For many reasons it is highly appropriate that Deputies have paid tribute to the late Brian Lenihan during their contributions to this Budget debate.
No Minister for Finance has ever faced the combination of dramatic challenges which confronted him during his two and a half years in that office.
The scale of the problems and the speed with which they kept changing placed an enormous burden on him. Nonetheless he confronted them with urgency and vigour. He always acted in good faith and was motivated by the republicanism which has always been a proud hallmark of his family.
In preparing last year’s budget he, along with all of his colleagues, was determined to set out a clear framework for restoring Ireland’s fiscal and economic health.
Ministers Noonan and Howlin, together with the Taoiseach and Tánaiste have spoken repeatedly of how the Budget announced last year has succeeded in showing the world that Ireland is on the right track in consolidating its budget. They have also pointed out how economic growth returned while that Budget was in operation.
They of course have not managed to acknowledge that they voted and campaigned against the Budget which they now spend so much time claiming credit for. Although in a position to do anything they wanted, they chose to leave it unaltered in any significant way.
It is impossible to listen to the government contributions to this debate and fail to remember what the same people were saying when they were looking for votes.
Last year the Taoiseach stood in this spot and condemned the Budget as “stale unfair and out of touch”, “devoid of hope, ideas and imagination” and he of course called for the immediate burning of bondholders.
On Sunday he praised that Budget for having ‘restored confidence’.
Before he assumed his current responsibilities Minister Howlin said of the Budget, “I have listened to many budget speeches in this House over the years but none was more disingenuous and more dishonest”. He attacked education charges and said the claims made for the Budget reminded him of the theory of ‘the big lie’ as contained in Mein Kampf.
On Monday that Budget was, for him, merely a ‘first step’.
The truth is that over the last nine months this government has taken few significant decisions and has coasted on the back of plans already in place or ready to go. Its most-hyped initiative, the down-graded jobs budget, has damaged investment and cost jobs.
In spite of having a secure majority which will survive even in the unlikely event that more Labour backbenchers remember the policies they stood on, the government has been timid and obsessed with political manoeuvring. Never before has a government spent so much time praising itself while actually doing so little.
At the end of a long month of leaks and press conferences we have in the last two days finally seen exactly how Fine Gael/Labour intends to govern.
We have finally seen them move from vague generalities to taking real decisions.
We no longer have to take them at their word – we can see the cold, hard facts of what their priorities are.
This is their Budget. They spent six months preparing it and have rolled out the largest number of media briefings, both official and anonymous, ever used to promote a Budget.
Minister Howlin has said that he personally examined every area of spending and that the decisions taken are based on political priorities. Minister Noonan has confirmed that the government was entirely free to make its own decisions within a set deficit target. Both the Taoiseach and Tánaiste have confirmed that they support this target and would want to hit it irrespective of where the state is borrowing its money.
You had choices to make and you are accountable for them.
Through the mountain of detail and the hours of announcements what has emerged is a deeply unfair and damaging Budget.
This Budget is the most regressive in years, it will cost jobs, it breaks an unprecedented number of promises made only months ago and it may lead to a serious shortfall in government revenues as soon as, early next year.
It will not promote recovery, it will endanger the achievement of fiscal targets and it will shift an unfair burden onto groups which are least able to manage.
It shows a government which is wasting an enormous amount of public goodwill as it shows a self-righteousness which is on display every day in this chamber.
Overall Economic Prospects
The single most important thing which will create jobs and ease fiscal pressures is overall economic growth.
We support the fiscal target set in this Budget. It is a reasonable compromise between the need to get to a sustainable deficit level and to protect the growth potential in the economy.
We set out a detailed series of proposals for this Budget. They were constructive, costed and credible. Some of them have been adopted by the government and we welcome that. We accepted fully that unpopular choices were required and we rejected the tactics followed by the government when in opposition of pretending that there were easy solutions to even the hardest of problems.
