used as the basis for demanding that those on low incomes under severe pressure from increases in the cost of living should be forced to accept pay freezes.

The Government, including the Minister, faces great challenges and I hope it can meet them face-on. There needs to be a special case made for the north west. I have called many times in the Seanad for it to be designated as an area of economic need. I ask that the new Minister for Finance take my points on board.

I welcome the Minister for Finance to the House. I congratulate him on his new portfolio and wish him well.

I thank the Leas-Chathaoirleach. I am very glad to have the opportunity, on my first visit to Seanad Éireann as Minister for Finance, to speak in support of the Government's amendment to the motion on the prospects for the Irish economy. We have seen the publication today of a very favourable medium-term assessment of the economy by the ESRI. However, before commenting on both our short-term and medium-term prospects, we must put our current economic environment in context.

Over the past decade or so, Ireland has experienced unparalleled levels of economic success and prosperity. Our economic environment has been transformed through the implementation of appropriate Government policies, underpinned by stakeholder participation, as shown through the social partnership framework. Under several key measures our economic achievements have been remarkable.

Since 1997, the rate of economic growth in Ireland has averaged 7.25% per annum. This buoyant rate of expansion has propelled average per capita income in Ireland not just up to convergence levels but has surpassed those enjoyed in most other developed economies. We have changed from a country that had to send its people abroad for work to a country that now welcomes a substantial inflow of persons from other European Union member states and further afield. Our labour force now stands at over 2 million. The total number at work has risen by some 700,000 and the unemployment level decreased from some 10% in 1997 to approximately 4.5% in 2007. More recently, however, unemployment has increased, thus reflecting the slowdown. The pace of economic growth this year is far slower than it was in preceding years.

It is true to say the economic environment has become more challenging in recent months and the outlook is less benign and more uncertain. The risks that we identified in the last budget have materialised. They include risks such as recent developments in the international financial markets, further appreciation of the euro against the dollar and sterling, lower international growth and, at domestic level, a sharper slowdown in the housing market. We must accept that the short-term prospects are more challenging and ensure that we respond appropriately.

Global economic developments play a key role in shaping Ireland's economic horizon. As a small open economy, Ireland is highly integrated into the global economy. The difficulties in the United States stem mainly from the housing market and especially from the sub-prime mortgage segment of that market. These developments have impaired the functioning of international credit markets and it is fair to say these problems have persisted longer than had been initially expected.

Domestically, the residential house building sector is undergoing a sharp slowdown following a prolonged period of catch-up. Uncertainty remains regarding the projected level of housing output for this year and how long it will be before the medium-term sustainable level of activity is achieved. However, we know the underlying demand for housing remains strong and it is driven by a relatively young population and continued inward migration. While we may experience a year or two of less than 50,000 completions, it is reasonable to expect over the medium term that the annual completion rate will return to a sustainable level that will remain high by international standards, reflecting the strong underlying demand for housing in Ireland. This is a point that today's ESRI review has factored into its medium-term assessment.

One aspect of the change in the housing market, which is being overlooked by commentators, is that the moderation in house price levels, when combined with measures on stamp duty and mortgage interest relief, taken by the Government at budget time, means that better value is being obtained by those who wish to buy their own home, especially first-time buyers.

The key message of the ESRI's medium-term review is that the Irish economy is flexible and resilient. Given our sound economic management and fundamental fiscal factors such as our low ratio of debt to GDP, and the substantial surpluses that we have had for the past decade, our economy has the ability to absorb shocks in an efficient manner.

In view of the Government's sound economic management and fundamental fiscal factors, such as the low debt to GDP ratio and the substantial surpluses Ireland has enjoyed for the past decade, the economy has the ability to absorb shocks in an efficient manner. By this I mean there will be limited economic fall-out and a return to trend growth within a reasonable period. Based on the ESRI's analysis, real growth in GDP of 3.75% per annum is sustainable over the medium term. This rate of growth is far higher than elsewhere in the euro area. In contrast to the prevailing mood of pessimism, the ESRI shares my view in that we should see a return to trend growth from 2010 onwards. As I noted previously, economic conditions in 2008 and 2009 will remain weak but sensible policies will be pursued. The Government remains determined to press ahead with its infrastructural development programme, thereby enhancing Ireland's productive capacity. Discipline on current expenditures under all headings will be critical in the next few years, given the changed resources available.

