Yesterday the Minister won the Booker Prize for fiction. Sometimes it is better not to make unsustainable claims about what he has done. To stand up yesterday as the Minister did and make a speech about sound finances merely invited scorn. Judging from this morning's newspapers, scorn is what the Minster has received. It is the inevitable fate of a man who believes his own press releases. I will return later to read into the record a sample of the quotations of objective observers rather than political participants.
If the Minister really believed what he said yesterday about borrowing, we would be looking at a totally different budget. If yesterday's budget says anything, it is that the Minister knows he has delivered his last hurrah as Minister for Finance. He cooked the books. He may not have to deal with the harsh reality of a deficit but he has made certain that his successor will.
Some 3 billion for 2003 and 3.7 billion for 2004, based on no policy change, represent stark deficits by anybody's language. There will be no general Government surpluses in those years but clearly the Minister, Deputy McCreevy, hopes that problems will not be attributed to him. The contrast between his legacy and the situation he inherited could not be greater. He advocates that, to maintain the integrity of a fund established by him to look after pension requirements until 2025, we should borrow on a year in year out basis from next year to put money away in this fund. It is nonsense and it is time those who have supported this nonsense came out and admitted it. Although I see from an article in The Irish Times of a couple of weeks ago that fewer and fewer economists are prepared to subscribe to this lunacy.
The Ministers downfall has been his dishonesty. Had he had the courage to stand up yesterday and declare that the requirements of the national development plan and our future economic growth required sensible deficit financing, he would have been lauded. One Sunday newspaper said as much last weekend. My party's position has been for some time that borrowing is justifiable for the purposes of capital investment in order to improve the capacity of the economy to grow. The Minister's previous rhetoric and his own puffed up sense of importance made this impossible. Instead he chose to spin the unspinnable story and it has landed flat back in his face.
If the Minister thinks the Labour Party intends to stand here and see the social insurance fund raided for this indulgence he can think again. There is a long way to go to Christmas and I can guarantee each and every Fianna Fáil backbencher that yesterday, the Minister made it longer. Deputy McDowell is right. What the Minster announced yesterday in respect of the social insurance fund is illegal. By agreeing that it needs to change the law before proceeding, the Government is accepting the analysis put forward by Deputy McDowell yesterday.
It is also an act of not inconsiderable hypocrisy on the part of the Minster who complained in the past about the payment of the equality social welfare arrears out of the fund. Those payments, which totalled no more than £50 million, 63.50 million, were described by this Minister in 1995 as a raid on the fund. If that is the case, what else can you describe dipping into the fund, a fund paid for by workers and employers, to the tune of ten times that amount? There is no doubt either on the Government side that this is a new and unprecedented raid. The Attorney General, Micheal McDowell, ranted about the social insurance fund, also in relation to the 1995 budget. He accepted that the fund constituted a hypothecated tax, namely a tax that must be spent for the purposes for which it was raised. There is no doubt that digging the Minister, Deputy McCreevy, out of a hole is not one of the hypothecated uses for the fund as set out in the 1993 Social Welfare Consolidation Act.
What about the review and operation of the social insurance fund board conducted in accordance with the Programme for Prosperity and Fairness with the social partners? Were they consulted on this matter? Perhaps the Taoiseach will elaborate on that point when he responds. Was the hapless Minister for Social, Community and Family Affairs consulted on the issue at all? What possible strategies is he to examine in relation to a denuded fund now? In July last he told Deputy Jan O'Sullivan that a review was necessary "in order to ensure that they are used to best advantage having regard to emerging demands and overall interest of its contributors."
It would appear that the Minister for Finance could not give tuppence for the concerns of the Minister for Social, Community and Family Affairs, Deputy Ahern, about the "overall interest of its contributors". Why is it that this Minister, the man who clambers around trees in North Dublin, is so badly treated by a Government that cares not for his dignity or his talents? It is not as if the fund could not have been used in the manner for which it was intended. Last Sunday at the launch of my party's pre-budget statement, we called for a £20 or 26 increase in the old age pension. That we believed would be a reasonable step towards benchmarking this critical payment at 34% of average earnings. It would not have gone the whole way, but it would have been a start and a good one at that. What we got instead was 12.7 and the path of pensioners into continued relative poverty was firmly set out by the Minister.
