Speaking in the Dáil today on the Labour Party’s Private Members’ Motion on the economy, Deputy Joan Burton called on the new Government to take their heads out of the sand and take action to curb rising unemployment and rising prices.

This House devotes far too few hours to economic matters. We are thankfully coming to the point when policy makers are, however belatedly, responding to repeated wake up calls from home and abroad about the state of the economy.

Our economy has many strong points built up by workers, business people and the public sector. This is true. We have a young, educated and hard-working workforce. We have a can-do entrepreneurial spirit in this country that has served us well in the past and which will serve us well again in the future.

We must stimulate innovative indigenous entrepreneurship. We can must re-orientate our economy towards high-tech, high-value-added activity. We must invest in the infrastructure of education and public transport we need to support this vision of the knowledge society.

This Government has been in denial about the impact of the economic downturn on tens of thousands of people across this country. But the thousands who are losing their jobs, the businesses that are finding the going rough and the homebuyers in negative equity know how difficult the current situation is.

Already this year, we have seen the largest monthly increase in the live register since 1967 while 1,600 people are losing their jobs every week.

Economic growth is at its lowest level since 1988.

The cost of living is increasing at 4.3%, and three times the rate that the Government inherited in 1997.

The ESRI consumer confidence index is at its lowest level since the index was first introduced.

Retail sales are falling for the first time since 2004.

The CSO construction employment index is down by 11% in the last twelve months.

Cuts in hospital budgets being imposed this year are, in real terms, the most severe since 1988.

Exchequer Situation

Four months into the year, and the budgetary arithmetic is already under severe strain, as tax revenues have come in 736m below target, down 6.5% on the same period last year even when inflation was running at nearly 5% for the year.

The Minister for Finance is praying that he will be rescued later in the year when corporation tax and income tax from the self-employed is due.

But, if we extrapolate the latest exchequer figures for the full year, we could see tax revenue coming in much lower than the target of nearly €49bn which Brian Cowen set on budget day.

Such is the deterioration in the Government’s financial position that the Maastricht criteria now loom on the horizon as a further discipline in 2009.

Who would have imagined this as Brian Cowen promised the world in the run-up to the general election.

We need to see revised economic projections. I call on the new Minister for Finance to publish revised projections, both for the tax take and for expenditure, as soon as possible.

Ostrich Syndrome

We have already witnessed from Fianna Fáil and the Government the 5 typical phases involved when a shock or a bereavement occurs,

• denial,
• bluster,
• bargaining,
• depression,
• and finally, reluctant acceptance .

If a week is a long time in politics, then for this Government the denial phase lasted for an eternity.

Ministers, led by Brian Cowen, buried their heads in the sand and pretended the problems would go away. They had a bad collective case of Ostrich Syndrome.

Many Deputies, I’m sure, have read Charles Dickens’ novel David Copperfield. In it is a loquacious character named Mr. Micawber, a man who owed much, and earned less.

He was always certain that “something will turn up.”

For the past year Brain Cowen has been more Micawberish than Dickens ever imagined.

After denial comes bluster. Fianna Fáil Ministers are like the New Orleans officials who denied there was anything wrong after Hurricane Katriona until the water was up to their necks. These Ministers confidently predicted a soft landing and derided realists for ‘talking down the economy’. Bertie Ahern famously suggested that all the doomsayers should just go and top themselves.

Now we hear them telling us that the worst is over. Present events, they say, are no more than a necessary correction to an overheated market. They tell us there has never been a better time to buy, and so on and so on, ever more desperate tones. They tell us that all will be well in 2009 if only people would stop worrying. They seem to be waiting in hope for the Celtic Tiger’s ‘third coming’.

This Government was happy enough to ride the crest of an economic wave for a decade, taking all the credit when things were going well but are only able to point fingers when things go pear-shaped. They create excuses in their heads as to why something is happening. There is always someone else to blame, never themselves.

This is what is happening at the moment.

But it doesn’t wash.

Psychiatrists could write a whole book on the way Government Ministers have reacted to the events of the past year. Now the truth can no longer be avoided.

There Will Be Blood

From the coal face, the redoutable Owen O’Callaghan warns “There will be blood”. This is a hard lesson in economics for the many Finna Fáil slow learners even if his choice of words is hardly very original.

We all know how that film ended. Greed drove away everything that was dear to the Daniel Day-Lewis character. Profit margins in the construction industry are down from 33% to 20%. There will be blood indeed. Let’s hope it’s the speculators that lose out, not the decent building firms and construction workers working in the industry for the long term.

