I will call on the Deputies who tabled questions to the Minister for Finance in the order in which they submitted their questions.
Private Notice Questions. - Budgetary Policies.
asked the Minister for Finance if he will make a statement on yesterday's meeting of EU Finance Ministers in which the 14 other Finance Ministers voted to reprimand the Government's budgetary policies.
Mr. Hayes
asked the Minister for Finance if he will indicate the changes in budgetary policy he will now introduce in view of the meeting of ECOFIN yesterday.
asked the Minister for Finance the consequences for Ireland and for the euro zone of his defiance of the other Finance Ministers of the European Union and of the European Commission.
asked the Minister for Finance to make a statement on the outcome of the meeting of EU Finance Ministers in Brussels yesterday which issued a formal reprimand to Ireland; outline the implications for fiscal policy and for our relationship with our EU partners of the decision; the steps that are planned to undo the damage that has been done and to re-establish Ireland's good standing in the European Union; and if he will make a statement on the matter.
asked the Minister for Finance the reason he was unable to obtain even a single vote or voice in support of Ireland when being reprimanded by the Finance Ministers of the European Union; and the urgent measures he now proposes to try to re-establish our international credibility.
I propose to take all the questions together.
I am pleased to be here today to answer the Deputies' questions as well as respond to the comments of other Opposition Deputies regarding yesterday's events.
I want to record the Government's achievements with regard to the economic and budgetary management of Ireland's economy over the past four years. In so doing, I want to respond to the criticisms which in my view have been unfairly levelled against the Irish economy and the Government's management of it.
In particular, in responding to the Deputies' questions I want to address three issues central to this debate. First, I will contextualise the events of recent weeks by setting out briefly the process of European economic policy co-ordination, a process which is central to yesterday's events. Second, I will address the key issues raised by the European Commission in its assessment of last December's budget, and set out the Government's response to them. Finally, I will update the House on yesterday's events at the Economic and Finance Ministers Council meeting in Brussels.
By way of introduction, it may be useful for Deputies if I briefly touch on the process of economic policy co-ordination which is now taking place in the European Union in light of the com pletion of economic and monetary union. A central tenet of economic and monetary union is the closer co-ordination of the economic and budgetary policies of member states. There are a number of elements involved in this process. Key among them are the stability and growth pact and the annual broad economic policy guidelines.
The stability and growth pact is at the heart of economic policy co-ordination in the European Union. The pact requires member states in EMU to commit themselves to aim for a medium-term budgetary position of close to balance or in surplus. The rationale underlining the pact is that in favourable economic times, member states should manage their budgets so as to ensure that they can, over the course of a normal economic cycle, reliably keep under the 3% ceiling on budget deficits prescribed in the treaty.
The broad economic policy guidelines is the other lesser known element of the economic policy development process. The guidelines are an annual procedure carried out by the European Commission in consultation with the member states under Article 99 of the European Treaty. They essentially monitor progress and make recommendations on the direction of EU-wide and country specific macro-economic policy and on economic reform of product, capital and labour markets.
The country specific guidelines, which cover each member state in turn, seek to identify economic policy priorities for the individual member state taking account of its own particular circumstances. The stability and convergence programmes are examined by the European Commission which prepares an annual assessment of them based on their adherence to the stability and growth pact, the broad economic policy guidelines as well as measures of sound economic management generally. On foot of this, the Commission prepares a recommendation for a Council opinion on each programme which is debated, changed as necessary and agreed by the Council of Economic and Finance Ministers, known as ECOFIN, usually during the early months of each year.
Under Article 99(4) of the treaty, where it is established that the economic policies of a member state are deemed not to be consistent with the broad economic policy guidelines, the Council, acting by a qualified majority, on a recommendation from the Commission, may make the necessary recommendation to the member state. The Council may, acting by a qualified majority, make that recommendation public. However, the Council has no powers to enforce this recommendation. Until now, Article 99(4) has not been invoked. That is a brief synopsis of the process in which we as a European member state within the EMU are involved.