The other purpose for which the social insurance fund can be used is in accordance with the redundancy payments acts. In the present context, workers who were the unfortunate enough to lose their jobs in the current downturn, with minimal skills could have had their statutory entitlements increased. The Labour Party will bring forward legislation to that effect. If such entitlements were increased, combined with training allowances, they would have a cushion and a possibility to retrain while maintaining a decent level of income support so that they could return to the labour market with enhanced skills and take up the slack already there. This was not to be. We have had five chapters, five years, five awful years, five wasted years.
It is hard to think of it now but when looks at the figures they are quite stark. During those years, we have spent 4.8 billion on income tax and PRSI reductions. It is an unprecedented amount of money and the Minister sought to make much play of it yesterday. The Taoiseach will no doubt seek to do likewise this morning. We will hear tall tales of this Government's achievements and comparisons with years gone by and other administrations. It amounts to saying no more than the 20th century was better than the 19th century and that the 21st century will be better than the last. Things progress, even the inflation which this Government has stoked in its time, exaggerates the claims this Government makes about its own performance – figures are up, in part, because money has been devalued. I ask the Taoiseach not to give us that nonsense this morning. I know it is nonsense and so does he. If he wants to go into people's past records as Minister for Finance he should look at his own as well as others.
I am sick and tired of the Government regaling us with stories about how much more than the Rainbow Government it has spent in certain areas. As Minister for Finance in that Government I remember been subjected to barrages of abuse about being a "tax and spend" Minister, particularly from the current Minister for Finance and the current Attorney General. They wanted me to spend less money on social services, not more. They complained about the deficits we ran, they did not request that those deficits be higher. If they were as honest then about the macro-economic climate as my party has been in recent weeks, public debate would be all the better for it.
If the Minister and the Government insist on looking at the choices they have made then let us return to his home ground issue – taxation. The Minster was at great pains to suggest that his tax reductions have been progressive. It is abject nonsense. On the Minister's own figure 33% of the money spent on tax reductions over the past four years went exclusively to those on the upper income bracket. It sounds good, does it not? The Minister of State might even buy it. The reality is that 67% of the people, the least well off in our society, were excluded from that largesse. They did not benefit by one penny from it, but the lucky 33% benefited from the reminder of money spent on taxation. They shared in the benefits that accrued to the other 67% arising from the reductions in the standard tax rate and benefited from increases in the allowances.
Trick-o-the-loop economics and playing around with the figures was what we got yesterday. I am surprised the Minister sought to make a point of this yesterday. He may not like it but on this one the commentators are right. As Minister for Finance, he has created categories of taxpayers, deserving taxpayers and non-deserving taxpayers. For him and his political colleague and soul mate, the Tánaiste, high flyers and the well off are the most deserving recipients of the largesse he has distributed as Minister. They are also the people who probably benefited most from the reductions in capital gains tax and the latest schemes on capital acquisitions tax announced by him in this budget and in the previous one. These are the winners. The losers are those on low pay, on the minimum wage who, after seeing almost 5 billion spent on tax reductions in the past five years, still have almost 50 of their incomes subject to tax as a result of this budget.
Yesterday the Minister for Finance, always capable of a coup de grace, crowned it all by reducing business taxation by more than the reductions in tax on personal incomes for workers. The reality is that yesterday's budget is about the future, but in the eyes of this Government the future extends no further than the next six months.
The increase in indirect taxation, particularly in the form of a 1% VAT rise, will also disproportionately affect the least well off in our society. On this point, the Minister stretched the bounds of logic to its limits. He told us – this was straight out of Alice in Wonderland– he was reversing last year's 1% reduction, introduced as a result of his loss of control over inflation, because it had not been passed on to consumers. If that is his view, does he accept that it follows a further increase will this time be passed on to consumers and that the kindest interpretation of his intervention in this area in the past two years has been to push prices up by 1%, not to mention the cover he has given to anybody who might decide to use this increase as a further excuse to push up prices during the sensitive, complicated euro changeover period?
If there has been an economic consensus about how to react to the economic difficulties of the past six months, it has been that continued investment in the structural deficiencies of the Irish economy could not be sacrificed. It is fair to say we have all known for quite some time that the economy could not continue to grow at the pace it has grown in the past few years. We knew the slow down would inevitably come, that the economy has been skirting close to its productive limits, and that only so much economic activity can take place in a city like Dublin where traffic grinds to a halt on a regular basis. We also know an economy cannot continue to grow rapidly when it is close to full employment and that it is possible to move only so much freight on the worst railways and roads in Europe. We know that only so many workers can be employed when there is not enough housing, when the health system cannot look after them and when there is not affordable and decent child care places.
