[Senator Marc MacSharry   ]
With regard to social welfare, from 2010 the early child care supplement will be replaced by a free preschool education year at an estimated cost of €170 million. It is intended either to tax or means test child benefit but we should closely examine that. I believe those who are in a position to pay a little more would happily do so to secure our children’s future. Our children should be ring-fenced from this and we should do all we can to enhance the services available to them. I believe those who are lucky enough to be employed and earning appropriate levels of income would not have a difficulty with paying a little more to secure our children’s future and to protect the more vulnerable in society. As this year progresses and notwithstanding the measures that have been taken, we should seek to avoid adversely affecting the level of child care supports. The jobseeker’s allowance for new claimants under the age of 20 years will be halved to €100 per week. Unquestionably, this is severe and the various youth groups have expressed their concern, as I have. However, I hope it might encourage more young people to engage with the education system. A total of 24,000 additional places in education and training have been made available. I hope that when resources are available this measure will be examined again. Payments under the rent supplement scheme will be reduced to reflect prices and rents. It will be interesting to see how that will be implemented because rents vary in different parts of the country. Will that be discretionary for the local authorities or will there be a clear set of parameters? There is talk of an average of 6% or 7% up to a maximum of 10%, but I would like a little more information on it. The December bonuses will be discontinued. Again, this is a very severe measure and I can understand the pain it will cause. I have received calls from people who are very concerned about the level of pain this will create at Christmas, a time they would have earmarked it for other expenses. However, as the Minister, Deputy Mary Hanafin, said, it was necessary to use these funds to avoid cutting the basic social welfare and jobseeker’s allowances. With regard to reform in the use of public sector resources, there are some measures in terms of the proposed reduction in the number of Ministers of State, ministerial pensions not being paid and so forth, but there is more scope to refine further the delivery of service in governance and to reform the Oireachtas. Perhaps over the next few months we could examine areas where even more savings could be made. However, I am not interested in pandering to media interests or engaging in tokenism or gimmickry. If we are to tackle the public service pay bill and secure efficiencies in the public service, we should take a comprehensive approach. I have no interest in focusing just on judges, Deputies or Senators. If there were a proposal, for example, to cut public sector pay by a certain percentage in the national interest, I would be far more supportive of that than simply pandering to a particular interest. Senator Twomey referred to the ministerial cars and spoke about cutting this and that. That is fine and if it is part of an overall package of measures, there is scope for that. The various task forces that have been established to review public sector numbers and to seek efficiencies are due to report over the coming months. I look forward to tangible actions being taken as a result of those. The public service has served us exceptionally well through the decades and the Celtic tiger years but there is always room for improvement. The numbers have grown a little too much in some areas and there is some duplication. When one considers that of the approximately €54 billion in expenditure, a total of €20 billion goes on public sector pay it is a no brainer. It is something we must tackle. It will be painful but we will have to do it. I am pleased that we will continue to spend approximately 5% on capital projects, which is still approximately double the EU average. However, it is important to focus our capital expenditure on labour intensive projects and projects that will contribute most to our competitiveness. It is vital we address this issue because, in recent years, we have become uncompetitive. Overall, there are savings of €576 million in gross capital expenditure. Obviously, there are reductions in schemes which will cause pain, especially for farmers. There is a proposed reduction of 17% in the rural environment protection scheme and the fallen animals scheme is to be abolished. A sum of €200 million is to be saved in the areas of social housing and water services. I would like more detail on the housing aspect. The €150 million saving on roads mainly applies to regional and local roads. These cuts are highly regrettable, but necessary. The options available to the Government were limited. A difficult balance was sought and, to the extent possible, I am pleased the Minister has come close to achieving that balance. When preparing and commenting on a budget such as this, we must acknowledge the level of obvious frustration and disappointment it will cause but we must also acknowledge the reality and the fact these measures had to be introduced. Governments operate in a real-time environment, without the benefit of hindsight. As the Minister, Deputy Brian Lenihan, said in the Budget Statement, some people predicted a soft landing for the property boom and others did not. No one predicted the pace and scale of its demise, which is highly regrettable. However, we are where we are and we must take the appropriate actions that will take the country out of the recession. To return to public sector pay, I welcome the fact that our salaries will be benchmarked against those of our counterparts internationally. However, they should also be benchmarked against the