As a nation we will be obliged to manage our expectations more prudently and to focus clearly on what are our spending priorities. While this is a challenge for everyone, it must be seen in the context of the highly significant increase in the amount of Government spending that has been provided for in recent budgets. While there is no denying that our fiscal position has changed from that envisaged at budget time, it is important to point out that the current situation is manageable given the strong position of the public finances. Despite the underlying strength of the public finances, my Government colleagues and I are determined there will be no unnecessary loosening of fiscal policy. Current spending must be controlled to keep it in line with resources. I will consider these issues closely in the coming months as I prepare for the budget for 2009. It is crucial for Departments to adhere to the highly significant levels of current day-to-day expenditure provided for their activities this year.

Successful achievement of this objective when resources are constrained must be based on sound priorities. The priorities of the Government are clear and straightforward. They are to protect the weaker in society through maintaining a high level of social spending; to deliver better and more effective public services; to seek value for money at all levels of public spending; and to continue the programme of substantial investment in public infrastructure.

Ireland has been hugely attractive to multinational investment given its skills base, pro-enterprise regulatory environment and low taxes on capital and labour. The Government is committed to fostering the development of dynamic and innovative Irish companies. A proactive initiative in this regard was the establishment of a seed and venture capital scheme by Enterprise Ireland in 2006. This €175 million scheme targets young, high-technology start-up firms. These companies have high growth potential and operate in sectors such as software, communications and the life sciences. This development complements the re-positioning of the economy in the production of knowledge-intensive goods and services.

Everyone is aware of the impact that unemployment has on the individuals affected, their families and wider communities. Despite the success of the economy in sustaining several hundred thousand additional jobs in the past decade, there have been a number of recent high-profile instances of companies making workers redundant. The various State agencies and appropriate bodies are providing opportunities to allow affected workers access training programmes to update their skills in order that they can then access new employment opportunities. I might remind Senators that as the Minister of State at the Department of Finance, Deputy Martin Mansergh, noted in the Dáil last night, as part of its ongoing implementation of the Irish national employment action plan, a strategy introduced in 1998, FÁS reduced the employment action plan referral threshold from six months to three months for first referrals as long ago as December 2006. Last year, under this proactive labour market initiative, more than 51,000 people were referred by the Department of Social and Family Affairs to FÁS, of whom approximately 32,000, or 63%, had left the live register by the end of the year. FÁS also is placing particular emphasis on the training of low-skilled workers in vulnerable industries to ensure that in the event of becoming unemployed, they will have the skills necessary to make the transition to other employment.

The Government has given priority to full implementation of the national development plan and has provided for an increase in capital spending of approximately 12% this year. In the short term, this will help to absorb some of the capacity emerging from the new house building sector. The medium and longer-term impact of this spending will be more important. Spending on human and physical capital under the national development plan will help boost the productive capacity of the economy. It will remove critical infrastructural bottlenecks and will facilitate the re-positioning of the economy in the production of knowledge-intensive goods and services. This is how Ireland will become an even more knowledge-based economy, will lay the foundations for future improvements in living standards and will sustain the economy's competitiveness.

The implementation of the public service modernisation agenda has been and continues to be driven by the various partnership agreements across the public service. The current partnership agreement, Towards 2016, builds on the progress made under previous agreements and ensures continued co-operation with change and modernisation initiatives, as well as improvements in productivity across the public service. It provides an important framework for meeting the economic and social challenges ahead and builds on the achievements of previous agreements.