At the heart of our current economic problems is the fact that we are experiencing an external and a domestic economic shock. Perhaps there is not much we can do about the former, but if we fail to address our domestic constraints we will never make full use of our economic potential. It is a poor and selfish Government that cannot even support the national interest to jump this basic hurdle just because the Minister made his career talking tough on the economy more than 20 years ago.
Yesterday our worst fears were confirmed. A poor, ill conceived and limited national development plan was slow tracked officially by the Minster. If the Estimates day was bad, budget day was worse.
More spectacularly, whatever hopes we held out for a health strategy – announced at great expense by a Government within the past fortnight – have died completely. The Minister for Health and Children, Deputy Martin, is now the emperor with no clothes; there was a lot of hype but very little substance. As my colleague, Deputy McDowell, amply demonstrated yesterday, the National Health Strategy is a work of fiction. The Government is so inept that it set out a series of targets for itself over a ten year period and comprehensively failed to make an impact on those targets within ten days. That is a question only the Taoiseach can answer. Why lend one's name to a strategy that the Finance Minister has designated for scuttling? Why raise the hopes of a nation about something that one has no intention of fulfilling. Why say one will spend 11 billion on capital investment in health over ten years when one's investment goes no further than 200 million? Those who need medical cards are not the only losers this week. Those of us who had hoped for a decent and fair health system have also lost out badly.
I ask the Taoiseach to think seriously about the hypocrisy involved, not so much on the part of the Minister, but on the part of the Government as a whole. Having jumped through every hoop possible to return a budget surplus this year, the Government has failed to deliver on its health strategy. It wants somebody else to do it. The Government that will succeed it and inherit a 3 billion deficit from the Minister, Deputy McCreevy, is expected to try to implement it.
Make no mistake about it, the remaining signs of life were strangled out of the health strategy yesterday and the political career of the Minister for Health and Children, Deputy Martin, should go with it, but perhaps that would not upset the Taoiseach too much. Few politicians would lend their names to such a cynical exercise. That the Minister, Deputy Martin, should also be centre stage on a divisive and ill conceived referendum that may never happen makes him the fall guy of, to use a well known quote, "the most cunning and devious of them all". There is no fear from Cork.
Needless to say, the health strategy is not the only loser. Thankfully, social housing got a shot in the arm yesterday but not near enough to fulfil the commitments made in the PPF, as the Taoiseach acknowledged earlier this week during Question Time. The shambolic state of school buildings up and down the country, as described by the INTO, also seems set to continue. The roads programme will make no great recovery either from the assault waged on it on budget day.
I am pleased the Government lived up to its commitment on child benefit. We have gone some considerable way in the past ten years to tackle child poverty and the Government, at least in the past two years, has played its part, for which I unreservedly salute it. However, it is fraudulent to say that tackling child poverty amounts to tackling the issue of child care which remains a capacity constraint and an upward pressure on wages in our economy.
As I have said previously, part of this problem relates to supply side control. It is about the co-ordination of places in the right place and at the right time. Extraordinarily, the Government's response has been to deal with this problem within the Department of Justice, Equality and Law Reform. As an aside, in years to come when somebody compiles a lexicon of the greatest Irish oxymorons of all time, the author in respect of the Department of Justice, Equality and Law Reform will win the Booker Prize. There is no doubt about that.
Child care is something the bombastic Minister for Justice, Equality and Law Reform does when he takes a break from bullying refugees. In reality it never gets done, and its consequent drag-down effect on our economy has continued over the past four years because nobody is responsible for solving the problem of child care. One only has to look at the draw-down in the capital figures to see the accuracy of that analysis.
While I have commended the Government for its efforts to tackle child poverty, its efforts to tackle poverty as a whole have been lamentable. The gap between rich and poor has grown massively in the lifetime of this Government, the one Government with the time and the resources to address the issue. Why has the Taoiseach not accepted, as I have done, the need to benchmark our social welfare payments with earnings? Is he at all serious about the issue of relative poverty? Yesterday, rather than use the money in the social insurance fund for what it was intended, the payment of pensions and other social welfare benefits, it was raided to make the Minister for Finance look better. What we got yesterday in social welfare was more of the same. The gap between those on the poverty line and those in employment increased further. Another PPF commitment has fallen by the wayside.