private sector and, just as they went up with the private sector salaries, they should also come down with those private sector salaries. In that context, I hope the process of social partnership can continue and that we can achieve a consensus on how to continue to meet the challenges presented by this crisis. No stronger message can come from this country than a social partnership agreement. I believe the social partners are realistic. An element of realism has come into all sectors of society in recent months. We are in very difficult times and we must take appropriate action. I wish to comment on the proposed national asset management agency. The banks provide the lifeblood of the economic system. Without them to lend money to households, individuals and businesses, the economy would contract even further. I welcome the establishment of the national asset management agency. I like the proposal and believe it will be a template that will be replicated throughout Europe. I like the way it will operate. However, I have some concerns. The first is how we will determine the asset values. Reputable firms and expertise will be sought and engaged to do this. I am involved in the property business as an auctioneer and it must be pointed out that if one went to 20 auctioneers in the current environment for valuations, one would be guaranteed to get 20 different valuations. It is very difficult to determine asset values at present. The Minister should take a number of different valuations and arrive at an average because it is impossible for one individual to get it right. A sample of valuations will be required to determine the valuation appropriately. My other concern, which has been expressed by many people, is about the non-Irish assets. I have concerns about us managing a property portfolio that includes properties all over the world that are subject to a series of different regimes and government policies over which we do not have control or influence. That will have to be examined. The European Central Bank would probably like to see this replicated throughout Europe. If that is the case it will signal the turning of the corner for the European economy in terms of dealing with the toxic debt.  12 o’clockFollowing on from the painful measures that have had to be introduced, we must remain constantly alert to the difficulties of the less well-off and the most vulnerable. As certain cases emerge through the media or anecdotally from Members, we must seek to make adjustments where appropriate to help them. There is no question that unique cases will arise. It is very difficult for people at the moment and more will have to be done. In terms of protecting jobs and helping people without jobs, I welcome the enterprise stabilisation fund of €100 million. Unlike Senator Twomey, I am happy that Enterprise Ireland will administer that fund. The work of Enterprise Ireland and the IDA needs to be supported in any and all ways possible. The announcement of the previous budget re the smart economy has been enhanced further by the investment incentives to reach a research and development target of 2.5% of gross national product, GNP, by 2013. In that context, as the Minister of State is aware, I previously referred to the cut in Science Foundation Ireland’s funding by a small percentage. I would not mind paying a little more to ensure organisations such as Frank Gannon’s Science Foundation Ireland would have the appropriate resources. The research in which they are engaged is of consequence. It is not just a case of PhDs that do not produce tangible results. It will help the economy. The more we can do in that regard the more we will lay a foundation that will take our country on a sustainable growth path. I welcome the enhanced access to the back to work enterprise allowance scheme that will facilitate an additional 1,400 places. That may not sound very much but anything is a help at this point. I also welcome the earlier eligibility for the back to education allowance and the new work experience programme for graduates. One other thing I would like to see is a focus on revenue-neutral measures. I have been working on some in the area of entrepreneurship, especially the introduction of entrepreneurship from primary education through to third and fourth level. In terms of entrepreneurship we focus too often in this country on the person who is an entrepreneur rather than on it being a way of doing things. I have called for a debate in this House on the issue and I will bring forward some suggestions myself. They are the kinds of improvements on which we need to focus. I refer to a quotation that is relevant to this time, which I will identify later: We have the essential resources to get out of the depression that has enveloped the country in recent years and to open up new possibilities for growth and employment. We simply cannot afford to let opportunities slip. Optimism does matter. We must provide the best conditions for the inflow of capital into the country ... and for higher investment.
This budget is the first step in providing the right balance for a new outlook ... New possibilities for steady economic growth and employment are being opened up. The policies being implemented this year will be continued and developed over the next few years in line with the Government’s programme and ... direction. The public finances will be managed prudently; there will be a better distribution of the tax burden and the economy will become increasingly competitive.
We must not be intimidated by the difficulties or give way to defeatism. Let us take the opposite course. Let us talk of opportunity. Let us work together in a new spirit of co-operation, determined to get things right. This requires a contribution from all sections of the community. The essence of consensus is that the various interest groups will each make some contribution to the public good.