Within the overall target for next year there are many different approaches which can be taken. Measures can be targeted so that they do as little damage as possible to growth and jobs.
Last week I directly asked the government about its forecast for growth for 2012. Minister Noonan and others confirmed that they were sticking to 1.6% as per the forecast. Yesterday he lowered the forecast to 1.3%. This is probably justified by the latest forecasts for Europe and the global economy. Why this took until yesterday to announce is unclear – perhaps ministers were concerned that it would raise too many questions during their cavalcade of press conferences during recent weeks?
What is of much more serious concern is that the measures announced over recent days are likely to cause further downward pressures on growth.
When it comes to spending cuts and revenue raising, not all measures have the same impact on the broader economy. A consistent theme of the spending plans and the tax measures is that they include nothing significant to promote growth, and many measures which may cause serious damage.
The accelerated cut in capital spending, the undermining of investment by pension funds and the VAT increase are highly likely to depress economic activity beyond the figures produced yesterday.
Everyone knows that VAT returns are posing the biggest concern for the Exchequer. They are well behind projections and underlying consumer confidence is week. The overall deficit target cannot be met if VAT continues to underperform and if this increase drives consumers away from our already hard-pressed shops.
We now have the bizarre position where the Government is making directly contradictory claims about VAT changes in different parts of its budget. When it was cutting VAT for selected industries in June it claimed that thousands of jobs would result. It said that cutting VAT was the best way to create jobs. Now, when it is front loading VAT increases of 2% on a much wider range of goods and services it claims that there will be no impact on the economy. In fact Minister Noonan has actually claimed that he is putting up VAT because of how much he cares about jobs.
The failure to include any economic impact of the VAT increase in the Budget figures directly undermines their credibility. The government are predicting that this increase will yield €670million but does not take into consideration the impact of the increase on sales, which will be particularly evident in the border counties.
This situation has arisen solely because Fine Gael wants to be able to claim to have left income tax untouched. Instead of targeting revenue measures at the highest earners as we proposed, it was decided to rely on the most regressive tax and the one which is increasingly under-delivering. This has introduced an uncertainty into the programme of fiscal consolidation which the government may come to rue.
No Pro-Growth Provisions
There is also a complete lack of any stimulus or investment in the growth potential of the economy. Fine Gael’s €7 billion New ERA is missing, as are the billions in stimulus which Labour said would be pouring into the economy from their Strategic Investment Bank.
There will be projects bearing those brand names, but they will be minor side projects with no serious national impact.
If you actually want to promote growth then adopt our policy and replace the pensions levy with an investment fund which would combine a compulsory investment by the pensions industry with state resources. The billions involved would stop the damage being caused by the levy and provide major resources for job-creating investments. It would also yield a return for the industry rather than penalising pensioners from Tara Mines and other companies.
Effectively, the government’s policy on growth is to hope it turns up in the international economy and helps our exporters – at which point they will no doubt be ready to claim credit for it.
In other areas the Budget will have an active and immediate impact, mostly for the worse.
A Budget which will cost Jobs
All ministers have claimed that creating jobs is a core objective of this Budget. This is unfortunately, nonsense. The net effect of this Budget will unequivocally be to cost more jobs.
This is more of what we heard from the government at the time of its downgraded Jobs Budget. The net €1/4 billion they took out of the economy this year has cost jobs. In spite of the clear evidence to the contrary, the Taoiseach actually claimed on Sunday that it has created tens of thousands jobs. In actual fact, unemployment has grown consistently in the last nine months.
The obsession with trying to spin its record to date has led to the ludicrous claim that the ‘jobs initiative’ had a big impact in tourism. First of all, the increase in tourist traffic began well in advance of the ‘jobs initiative’. Secondly, a major factor is the absence of an ash cloud this year. Minister Varadkar has many talents, but the ability to control Icelandic volcanoes is not one of them.
