Economic Policy: Statements.

I welcome the opportunity to contribute to this Seanad debate on the stewardship of the economy by the Government and to acknowledge the productive investment being made under the national development plan. This plan consolidates and enhances Ireland's economic competitiveness. In particular, I would like to take the opportunity to outline the main measures that the Government is taking to address our current economic challenges. I assure Senators that through enacting policies that support our economic and budgetary stability, the Government is taking resolute steps to ensure that we are well positioned to take full advantage of a future upswing in the global economy when it emerges while at the same time maintaining steadfast in our commitment to protect the vulnerable in our society.

While the focus is on our current situation and the actions announced by Government, it is worth reminding ourselves of Ireland's transformation in both economic and social terms over the past decade. We have experienced unparalleled levels of economic prosperity and success. During this time the rate of economic growth in Ireland has averaged approximately 7% per annum. This very strong rate of expansion has facilitated a convergence in Irishper capita incomes not only up to but beyond those enjoyed in other advanced economies. This Government and its predecessors have soundly managed the public finances. For example, we have delivered budget surpluses in ten of the past 11 years while managing to fund a substantial investment programme.

Of equal impressiveness has been the performance in our labour market. We now have over 2 million people in work compared with 1.5 million a decade ago. This has facilitated a decline in the unemployment rate from over 12% to the current position now, where we enjoy one of the lowest rates of unemployment in the eurozone. This has also led to the ending of involuntary emigration and Ireland has become a destination country for migrants in recent years. The current situation in the labour market is not as good and while we expect to see a pick-up in unemployment throughout this year, we must not lose sight of the fact that the economy is still producing jobs — good quality, high end jobs. We still have a very high level of employment in this country.

However, as Senators will be aware, in common with other countries, the economy has now entered a more challenging period. Domestically, the pace of transition for the new house building sector to more sustainable levels of output is having a significant dampening effect on economic growth. Global economic developments have compounded this situation. A continuation of international financial market difficulties, rising food and oil prices, adverse exchange rate movements and a general weakening of the economic outlook in several of our major trading partners are also causing problems.

As a small open economy focused on international trade, our scope to mitigate the effects of such global economic developments is restricted. The impact of this combination of domestic and external shocks means that our economic growth has plateaued for now, albeit at a very high level.

As Senators are no doubt aware from last week, my Department, taking account of the latest available data, has revised downwards its economic growth forecasts for this year as the downside risks identified in the budget last December have materialised. It is now expected that GDP and GNP will expand by just 0.5% this year. However, in considering this very modest rate of real expansion in the economy this year, it must be recognised that the significant investment in the housing sector represents a drag of the order of 4%.

Apart from the construction sector, it should be pointed out that the rest of the economy has performed well given the international circumstances we face. The outlook is for tax revenues to remain weak for the remainder of the year with a tax shortfall of the order of €3 billion now being factored into the budgetary arithmetic.

On the spending side, Government expenditure is running at 11% higher than the same period last year with a number of spending pressures due mainly to higher unemployment. It is Government policy that these pressures must be met without adding to overall spending this year and that is why we have taken the action we announced yesterday.

The change in the public finances as outlined by my Department last week means that, based on our current assessment, the general Government deficit, could be close to the Stability and Growth Pact limit of 3% of GDP in 2008 and, in the absence of corrective action, could breach that limit next year. It is not just a question of observing rules — it is ordinary common sense that one does not borrow to meet ongoing expenditure. This country has to live within its means.

We will not repeat the mistakes of the 1970s where failure to act in time and in the right way resulted in severe problems which persisted through much of the 1980s. If we do not pursue measured and sensible action now when confronted with the twin developments of falling revenues and pressures on expenditure, the financial situation facing us for 2009 will be more difficult and the action required will be more urgent and severe.

Yesterday, the Government announced proportionate, measured and sensible action to ensure that the public finances in the years ahead are kept on a sustainable footing. Sound public finances have been critical to our success over the past decade and are critical to future growth. The measures we are taking are designed to maintain a prudent fiscal outturn for 2008. They are also designed to limit the negative effects of any corrective action on vulnerable sections of the community.