Turning to recent events, my Department received the annual assessment by the European Commission of Ireland's updated stability programme early in January. Subsequently, a draft Council opinion was prepared which proposed issuing a recommendation under Article 99(4) of the treaty. The Government does not see that there are reasonable grounds for a recommendation in relation to the broad economic guidelines and this remains our position. I do not believe that what was done was a proportionate or even-handed response. The concerns expressed in the recommendation are based on a misreading of the economy.
The Commission's assessment and the broad economic policy guidelines advises Ireland to seek to achieve economic stability. This is exactly what the Government sought to do in the budget in a number of ways by: securing the continuation of social partnership and wage moderation and avoiding a wage price spiral – this was a major factor in the Government's strategy in view of social partnership's contribution to our economic success; promoting measures to encourage increased labour supply and productivity; taking action to reduce price inflation, including indirect tax reductions so as to counter the inflationary psychology – it was important to quash inflationary expectations before they took hold; delivering the largest fiscal surplus in the European Union; reducing the debt burden to the second lowest in the Union; and using the budget surplus wisely by providing large sums – 6% of GDP – for future ageing costs.
We are accused of being pro-cyclical in our budgetary policies. According to the explanatory memorandum to the recommendation, we have ignored repeated warnings from the Council and continued on an expansionary course. However, the Commission's budgetary calculations on a cyclically adjusted basis do not support this. On the Commission's figures, our fiscal stance over the past three years has been contractionary and will be contractionary again over the 2001-03 period as a whole. Therefore, we are not repeat offenders in any sense and any allegation of ignoring repeated warnings simply does not hold water. The previous Council opinions were adopted by the Council without any indication that we did not adhere to the guidelines.
As regards 2001, the Commission methodology overstates the extent of fiscal loosening substantially due to once-off factors. The Commission in its report has not paid enough attention to this aspect. In particular, we are moving to a calendar tax year in 2002. This gives rise to a nine month tax year in 2001 and to some unavoidable cash flow losses to our Exchequer. However, these have a limited impact on the real economy.
As I advised my colleagues at ECOFIN, I have no problem with advice to Ireland setting out the Council's view of the appropriate policy mix for the future. This should have taken the form of an opinion, as is the normal course. I remain convinced, in light of the comparative performance of the economy relative to other EU member states, that a recommendation was not warranted. This is evident from our recent economic and budgetary performance. Our growth rate at 11% is more than three times the average of the other EU member states. We have a budget surplus of nearly 5% of GDP. Eight of the 14 other EU member states are running deficits. Our debt-GDP ratio is 39%, while most others are at 60%, and three have ratios well over 100%. Our unemployment rate is half the EU average. Tax and expenditure levels at approximately 33% of GDP are one of the lowest in the European Union. We have a binding commitment to provide 1% of GNP each year to meet future pensions and the national pensions fund is already over 6% of GNP. The rest of the European Union has shown little progress on this front. I pointed out these facts to my colleagues in a detailed table backing up these statements. Benchmarking Ireland's economic performance against other member states in this way shows how narrow the criticisms of Irish economic and budgetary policy really are.
In relation to price inflation, another issue highlighted by the Commission, we acted to address this in the budget, although the increase last year was largely generated by external factors such as oil price and the euro. The latest figures show that inflation, as measured on the harmonised European basis, has fallen from 6% in November to 4.6% in December to 3.0% now. On the basis of the latest available data, this rate is lower than several other larger member states. While month-on-month changes are difficult to predict, I expect the inflation rate to decline further during the course of the year.
I wish to outline for the Deputies the events as they took place at yesterday's meeting of European Economic and Finance Ministers in Brussels. A Council opinion on Ireland's stability programme was adopted at the meeting. As Deputies will be aware, the Council also decided to adopt a recommendation under Article 99(4) of the European Treaty. In this context, I reiterate to Deputies that the Council recommendation, as adopted by the Council yesterday, remains a recommendation only. I would also point out that, contrary to much of the media reporting yesterday, the Council did not take a vote on this issue and, therefore, it is wrong to say that the other member states voted against Ireland.