The measures announced in the last two days to aid the export and construction sector are welcome but once again are being over-spun. They are so small that the Budget documentation shows them having no projected impact on growth or employment. They are also accompanied by an accelerated cut in the government’s capital spending. The €750 million being cut out of this area is substantially bigger than any stimulus announced yesterday.
The net effect of these changes will be a further fall in construction employment, and no amount of spinning can cover this up.
Minister after minister has appeared over the last few days to say that job creation is their number one priority. This doesn’t stand up to even the most basic scrutiny.
An Unfair Budget
Members of government have also been active saying that fairness is at the heart of this Budget. This bluster fell apart within minutes.
This is by far the most regressive Budget in some time. The spending cuts and tax increases will directly fall disproportionately on the weaker and poorer sections of society. After a period during which every independent study demonstrated that Budgets were highly progressive, this government has chosen to take exactly the opposite approach.
The government’s single largest decision in this Budget was to concentrate its new taxes in a way that will have the biggest impact on poorer groups in society.
In what can only be described as a deeply cynical move, the documentation published yesterday did not provide a detailed impact on different social groups of the announcements of both Minister Howlin and Minister Noonan. They could easily show the impact of all changes on the standard of living of households but they chose not to.
The welcome but minor USC change was clearly intended as a distraction to hide the much deeper impact of the VAT increase on poorer households.
For many years Minister Burton and the Tánaiste spent Budget night coming up with new ways of describing changes in social welfare as savage. They spoke at length about “the dirty dozen”, “the savage seven” and even “the treacherous thirty”.
When attacking a €7 increase in welfare payments for 2009, the Tánaiste described it as “the meanest possible increase” and said that if the budget were the Titanic it would be a case of “women and children last”. He also demanded higher fuel allowances.
In this Budget, Labour Ministers for Social Protection and Public Expenditure – Labour ministers – negotiated together and came up with a set of cuts which are deeply mean-spirited and cruel. In fact they go well beyond anything ever proposed by the party which Minister Gannon used to lead.
The proposed cut to payments for young people with disabilities is callous and unnecessary. To single this group out for such a cut says a lot about the priorities of those who made this decision.
This targeting of the disabled is not just another broken promise. When asked during the election debate what the number one social issue he would pursue in government the leader of the Labour party said:
“I think it would be looking after people with disabilities…..The first area that Labour in Government would address in terms of equality and in terms of giving decent supports to people would be people with disabilities. I think as a Country, I think we have to make that the priority.”
The leader of Fine Gael followed quickly with “That’s very laudable and I share that”.
In their first opportunity to turn those words into action they chose to cut a massive €88 a week from young disabled people. They also began to shut the door of educational opportunity by cutting the third-level disability fund by 20%. This will not be forgotten. I am on the record already on the record saying that this decision should be reversed as it is callous and cold.
The other welfare cuts have been presented as ‘incentivising work’ and cutting ‘undeserved’ payments rather than as unavoidable cuts. Minister Burton has spent a lot of time using extreme examples to justify her choice of cuts. If this agenda had been followed by any other party the Fine Gael and Labour ministers involved would have been screaming.
The end of lone parent payments for many families will cause serious problems if extra funding is not provided for training and childcare for those affected.
The restrictions for people with limited social insurance payments will be felt most by women.
Last year Minister Noonan enjoyed his joke about third children so much he repeated it four times during his speech. This year he and his colleagues have implemented a bigger cut and done everything possible to avoid talking about it.
The welfare measures in this budget are driven by the Labour Party’s desire to say that the biggest welfare payments are unchanged. As a result they have adopted an approach of finding cuts which are deeply unfair and carefully targeted smaller benefits relied upon by vulnerable groups.
Every party in this House was elected on a platform of giving education a clear priority in public spending. Previous plans showed specific measures to protect school staffing and supports for pupils with special needs. In April we put down a private members motion to this effect which passed unanimously.