I will outline for the House the decisions taken by the Government yesterday. All Departments, State agencies and local authorities, other than the Departments of Health and Children and Education and Science, will be required to reduce their payroll bill by 3% by the end of 2009 through all appropriate measures identified by local management in the light of local circumstances. The parameters of this exception for the health and education sector are to be agreed by the Departments concerned with the Department of Finance. That does not mean these Departments are immune from a payroll reduction. It means that because of the sensitivity of some the frontline services they provide, care will be taken in the implementation of the payroll cut. Indeed, yesterday's Government announcement drew attention to the fact that the one area in which it was willing to make funds available for voluntary redundancy was in the area of surplus administrative staff in the Health Service Executive.

All expenditure by Departments and agencies on consultancies, advertising and public relations will be significantly reduced for the remainder of this year and by at least 50% in 2009. Further savings in 2008 and 2009 are to be secured by a range of measures, including those identified as a result of the budget day efficiency review initiated by my predecessor. All of the aforementioned efficiencies will apply equally to State agencies. In addition, I have asked that these agencies be reviewed to examine whether they can share services, whether it would be appropriate to absorb some of their functions back into their parent Departments or whether some agencies should be amalgamated or abolished. The outcome of this will be considered by the Government in the autumn.

To those who urge that I should publish a list of affected bodies, it should be borne in mind that many of these bodies are established under statute and have established personnel, practices and locations of work. It is essential that in doing a comprehensive review of all of these agencies, we come to conclusions about them having listened to what they have to say. The House should be under no illusion about my determination to deal with the issue of the proliferation of State agencies and bodies. I am determined to deal with it and proposals will be brought to the Government in the autumn to reduce the number of such entities.

Capital investment will remain a top priority. Capital projects will be examined and prioritised to ensure that resources are targeted at construction-related investment in core economic infrastructure that adds to productive capacity. We will also take account of our climate change obligations in having regard to how we proceed on capital investment.

The Government has also decided, in light of the current Exchequer position, that further expenditure for the acquisition of accommodation for decentralisation will await detailed consideration of reports from the decentralisation implementation group. My colleague, the Minister of State, Deputy Martin Mansergh, will head up a joint public procurement operation between the OPW and the Department of Finance to drive a programme of reform and to produce a business plan for purchasing savings to be achieved by Departments and other public bodies in 2009. He will report in the autumn with specific proposals to target at least €50 million savings in 2009 on this front.

Given the projected revision to GNP and other factors, there will be savings in overseas development assistance, ODA, of some €45 million this year. The revised total contribution in 2008 will be over €200 per citizen, totalling approximately €900 million. Ireland is far ahead of almost all other developed nations in our rate of ODA.

In addition to these measures, the Department of Finance and the Department of Health and Children will draw up proposals for a targeted scheme to reduce surplus staff in the HSE as soon as possible. We will consider extending this scheme on a selected basis to other public service agencies where staff surpluses are identified. These and other savings announced are estimated to deliver €440 million and the fiscal position will continue to be rigorously monitored and controlled. The Taoiseach already set out earlier today in the Dáil a breakdown of the components of the aggregate savings.

The delivery of the productive investment priorities to be financed under the national development plan will ensure our economy is well positioned to take advantage of a future upswing in the global economy. This investment will also improve our competitiveness and provide a better quality of life for everyone in the country. The investment in economic infrastructure and human capital will boost the productive capacity of the economy and facilitate a repositioning of the economy in the production of knowledge-intensive goods and services. I stress to Senators that I am committed to investment in the infrastructure and productive base of this country. Of course, projects will have to provide value for money to the taxpayer, but if they pass that test and add to our competitiveness, they will be prioritised.

The comprehensive 2007 NDP annual report laid before the Oireachtas last week shows the Government's commitment to making the investment necessary to consolidate and enhance Ireland's economic competitiveness. The report outlines the financial outturn of each NDP sub-programme, the outputs resulting from NDP investment and expenditure and the contribution of NDP investment to promoting all-island co-operation, regional development, environmental sustainability and the development of the rural economy.

