Dáil Éireann díospóireacht -
Tuesday, 1 Jul 2008

Vol. 658 No. 1

Leaders’ Questions.

Deputy Enda Kenny

Today the Ulster Bank and Halifax and First Active have raised their variable standard interest rates for the first time since 2001. This development comes in the face of a further hike in interest rates by the European Central Bank when it meets on Thursday. This will make life very difficult for hundreds of thousands of people who currently feel the pinch of rising prices, fuel costs, threats of unemployment, cutbacks in frontline services and a deterioration in the value of their pensions and houses. In particular, 100,000 young people face the terrifying spectacle of their houses being lower in value than their mortgages.

I remind the Taoiseach that he bears responsibility for a great deal of the problem, despite the fact that he and his Government will continually argue that it is due to international events. I will quote his address to the National Mortgage Conference in January 2006 when, as Minister for Finance, he stated "there is certainly a consensus that the Irish mortgage and housing market has been strong over an extended period of years because the economic fundamentals of the Irish economy have been strong". In April 2006, speaking to the Real Estate Alliance property conference, he assured the public, particularly young people considering whether they should use their savings to buy a home, that economic fundamentals were "anchoring the performance of the property market". We now know there was no such consensus because in October 2005 the International Monetary Fund, backed up by the OECD, the ESRI and the Central Bank, stated the house price over-valuation in Ireland was large compared to other countries and could not be solely explained by economic fundamentals. During his term as Minister for Finance, the Taoiseach knew and was being advised by the best experts at home and abroad that house prices were grossly over-inflated. Does he accept any responsibility for this debacle and the position in which 100,000 young people, including many young couples, find themselves?

Will the Taoiseach explain what the Minister for Social and Family Affairs meant yesterday when she said the Government was there to help people who lost their jobs or got into difficulty repaying their mortgages? Was this an announcement of some new Government scheme for mortgage repayments?

The Taoiseach

There is an existing scheme which relates to mortgage interest relief. Mortgage interest relief was more than doubled in the past two budgets.

Deputy Michael Creed

The Government will be obliged to double it again.

The Taoiseach

This was a proper response and it resulted in much greater benefits for a larger number of house buyers and those with mortgages than would have been the case had I taken on board some of the proposals put forward by the Opposition at the time.

I do not accept the point made by the Leader of the Opposition to the effect that I made an incorrect policy decision in choosing that option rather than proceeding with stamp duty reform at a time when house prices were appreciating. If I had instigated such reform, prices would have been hiked up to an even greater degree because it was then a seller's market. I continually made that point in the past and I stand by my assertion. The reforms I put in place in the most recent budget were introduced at the appropriate time.

On increasing interest rates, there is no doubt that difficulties in international markets and the lack of access to funds are causing problems in the context of the cost of the inter-bank rate for banks themselves. That cost is being passed on to consumers. I regret that this is a consequence of what occurred in international markets during the past eight or nine months. Ireland is not immune to what happens in those markets. Since joining the euro, we have enjoyed historically low interest rates. I do not underestimate the increased costs accruing to mortgage holders. However, the responses I brought forward in successive budgets in respect of increasing mortgage interest relief were appropriate and led to people benefiting.

Deputy Enda Kenny

The Taoiseach was dragged, very reluctantly, towards taking action in respect of stamp duty. When he finally took such action, it was too little too late. If the Taoiseach is stating that he knew in advance that mortgage interest relief would have to be available in abundance through the Department of Social and Family Affairs, this makes the reply he has just given even worse. He was advised by national and international experts that house prices in this country were grossly over-inflated. He stated in September 2007 that the economy was stronger than at any previous point in history. In April of this year, he said he was not concerned with regard to the slowdown in the construction sector.

The Taoiseach now appears to be expressing helplessness and stating that we are not immune to international developments. Such developments are not responsible for the highest increases in the cost of living in any of the eurozone countries since 2001 or the highest increase in unemployment among European Union states. Ireland has been steadily losing its market export share since 2001. These developments were not caused by international events and the Taoiseach served as Minister for Finance when they came about.