At the meeting I put forward Ireland's case vigorously and argued strongly that a recommendation was not justified and that any action taken should be seen to be equitable in terms of the treatment of all member states. As to what happens next, I assure Deputies that we will continue to do business in Europe on a variety of issues in the normal way. We will continue to participate in Europe and EMU in Ireland's best interests. As has always been the case, I will listen to the views of colleagues.
Above all else, the House can be assured that the Government remains fully committed to implementing its budget as set out in December for the very reasons that our policies will enable Ireland continue on a successful growth path well into the new millennium. In short, the Government's budgetary strategy remains on course.
We on this side of the House believe that the Minister is more than half right in his arguments. However, it takes some arrogance and recklessness to turn an economic miracle into a diplomatic rout, as the Minister has done. The jingoism of Norman Tebbitt or the diplomacy of Margaret Thatcher are no way to deal with the European Union.
This is Question Time and I ask the Deputy to put questions to the Minister.
The question is in the process of being put, Sir. Will the Minister agree that to disregard German, Luxembourg and French criticism in a "that's out" manner is no way to treat our European partners? Will he accept that the European criticism has some validity and that the Government's policies are expansionary and inflationary? While the Minister is correct in wanting to share the wealth created with the people who helped to create it, there are ways of doing it in a non-inflationary and non-expansionary way. Is he prepared to accept suggestions from this side of the House as to how to meet those two criteria?
I do not accept that the budgetary policy announced in December or the policies announced in the previous three years have been anything but successful in giving us our economic success. I have made it clear over the past few months since this issue came into the public domain that I do not accept the criticism of the European Commission in this regard. It is a misreading of the economy and I am supported in this by a number of commentators at home and abroad, some of whom are of the highest eminence in the economic field. I do not accept for one moment that the criticism of the European Commission, leading to the recommendation yesterday, was justified in any respect. Of course, I will listen to the views of everybody, as is well known.
That is big change for Fianna Fáil.
Mr. Hayes
The Minister is known as a bit of a gambler but he gambled on the wrong side yesterday. If he is so confident of the position he outlined to the ECOFIN Ministers' meeting yesterday, so assured of his persuasion skills and confident of the principle he sought to enunciate before yesterday's meeting, why did he not put the issue to a vote at the meeting?
Will he accept that yesterday's reprimand is in line with the broad thrust of recommendations from the tax strategy group, which meets and discusses matters of this nature on a regular basis? That is the group that regularly idiot proofs budgets presented by the Minister to this House.
The question of calling a vote at European Council meetings or ECOFIN meetings is clearly laid down. It is a matter for the chairman, and for this six months the chairmanship lies with Sweden.
Why did the Minister not object to it.
Mr. Hayes
Why did the Minister not oppose it.
We did oppose it. I spoke loudly and clearly and said I was against the recommendation.
Mr. Hayes
No one believed the Minister.
Deputy Hayes, allow the Minister to proceed without interruption.
I wish Deputy Hayes and other Deputies opposite success in securing the Fine Gael Front Bench position on Finance.
The Minister was a long time waiting for it.
The tax strategy group was set up during the term of the previous Government. It examines matters relating to tax, but not matters of overall budgetary strategy. As its name implies, it is to do with tax matters and it examines particular tax matters. We publish all the old tax strategy papers on the Internet each year and we circulate them to Opposition spokespersons.
I put it to the Minister that what we are seeing and what we saw yesterday is part of a pattern to distance ourselves from the European Union. His performance in recent days must be seen in the context of the big picture. I include in that picture the statement by his colleague, the Minister for Arts, Heritage, Gaeltacht and the Islands, Deputy de Valera, in the United States last autumn, the ongoing performance of his colleague the Tánaiste, who is hell bent on the Americanisation of the Irish social and economic fabric, and now he is unnecessarily picking a row at the highest level in Europe. I ask him to state on behalf of the Government if there is anyone responsible for the overall co-ordination of Irish foreign policy, as far as Europe is concerned. I put it to him that he obviously fails to notice, at every opportunity, that every by-pass, bridge and sewage treatment works throughout the country has been funded from the European Union. I also put it to him that his acknowledgement and the comments of the Tánaiste, that in effect he is wearing the green jersey is misplaced and instead he is burning up goodwill we have enjoyed in Europe in recent years.