For many, the most visible outputs from NDP investment can be seen in our steadily improving transport network. By the end of 2007, 313 km of the major interurban routes linking Dublin to Belfast, Galway, Limerick, Cork and Waterford were completed and a further 324 km were under construction. NDP investment in 2007 also helped to augment our public transport infrastructure through the provision of new rolling stock, new stations in the greater Dublin area and the commencement of the extension of the Luas red line trams to carry more passengers.

In the built environment, some €670 million in NDP investment in 2007 helped to upgrade our environmental infrastructure and facilitated commercial and housing development. This investment also supported the NDP's objective of enhancing environmental sustainability. NDP investment also supports the progressive implementation of the strategy for science, technology and innovation. This will help firms in Ireland to produce high-quality, value-added and innovative goods and services that will generate competitive exports. In 2007 some €635 million in NDP investment went into research, development and innovation in various sectors.

The NDP also assisted our enterprise sector, both in terms of helping indigenous firms to grow and prosper and in attracting foreign direct investment. Some €432 million of NDP investment in 2007 helped create 210 high-potential start-up companies, helped indigenous firms enhance their export readiness through productivity improvements and created over 9,000 new jobs in overseas companies located in Ireland.

The tourism sector was also supported under the NDP to market Ireland and to provide people working in the sector with the skills and training that will enhance Ireland as a tourism destination. The NDP also enabled work to begin on the new convention centre in Dublin, the progress of which is highly visible on Dublin's quays. Through prioritising such productive investment, we will lay the foundations for future improvements in living standards so as to ensure that our economy's competitiveness can be among the best in the world.

The Taoiseach remarked yesterday that we intend to manage this challenging period through the social partnership framework. That framework has played a vital role in delivering economic and social benefits over the past number of years and ensures that all stakeholders in our economy have a shared sense of the difficulties that are emerging and that inappropriate policies are not implemented. This approach can also ensure that competitiveness is restored, thereby enabling a rebalancing of activity towards sustainable growth.

I remind the House that we face our current challenges from a very strong position. Although we are now facing into a number of short-term difficulties, the economic prospects beyond these still remain favourable. Our remarkable economic progress has not been reversed overnight. Its underlying health remains strong. We must not forget that the economy has responded quickly and effectively to difficulties in the past.

Our markets are flexible, allowing us to respond quickly to difficulties, we have a dynamic and well-educated labour force, we have a pro-enterprise oriented society and taxes for both workers and businesses are low. It is worth reflecting that not many countries face the current global economic difficulties from such an enviably strong position. While growth this year will be very weak, my Department anticipates it will pick up next year to somewhat of the order of 2.25% and towards trend growth of 4% by 2010. None of this will happen unless we observe the necessary disciplines. It is just not good enough for Opposition critics to suggest, as an informed commentary on the Government's plans announced yesterday, that we can cut taxation and increase spending. That will not solve our economic problems; it will compound them.

Our perspective on the positive medium-term outlook for the Irish economy has been shared recently by the independent economic research body, the Economic and Social Research Institute, in its Medium Term Review 2008-2015. However, I must stress that this benign scenario will not materialise unless we observe certain necessary disciplines now. On account of our sound economic management and the underlying health of the economy, the institute agrees that the Irish economy is flexible and resilient and has the ability to absorb a downturn.

In conclusion, the objective and priority of the Government is to balance the need for fiscal restraint to ensure domestic recovery with the need to protect the vulnerable. Our economy is resilient and through priority investment in the economy underpinned by measured, decisive action, we will be well-placed to take advantage of a future recovery in the world economy and return to our potential growth rate as soon as possible.

The people feel they were sold a pup before the general election 12 months ago. We should ask why this happened. Since 1994, Ireland has had a developing economy and, upon entry to the eurozone, cheap interest drove us further forward. In respect of the construction industry, banks offered 100% mortgages with 30-year contracts. They claimed they did so to make it easier to repay loans but the reality was that people had to borrow larger amounts to purchase houses at higher prices. The Government did nothing to curb the resulting construction frenzy because it profited from it. No Minister has yet acknowledged the housing bubble that built up several years. We were building half the number of houses that were built in the UK.

The Government should acknowledge that, notwithstanding global problems and the cost of oil, bad policies have put young people in this situation. National debt may have decreased but, in terms of total debt, the people are as much in debt as they were in the 1980s. The banks made it clear when they appeared before the Joint Committee on Finance and the Public Service that they do not care about this. They feel it is business as usual and are prepared to take the losses as they occur. The plight of young people is seen as nothing more than collateral damage. The Government contributed to this.