To his credit, Minister Gormley proposed the introduction recently of windfall charges on speculative land purchases. This would strike the average person as a commonsense proposal. Brian Cowen wasn’t having that though and he slapped down the proposal. He also refused to close the section 110 loophole used by property developers to avoid tax. It’s clear his priorities haven’t changed. Pandering to vested interested in the Galway tent are still the modus operandi while everyone else is expected to bear the brunt of the economic downturn.

Economic Growth

It is instructive to note that the latest Reuters poll of Irish economists puts average economic growth at 2% for 2008. If you put 3 economists in a room, you’ll usually end up with at least 5 opinions – so this average gives a not-so-happy medium between the optimists and the pessimists. Back in October, this average stood at 3.5%, then in December it was 3.3% before falling to 2.7% in January, 2.5% in February, and 2.3% in March. Although it must be judged highly unlikely that 2008 will see the first year of negative growth since 1983, it’s not beyond the realms of possibility. The fact that this is even considered a possibility shows just how much the economic climate has changed.

All of this happened on Brian Cowen’s watch as Minister for Finance.

Property Market

We have a housing slump. Owen O’Callaghan has let the cat out of the bag, advising people to hold off buying for a while yet – so it apppears we are not out of the woods. We now have a situation where thousands of people who bought houses on 100% mortgages over the past year are now in negative equity.

The first trembles in the housing market were seen when the Government fuelled specualtion about stamp duty reform. We then saw not one bout of reform but two, a stark admission that the ill-thought-out reform had been botched the first time around. In any asset market, the worst possible course of action is to introduce uncertainty. This is one part of the problem.

Another part of the problem is that property development was treated by Government as a speculative get-rich-quick scheme. They pump-primed the housing market, egging on people to pay more and more for homes; they fuelled the hysteria about the race to get on the property ladder.

It was a get-rich-quick scheme alright – for all the property developers who gather for their annual love-in at the Galway races tent. The people set to lose out are the thousands of mainly young people and families are now faced with negative equity and years of worry and uncertainty.

Broader economic impact of Housing Slump

Soaring house prices boosted consumer confidence, comsumer spending and the broader economy on the way up. We are now reaping a bitter harvest for the Government’s short-sighted concentration on a purely bricks and mortar economy rather than more balanced economic development. Falling house prices have seriously undermined consumer confidence – now at its lowest in a decade and still falling. This has hit consumer spending, particularly on big-ticket items like cars and household goods. We see recently the effect this is having with the closure of Habitat stores, for instance.

So the fall-off in house building is not only leading to job losses in the construction sector, but to job losses across the wider economy. We have job losses on a scale that most young people have never witnessed and are an unhappy distant memory for eveyone else. We are seeing job losses all around the country and in all sectors, even in the previously robust financial services sector.

These cold realities are beginning to strike home and it is not a pleasant sight. People are beginning to feel the pinch and to tighten their belts accordingly.

Yet, faced with this scale of crisis the Government has flinched from its obligations and has refused to take corrective action for entirely political reasons to do with the recent upheavels in Fianna Fail.

Cost of Living

I worry about higher food prices. The price of flour is up 40% in the past year. Milk is up 30%. That affects every family and it affects less well-off familiesmore than others. Those on low, fixed incomes and on social welfare are finding it more and more difficult. The Government should show leadership by considering whether their own salaries deserve to jump by up to €38,000, more than many earn in a year.

People are worried about the price of fuel. It’s costing more and more to fill the tank with petrol, the tractor with diesel and the central heating with oil. Not only are people spending longer and longer stuck in traffic burning fuel, but this is costing them a packet. Fuel poverty is becoming more of a concern. Increases in fuel allowances have not kept pace with fuel inflation.

If action is not taken this year then the effects of fuel poverty are going to hit home harder this Winter. We are going to see an increasing number of people, particularly single pensioners, who just can’t afford to keep the fire burning through the cold months of the year. This can’t be allowed to happen.

When the economy last looked a bit rocky back in 2002, Fianna Fáil chose the easy targets for their savage cuts. This can’t be allowed to happen again.
When your currency is strong, you expect to see a dip inflation, yet Irish inflation remains stubbornly above the eurozone average.

At a time when our exporters are taking a hit from the weaker dollar and weaker sterling, our consumers are still faced with higher prices. It has become clear that many retailers are not passing on the benefits of cheaper imports to their consumers. In many British high-street chains you can see the full extent of this rip-off. Prices are often marked in both sterling and euro side by side. This makes transparent just how out of kilter the exchange rates being used are.

The National Consumer Agency and the Competition Authority have key roles to play here. The Government must direct these agencies to be more aggressive in protecting consumers from predatory pricing. They must insist that all goods are priced in euros, to actively monitor pricing policies and exchange rates to ensure fair play for consumers and to protect against rip-offs.