The suggestion by the European Commission is meant to be a statistical exer cise, and that is what it is. The European Commission under the commissionership of Mr. Solbes does exactly that. To start to link other matters to that assessment is a total misreading and a misunderstanding of what the broad economic policy guidelines are supposed to be about. Furthermore, it shows a fair lack of knowledge of what the EMU project is about.
Ireland has conducted its relationships with Europe recently and over many years in a very constructive manner under all Governments and we will continue to do so, but when the euro project was discussed and the rules were drawn up, it was clearly laid down that national budgets are the responsibility of the individual governments. It is a right each Finance Minister of the EU 15 would jealously guard. I do not think the Deputy or his party would go along with anything that would subjugate the right of the Irish people, through their elected representatives in their national Parliament and thereby through the elected Government of the day, by taking away the right to decide what was in the best interests of the Irish people in terms of welfare policies, education policies, expenditure policies and taxation.
Out comes the green flag. The Minister does not believe a word of it.
That right is guarded jealously not only here but by every one of my colleagues in the EU 15.
The Minister agreed the EMU parameters a long time ago.
I must be the only Member who has spoken so far who does not appear to be auditioning for Finance spokesperson of Fine Gael.
How many are auditioning?
The Deputy would be welcome, if he wanted to join.
I do not want it, thanks very much. I am happy enough where I am.
(Interruptions.)
I put it to the Minister that what he has just said to Deputy Flanagan is wrong and that he knows it to be so. Those of us in parties that have connections in Europe know the effect of what has happened in recent months. I had the opportunity in Brussels during the past two days to test it. These matters are connected and real damage has been done. The Minister knows that and for him to come in here and pretend otherwise is not good enough.
I put it to the Minister that what has been reported as the views of the European Commission, ECOFIN and the European Central Bank are consistent with what the Irish Central Bank and many economic commentators have said, of what his Department advised him before 6 December last and with pretty well everything he said for the most of the past 20 years until he had his Pauline conversion last December. If he requires some assistance on that, I remind him that when he came into power, to give emphasis to his argument on public spending, he said—
The Deputy may not quote during Private Notice Questions.
—if inflation was 5% over the lifetime of the Government, there would have to be a real decrease in spending. While that is not a view I support, it is something he has said consistently over 20 years. Therefore, to suggest he has had a coherent policy over the years is simply not true.
Deputy McDowell and I have had many debates in this House on the causes of inflation. He and I agree on them, that most Irish inflation not only over the past three and half years or the past year but over the past 25 years have been caused by externally related factors.
Most, but not all.
Deputy McDowell, allow the Minister to continue without interruption.
Even the Economic and Social Research Institute calculated last December that £500 million in additional expenditure by way of taxation cuts would have an effect of only increasing inflation by 0.13% over the next three years. I do not know of any commentator who would say that a tightening of fiscal policy would do anything to reduce inflation except if one were to take a few billion pounds out of our economy. I am not talking about a few hundred million pounds or £500 million. If one took £3 billion out of the economy, that might have some effect on inflation. Would anyone in his or her sane senses suggest that we take that amount of money out of the economy, the effects of which would be dubious, as the determining factors of Irish inflation, as agreed by nearly all commentators over the past 25 years, are primarily outside our control? They are primarily the exchange rate, and recently the weakness of the euro has reflected that, and prior to its introduction the value of the punt vis-à-vis other currencies, primarily the punt vis-à-vis sterling.
We would have set off a wage price spiral if social partnership had broken down. In the lead up to the last budget people will be aware that social partnership was under some threat. We renegotiated an agreement, which was predicated upon a successful outcome of the budget. Members will recall in the aftermath of the budget, the social partners and, in particular, the Irish Congress of Trade Unions, supported the budget. The Irish Congress of Trade Unions met and agreed to renew the partnership. Social partnership has been a key factor in our success over the past 13 years and most people would agree it is important to keep it on board.
In the public sector only.