Laid-off construction workers have told me that if they are lucky enough to find new employment, they expect pay rates of €450 per week, compared to their previous rates of between €700 and €800. If the Minister for Finance prefers, I will sit down so he can speak with his colleagues.

Táim ag éisteacht.

He has clearly become bored with the Opposition's criticism of the Government's management of the economy.

People making €800 per week have lost their jobs and are being told that the going rate in the construction industry is €450 per week. Ministers who make €5,000 per week are trying to fob these people off by promising to take their snouts out of the trough for a year before giving themselves pay rises.

We made it clear yesterday that there is no commitment to pay rises.

It is a serious business for many people.

The Senator should not misrepresent the facts. I am listening carefully to what he says. There is no commitment on pay rises for Ministers in 2010.

We all know that the review of the matter in 2010 means they will pay themselves more.

That is not true.

My elderly patients tell me their pensions are being eroded by the cost of food and fuel. This is more than a blip for the economy. It is hurting people badly. The pensions of people who hope to retire in the next five to ten years are being eroded by the turbulence in the stock market. Much of this has been driven by the greed and frenzy in the Irish construction sector which was encouraged by the Government.

We are now facing rising inflation and unemployment and a deterioration in the national finances. I would be interested to learn how the Department of Finance arrived at its predictions of 2.5% growth next year and 4% in 2010 because many people believe the economy will not grow over the long term. The Government refuses to face up to that and is trying to soften the blow. Even some of the cutbacks the Minister announced, such as the €85 million reduction in nursing home payments, were never spent in the first place. There is no urgency on the part of the Government to make the cutbacks necessary to bring the national finances back into line. It has merely tinkered around the edges.

The Minister stated that health and education would not be affected but that is clearly not the case. Education will be affected if the VEC is required to reduce its staff complement. The HSE is to cut 1,000 administrative jobs but we are told that front line staff comprise 90% of HSE employees. That leaves a pool of 10,000 to 15,000 people from whom to take 1,000 redundancies. To whom does the Government refer in that regard? The reductions should have been made when the HSE was originally established rather than allowing the explosion in numbers that took place. The Government's proposals have been generic despite its claim to have considered them over the past few weeks. We need more detail.

The Government set up most of the quangos currently in existence but now we are told they are surplus to requirements. It is shameful that a huge amount of money has been wasted on them over the past decade instead of being put aside for this rainy day.

I ask for clarity on the issue of decentralisation. In my area, County Wexford, some buildings are currently under construction and negotiations are ongoing between Departments regarding who is expected to move first. The Minister needs to clearly state where this is to stop because if buildings are being constructed in anticipation of what happens in other parts of the region, the mess of decentralisation could become even bigger. We should not wait too long for the decentralisation implementation committee to report because we need to know what will happen. The process is already extremely slow but it could become an even bigger problem in the long term.

I would like more time to discuss what went wrong in regard to competitiveness. We also need time to discuss social partnership given its potential impact on Irish people over the next year.

I hope I will receive a response from the Minister in regard to decentralisation. I have focused on County Wexford but I am sure the rest of the country is facing similar issues. We need clear answers and an acknowledgement from the Government of its role in creating this problem.

I join other Senators in welcoming the Minister and I am delighted to have an opportunity to speak on the important issue of our changed economic circumstances. Senator Twomey will appreciate that, as is customary, I have to rebut his arguments. It is a shame that he did not start with tangible suggestions but he always seems to run out of time before completing his moaning. He suggested that our current woes are entirely the Government's fault.

There is no question that the nation has benefited tremendously over the past decade from high growth rates. All sections of society have realised a level of prosperity as a result of the implementation of appropriate policies by consecutive Administrations over many years. I give credit to the Opposition in that Alan Dukes agreed to the Tallaght strategy once he realised that the then Fianna Fáil Government's policies were correct. We all know what Fine Gael did to him for pursuing that strategy, however.