The OECD review of the Irish public service was published recently and it acknowledged the central role played by the public service in contributing to an economic success story that many OECD countries would like to emulate. It states that while service provision is good, scope remains for improvement. The key will be to get the public service to become more efficient. Growth in new public sector bodies must be reined in and what is already there must be rationalised. The Taoiseach will announce shortly the appointment of a task force on public service reform to report to the Government with a comprehensive programme for action.

It has been known for some time that in riding out a storm, economic flexibility is crucial. The Government knows this from having overcome difficulties in the past and the ESRI review, published today, restates this point. The limited economic fall-out from the global information technology shock at the beginning of this decade is one of the best examples of the economy's resilience. In other words, while the short-term prospects are unfavourable, we face them from a position of considerable strength and the economy is sufficiently resilient to ensure the medium-term prospects remain relatively benign. This, of course, is predicated on implementing the correct policies, which the Government is determined to do.

Under the Government's assured stewardship, the fundamentals of the Irish economy will remain strong. Because of this, Ireland is well placed to absorb the housing adjustments and external shocks in order that its medium-term prospects will continue to be favourable. The public finances are sound, with one of the lowest levels of debt in the euro area. Irish markets are flexible, which allows us to respond efficiently to adverse developments. Ireland has a dynamic and well-educated labour force and a pro-business outward-looking society. The tax burden on both labour and capital is low. Not many countries anywhere in the world face the present global economic difficulties with such advantages.

In addition to corrective action, if Ireland is to keep its medium-term prospects bright, we must reassert our rightful position at the heart of Europe through a "Yes" vote on the Lisbon treaty in June. I listened to Senator Doherty's contribution a few moments ago, which extolled the merits of export-led growth. I am astonished that a party is campaigning against the Lisbon reform treaty when its principal spokesperson in Seanad Éireann extols the merits of export-led growth. Fundamental to export-led growth is Ireland's continued participation in the European Union on the terms we have negotiated in the Lisbon treaty. These terms were negotiated by the then Taoiseach, Deputy Bertie Ahern, and the present Taoiseach, Deputy Brian Cowen, in his former capacity as Minister for Foreign Affairs, ably assisted by many of the best in the Irish public service. This is not a treaty which is being imposed upon us from Europe. It is a treaty to which some of the best and brightest of a particular generation in Ireland applied their minds. In economic terms, it is highly important for Ireland to reassert its position at the heart of Europe through a "Yes" vote on this treaty in June.

Participation at the centre of a large political and economic grouping, the European Union, gives Ireland real negotiating power in international relations, particularly in the area of trade and increasingly in the field of diplomacy. Only yesterday evening, I attended the meeting of the European finance ministers which takes place on a confidential basis, to meet the officials of the European Central Bank. Through such a medium, Ireland, in common with the other smaller countries, as well as the greater countries that are in the European Union, has the access to at least make its views heard regarding the monetary policy that binds us all. Previous generations of Irish statesmen, leaders and representatives did not have such access. Ireland's membership has provided free access for Irish indigenous industry and international firms to an internal market, which now numbers 500 million consumers. I commend the Government amendment to the House.

I welcome the Minister to the house and congratulate him on his recent appointment. I am glad that Fine Gael tabled this motion because with a new Taoiseach and Cabinet, it is essential to have a full and frank debate as early as possible on the economy. There are many reasons why our economy boomed in the past ten years. Many of these are due to external factors. They have not been in the control of the Government but have been due to factors from outside, such as the World Trade Organisation and economic growth in the United States. It is true that some reasons for our growth have been due to internal factors, for instance the corporation tax rates, but these were introduced by my colleague, Deputy Ruairí Quinn, not by the former Minister for Finance, Charlie McCreevy, nor by Deputy Brian Cowen when he was Minister for Finance.