I do not know of anyone who would suggest that we take a few thousand million pounds out of the economy, as it would have a minuscule effect on inflation.
I am not so sure the EU Commission would have been so quick to dump this unprecedented recommendation for reprimand on one of the larger member states. Why was the Minister unable to rally even a single voice in support of the Irish position. How did he come to find himself in such unsplendid isolation unable to muster support? In the past – I attended European Council meetings four or five years ago – we could rely on our neighbours in the UK to speak up for us when we found ourselves in tight corners. Yesterday, the Minister found himself totally isolated.
Will he not accept that because of the way in which he handled the recommendation for reprimand – supported, as far as he was concerned but not as far as Ireland was concerned, by the Tánaiste – we have squandered our political capital and that when we really need support from Europe, for farmers in a BSE crisis or when renegotiating the Structural Funds to deal with enlargement, in the months and years ahead we will be left out in the cold? We have no friends who will support us. That is the real damage the Minister has done to Ireland.
As I pointed out earlier, the purpose of the assessment of the broad economic policy guidelines and the methodology used is not a negotiating process which requires allies in the same way one needs allies when seeking additional funds from the Commission. These are factual assessments, mathematical assessments undertaken by the relevant Commissioner. It is not a matter up for negotiation as is the case in the Council of Ministers for Agriculture. That is a misreading and misinterpretation of the broad economic policy guidelines—
It was an unprecedented recommendation.
—and Article 99.4. Deputy O'Keeffe raised an interesting theory in his contribution regarding larger member states. A number of member states were up for assessment regarding the broad economic policy guidelines. Different rules appear to have been applied over the past four weeks during their assessment. Significant changes were made.
Why?
I will let people judge for themselves. Larger countries than Ireland have budget deficits. It is a serious offence to remain outside the terms of the stability and growth pact. Each country was to have its budget in balance or surplus before 2002 at the latest. References which might have been considered offensive to other countries were deleted. In the table I circulated yesterday comparing Ireland to—
Maybe they are just better at diplomacy.
—other Governments in terms of inflation debt – I am referring to reports in some of this morning's newspapers – Ireland is at the top of the class in nearly all the comparatives.
(Interruptions.)
The Minister, without interruption, please.
Ireland is the first country against which the formal recommendation has been used. The Irish Government and other member states will be watching to see what happens to other countries in the future. I read some interesting comments this morning in that regard in some of the international newspapers, European ones in particular.
I do not believe we have squandered our political capital. I would be open to some criticism from Deputies on all sides of this House if I had not gone to Brussels to defend the Irish position and our national competence regarding our affairs in terms of expenditure and taxation. I think I will be supported by the majority of the Irish people in that regard.
The Minister began by saying he is pleased to come into this House today to answer questions. That is very nice of him but he is obliged to do so.
Ask a question, please.
In circumstances where a great degree of tolerance and understanding has apparently been shown to other countries whose fiscal situations are less favourable than ours, how did the Minister, unaided, create a situation where no tolerance or understanding was shown to him? Has it, perhaps, something to do with his attitude?
No.
I wish to ask a slightly hypothetical question regarding Article 99.4. Will the Minister tell the House what his position would be if one of these larger member states infringed the rules of Article 99.4 in a way which raised interest rates or pushed down the exchange rate of the euro to our disadvantage? What would the Minister do? Would he go to Brussels – as he should – to ask the Commission to take action invoking the rules of Article 99.4 in our defence? If so, why has he so singularly failed to explain to anybody else in the Commission or the other 14 member states that what we did did not have that effect on any other member state? Why is he so misunderstood? Why has he created a situation whereby he cannot go to ECOFIN or the Commission to request it to take action in our defence if another member state causes us a problem?
The European Commission's analysis of what the broad economic policy guidelines for all member states should be, particularly for Ireland, raises quite interesting questions. It may be that the theory emanating from Brussels on sensible and sane economic policies are not the correct ones applicable to Ireland. Deputy Dukes will appreciate, more than most Deputies in this House, that economics is not an exact science.
That is not a good argument.