The Taoiseach previously stated that we should engage in some straight talking on these matters. Straight talking was the mark of the Deputy Cowen of old when he occupied the seat to his left in which the Minister of Health and Children is sitting. What is the position? Does the Taoiseach accept responsibility for the situation where 100,000 young people, single and couples, face the terrifying prospect that the value of their houses and pensions are deteriorating? People's mortgages are now greater in value than the houses in which they live. They are the mortgaged poor and have been made such by what was a phoney economy.

The Taoiseach holds responsibility in respect of this matter because he led the economy to which I refer. As Minister for Finance, he introduced successive budgets which were reckless in nature and which gave rise to inordinate levels of public spending. The banks lent money, left, right and centre, and it was a case of "easy come, easy go" in the economy because it made people cheerful and helped win votes.

Does the Taoiseach accept that the position in which we currently find ourselves was compounded by the actions he took when Minister for Finance? The people to whom I refer are approaching Deputies on all sides of the House to voice their concerns regarding their mortgages and the threat of unemployment and the cuts in front-line services. The problems to which I refer were created on foot of the construction of a phoney platform designed to get the Taoiseach's party through another election on the basis that people would assume that all was rosy in the garden when, in fact, that was not the case.

Will the Taoiseach see to it that the Ministry for Finance will not again become a tool used to encourage people or give them false hope, as was the case when it was claimed that the construction economy was built on a sound platform? He was responsible for the economy for the past three years and he will now be obliged to suffer the consequences. At least 100,000 people are going to find themselves in dire straits as a result of the actions he took when he served as Minister for Finance.

The Taoiseach

I reject all of the assertions put forward by the Leader of the Opposition and I defend the actions I took when I served as Minister for Finance. On the question of reckless spending, the national debt fell from 30% of GDP in 2004 to 25% last year. Debt service as a share of tax revenue fell from 4.7% in 2004 to 3.4% last year. In the years 2005, 2006 and 2007——

Deputy Paul Kehoe

What about the way forward?

The Taoiseach

I am answering Deputy Kenny's question on reckless spending.

An Ceann Comhairle

The Taoiseach should be allowed to reply.

Deputy Michael Creed

We are looking forward, not back.

The Taoiseach

I would like to answer the question and I listened in silence to what Deputy Kenny had to say.

Deputy Michael Creed

The Taoiseach is spoofing.

The Taoiseach

In the years 2005, 2006 and 2007 there was a current budget surplus of €22 billion. That gives the lie to charges of reckless spending. We increased capital spending and I stand over the decision taken in this regard.

Deputy Michael Creed

Did the Government obtain value for money?

The Taoiseach

It is important that we continue with capital spending. I make no apologies for increasing the old age pension by €66.

Deputy Enda Kenny

Good.

(Interruptions).

Deputy James Bannon

What is the Government going to do in 2009, 2010 and 2011?

The Taoiseach

I doubled financial supports for parents with children under six years of age.

Deputy Enda Kenny

Very good.

The Taoiseach

I also doubled the provision relating to special needs education. In addition, I increased the social welfare budget by 40%. I stand over the decisions I made in this regard.

Deputy Enda Kenny

Does the Taoiseach stand over the €60 million spent on voting machines?

The Taoiseach

Deputy Kenny claimed that I was profiting and misspending. He should indicate where I spent too much, as far as he is concerned, in the areas of health, education and social welfare.

Deputy Michael Creed

Did the Government obtain value for money?

The Taoiseach

It is his responsibility to do so if he disagrees with my assertions.

Deputy Enda Kenny

What about the money spent on voting machines and PPARS?

(Interruptions).

The Taoiseach

The Deputy also suggested the economy——

Deputy Enda Kenny

The Government created the monolith that is the HSE, which is costing €15 billion and the level of service has worsened.

The Taoiseach

——can be characterised as a building site and nothing more. Our economy is sophisticated and developed. One quarter of the jobs currently in existence in Ireland were created during the past ten or 11 years when this Administration was in power.