Much of the growth we have seen is due, not alone to Fianna Fáil's stewardship of the economy but to ourselves and others. Now there is a need for real stewardship because along with the slowdown in economic growth comes a reduction in employment. Only last month the figures for unemployment showed a rise of 5.5% on the previous year. That cold figure hides a lot of hardship. In Meath, for instance, the live register figures have gone up by 1,430 in the year to April 2008. Kells has seen an increase of 236 people on its register. That means 236 families are now suffering and having to re-adjust their lifestyles to cater for their new economic situation.

We are losing jobs fast and in two ways. There is an almost constant loss of international companies that leave Ireland for cheaper workforces elsewhere. The construction industry, which up to recently was extremely busy, is in rapid decline. We can disagree about the reasons for this and disagree also about the quality of the handling of the economy to date. However, I believe we all agree that now is the time for effective stewardship. The economy can be steered in the right direction by investing heavily in technology, infrastructure, education and tourism. Ireland must be an attractive and viable destination for international businesses. We fall short, however, in areas such as access to quality broadband. Often this is a deal-maker when it comes to businesses from abroad moving here. Last year the Communications Regulator wrote a report outlining the supply of broadband to many rural areas. It stated that almost all the businesses in these areas still used dial-up, not because they wished to, but because no broadband was available.

Senator Dan Boyle — who was referred to earlier as Dan Brown — has said that nothing else can be done. I would prefer to believe Dan Brown on this issue rather than Dan Boyle. Clearly, things can be done. We must invest in quality broadband. The Government has been very slow to roll out broadband across the country and as it has struggled the technology has moved on. The cutting edge of broadband is found in places such as Japan where up to 100 megabytes per second can be achieved. In most European countries the speeds are between ten and 15 megabytes per second. In Ireland we are lucky to get three or four per second. One would wonder how a nation that is serious about trying to be a First World country can survive on Third World technology when it comes to broadband. We must set our minds to discover how to make Ireland an attractive 21st-century country for 21st-century jobs. We need investment in broadband, in roads and rail services, and in education.

Senator Boyle said that very little else could be done. I would like to remind him of these words:

The Government's failure to commit modest funding required for the implementation of the McIvor report shows that it is still failing to invest in the domestic skills base. Irish industry and the Irish educational sector, will, I believe, join me in saying that this represents a serious misjudgment.

In effect this person is saying that we will lose out when it comes to jobs and the economy because of not implementing the McIvor report on third level education and by not investing in education. The quotation was taken from Senator Dan Boyle's website in December 2005. Things can be done. Senator Boyle is in Government now and can get the McIvor report implemented. However, we have not heard him suggest this, so I remind him of his statement of 2005.

We advocate investment in broadband, further investment in education and in public sector projects. These will help to ensure that we continue to see economic growth. We all worry that the boom years have perhaps been wasted to some degree. There has been no improvement in health and underinvestment in our rapidly growing schools. Few people now can afford houses. Senator O'Malley does not seem to have a problem about negative equity. The truth is that many people bought houses at the top of the market at low mortgage rates in the hope that they could re-mortgage in a couple of years. They cannot re-mortgage now for lower rates because their loan devalue is not what they had hoped to achieve. Given the deficit in their loans in comparison to the value of the house they are not going to get cheaper mortgages. This costs people money. The issue is not about moving house, rather it is about people who might wish to re-mortage suffering because of negative equity. It is unfair and ill-informed to suggest otherwise.

We believe that the Government lazed its way through the economic boom and now it is time for real stewardship. I saw the ESRI report this morning. Perhaps that organisation is correct in predicting that we will be lucky and will see growth rates of 3.5% a year but we will not get it by default. We must work for it. If the Government is serious about achieving those rates it must invest, in education, in broadband and in industries such as tourism.

I thank the Minister for coming to the House tonight. His rapid rise puts him at a great risk of altitude sickness but I wish him very well in the next couple of years.

While the Minister speaks much of what the Government has done in the past decade the most productive period in terms of real growth in our economy over the past 15 years was that during which John Bruton was Taoiseach and Deputy Ruairí Quinn was Minister for Finance. We must emphasise that point on this side of the House because the Government is trying to take all the credit for any improvements in the economy during that time. The best part of the growth occurred before Charlie McCreevy or Deputy Bertie Ahern became Minister for Finance or Taoiseach, respectively.

