The budget is flawed by an internal contradiction. The Minister has tried to stimulate the economy while failing to take the necessary steps to give it the capacity to respond to that stimulation. The budget is like trying to inflate a child's swimming ring, while the child is still standing on it. It could also be likened to a huge blood transfusion to a body with arteries which are already blocked. The blockages in the arteries of the economy are most visible every day in the form of traffic jams. These blockages are also to be seen in spiralling house prices, the unavailability of child care and the lengthening waiting lists for medical care. The extra spending power in the budget will not relieve the traffic jams, bring down house prices, or relieve the child care or medical concerns of families. If anything, it will increase the pressure.
The Minister, on entering into the Da áil yesterday, had a budget surplus of £400 per year to distribute for every man, woman and child. However, child benefit will only increase by £36 a year while old age pensions will rise by only £312 a year. The standard-rating of income tax allowances is welcome and will remove a structural unfairness from the tax system. This will be potentially helpful for future budgets. However, the contribution of two budgets introduced by the Fianna Fáil-Progressive Democrats Coalition to tax fairness has been to widen the gap between lower and upper income groups. Following those two budgets, a single person on £15,000 a year is now better off by £14 per week after those two budgets, but a single person on £50,000 a year is better off by more than £27 per week. For a married couple, the difference is even more marked, with a gain of only £18 per week for the lower income couple, as against £38.67 per week for the higher income couple.
The old age pension increase of £6 per week looks much better than it is because £2.40 of it will be absorbed by inflation and £2.50 by Minister for Health and Children's reduction in drug refunds. That leaves only £1 per week of a real increase, out of which many pensioners will be obliged to pay an increase in their differential rents.
The £8 million for hospital waiting list reductions is measly. A number of weeks ago the Minister for Health and Children seemed to imply that he does not believe in waiting list reduction initiatives. Now he has introduced one, but it is so small it does little more than underline the Minister's lack of appreciation of the crisis facing our hospital services. The reduction in the tax on gambling amounts gives away more money than the entire increase in provision for services for the physically and mentally disabled.
The Minister for Health and Children revealed his long awaited waiting list report on budget night. He obviously did not want it discussed, therefore, he chose to publish it last night. This report has been in the Minister's office since last July, a period of almost six months. During that time waiting lists have lengthened and families have been traumatised by seeing loved ones suffer in pain as they await operations. Last July's report made a number of short-term recommendations. The review group states in its report: "a number of recommendations. could be implemented before the end of 1998". The groups clearly expected that these recommendations would have been implemented before the end of the year. Instead, the Minister effectively buried the report by refusing to publish it and nothing has happened as a result.
The Taoiseach told his party's Árd Fheis a number of weeks ago that no one in the country is obliged to wait more than seven months for cardiac treatment. That statement is untrue. If the Taoiseach had asked the Minister for Health and Children to check the lists he could have obtained the correct figures. At the end of September this year 832 people had been waiting for cardiac surgery for 12 months or more. The Taoiseach was as misinformed about the health services at his party's Árd Fheis, as was his predecessor when he called the 1989 general election.
The official waiting lists tell only half the story. Almost every person who finally gets on to the hospital waiting list has spent anything between six months and one year waiting to obtain an appointment with a consultant to have his or her name placed on the list. In many health board areas patients who visit their GP this week will not get a consultant's appointment before next summer. That is before they are even included on the waiting list. This issue is causing stress to families.
Another issue causing stress to families is child care. The lack of child care is not only depriving the workforce of people who want to take up paid work, it is also denying parents who choose, in an unpaid capacity, to care for their children, any relief to go shopping, visit a relative or any of the thousands of things a stay-at-home parent must do to remain sane or manage their lives.
In our policies on child care, we must deliver even-handed support structures to all parents. We must respect and value equally the work of women who fulfil the bulk of this essential, unpaid role, whether caring full-time at home or combining that role with work outside the home. Unpaid child care by parents, grandparents or other relatives must not be devalued by artificial incentives which place a higher financial value on paid forms of care for children. Initiatives in this area must neutrally support parental choices between paid care and care by family members on a voluntary basis. We must not introduce new inequities or financial incentives which artificially pressurise parents in one direction or another.
The crisis in child care arises largely because women's role is changing. There are 600,000 Irish women in paid employment. Of these, it is estimated that 46 per cent have children under the age of four. The number of women working is expected to grow by 37 per cent by 2011 as a further 218,000 join or rejoin the labour force. The change has increased the demand for child care dramatically. Meanwhile cre ches are being closed down because of planning difficulties, greatly increased regulatory costs and unsympathetic local authorities.
To help deal with this crisis the Government promised tax relief for child care. This would have benefited privileged high income families and penalised parents providing unpaid care for their children. The Government has not proceeded with this and has no alternative strategy. This is typical of the lack of foresight that characterises Government decision making on a range of other issues.