As things come right, success will become self-sustaining. Jobs will become [more] available . . . We will have a stronger economy that will allow us to improve social conditions. These are the rewards for exercising the necessary discipline and restraint in the short-term.
That is the concluding paragraph of the budget in 1987, which is very relevant today. If we go forward in the same manner from this budget the rewards can be reaped here as well. We saw the 20 years that followed it when economic conditions in this country flourished following the appropriate fiscal rectitude measures that were taken at that time, although I accept mistakes were made in our over-reliance on the property market. Let this be the beginning for us to do the same, namely, to lay the foundations for the years ahead. Senator David Norris: I wish to share time with Senator Feargal Quinn. An Cathaoirleach: Is that agreed? Agreed. Senator David Norris: I welcome the Minister of State, Deputy Mansergh, but it is a qualified welcome. I do not mean any disparagement to his talents because I have known him as a very senior and capable public servant, a distinguished Member of this House, and a very capable Minister who understands clearly these matters, but for such a serious debate it would have been welcome if the Minister for Finance himself had turned up. It would also have been helpful if we had had immediate delivery of the Minister of State’s speech. I had to ask for it. I also had to ask for a copy of the blue book, the supplementary budget. It was not delivered to Members of this House, as was traditionally the case. Neither was it given to Members of the other House until after the press got hold of it. I would like to think the Civil Service in this country was treating the Parliament with the respect with which it is due. I will continue to call for that. At the outset the Government should acknowledge bad stewardship. I do not say that in a vindictive way. The Minister of State knows perfectly well that I have supported the Government when I thought it was doing appropriate things but there has been bad stewardship. We could spend the whole day giving a recital of it. I refer to PPARS, the overpayments to road builders, which was raised consistently by people such as me in the House, and waste in the health service. I previously mentioned a case where I lobbied with a parent to get delivery of a medical service for a particular syndrome. Three managers were appointed at the first stage but when the embargo on recruitment was introduced there was no delivery. That is wasteful. Those people are still in place and that kind of flab has to be cut out, however painful it is. Let us consider the banks. The Minister of State spoke about our reputation. That is important but it is being squandered by these people who showed themselves to be nothing but beggars on horseback. What we have seen is gombeenery run riot. They alienated their own clients, the small people who pay taxes and who provided the funds. They deliberately moved managers around so that they would not know what was a good risk. They did not know how to rate people. They broke the contract between the ordinary people of this country and the banking institutions and for that reason I will have certain recommendations to make. Scandal after scandal has been uncovered. Banks have taken money from people, stolen money from people’s accounts and overcharged. For the purpose of foreign investment, banks involved themselves in the United States of America and that involvement collapsed through the fraud of their own officials. They provided packages so that people could have offshore accounts. Is it any wonder our reputation is in tatters? We have a good capacity in this country and it is the same with our natural resources. Let us look at our agricultural industry to which Senator MacSharry on the Government side referred. We have wonderful beef and our reputation is in tatters because of the way the beef industry operated. Again, it repackaged rotten goods and destroyed credibility. We need to clean this gombeenery out of this country, however painful it is. How dare people like Standard and Poor’s and the rest of the international rating agencies downgrade this country. They should be held to account for their complicity in this mess that originated with the sub-prime collapse in the United States of America. This is an opportunity to do that by international agreement and for us to examine internationally the operations of multinationals that are now more powerful than governments. I would especially like to see Monsanto and Shell put in their boxes. Seriously damaging actions were taken to the detriment of our reputation. I have made some proposals in this House. It is at least three months since I proposed the creation of a national property management agency. I am pleased to see some elements of that have been taken up under the national asset management agency, but it is not enough. We need a national property management agency into which all this property should be transferred. There is no constitutional impediment to this whatsoever. I know the rights of the owners of private property are guaranteed but the governing clause of the Constitution refers to the social good, the good of the