Education, Training & Re-skilling

When Labour last left Government, we were creating 1,000 jobs a week. According to the live register, 1,600 more people are now losing their jobs every week. This year we have already seen the largest month-on-month jump in the live register since 1967. This is the legacy that Brian Cowen has left to the new Minister for Finance. The question now is what are you going to do about it?

Priority number one for the new Government seems to be public sector refrom. I think all members of the house would agree that we need a more effective, efficient and citizen centred public service. Priorty number one for any Government, however, must surely be to get the country working.

Our economy and our public finances became too dependent on housebuilding as a direct result of Government policies. It was never sustainable to be building nearly as many houses as the UK every year in a country only a tenth of the size. The question facing the country is what do we do now? The Labour Party has some answers. You may not agree with them, but if not then we expect the Government to finally come up with their own proposals.

As an absolute priority we need to implement a programme of education, training and re-skilling for all those coming out of the constructuion and manufacturing sector. Many young men, in particular, are at risk of falling into the unemployment trap if clear pathways are not outlined for them to acquire transferable skills. There must be a significant focus on retraining and educational opportunities for such workers. The cap on the number of participants in the Vocational Training Opportunities Scheme should be considered immediately. In particular, this could be targetted at those coming out of certain sectors, rather than waiting for people to fall into the trap of long term unemployment.

In fact, we should be ambitious for many such young men to go to university to acquire the skills that they will need to compete for the high-level jobs in IT, finance and pharmaceuticals that do become available.

One area that will become increasingly in vogue over the coming months and years are so-called ‘green-collar’ jobs. Imrpoving the environmental standards of existing buildings: retro-fitting and installing insulation and other energy efficient measures . These are labour intensive activities and it’s not clear that we have the appropriate skills yet in Ireland to do this on a large scale. The Government should give consideration to targetted demand and supply side measures to stimulate this sector. On the supply side, there is a need for appropriate training courses so that people in construction and the trades can make the transition to these ‘green-collar’ activites. On the demand side, consideration should be given to giving tax relief for making homes more eco-friendly. Measures in the most recent Finance Bill largely targetted the commercial sector. Consideration should be given to orienting these reliefs towards homeowners so that houses can be brought up to speed.

School-building programme

For years, there has been serious underinvestment in the Irish education sector, particularly on the capital side. It is testament to the quality of the teachers in this country that our education outcomes are so good.

From Donegal to Wexford and from Dublin West to South Kerry there are schools in serious states of dilapidation. We hear about children having to take classes in converted toilets and the like. This in a country which purports to have a ‘knowledge economy’.

We now have an opportunity to end this disgrace and use the spare capacity in the construction sectorto build schools to a standard we can be proud of. With the current lul in the construction sector, the Government should be able to get value for money through the tendering process in building and refurbishing scholls.

This is an area where the Labour Party calls for the front-loading of NDP expenditure for immediate investment in building and refurbishing our schools. Not only would this provide work for many people coming out of the housebuilding sector with the right skills, it would also shore up our education system by ensuring adequate capital investment.

Another measure which could have an immediate impact here is to restore the summer works scheme for this summer. These are not the long-term answers, but they would help smooth the transition to a more broadly balanced economy. Investment in education is imperative. It will be the foundation of our knowledge economy and of the opportunities for future generations.

Over the medium-to-long term, we have to look beyond an economy over-reliant on low value-added construction; we need to move beyone the bricks and mortar economy; we have to restore competitiveness while striving for social and environmental sustainability; we have to ramp-up support for indigenous industry; we have ensure we have a fiscal and infrastructural framework in place with which to support a high-tech, high value-added economy; in short, we have to lay the foundations for a 21st century knowledge society.

At the weekend, all of the profiles of the new Minister for Finance celebrated the fact that he’s a Cambridge man.

I’m sure the Minister, in his Cambridge days, enjoyed a pleasant punt on the river Cam.
Indeed what could be finer than punting on the river Cam on a lovely sunny day?
It’s an image often associated with Cambridge – lazy summer days, champagne picnics, men in straw boaters.

I spent a pleasant day there once as a tourist looking at the punters.

I saw some spend all their time going round in circles.

I saw some even go backwards.

Punting can be fun and I’m sure it’s not as easy as it looks.
But believe me it is no preparation for navigating the stormy seas surrounding Ireland’s economy at this moment in time.

The sea around us is choppy and stormy but the people in charge of the economy on the Government benches carry on as if they were at a summer picnic.

This is not good enough.

The country deserves better.