The revelation that the Education Estimates provision for 1999 is less than the no policy change provision for 1999 made 12 months ago shows that the Government is not giving priority to education. I have said time and again that my priority for public spending is education before all other forms of spending. Within education my priority is primary education. It is easy to see the social policy difference between Fianna Fáil and Fine Gael when the allocation for education did not match the Fianna Fáil no policy change provision.
Fine Gael does not agree with Fianna Fáil that there is no need for a policy change in education. One in five children still leaves school functionally illiterate, unable to read instructions on a medicine bottle or fill up a job application form properly. In a year when he opened his Budget Statement with the biggest budget surplus in the nation's history the Minister for Finance is adding only £10 million to the education budget to deal with disadvantage. That is equivalent to an extra 42p for every £100 the Minister for Education and Science spends.
The Government was wrong not to accept the case to include the self-employed in the family income supplement scheme. The self-employed have families and low incomes. Why should they be excluded from family income supplement if they can prove that their family income is below the qualifying level? The Government refused to accept this case and decided to make changes in farmer's dole. This was, surprisingly, welcomed by some farming organisations. It makes it look as if the farming organisations were not making a case based on equity between farming and nonfarming families when they could be so easily bought off with a selective dole change.
The farm income crisis should not be dealt with by special doles for farmers. It should be dealt with by treating farmers the same as everybody else and allowing them qualify for family income supplement. That is a sound principle to which no PAYE worker could object. It does not isolate the farming community as a minority group. Special dole for particular sectors, by its nature, causes resentment and isolates one sector from another. The Government has made the wrong choice. The farming organisations which have supported its choice are also wrong.
In the 1980s there was a national consensus to deal with the national debt. The Government of the day responded and the problem was solved. In the early 1990s there was a national consensus to deal with chronically high unemployment. The Government of the day responded and the problem has been partially solved. As we turn the page of a new century there is a growing national consensus that our next task is to narrow the widening gap between the comfortable majority and the uncomfortable minority. The gap is financial but it is also psychological, educational and geographic. The socially-excluded are not only worse off than the rest of us, they are excluded from the consumer culture of the majority purveyed through television, often attend different schools and live in different suburbs. That gap must be bridged. In the budget the Government has shown no coherent commitment to do so.
Last year the Government had a different set of tax priorities. There is no sense that it has a plan. It has a list of promises but it has no plan for housing, traffic, child care, farming or social justice. That is the fundamental weakness of the budget, it is not part of a coherent strategy. It is sufficient for the day but without any sense of what the ultimate destination should be.
Most economists did not predict the strength of the economy's growth. They are now suggesting that its growth pattern will not stop. We should not be too self-congratulatory, therefore, in our reliance on economists and their analyses. Economists, by their nature, are guiding the bus while looking out the back window. The data on which they rely is retrospective in character.
It is the job of politicians to analyse and identify the threats to current success. There are two risks facing the economy — inflation and deflation. It is hard to imagine from our current vantage point that deflation presents a threat to the economy but, as I will demonstrate, it could.
As the Taoiseach acknowledged yesterday, we have the highest inflation rate in the euro zone at 2.6 per cent. It has grown more quickly than in any other country in the euro zone. There is a view in central bank circles in Europe that the Government should have a fiscally restrictive budget and run a bigger surplus on current account to reduce the risk that the inflation rate will rise further.
That view is technically mistaken. It assumes that this is a closed economy and that one can inflate or deflate it by what one does on budget day. That is not the case. If one stimulates the economy on budget day, a great part of the stimulus goes on imports. One ends up, therefore, stimulating the British or American economy. If one deflates the economy to reduce the inflation risk, one reduces the demand for British, French or German goods. As a result the effect is spread across all our customers rather than being confined to the economy.
The analysis prompting comment in central bank circles in Europe that the Government should opt for a restrictive budget to deal with the inflation risk is mistaken for the technical reason given. This is not new but there remains an inflation risk. It is driven by the supply, not the demand side of the economy. It is driven principally by rising house prices and the rising cost of child care. This will force workers into demanding pay increases that the country cannot afford without fuelling inflation. The inflation risk is driven, therefore, by pay, not by consumer spending.
There is a serious problem with house prices, a structural problem which is affecting a minority of the workforce at present. However, as more new entrants come into the workforce it will affect, through mortgages, an ever increasing segment of the workforce. Even though house prices may not be rising very much at present, the number of people on high mortgages who pay those prices as a proportion of the total workforce will increase steadily as new people enter the workforce and others leave. The problem of house prices and its effect on pay will increase inexorably because of the transformation of the workforce. We need a fall in house prices, not just a stabilisation, if we are to avoid the inflation risk that rising house prices can cause.