people. I could quote it if necessary. I would love to see a property developer, speculator or bank go to the Supreme Court and argue that his or its private speculative interests were of more significance under the law and Constitution than the welfare of the people. By way of a little coda, I must state I have never been a republican, unlike the Minister. I have never really acknowledged anything other than a cosmetic argument for a 32-county republic but it is now made and that is what we must move towards. One of the factors inhibiting us is the separation of the two parts of our island. We are inhibited in terms of certain tax structures but we should be fighting together. I am sorry to say the British have let us down by devaluing their own currency and selfishly not joining the eurozone. It would be much better if Newry and Dundalk were in the same regime. I say this against my deepest cultural persuasions. We need positive ideas and they need to be listened to. We do not need all these Robespierres and Mesdames Defarges around this House calling every week for somebody else’s head or a bucket of blood in respect of some personality-based issue. We need a couple of really good ideas and this is the time to implement them. I did not believe I would see an asset management agency in my lifetime and I welcome the one to be established. Crony capitalism was referred to and that is exactly what we have. In addition to establishing the national asset management agency or property management agency, the banks should be nationalised. They should be drawn together into one great bank of Ireland that can have its reputation restored, whatever the cost. I do not want to see any property speculator making anything back out of this. So what if they lose their houses; I have no pity for them. So what if they go on social welfare. They made other people lose their houses and require social welfare. Let them taste what they themselves have delivered to the people. A very serious problem confronts us. We will have a higher national debt, higher inflation, higher interest rates, higher unemployment and higher oil prices. We must stop doing what is good for Dublin 4 in the belief that it is good for the entire country. What is good for the country will be good for Dublin 4 as well. What we need to do is reduce Government spending and raise taxes fairly. Not all the budgetary provisions are fair. We need to stimulate the economy and protect and create jobs. With regard to fair taxes and efficiencies, I call for the establishment of a new Ministry. In the United States there is a Department of Homeland Security. I want a Minister for home security to protect ordinary people’s mortgages and ensure they at least have a roof over their heads. I want an audit to be conducted within every single Ministry and the results forwarded to the Committee of Public Accounts for examination. There is flab around the place. There are 58 different accounting systems in the Health Service Executive alone. What is that about? Let us cut it all out. We are again requiring the Central Bank to engage in financial regulation. We are going round in circles because this is where we started. We found the system we had to be unsatisfactory and then established the Financial Regulator, which apparently was unsatisfactory because the regulations were not imposed and the authorities did not engage in supervision. Why not introduce legislation to outlaw non-recourse provisions in loan agreements? If a property developer has three developments in construction and defaults on one loan, the banks are prevented from going after him in respect of the other two. Why? They should all be part of the same bundle. Why did I have to ask the Minister for Social and Family Affairs, Deputy Hanafin, six months ago the position on claiming a social welfare benefit? I have become aware that there were people from outside this country getting friends to go into the social welfare offices to collect their money for them. When I asked the Minister whether they were being asked to produce identification, she did not know. I now know they were not. At least it is now known but it is ridiculous that it took me to point it out in this House. If I want to connect a telephone, I am asked to produce my passport, birth certificate and bank statements, yet we are handing out money as I have described. Why not stop the extra child care supplement this September and then start the free year immediately? There is no joined-up thinking. Why is there a gap? Why are we only changing tax rates at the end of the year? We have the technology and talent to address this. There will be an eight-month gap before the measures are implemented. We are in a crisis but not behaving as if we were. Betting does not do very much for this country. Why not double betting tax? Why not have a proper tax on travel abroad? Owing to the time restrictions necessary to allow us all to contribute, I did not have the opportunity to make the kind of plea I usually make on behalf of the people who have lobbied me. I will leave this for the Finance Bill. However, I must say one of the meanest measures was the cut to the scheme for community support for older people, which is responsible for meals on wheels, electricity, etc. This is