One could not get one single opinion from ten economists in a room. That has been evidenced by international commentators throughout the world, some of them agreeing with Ireland's position and saying Europe is wrong. I believe Europe is wrong. This reminds me of a joke which used to go around when Deputy Dukes was Minister for Finance – I think the people in Europe are a little confused, Ireland appears to be working well in practice but does not fit with their theory. That charge was levelled against a colleague of Deputy Dukes some years ago.
The Irish situation may have confounded European economic commentators but I am glad to report the Irish economy remains the most vibrant in the Union.
Fog in the Channel, Continent put out.
Everybody is out of line except our Charlie.
It is remarkable that only six months ago the Minister was saying something entirely different. He would have been leading the charge, as Deputy Dukes rightly points out, in terms of making precisely the argument made by the European Commission.
A brief question, please.
There was a time when the Deputy was—
I agree with the Minister when he says that much of Ireland's inflation is externally generated. What he appears to be saying – I appear to be interfering with a domestic Kildare discussion—
Please allow Deputy McDowell to ask his question.
It is one thing to say that much of Ireland's inflation is externally generated – there is consensus in the country that, by and large, that is the case – but it is something else to suggest that fiscal policy has nothing to do with the overheating which is clearly taking place in the economy. The situation of those trying to purchase a house is a clear indication of the capacity constraints we have discussed so many times before. Is the Minister saying fiscal policy has no impact on inflation, that it has no impact on domestic demand and that it has no impact on the overheating and capacity constraints prevailing? If so, he is defying all the rules of economic common sense, many of which he has preached to us for the past 20 years.
I never said that. All matters relating to economic policy are naturally inter-related. There is no single solution that will fix a particular problem. If that were the case, every country in the world could ring a place to get the formula in order to apply it to its own economy and then they would all have the same amount of wealth. That does not happen. One must adjust one's economic policies at various times to changing circumstances but there is no set of ground rules that says one must do so in a certain way.
For example, if a Member said last September that Alan Greenspan, the respected chairman of the United States Federal Reserve, would drop interest rates by 100 base points in January, he or she would have been laughed at as Mr. Greenspan was then increasing interest rates. Whatever laughs that would have got, if the Member had also said in September that Mr. Greenspan would endorse President Bush's tax cutting plans in January, advocating that as the right way to go, the Member would definitely have been taken away. Yet that is what Mr. Greenspan did in the last few weeks, which goes to prove, as Deputy Dukes and I know, there is no exact formula in economics which applies always, forever and a day.
Regarding inflation, we mostly agree about the causes of Irish inflation and have in the past had good debates about it. Figures for the last two months have been very favourable regarding Irish inflation. According to the harmonised bases we were at 3.9% by end January while there are definitely two countries above that figure and one other country was above it at least for last month. The EU harmonised index and the euro 12 is 2.9% while we are at 3.9%; the EU 15 is 2.6% according to the last stated figures.
Due to the activities of some publicans, particularly in the Dublin area, I expect Irish inflation to go somewhat upwards in next month's figures but the overall trend of Irish inflation, given the normal caveats regarding the euro, oil prices and other outside factors, should level off this year, as I have indicated.
I have never said that Irish economic policy and what we do here would have no effect. All these matters are interrelated but we both agree that the underlying causes of Irish inflation are in the main outside our control.
Does the Minister recall his arrogance and stubbornness regarding an appointment to the European Investment Bank and the loss of respect for and damage to the national interest? Is he about to repeat that stubbornness? Will he not learn from his previous mistakes and agree to some accommodation of the valid criticisms of the EU being taken on board? If so, does he plan to make any changes to the budget in the forthcoming Finance Bill or will he make any changes to budgetary policy in the next budget?
As I said yesterday and on many other occasions, in the run-up to every budget I take advice on board from a number of quarters – the Central Bank, commentators here, the European Central Bank and the European Commission. The expenditure and taxation changes I announced in my last budget will be our programme for this year and the Finance Bill will be published on Thursday. As with every Finance Bill, there will be some additional measures but there will be no change to the broad taxation changes as announced in last December's budget regarding either taxation or expenditure policies.