We will face into the international downturn——

Deputy Joan Burton

It always comes back to the international downturn.

The Taoiseach

——in a far stronger position than previously. We will be obliged to ensure that we take prudent corrective action. We must not defer the necessary corrective action because if we do so, we will face more difficult times in the future. We will make our decisions in this regard on the basis of the publication of the mid-year Exchequer returns tomorrow. The Minister for Finance will make a statement on those matters and the Government will make its decisions appropriately, prudently and quickly as a result.

Deputy Paul Kehoe

More cutbacks.

Deputy James Bannon

Stealth taxes will be introduced when the Dáil goes into recess.

The Taoiseach

We will discuss these issues in the House next week.

Deputy Enda Kenny

Those in government are not taking responsibility. They are headless chickens.

Deputy Michael Creed

Will the Taoiseach lead by example? Will he forego his pay rise?

Deputy Eamon Gilmore

The Taoiseach stated the Government will make decisions based on the mid-year Exchequer returns. I understand these will be published tomorrow. Is the Taoiseach aware of the contents of those returns? Did the Cabinet discuss the figures today? When will he be in a position to outline to the House exactly what he and the Government intend to do to deal with what is indicated by those figures?

For a couple of weeks, the Taoiseach and the Government have been communicating in coded language. More use of this language is evident today. The Taoiseach referred earlier to taking prudent corrective action. Last week he stated that temporary adjustments would be necessary in order to avoid more permanent damage. The Minister for Finance stated on the "News at One" last week that resolute, prudent and determined action would have to be taken. The Taoiseach also informed those at the IBEC dinner last week that it may be relatively painful to apply a corrective course now. When speaking in New Ross, the Minister for Finance indicated that none of this means there will be cutbacks but rather that savings will have to be made.

As the Taoiseach's predecessor might have said, the world, his brother and his mother knows that all of this coded language means that the Government is contemplating making cutbacks and introducing some form of stealth taxes. The only thing we do not know is what exactly the Government means to do.

Will the Taoiseach come clean and inform the Dáil and the people as to the nature of the corrective actions, measures, temporary adjustments and savings the Government intends to announce? Does he intend, prior to the summer recess, to indicate to the Dáil the steps the Government will take and translate the coded language into words we and the public can understand?

The Taoiseach

To answer Deputy Gilmore directly, the situation is clear. We are experiencing a reduction in tax revenues. As is normal, the Minister for Finance will have informed the Government in general terms about the figures to be released in advance of the publication tomorrow of the Exchequer returns by the Department of Finance. They will be released tomorrow, not today, by that Department, in keeping with convention. As a result of publication of those figures, the Minister for Finance will issue a statement. As the Deputy is aware, we will have a debate next week on the NDP and the economy which will present a good opportunity for the Government to outline the general position. Given that tax revenues will be back from where we expected them to be because of the international financial situation, it will be necessary for us to work to our expenditure targets within the budgetary parameters we have set ourselves. That makes for a challenging time both for the remainder of this year and in respect of the opening position for next year. Decisions will have to be taken in the context of the Estimates for next year's expenditure targets.

This matter will be addressed calmly and sensibly in the context of informing the House in the normal way. Deputies can be assured that the Minister for Finance will be in a position to make a statement to the House next week. It is not for the Government to make decisions on foot of how eminent other financial institutions may be; it must decide on the basis of its own figures which are collated right up to the time of publication. The Government is au fait with the general position and the Minister and his colleagues will determine the broad strategy to be adopted. The Government will make decisions promptly and appropriately and we will discuss them in the House.

Deputy Eamon Gilmore

I understand the Exchequer figures will be released tomorrow at a press conference.

The Taoiseach

That is normal.

Deputy Eamon Gilmore

We are not in a normal situation. We are seeing the most dramatic turnaround in the public finances in a very long time. Will the Minister for Finance come into the House tomorrow to tell us what the Exchequer returns are and the approach the Government intends to take?

Deputy Seán Barrett

It is what the Dáil is for.