Mortgage lending has fallen to its lowest level since data began to be collected and is 70% below the peak recorded in November 2006. That is in the United Kingdom. Approximately 42,000 mortgages have been approved, which is 27% less on the month and 60% on the year. UBS confirmed last week that it faced further heavy write-downs on exposure to troubled US credits meaning earnings for the second quarter would be "at or slightly below break-even". It is a remarkable achievement in government for Fianna Fáil that the policies it implemented in recent years have had such an effect on the United States and the United Kingdom.

In terms of the changed economic situation, I am sure Senator Twomey is well aware that Fine Gael did not predict that this would happen. The Fine Gael manifesto of last June indicated a 4.5% growth in the year ahead. As we all know, that did not materialise. I do not blame Fine Gael for not knowing this because nobody knew circumstances would change so much throughout that period. Since then oil and food prices have risen exponentially leading to high inflation and, in turn, to high interest rates. The credit crunch was unprecedented and we are in uncertain times in terms of the international banking sector. To complete the perfect storm conditions, exchange rate difficulties, in terms of the strength of the euro against sterling and the US dollar, have resulted in Irish and eurozone exports being less competitive than those around the world. None of this, any independent or objective commentator will admit, has anything to do with the policies that can be pursued by this Government.

In the main Ireland has benefited from its involvement in the eurozone and single currency. However, it is arguable that our signing up to a single currency at a time of unprecedented economic growth — on average 5% per year — while interest rates in the eurozone stood at 2%, may have led to a frenzy or increased activity on the part of developers or people yearning to capitalise on Ireland's new found prosperity. Money was cheap and growth was high and this arguably contributed to the growth of what some choose to call "frenzied property speculation".

The reality is that Ireland constitutes less than 1% of the eurozone economy and as such what is good for Europe is not necessarily at all times good for us. Had we been responsible for setting our own interest rates, we might have set them a little higher. The reality is, in terms of oil, food, the credit crunch and exchange rates, that nobody in the world perceived the development of the current situation. Fine Gael, which predicted a 4.5% growth, did not foresee it.

A famous person once said that when circumstances change we change our minds. That is precisely what we have done. I would like now to comment on the Government's announcement yesterday of sensible proposals, incorporating a few different measures, to address the situation. The deferral of ministerial pay rises is a prudent move, one we all support. There is no indication this issue will ever arise again. We are told only that the matter will be reviewed in 2010. The reduction in the payroll bill of 3% across the board is an admirable proposal. However, I suggest that the Minister, as far as is practicable, should be directly involved in this to ensure that front line services are maintained. It is timely that advertising and consultancy services are reviewed to increase efficiencies. There is no question but that there exists an over-reliance on the advice of consultants when much of that expertise is available in-house. There are savings to be made in this area.

The re-organisation of the various agencies or quangos, as some people prefer to call them, is also an admirable proposal. The Minister indicated reviews are taking place and that he will not at this time name the agencies involved. However, an announcement will be made in due course. The decentralisation programme has paused but has not been cancelled. Decentralisation has been successful in Sligo with some 900 people currently working and living in the area. I have no doubt Government will return to this programme when it is prudent to do so.

The Government made a hames of the decentralisation programme.

As the Minister stated, the review group will make recommendations on the matter. We will revisit the programme in due course.

The Government also announced prudent proposals in regard to HSE staff. In so many debates in the House on this issue there have been calls to put in place a package for staff who are non-essential or surplus to requirements. I welcome the review. Overall, it is important the Government remains committed to protecting the most vulnerable in our society and ensures front line services are not cut in terms of current expenditure, social welfare, education and the HSE. The Government is also committed to capital projects. It is most important that in these economic times we maintain the momentum by investing in our capital programme so that we are best positioned to capitalise on the uplift when it comes.

On balance, I am delighted to have had the opportunity to contribute to this debate. Like Senator Twomey, I too could speak on this subject for quite some time. I commend the Government on the package of measures announced and for making these most difficult decisions in these changed economic times. The message we must send out to the people is that this is the party that in government faced up to the realities of more challenging difficult situations; it has taken the required steps to ensure this country can move forward with confidence, ride out the difficulties and changed circumstances and position itself to capitalise on the upturn if and when it arrives.