Unfortunately the details announced on Monday show a significant increase in the pupil teacher ratio for both primary and second level. As with everything else, these were cynically hidden in the middle of words claiming that everything would be fine.
The cuts to smaller schools will directly impact on communities which are most dependent on them.
The abolition of support for career guidance is a shocking decision. Its impact will be felt everywhere, but most of all in schools serving disadvantaged communities. To claim that these cuts can be absorbed in the general teaching schedule shows a deep ignorance of how this vital service is provided.
Every school needs career counselling. Every pupil should have the chance to speak confidentially with a trained person about their future. It cannot be done in a group setting or in an ad-hoc way. It is at this age that young people face the most pressure and when they are most in need of someone to talk to.
In schools where nearly every child goes to higher education there is less pressure on the service, but schools which serve disadvantaged communities desperately need career counselling. Their pupils depend on expert advice to help them make the critical move from school to higher education, training or work. These are the schools that cannot simply absorb the cut in their staffing or fund it some other way.
It is a deeply regressive and short sighted decision which should be reversed.
One issue which has served to expose the cynicism of the government parties’ election campaigns more than any other is student charges. The solemn pledge not to increase them which the Tánaiste and Minister Quinn signed was a part of a direct campaign to win student votes. They were fully aware of the state’s financial position when they made their pledge. With this increase and the move to reduce student voting by moving polling to Thursdays students are now fully aware of what the Labour Party really thinks of them.
A number of weeks ago the Minister briefed a newspaper about a plan to abolish grants for postgraduates. It was probably another exercise in manipulating expectations through the media so that people would be relieved that he is only abolishing the maintenance element of the grant. This decision was on no one’s agenda before and it will limit access to postgraduate study to students from poorer families – or it will force them into extra part-time work which will undermine their studies. This runs against all strategies for increasing access and meeting skills needs.
This change also fits into a consistent pattern across departments where rural areas will feel a disproportionate share of the burden.
Rural schools are being targeted to lose hundreds of teachers. The extra charge for rural school transport, condemned last year by Fine Gael and Labour as an outrage, is not only being retained it is being doubled. Rural students, who are those more likely to qualify for maintenance grants, will have less access to post-graduate study. Rural Garda stations will close in higher numbers than elsewhere.
The means-testing and income criteria changes to Farm Assist will hit poorer farmers. Changes to REPS and the Disadvantaged Areas Scheme will hit the most vulnerable farmers.
We welcome various changes announced yesterday which will help in the transfer of farms and we also welcome the government’s stated commitment to continue implementing our strategy for creating jobs in the agrifood sector. However the accumulated impact of the changes announced this week marks very bad news for rural areas.
In areas like South West Cork, where the government controls 100% of the Dáil representation, their deputies will have a difficult time explaining how they will disproportionately feel the impact of cuts to schools, Garda stations and health facilities.
Mortgages and Rent
In the early stages of the election campaign Fine Gael spent a lot of effort telling people with mortgage and rent pressures that a vote for them would bring thousands in reliefs. Many people fell for those promises and the measures announced yesterday come nowhere near meeting the urgent needs of a section of society which is facing enormous pressure.
The Minister said that he will soon get around to dealing with the report of mortgage arrears. There is no need to wait. We have a Bill on the order paper which could be quickly adopted and would begin helping these families.
The Minister’s anouncement that there are insuperable legal barriers to ending upwards-only rent reviews is a deep blow for many businesses who listened to Fine Gael’s and Labour’s promises of immediate abolition.
This commitment was not just in Labour and Fine Gael manifestos –it was also in the programme for government!
The law hasn’t changed since that promise was made, so you either didn’t check if you could implement it or you made the promise regardless of advice. Retail Excellence Ireland has criticised what was described by them as the “scandalous government U turn”. They have said that “the government has lied to every commercial tenant and retail employee in the country”. This is a disgraceful way to treat an industry that has lost over 50,000 jobs in the last four years.