Deputy Eamon Gilmore

It is not credible when for the past couple of weeks the Taoiseach and the Minister have spoken in this coded language and dropped hints all over the place about corrective action, prudent measures, savings and temporary adjustments. Such language is creating the climate for the Government to engage in cutting various programmes and services and, possibly, introducing some stealth taxes. In effect, what the Taoiseach has being doing for several weeks is communicating the preamble of what in effect will be a mini-budget, yet it appears he will not present it to the House. As soon as it goes into recess, he will have a couple of months to put it into practice.

Everybody knows that the public finances have changed. Everybody understands the economic environment is different. Incidentally, this is not an international matter. It is largely due to the Taoiseach's mismanagement of the economy that we are in this hole.

The Taoiseach

Rubbish.

Deputy John Cregan

It is rubbish.

Deputy Eamon Gilmore

We want the Taoiseach to tell the House what he will do to address the issue instead of presenting all these coded messages and pretending that we will get the figures tomorrow, following which the Government will address what it is going to do. Is he trying to tell us that the Government has not been addressing this issue for quite some time? It is incredible that he does not know, in general terms at least, the steps that will be taken, the programmes that will be hit and the expenditure that will be pared back. We are seeing some of this in practice.

Deputy Michael Creed

The sick and the handicapped.

Deputy Eamon Gilmore

Anybody with experience of dealing with Departments or the public service can see what is happening. Will the Taoiseach treat the people like adults and tell us exactly what is happening and what will be done? He should put it on the table and take out the coded language and, instead of allowing the Minister for Finance or his officials to arrange a press conference, he should have the Minister come to the House in order that we can debate the matter.

Deputies

Hear, hear.

Deputy Seán Barrett

That is real Dáil reform.

The Taoiseach

The Government makes decisions on the basis of its own figures. We make these decisions after we receive the figures which are being published transparently and will be explained by officials of the Department of Finance. As that is long-established practice, there can be no suggestion from Deputy Gilmore or anybody else of spin. The figures will be published by the Department, which is the norm.

Deputy Eamon Gilmore

Does the Taoiseach know the figures?

The Taoiseach

The Government will make decisions——

Deputy Paul Kehoe

Bring them here.

The Taoiseach

Excuse me——

Deputy James Bannon

Will there be money?

An Ceann Comhairle

Please allow the Taoiseach to finish.

The Taoiseach

The Government will make decisions in regard to the figures at its meeting following their publication and we will come into the House next week to set out our broad budgetary strategy based on them. That is an expeditious, sensible and orderly manner in which to conduct Government business. We will not anticipate those decisions until they are taken. That is the position. The Government has been indicating that, with tax revenues down, we will work within the broad budgetary parameters we have set for ourselves, which means that in the short term, as we know, there will be a deterioration in the public finances this year because tax revenues will not meet the predicted level. Our growth rate will not reach the predicted level because of the situation affecting every country, not only Ireland.

Deputy Michael Creed

It is not affecting every country.

The Taoiseach

In regard to——

Deputy Paul Kehoe

Bring the figures here.

The Taoiseach

——an analysis——

Deputy Seán Barrett

There is no European recession.

The Taoiseach

I am sorry gentlemen.

Deputy Seán Barrett

It is the same spin as in the last general election.

An Ceann Comhairle

Please allow the Taoiseach to finish.

The Taoiseach

In regard to an analysis of what is happening in the economy, the drop in output in the residential construction sector has been a major reason for the reduction in growth rates to the current level. That will be announced in a transparent and orderly fashion by the Government.

Deputy Damien English

Will it be debated in the House next week?

The Taoiseach

That is the orderly way to proceed. We have listened to the various forecasts and will make our figures available to the public tomorrow. The Government has been discussing this matter and will come forward with its decisions following publication of the official figures.

Deputy Joan Burton

The Government received the figures last week.

The Taoiseach

We will make our decisions at next week's meeting and then come to the House.

Deputy Dermot Ahern

We do not make them off the top of our heads.

Deputy Michael Creed

The emperor has no clothes.