Deputy Stephen S. Donnelly:

I accept that the Government had to make difficult decisions.

I have never sat through this process or watched it on television, but if I were a lone parent or someone in receipt of a jobseeker’s payment watching today’s circus, in which a bunch of people making up the national Parliament who are paid a minimum of €93,000 per annum and protected by gilt edged pensions are behaving in the way we are, I would be very angry and scared about the future of the country.  I say this as someone who has never been through this process before.  Over time I may change my behaviour, but I hope not.

It is difficult to react quickly to the detailed 200 pages of the expenditure report; therefore, I will address the overall approach adopted.  Last year, in response to Fianna Fáil’s last budget, the Minister for Finance (who, like the Minister for Public Expenditure and Reform, has left the Chamber) said: “The Government never learned that one cannot cut and tax one’s way out of a recession.”  That was right then and it is right now.  There is Harvard research to show that in the last 200 years only one country has ever cut its way out of such a debt overhang.  Can this become the second?

What is happening to the economy?  The domestic economy is collapsing.  The United Kingdom is one of our biggest trading partners and the OECD has just stated it looks as if it will move back into recession.  Across Europe there are extremely difficult trading circumstances.  We are dealing with an over-inflated currency which makes it difficult for our exporters to sell into the United Kingdom or the United States.  Last week and the week before our growth forecast was slashed hugely.  What happens?  Our target of the deficit to GDP has widened.  We are in an IMF programme and signed up to a deal; therefore, we cut further.  What will happen then?  The domestic economy will shrink further and we will bet the house on the fact that somehow the United Kingdom, the United States and the central European economies will grow.  That is how we will get out of this.

We are talking about a cut of €2.2 billion, made up by €755 million in capital expenditure and €1.45 billion in operating expenditure.  Every Member of the House knows this will devastate families and would prefer it did not happen.

I accept that we must correct the budget and that it will be painful.  However, in a few weeks’ time, in January, we will pay €1.25 billion to unguaranteed senior bondholders in Anglo Irish Bank.  That amount would cover the entire cut in next year’s operational expenditure.  We will pay [a total of] €3.1 billion by way of ill-conceived expensive promissory notes, much of it to a dead criminal ex-bank.

What else can we do?  The Government states we should not increase income tax.  Normal economic theory states one does not increase income tax because one should not tax labour and we are trying to keep everyone at work.  Therefore, we should tax consumption.  That is smart economic theory.  However, that theory does not apply in a situation such as the one in which we find ourselves.  If we were to increase income tax on incomes above €100,000, as an emergency tax for a limited time, it is unlikely that people earning more than €100,000 would decide to move to Australia or the United Kingdom and stop working.

Conversely, taxing consumption presents a huge problem.  It is a regressive tax and hits the worst off hardest.  While I accept the Government’s logic in normal times, I ask the Minister to reconsider this measure before the Finance Bill is introduced.  That logic does not work in current circumstances.

Similarly, we could look at higher end public sector pay and pensions.  The Government recently made a move on the highest public pensions.  For years under Fianna Fáil generous public sector pensions were increased far above the rate of inflation.

In a time of national emergency, when we are cutting support to jobseekers, fuel benefit for poor families and the help we give to one-parent families, it is reasonable to consider such issues.

I welcome the new process outlined by the Minister, Deputy Howlin, and it is great to get new information and a staggered budgetary approach.  However, there is a need to go much further.  For example, we are looking at a taxation to expenditure ratio of €1.6 billion to €2.2 billion.  We do not know why and we have not seen any analysis as to why that is the correct cut.  We are looking at capital expenditure next year of €3.9 billion but we do not know why; for example, we do not know if we should take €1.4 billion from that and resist all cuts on the operational side.  I encourage the Government to produce much more in that respect.  I would like to see a poverty impact analysis, regulatory impact analysis and gender impact analysis of the proposed cuts, particularly with regard to one parent families.

The current approach is taking us in one direction, a continued loss of sovereignty, and in this case it is potentially a permanent loss of sovereignty, ceded to central European powers.  Last week in the Chamber and in his address last night, the Taoiseach stated he wanted stronger governance in Europe so that we could avoid repeating the mistakes of the past.  I put it to the Taoiseach that this logic suggests that we will continue to make the mistakes of the past and we will, therefore, hand over oversight of our finances to a central power so we cannot do so.

The Taoiseach:

Wrong.

 

Deputy Gerry Adams:

Right.

 

Deputy Stephen S. Donnelly:

That is the logic.

 

The Taoiseach:

It is the Deputy’s logic.

 

Deputy Stephen S. Donnelly:

It is how the Taoiseach is looking to avoid the mistakes of the past.  I do not agree with the Government’s overall approach and there are issues which I, members of the Government parties and others will have with the budget.  However, this budget shows we can govern ourselves and are perfectly capable of making very hard decisions.

I will finish with a second quote from the Minister for Finance, Deputy Noonan, when he responded to the Fianna Fáil budget last year.  He said:

“This is the budget of a puppet Government, which is doing what it has been told to do by the IMF, the EU Commission and the European Central Bank.”

This new Government can escape that fate but right now, this budget is doing exactly what the Minister, Deputy Noonan, suggested that Fianna Fáil was doing the last time.  I encourage the Government to return with radical new proposals.