As the Taoiseach has said many times in the Dáil, Fine Gael and Labour do not feel bound by their election manifestoes. No matter what commitments were made – be it on the back of a lorry in Roscommon or in front of Trinity College – they are not to be held to them.
Never before did parties have such detailed access to public finances before an election. In April the Taoiseach tried to claim that things were much worse than expected but he was undercut by Minister Noonan when he said that the books were “better than on target.”
This week and for the last nine months there has been a steady escalation in the amount of praise which the government has lavished on itself. In the process it’s getting to the stage where words such as ‘reform’, ‘radical’, ‘fairness’ and ‘job creation’ are being reduced to a level of Orwellian newspeak.
In area after area, supposed ‘proof’ of the government’s effectiveness is based on manipulating baselines and brazen exaggeration. For example, 80% of the cuts in ministerial pay and 90% of the reduction in public service numbers being cited by the government were in place before they took up office.
We’ve heard a series of speeches this week with claims that the government had ‘negotiated’ a €10 billion reduction in interest payments while the facts show that it was a pan-Europe deal which was over four-times the size of what Ministers were actually negotiating for.
Tomorrow the Taoiseach will attend a European Summit which will take decisions vital to the economic future of Ireland, Europe and perhaps even much of the world. Since the Dáil returned in early September I have been asking the Taoiseach to outline what his position is, on changes to the economic governance of Europe. Since much earlier I have been pushing him on the issue of the flawed policies and damaging behaviour of the ECB.
On the eve of this vital summit he is still refusing to outline a single proposal he has suggested. He will not circulate the proposals of other countries and he will not say what his negotiating position is other than in the most banal generalities.
The record shows that none of the Taoisigh who have discussed major European reforms, have ever taken such a dismissive approach to the Dáil and the Irish public. No matter how often you are asked questions in here, you will not even provide the information being briefed to journalists by your staff.
What is now deeply worrying is that the Taoiseach has signed up to the idea that the core problem for Europe is the need for stronger fiscal controls. This is the very agenda which has turned a challenging situation into a crisis which threatens the future of the Euro.
This crisis was not caused by national governments breaking fiscal rules – it has been caused by market concern that the ECB might be willing to see a country fail to refinance its debts.
The Taoiseach is so blinded by his partisan agenda in domestic politics that he cannot see the reality that is now accepted by most experts – the Irish and Portuguese bailouts were required by a policy which has failed and which Europe is trying to find a way of abandoning.
Under the targets agreed before the bailout and supported now by both government parties, Ireland’s debt is due to peak at a level below many countries that have no problem raising funds in the markets. The same applies for Portugal and other countries which are facing problems.
Investors have fled the bond market because they believe that the ECB will not help countries to raise new finance. If this doesn’t change at this week’s summit, whatever emerges will be another short-term fix which will fall apart and cause immense damage.
Tighter fiscal rules are reasonable, but only if accompanied by a change in ECB policies, an EU fund large enough to help stimulate economies in need and tight, unified financial regulation. A control-only fiscal union would just entrench flaws which even Jacques Delors says were caused by politicians looking for the quick fix rather than the right solution.
Every piece of major progress seen in Europe has come from solidarity and respect between nations. There has been precious little of either in recent months.
This is a time of unprecedented challenges both here and throughout Europe. It is not a time for the short-term political manoeuvring. There are choices to be made and if we want to restore growth and jobs we need them to be the right choices.
Unfortunately, both in this budget and in the agenda for the EU summit, the right words are being used to cover the wrong policies.
The Budget which has been announced at great length and much fanfare is deeply unfair and will cost jobs. This was avoidable, but the government chose to put winning a few headlines about income tax and welfare payments ahead of a fairer and job-supporting approach.
The measures being implemented pose a direct threat to existing growth forecasts and to tax revenues – raising major concerns about whether the targets it sets out can be met. It is truly a missed opportunity in these difficult times for our nation.