disgraceful and the scheme should be restored. The cut will only save a piddling amount of money. I will have more to say about fairness when discussing the Finance Bill. My heart goes out to the Minister for Finance. He looked shattered, over-worked and exhausted in the Dáil. We must all support the Government but it must do the right and radical thing and ensure these skunks do not get away with it any more. I will support the Government in every measure it implements in this regard, including the nationalisation of the banks. An Cathaoirleach: The Senator has reduced the time allowed to Senator Quinn. Senator David Norris: I have not. The Cathaoirleach can be flexible. Senator Feargal Quinn: I thank Senator Norris for allowing me time. For years during budget debates, I have had the chance to act as a schoolteacher and I usually say I will give marks to the Minister. It has been interesting to recall that over the past ten or 15 years, we have usually held the debate on the evening of the budget. With regard to what Senator Norris said, the Minister for Finance presented the budget very well and with confidence. Senator David Norris: He did but he looked exhausted. Senator Feargal Quinn: He instilled confidence in people and I congratulate him thereon. If he were receiving marks on the manner in which he delivered his speech, he would receive high marks. Before the budget, I wrote in one sentence that international investors need to see that Ireland has a comprehensive, credible, multi-year plan to tackle the deficit in our public finances, place our banking sector on a sound footing, transform the funding outlook and support our economy. The Minister achieved this and would receive marks in this area if I were giving them. With regard to the economy, the sovereign debt market, the banking system and public finances, the Minister would receive high marks for instilling confidence internationally. He claimed he would do so and achieved this. A business in financial difficulty would handle a financial crisis in a slightly different way from the Government. A business facing a crisis owing to costs rocketing out of sight and the failure to bring in enough income would state it would have to tackle the problem. It would also state it would have to instil confidence and hope among its people, be they customers or employees. The Minister cut costs only to a certain degree and this is where he would lose marks. If half of the savings are to accrue from cutting costs and half from increasing income, the Minister got it wrong. Much closer to a quarter of his savings are to accrue from cutting costs and three quarters are to accrue from increasing income. This is a lopsided way for a business to go. Something far more serious needed to be done with regard to cutting costs. When one looks back to the past five or ten years one sees where our costs have escalated. One of the challenges facing us is to cut costs and the Minister did not grasp this clearly enough. However, he increased the tax rates and I do not agree entirely with Senator Norris on this. There was a need for imagination on this but we did not have it. In 1987 we had similar problems. One could say they were bigger problems than those we have now with regard to debt. The then Minister for Finance, Mr. MacSharry, grabbed hold and cut costs but imagination was also shown. This was when the financial services centre was instituted and a target was set to reduce corporation tax over the following years. We reduced taxes on occasion to bring in more income. This is the message I would have liked to have seen in the budget. On many occasions in the past, particularly over the past 15 years, we saw that by reducing the percentage tax we increased income. A good example of this, which Senator Norris mentioned, was betting tax. I remember when the then Minister for Finance, Charlie McCreevy, introduced this he was howled at in this House. He reduced it from 20% to 10% and Members of this House argued he was looking after his friends in Kildare. He returned the following year and told the House he had taken in far more money at 10% than he did at 20% and that he would reduce it to 5% the following year. He did so and took in more money again. This is how a business operates. A business decides to reduce prices to bring in more income. I did not get the sense of any touch or flair of this in the budget and for this I would fail it in marks. The Minister did not raise confidence in the long term. Yes, in the short term he has done the correct things but there is a need to do something in the long term and I do not think we did so. Lip service was given to research and development and the Minister spoke about science. This is where we will have an opportunity to do something. However, the Minister only touched on it. We should heavily invest in this if we are to act in this area. In the budget, the Minister used the words “restoring competitiveness” but there was a degree of complacency. The Minister stated: Private sector wages need to adjust and are adjusting. I hear examples every day of companies and employees reducing costs and changing work practices in order to safeguard employment. It is this flexibility that will restore our competitiveness and provide the basis for future prosperity.