A few problems lie on the horizon but some of these have been of the Taoiseach, Deputy Brian Cowen's making. There has been a €10 billion deterioration in the Exchequer balance over the past two years. That may well have been to buy the election but at the same time it may indicate poor management of the public finances. Reform of the public service will be a very important issue over the next few years because funding will be restricted. It is clear that the Minister's speech was made for his Cabinet colleagues as much as for the Members of the House. If there is not going to be a dramatic increase in the level of funding over the next couple of years we must be more efficient in what we spend now.

The idea of reforming the public sector started as far back as 1994 with the strategic management initiatives. We must progress that a little faster than has been the case to date. I would wish the Minister to comment on this. Although there is much talk about this issue and a report was published recently we do not know what kind of initiatives the Government proposes and what they expect to save in the long-term once the modernisation and reforms of the public sector and the Civil Service have been carried out. What sort of timeframe is expected for this?

The Progressive Democrats and, in its turn, the Green Party have taken up the role of mudguards for Fianna Fáil. They seem to agree that all the dirt should stick to them leaving Fianna Fáil clean. It is important that the major political party in Government takes responsibility for what goes wrong. In the past couple of years, particularly before the general election, the property and construction industries were hyped. Many young people bought houses at what are now seen as exaggerated values and have been left with negative equity. This has a very serious effects on young families. If people feel that the house they live in is worth much less than they paid for it and if their mortgage rises, there is a psychological effect but also a reduction in ability to move to another job or another area. Additional financial burden is created if an individual in that household loses a job.

I look forward to having further discussions in this House. The point is sometimes made that Members on this side of the House confine what they say to criticising the Government. The economy is a broad subject. The Government takes up its Private Members' time to discuss those aspects of the economy that might be felt to be outside politics, such as the service industry and other sections of the economy that are doing very well with minimum interference from Government. This side of the House will therefore take it upon itself to discuss those parts of the economy it considers the Government has failed to address and which have an enormous effect on people's lives.

Amendment put.
The Seanad divided: Tá, 24; Níl, 22.

  • Boyle, Dan.
  • Brady, Martin.
  • Callely, Ivor.
  • Cannon, Ciaran.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • de Búrca, Déirdre.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Keaveney, Cecilia.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Phelan, Kieran.
  • Walsh, Jim.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Coffey, Paudie.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • Doherty, Pearse.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • Healy Eames, Fidelma.
  • Kelly, Alan.
  • Norris, David.
  • O’Reilly, Joe.
  • O’Toole, Joe.
  • Phelan, John Paul.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.
Tellers: Tá, Senators Déirdre de Búrca and Diarmuid Wilson; Níl, Senators Maurice Cummins and Liam Twomey.
Amendment declared carried.
Question put: "That the motion, as amended, be agreed to."
The Seanad divided: Tá, 24; Níl, 22.

  • Boyle, Dan.
  • Brady, Martin.
  • Callely, Ivor.
  • Cannon, Ciaran.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • de Búrca, Déirdre.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Keaveney, Cecilia.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O’Brien, Francis.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • Phelan, Kieran.
  • Walsh, Jim.
  • Wilson, Diarmuid.

Níl

  • Bacik, Ivana.
  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Coffey, Paudie.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • Doherty, Pearse.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Hannigan, Dominic.
  • Healy Eames, Fidelma.
  • Kelly, Alan.
  • Norris, David.
  • O’Reilly, Joe.
  • O’Toole, Joe.
  • Phelan, John Paul.
  • Regan, Eugene.
  • Ross, Shane.
  • Ryan, Brendan.
  • Twomey, Liam.
  • White, Alex.
Tellers: Tá, Senators Déirdre de Búrca and Diarmuid Wilson; Níl, Senators Maurice Cummins and Liam Twomey.
Question declared carried.
Top
Share