I am glad to have an opportunity to contribute to this debate. Although there has been a change of Ministers, Deputy Mansergh has occupied senior positions of administration before entering parliamentary life and as such he is well equipped to deal with any modest suggestions that may come from either side of the House.

I am sure the Minister of State, Deputy Mansergh, will agree that there is no avoiding the fact that the situation is serious and that it came upon us with remarkable rapidity. I am one of a number of people who believed this would happen. However, I was relying only on instinct as unlike my colleague, Senator Ross, I do not have expertise in this area. The problems that have arisen in respect of the construction industry are not entirely Irish; there are global factors involved, including the situation in regard to sub-prime lending in America. All of these problems are related to the neo-liberal economic policies and to the incarnation of greed as something good as represented by what I call the Leeson syndrome, namely, people, removed from the reality of ordinary people, speculating in the abstract on futures in the stock market.

I take an ideological slant on the matter with which I am sure not everybody will agree. However, we all recognise the situation exists. Two questions come to mind. How long will this economic downturn last? While it will end Government can bring it to a closure much more rapidly than might otherwise happen. Also, how badly damaged will be the most vulnerable elements in our society during that period? These are the people who most need to be protected in this situation. I refer in particular to people dependent on social welfare, people in receipt of health care and so on.

I agree there has been a collapse in the construction industry. However, that does not break my heart. No group deserved it more. The arrogance with which the building and construction industry treated people was unparalleled. I am sure the Minister of State will recall the stories echoed in this House about people being gazumped by builders who tried to squeeze more money out of them and did not honour their contracts. Everybody is aware of the attitude of individual builders to ordinary people trying to secure their services. They treated people with contempt. The regression was inevitable and necessary and my heart is not breaking over it. I heard Members on this side of the House state some people in the construction industry were earning €400 per week. I wish I had known who they were because I would have employed every last one of them. One of the bellyaches was that these people were being undercut by the Polish people. The Polish people work hard and turn up on time for work. They did not go off to South Africa on safari or to their villas in Spain halfway through contracts as builders here did. This is in some ways a salutary correction. However, I am concerned about those caught in the mortgage market. Everybody had money shoved at them. It was unconscionable. I do not have a mortgage or debts with the bank, thank God, but I remember the last time I had and it was very unpleasant. However, in recent years I was in receipt of correspondence from every bank in town. Letters poured in offering me €20,000 or €30,000. They could not get rid of money quickly enough. We must bear in mind the arrogance of the banks and the fact that they speculated in America. They also did so here many years ago and the taxpayer had to bail them out. They should be put on notice that they will not be allowed to savage the ordinary people who are being crucified by debts.

Senator MacSharry said that we should front-load the positive proposals because otherwise they would not be implemented. I have a few such proposals. They may be very naive but I would like to present them to the Minister of State. I whispered one or two of them into the ear of the Minister for Finance, Deputy Brian Lenihan, and also complimented him on taking this God-awful job at what was the worst time in political life to be catapulted into it. However, when I expressed my sympathy to him, he brushed it aside and said he was thoroughly enjoying the experience. Good for him. He was absolutely right to tell the conference in Dublin Castle that the building boom was coming to a shuddering halt. Why should he be criticised for this? A little more truth from members of the Government would be welcome. We can stand the truth and should hear it. The Minister also performed very well on "The Week in Politics" against a formidable opponent, Deputy Bruton, who would make a superb Minister for Finance.

Really. Perhaps in the next century.

We have about six months. If things continue to slide, they will become really serious. At that point people will start talking about a Government of national unity because there is damn all difference between the two principal conservative parties, Fine Gael and Fianna Fáil. We might then have Deputy Bruton as Minister for Finance.

We will be frightened then.

I will return to my suggestions. There are people of extraordinary talent who have benefited the country through their financial wisdom or artistic brilliance, including U2 and others.

Enormous amounts of money have been taken offshore. People have every right to do this and we cannot punish them for it. Tony O'Reilly has plenty of money somewhere around the place. Can we not lure them back? In the old days there were tax incentive schemes, but we now have public programmes that are undercapitalised. Why not say to the people concerned that now they have got away with it and have their swag offshore, we will let them bring it back without taxing them on the profits? They would be doing the work for which we do not have sufficient capital.