The same problem arises with child care. In the case of a household, the decision to strike for more pay is made not just collectively but by the individual participants. If, for example, a woman going out to work finds that virtually all of her take-home pay after tax is absorbed in child care costs, even though her husband may be bringing in money which is paying other parts of the household budget, she will be so aggrieved by the cost of child care, that she, independently, will be disposed to go on strike for a very large pay increase over and above what the economy can afford.
I contend that those two pressure points in our economy — house prices and child care pose a very real risk of generating inflation. Unfortunately, the measures of inflation we use do not adequately take these into account. House prices are not included in the consumer price index and I have no doubt, given that historically child care has been, to a great extent, part of the black economy, its costs are not adequately included in the consumer price index.
Those two threats to the economy — blockages in the arteries, to return to the analogy I used earlier — are very real and have not been addressed in a coherent way in this budget. I realise there is not a huge market in the media this morning — perhaps the same will apply next Sunday in the post-budget euphoria — for those types of medium term considerations. However, I assure the House they are real and they pose a genuine threat. That is all I want to say about the risk of inflation.
I am glad Deputy Howlin, the former Minister of the Environment, is here because he is an expert on what I am going to speak about, the risk of deflation to the economy arising from fulfilment of the global warming commitments entered into at Kyoto. There is a comfortable view in official Ireland that one can send environmental Ministers to these summits where they sign agreements. However, no-one really expects anyone to do very much about them. At the end of the day all we need do is put on our leprechaun hat and say, "sure aren't we the poor Irish and can't we be exempted?". If it comes to the crunch, our natural charm will get us out of whatever problem we are experiencing because of the commitments into which we have entered. That unstated assumption we probably all make about Ireland's ability to escape from commitments will not work this time because global warming is a really serious issue.
Up to three or four years ago there was a debate among scientists as to whether it was actually happening or whether we were just seeing freak weather conditions which had no underlying pattern. That is no longer the case. There is now, as other Deputies will concur, a scientific acceptance that global warming is a growing problem. It is a human problem. It is not all about the erosion of the coastline in Bettystown and a few houses having to be relocated. Global warming is about more than coastal erosion. It is about Bangladeshi farmers finding that their formerly fertile fields are under seawater for a large part of the year.
I cannot remember whether one third or one half of the entire territory of Bangladesh has been underwater for several months. It is worth recalling that Bengali is the third most widely spoken language in the world after Chinese and English. This gives some idea of the number of souls affected by this flooding caused by global warming. The social consequences of this are enormous.
We will have no choice but to implement our commitments on global warming. We have probably broken our limits already which means that to reach the target for 2006 we will have to substantially reduce the amount of energy we use. I am not a scientist but I know there are three elements which contribute to global warming — the motor car, energy generation and agriculture, which is comparatively small but still significant as regards methane and livestock production.
It is clearly the case that excessive private motoring will have to be fiscally discouraged. There is no way around this. The sooner this is done, the less painful it will be. If it is left until the end of the phase in 2005 to implement some draconian measures to reduce global warming emissions from motoring, it will not work. It will be too late and people will be unable to change their consumption or life patterns quickly enough. If the Government makes fiscal changes now, there is some chance they will work. However, by failing to listen to the Minister for the Environment and Local Government, who kindly told the newspapers what he was saying at Cabinet about this before he said it, the Government is building up a large problem in this area.
The same applies to electricity generation. It is not feasible to talk about bringing private sector investment into electricity generation or to think about the idea of selling shares in the ESB until one knows the conditions under which the ESB will have to operate as far as compliance with global warming is concerned. People are being asked to buy a pig in a poke unless clear decisions are made.
Instead of the highly relaxed consultative process with reports being produced, which contain no solid plans, and the endless consultations on global warming, the Government needs to take decisions. It does not matter that the Buenos Aires Summit was a flop because the Americans and Chinese could not agree. This will happen anyway. The Americans and Chinese are playing politics.
The physical reality of climate change will force all of us to take action. The sooner Ireland acts, the better. There are historical precedents for my argument. One country which came out well of the 1973-9 oil shock was Japan. This was because it took steps before the oil shock to significantly reduce its oil consumption and make its economy less energy intensive. It sailed through the 1973 deflation almost unscathed, when the rest of the world, notably the United States, gas guzzling as it is, suffered the worst effects.
The same differentiation will occur as regards global warming. The countries that are well prepared and have taken planned voluntary steps to reduce consumption will come through well. That issue represents the biggest threat of deflation to the economy. If we face it too late, because we have not taken action in time, we will suffer.
I wish to raise the budget vote last night, particularly the vote of Deputy Blaney. Was there any interference with the Garda in the performance of their duty in a law and order matter in Kerrykeel, County Donegal, to ensure that the Deputy voted for the Government? The idea that the Garda might stall some operation to facilitate the political needs of the Government to get a Deputy to vote for the budget is deeply corrosive of our democracy.