I do not accept for a moment that there is a link between the event last year the Deputy mentioned and the events of the past few weeks. I would have thought the Deputy would not be so anxious to raise the matter of the European Investment Bank. He has some cause himself to remember it. Maybe some day he and I will write a book about it.
You should retire to a villa in France for that one.
Comments through the Chair, please.
Mr. Hayes
Does the Minister accept it is in Ireland's medium and long-term interests that Britain should join the euro in terms of increasing trade, particularly between North and South in Ireland?
We are straying from the question.
Mr. Hayes
Does the Minister accept that his comments yesterday, dished up as Euro-scepticism, will only help those elements in British society which are implacably opposed to Britain joining the euro, which is definitely not in Ireland's interest?
I have said on a couple of hundred occasions that it would be in Ireland's overall interest if the UK joined the euro zone.
Mr. Hayes
The Minister's comments yesterday will not help.
I have said, just as the Taoiseach and others have done, that that is a matter entirely for the people of the UK and it is for them to make their own decision in their own time.
Mr. Hayes
No common objective.
Much as I respect my own greatness, I do not think that the people of Cornwall or Bradford are listening to what I say.
Mr. Hayes
Read the Financial Times.
If the Deputy is willing to give me the compliments I will gladly accept them.
Mr. Hayes
The Bill Cash of the Dáil.
The Minister's actions on behalf of the Government reflect the Fianna Fáil attitude to Europe. It is a party with no friends in Europe and is part of a small, ragbag group in the European Parliament. Now, on behalf of the Irish people, the Minister has isolated himself in ECOFIN. What remedial domestic action does he propose to take to repair the broken fences?
I remind the Deputy that it was a Fianna Fáil Government which put a referendum to the people to join the then EC. Deputy Flanagan will recall that his near neighbours in the Labour Party led the campaign against Ireland joining the EC at the time. There have been very satisfactory outcomes for Deputies Albert Reynolds and Bertie Ahern when, as Taoisigh, they negotiated Structural Funds over the past decade.
Deputy Reynolds was confused, remember?
The Deputy said we should not regionalise the country in order to retain Objective One status.
The issue of broad economic policy guidelines is supposed to be a statistical assessment. I do not accept for one moment that we will be damaged in Europe. Members of the previous Administration will know that we have got nothing soft from the European Commission in the past three and a half years. Nothing soft is got and the most minute change has to be notified to Europe. Deputy Quinn will have experienced that. What he rightly took for granted regarding some changes in taxation policy were not notified around 1995 as he thought there was no reason to do so. However, there was a real hullabaloo in the last two years because we did not notify Europe and we had to engage in much renegotiation about it.
Diplomatic skills.
Ireland has got nothing soft from the European Commission in recent years, particularly in the agriculture area. It will be no better or worse next week than it was last week.
The Minister's comment, that the budgetary surveillance that comes as part of economic and monetary union is simply a statistical exercise, is patently absurd and surely not something he believes. The Tánaiste's effort to link ratification of the Nice Treaty and support for enlargement generally with the Minister's travails over the last few days is both shameful and extremely unhelpful.
Hear, hear.
What countervailing measures does the Minister intend to take following the recommendation yesterday?
I am glad to support the Tánaiste on this matter. The Tánaiste has responded to questions, as I have, regarding the effect this will have on Irish attitudes to Europe and I said yesterday in a press conference that that is a matter that will have to be judged in time.
Identifying the Minister's interests with the national interest.
People must make up their own minds about this. In 1972 the referendum got a large yes vote—
It was 83%.
Deputy Quinn should remember he was one of the 17% opposed to us at that time. There have been a number of referenda since which some of us would contend entailed small changes to European treaties. I am not suggesting that those who opposed them were thinking so but most of us would have considered the changes as quite small. Those interested in statistical trends might be interested to note that the yes figure has been reducing consistently.
Is the Minister proud of his performance in attracting and dealing with this unprecedented reprimand by the EU? Is it the attitude of the Minister and the Government to replace the solid diplomacy which has brought such benefits to this country with the gung-ho bravado the Minister has displayed in recent weeks in dealing with this reprimand?