The years from 1997 to 2002 have been bad for those of us who believe in a fairer and more humane society and feel that the State's role and responsibility is to actively intervene to correct the distortions of our market economy. They have been disastrous years for those of us who looked forward to a time when this country would have the resources to turn the republican dreams of our fathers into reality.
I want to turn now from my comments and criticisms of what is contained in the budget – understandably, as politicians elected to this House, we are partisan – and read into the record some of the comments from today's newspapers. Many of the commentators would be impartial, others no doubt have their own private views and support different political parties.
The concluding sentence in the Irish Examiner editorial states: “At a time when the economy has grown at an unprecedented pace, the stark reality remains that one in five Irish children is still going to school hungry.”. The opening paragraph in the same editorial states:
Make no mistake about it – underlying Finance Minister Charlie McCreevy's eleventh-hour conversion to tackling the problems of social inequality, the low paid, the most vulnerable in society and those in need – this is an election budget.
However, reading between the lines of yesterday's funding allocations, this budget could be described as a short-term fix for the economy. Politically, the minister stands accused of indulging in a slick performance of sleight of hand, of massaging the figures, and of unashamed creative accounting. Nor are such criticisms without foundation. It is clear that while a surplus of 170 million is projected for this year, that upbeat scenario is predicted to change dramatically to a projected deficit of 3 billion in 2003, and to a deficit of 3.7 billion in 2004.
The final quote from the editorial of the Irish Examiner states:
While the Government plans to spend £6.5 billion a year on health, its failure to bring more people into the medical card scheme is disappointing. Bluntly, it means the continuation of what amounts to medical apartheid.
On the front page of the Irish Independent, under the by-line, “Comment”, by Brendan Keenan, not one of the derided “pinkos” or lefties about whom the Minister, Deputy McCreevy, makes comment on occasion, it states:
We have had Charlie the party-giver, and Charlie the gambler. Now, it's Charlie the squirrel. He has been busily burying surplus nuts during the good times of the last few years and yesterday, amid the chill of the economic slowdown, was the time to dig them up. There was the social insurance fund, where accumulated PRSI payments had exceeded social spending by £1.1 billion Mr. McCreevy dug £500m out of that. Then there was a secret hoard where he had stored some of the recent budget surpluses towards paying interest on the national debt. He left it alone this year, but will extract £400 million from it next year. He raided the Central Bank's fairly lavish store for another £400 million and pulled off a stunt favoured by predecessors in hard times – making business pay next year's taxes this year. One remembers a similar trick with something called VAT at point of entry. That came to a grant total of £3 billion, which is an awful lot of nuts. As a result, Mr. McCreevy was able to do the apparently impossible – continue spending money like water but have no recourse to borrowing, even in an economy expected to grow by no more than 4% next year.
The final quote from that article states:
The Government has left the hard choices until after the election. The EU Commission may well be startled by Department of Finance figures which show the public finances deteriorating by 3% of GDP next year and by 5% of GDP in 2003.
The first sentence of the comment from the chief political correspondent of the Irish Independent, Chris Glennon, whom most people would say is an impartial correspondent, states: “Charlie McCreevy made three daring cash raids to balance his final Budget before the general election.”.
I want to turn now to the opening paragraph of a commentary in the Irish Examiner, under the headline “Budget 2002”, which states: “A quick raid on the Central Bank and a dip into the Social Insurance Fund afforded Mr. McCreevy the necessary resources to narrowly avoid a return to the days of deficit financing in Budget 2002.”. The political editor of the same paper, John Downing, on its front page states: “On the basis of Finance Minister Charlie McCreevy's own figures in yesterday's budget, the country will be almost £3 billion in debt by the year 2004”. Further on in the article he states: “Minister McCreevy's own figures show he has effectively mortgaged the future of the country – leaving us £2.4 billion in debt by 2003, and £2.9 billion in the red for the year after”.
I now want to turn to a very impartial reporter, Mr. Sam Smyth, a man known to us all. In the Irish Independent, under a headline, “What a great budget – if you're a betting landlord, that is”, he states:
The Minister raided the Social Insurance (SI) fund for £635 million (806 million) and scooped another £480 million (610 million) from the Central Bank's euro windfall. Yesterday, a leading accountant said that if Charlie McCreevy presented his clients' accounts to the Revenue in the same obfuscating way that he laid his budget before the Dáil, he would probably be arrested.