I do not think we are doing nearly enough. He continued, “With the introduction of the pension levy, the public sector has also lowered its costs”. We must do far more than he gave us the opportunity to do in this area. This shows a lack of confidence in this area and this complacency concerns me. A number of weeks ago I recounted a meeting two years ago with the former US Secretary with responsibility for employment. She stated her job was to ensure there were more jobs in the US. She explained it was not her job to create these jobs but to create the environment in which entrepreneurship can create these jobs. This is not understood. If we are to make this an entrepreneurial, attractive country to create jobs we must do far more than we are doing. I did not see the spark of imagination I had hoped for in the budget. Businesses need money and a very large number of them are short of it. Steps could have been taken in this regard but they were not. The Minister has admitted it was probably an error — I believe he used the word “mistake” — to have increased the VAT rate last October at the same time as the rate was reduced in Britain and Northern Ireland. The British seem to believe that by reducing the rate they will do more business, encourage more business and will take in as much if not more at the lower rate than the higher rate. We slipped it up 0.5% hoping it would not be noticed. There is a realisation now that many businesses are short of cash. It would not have been an impossible task to stretch the length of time in which these businesses must pay VAT. VAT must be paid within 30 days. It would not have been impossible to stretch this to 60 or 90 days. Every business in the country would have had a little more flexibility and cash. This would not cost the State anything in the long term — it would have cost in immediate cash flow — to do this for one year. The Minister was not thinking about how to create entrepreneurs to create jobs and how to put more cash into the system on this basis. I support the move the Minister made with regard to the banks. It is the right direction and it appears the international markets have stated they think the solution should be given approval. To mark the Minister, he is getting honours in one or two areas but he will fail in a few others. I hope he identifies the challenges which exist and that we will see changes in the Finance Bill to create the atmosphere and optimism we need and to encourage businesses to create more jobs. Senator Dan Boyle: The budget was an exercise entered into reluctantly because of the economic circumstances in which we find ourselves. Nationally, it is meant to explain where we are going as a country under the leadership of the Government. Much of the uncertainty which has existed from recent interventions has passed because of the action taken by the Government this week. Prior to discussing individual issues I want to speak about the need for this budget in the context of the wider international audience. I was struck by some statements made in the immediate aftermath, such as that made by the European Commission on the degree of action being taken, which was unremittingly positive. Stephanie Flanders, the economics editor of the BBC, stated there was method in the madness of the Minister for Finance’s actions, particularly with regard to the proposal for a national asset management agency, and that the UK could learn lessons from this. This puts a context on the nature of the debate we are having which goes beyond the narrow definitions and knee-jerk politics we have had since the budget speech on Tuesday. There are encouraging signs that there is a degree of realism on where we stand economically in terms of how we are viewed internationally. If this was the intent of the budget we can be encouraged that things are going in the right direction. The options taken have been criticised. The first criticism is on whether enough action is being taken with regard to a €3.25 billion package. It is generally accepted that to take out more would have created too much tension and brought the economy to a standstill. We then consider whether appropriate amounts of additional taxes were levied and an appropriate amount of public expenditure was curbed. I cannot understand the contributors who stated additional taxation was three quarters and the public expenditure element was one quarter. From what I can see, the ratio is 1.8 to 1.5 which is approximately 60% to 40%. Suggesting that the public expenditure element should have been greater is a legitimate point of view but my view is that to have taken more out of public expenditure than was taken on this occasion for a period of eight months of this calendar would be to deprive the economy of the only engine of spending in the economy at present. An onus is on the Government to keep a critical level of public expenditure going. The decisions were made in this context. With regard to the level of additional taxation, difficulties arose because the changes and reforms which should happen to income tax are not possible in the middle of a tax year and so the levy vehicle which was introduced last October was made more progressive. My party argued for this and is more satisfied that the system of 2% and 4% and 6% is more progressive. I admit I would like to see a higher rate again for the higher income. I would like to see it applied at €150,000 rather than at €175,000 but these are measures which can be looked at in the future. There has been a degree of public and political disagreement over individual items of public expenditure cuts and much of this centres around decisions on the social welfare budget. This is now a budget of €21 billion amounting to 40% of public expenditure. While it is directed for the most part towards people in real need in society and therefore needs to be protected, there are elements of that €21 billion which are universally given to many in society who already have sufficient income. For instance, the decisions on rent supplement and on other secondary benefits were the right ones to take and they point out a possible direction for future reform of social welfare. The obvious and most disappointing aspect is with regard to the Christmas bonus but if the choice is between the Christmas bonus — which is not given to all categories of social welfare but only to the long-term unemployed and pensioners — and the option of reducing the 3% increase from last October, then I am not going to make any apologies and however unpalatable it was, it was still the better choice. There is some chink of light that if the anti-fraud measures being instituted this year towards enhancing the cost effectiveness of the €21 billion spend in that Department achieves more than is anticipated, the decision on the Christmas bonus might be looked at again and I would be hopeful in that regard. |