I am proud to stand up for the Irish cause in any forum.
That is not what I asked.
The Deputy asked about countervailing measures.
I asked the Minister about the gung-ho bravado he has displayed.
I see no element of gung-ho bravado or anything else in defending what we believe to be the correct policies for the Irish people at a particular time.
The Minister is totally isolated. Not a single voice was raised in support of him.
I see nothing other than a statement of the facts. Thousands of people are pleased that the policies we produced in recent years have given us economic success and helped us to improve the standards of those on the margins of society.
They are all out of step except our Charlie.
I will take two questions together from Deputies Joe Higgins and Gormley.
(Dublin West): Judging by the Minister's performance one would think he, and not the other person, was present at the wedding feast of Cana. While deploring the fact that the Minister's budget was skewed to disproportionately benefit the very wealthy, will he confirm that all tax concessions agreed with PAYE workers will be honoured? Will he commit himself to removing all low paid workers, particularly those on the minimum wage, from the tax net?
Does the Minister agree that if the EU is worried about tax levels, there is adequate scope to tax large companies, speculators and multinationals at rates more comparable with PAYE workers to bring in extra Exchequer resources? Does he further agree that the straitjacket which the EU is attempting to put Ireland in has been fashioned by the Government, with help from Fine Gael and the Labour Party, when they rushed this State into the Single European Act, the Amsterdam Treaty and, in particular, the Maastricht Treaty, and gave hostages to the EU bureaucracy to remove effective levers of control over the economy?
Please, Deputy, we must move on.
Perhaps they put the water in the jars in Cana.
(Dublin West): I am glad so many Fine Gael Deputies are anxious to take the snail by the horns.
The Deputy should not allow himself to be interrupted.
(Dublin West): Deputy Dukes should be trying to deal with the raging bulls and the Celtic tiger. Does the Minister agree that the real problem with the EU will come, not in times of economic boom, but when the chill winds of the US recession reach this shore and freeze the Celtic tiger and when there will be a need to maintain social, health and other socially necessary spending in far less favourable conditions? It is then that pressure will come from the EU to cut social spending and social programmes.
The Deputy has asked his question.
(Dublin West): That is when this country should stand up.
Bring back Leon Trotsky.
Does the Minister agree that this rebuke is a result of excessive centralisation within the EU and that if we continue to sign EU treaties it is only a matter of time before the budget is delivered from Brussels and not Dublin and that Dáil Éireann will become a glorified county council?
I will allow a brief question from Deputy Jim Mitchell.
I wish to ask the Minister a question which I already asked but which he did not answer. Will there be any budgetary changes this year or in next year's budget?
Next year's budget is months away and I am afraid the Deputy will have to wait like the rest of the people to find out what I am going to do. I have not considered next year's budget yet.
Will the Minister be here next year?
I have every intention of being here. As regards Deputy Joe Higgins's comments, the European Commission has been complimentary of the tax changes in the last two budgets. It awarded us high marks for the taxation changes which it stated would boost labour supply. The Deputy will be aware that I stated in my Budget Statement in December that over this and the following budget the Government intends to remove everyone on the minimum wage from the tax net. He will also be aware that the number of people outside the tax net as a result of the changes in this and previous budgets is very substantial.
Most of them are in the K-Club or Monaco.
The Minister without interruption.
Deputy Rabbitte mentioned his contribution to economics in recent years. When he was sitting on a stool looking in at the Government his then colleague and now leader, Deputy Quinn, succeeded over three budgets in taking about 35,000 people out of the tax net. Even before last year I had taken out three times that figure.
I do not have time to engage in an interesting discourse on EU membership with Deputy Joe Higgins. However, his views and mine do not coincide. At several conferences on Europe I have been asked the question raised by Deputy Gormley as to how matters will progress over the next decade regarding tax harmonisation and the national competencies of Governments. I find it difficult to believe that in my lifetime members states will be willing to give up the right to make their own taxation and budgetary changes. Some new mechanism might emerge but I doubt the majority of the 15 member states will agree to such a proposal. I cannot see that happening in my lifetime.
Written Answers follow Adjournment Debate.