I ask the Minister of State to recommend to the Government that it carry out a business efficiency audit in every Department. This would be useful, for example, for An Post which owns a warehouse around the corner from me on which rent of €108,000 per year is paid. It is empty. The only time it ever had anything in it was when one of the employees moved house, at which time it contained sofas, chairs, tables, fridges and cookers. We ought not to have such waste. We cannot afford that flab. I also ask the Minister of State to ensure the capital programmes are kept as intact as possible. This is important. The Government should not lose its nerve. For goodness' sake, it should not yet again let the Frank McDonalds of this world win and cancel the metro project. It is important that we give a commitment to carrying out this project.

I am glad the Government has decided not to go ahead with the wage increases for all of us here in Leinster House, although I love such increases. I am as greedy as anyone else and my snout has been in the trough, as was said here. I will accept that cliché. I snuffled up whatever I could. It is painful that we are not to receive our 1%, but the decision was the right one and I will tell the House why. When I was running the Hirschfeld Centre, I made it my practice not to ask anybody to do something I would not do. I worked on the door, behind the cash register and cleaned the drains manually when they became clogged. That meant that I could ask any other person in the organisation to do these things because I would not ask them to do anything I would not do myself. The financial implications of cancelling our wage increase are not worth a tuppenny damn, except psychologically. If we did not endure the pain, we would not be in a position to ask anybody else to do so.

All economies are cyclical. Although the nature of politics does not allow us to indulge too much in the theoretical and the philosophical, debates such as this allow us to talk about what we mean by economic wealth, what it consists of and how and when it is measured. The normal economic indicators are such that we measure economic growth in certain ways. We measure all economic activity, whether negative or positive, within certain timeframes. If we were to measure the economy since the turn of the year, it would not be seen in a particularly positive light. If we measured it in the last ten years, it would be seen as one of the best performing in the world, but if we conducted the same measurement to cover the time from the foundation of the State until the mid-1990s, say, it would certainly not be much to write home about. On these terms, we see in our own political history how the economy has ebbed and flowed and how the matter has been dealt with by successive Governments of different political affiliations.

The situation is far from ideal. It is serious and requires a particular approach. Whether it is the result of international or local indigenous factors is largely irrelevant. Any Government in office at such a time has a responsibility to do the right thing. While we have enjoyed a period of economic prosperity unparalleled in our history, it has now come to an end. Whether we have a sustainable economy for the future depends on whether we do things differently. The Opposition can talk about whether, as I argued myself as an Opposition spokesperson, we placed too much reliance on the construction sector during our last period of economic growth; whether we have a balanced economy, and the challenge that faces us in putting in place measures to ensure we have a balanced economy in the future and that it is sustainable and based on appropriate levels of education, investment and infrastructure, but I have no reason to believe the steps taken as of yesterday by the Government and the Minister for Finance and being taken on an ongoing basis are the correct ones.

We are facing into a world in which our neighbouring and competing economies are all experiencing the same problems. We are facing a post-oil economy. There are also indigenous factors such as our reliance on the construction industry. A crucial aspect which in better times was one of the biggest fillips for the economy is the degree of business and consumer confidence which, as of now, has dipped and is heading in the wrong direction. The business of the Government is to make sure such confidence levels can be restored because without such confidence the economy cannot recover.

There is also an onus on the Opposition to contribute to this process. It is not so much that it is engaged in its usual role in the normal business of democracy in pointing out the failings of the Government, but it must put itself in the role of an alternative Government at any given time. It must state what it would do differently and how it would do it. I realise Fine Gael has brought out a policy document in the last week, but it must go beyond this. The people have made decisions, particularly at the last general election, regardless of the situation, that if there was an alternative Government and if it were constituted differently, the same decisions would be made in the same way and we would find ourselves in exactly the same position. That is why there is a greater need to ensure the decisions made by the Minister for Finance and the Government are fundamentally correct. Otherwise we will be pointing ourselves in the wrong direction and frittering away much of what we have achieved as a nation in the last ten years.

On these grounds I commend the decisions made yesterday and invite everyone in the Chamber to contribute to that process in the most positive way possible.

I welcome the Minister of State, Deputy Mansergh, to the Chamber. It is nice to have someone from home here.

I use this opportunity to comment on the economic situation in which we find ourselves. I do not want to be accused of talking down the economy. There is an almost subliminally pervasive air of negativity towards people who wish to deal with the reality of this economic situation but, such is life.

A fact we must deal with is that the housing market is dead and no longer the economic driver it was. Many of us feel the fall in the housing market has lead to a downward economic spiral and has infected many other sectors of the economy. There must be analysis of how this was allowed to happen. Growth levels in the domestic housing market over the past eight to ten years caused us to have a very positive outlook but many of the elements they fostered are now having a long-term negative impact on the economy they were supposed to advance. While the housing market boomed we did not contribute to exports and it was all quite internal. We did not feel we had to compete with international competition in many sectors as migration to the construction industry and the consequent production of housing estates created a protective cocoon of sorts. We are now out of the cocoon and are struggling to stand on our feet.

There was great dependence on construction and it is synonymous with the boom times. It is said that for every 10,000 houses that will not be built we are knocking 1% off our growth rate and it is estimated that approximately 35,000 houses will be built this year. This is putting thousands of people out of work, which is a serious down side to all of this. I feel sorry for those who have lost jobs or who hold their breath in dread of an increase in interest rates. This is impacting on people's approach to what they must cut back on. I am not talking about relatively well-off people who may be forced not to send a child to summer camp or not to take a second holiday. I am talking about people struggling with basics, including children's school books, uniforms for fast-growing children and so on.

Thousands of tradesmen are unemployed and we need reskilling programmes to bring them back into the workforce. There must be a proactive approach to this as these people should not suffer due to the mismanagement of the housing sector. Construction workers, through their wages, should not struggle either as sales wane. I spoke earlier of young people with 100% mortgages and 105% mortgages who are now experiencing negative equity but it is people who made tens of millions of euro who should suffer. It should not be necessary to make this point. It is unfortunate how things have gone.

The Government has lowered the expected growth rate of the economy to 0.5%. It began the year at 3% but it fell to 2.3%, then 1.5% and now it is 0.5%. There is no real clarity on what is going on in this regard. Revenue from tax receipts is falling and the worrying fact is that more than a drop in stamp duty receipts is contributing to this — corporation tax, capital gains tax and VAT are all down. Consumer confidence is very low and we have the highest monthly increases in the live register on record. Some 54,000 people lost their jobs last year and this trend continues — every day we hear of people losing jobs. This can occur through a dribble of 30 people here and 30 people there but it affects 30 families and will have a wider effect on a community, especially small, rural communities. Investors in pensions have made significant losses on the Irish stock market. Between 1995 and 2000 export volumes grew by 20% but this figure is now around 5% and we have slipped 17 places on the competitiveness indicator in the past five or six years. The strength of the euro compared to other currencies is having a dramatic impact on companies' export capabilities and house repossessions are up 350%. These are not great statistics and I feel very sorry for the people feeling the effects of them.

This nation has one of the highest levels of personal debt in Europe and external factors, outside our control, like the oil crisis and the weak US economy have had a huge impact in contributing to the bad news. Add this to the news about the weather today and the picture is not good. We have seen probably the worst ever deterioration in Irish public finances and if the Government needs to save €500 million this year I do not think yesterday's proposals will help in a meaningful way. Nothing in yesterday's announcement will create jobs. The Government should not be thanked for abolishing certain quangos because they were created by the Government in the first place and taxpayers' money was wasted in many cases. I do not agree with cutting aid to poor people in the Third World because much positive work was done with that money. It is small change for Ireland but for people in the Third World it is hugely significant.

Nothing that has been proposed will allow for an increase in training for those seeking to reskill or get back to work. The difficulties facing the HSE alone deserve almost a full day of debate. There are many levels of bureaucracy in that organisation and many strands that operate under its umbrella. Every time a very genuine person comes before us regarding services that are or are not provided by the HSE or pointing out shortfalls in the system I wish for a magic wand. However, sometimes a magic wand is not needed and a person need only make a decision. Not giving Ministers the proposed pay rise was the least the Government could do.

We must be innovative to turn this economy around and I ask that the Minister and the Taoiseach use their abilities to do something positive. I await the outcome of this process with interest.

Debate adjourned.