Edited transcript of Taoiseach Brian Cowen's press conference in Government Buildings
Initial Statement
Last year, we expected to raise €49 billion. We raised €41 billion because of the recession. We spent €54 billion last year. The gap is 13 thousand million. This year, we will be spending €55 billion and we expect to take in, at best, revenues of €37 billion. That is a gap of 18 thousand millions.
In an ordinary person's language we are borrowing one-third of day-to-day expenditure in the course of this year. People will know from their household budgets, business finances, that that is not a sustainable position. And it is no different for the country. For
every man, woman and child in this country we will be borrowing €4,500. We are going to continue to invest in our schools, we are going to continue to invest in our hospitals, in our road networks, in our public transport. We want to invest for the future as well. Those are the building blocks for the future, when the upturn comes, when this recession passes as it will however long and deep it may seem at the moment. But day-to-day spending has to be cut. We cannot in a sustainable way continue to manage our affairs in view of the gap that has arisen. Today, we are starting the fightback to bring order and stability to our public finances by announcing €2 billion in savings in a full year.
And when we come to 2010 we are putting in place a systematic review where our Commission on Taxation will look at what sort of a tax base do we need in the new circumstances we find ourselves. Profound changes are happening in the international economy. What do we need to do in 2010, 11 and 12 on the tax side to build up the tax base again.
And we will also have to continue as part of our adjustment to reduce our expenditure. I have appointed a committee on public service and expenditure where every item of public expenditure in every department is being reviewed with a view to cutting as necessary.
The important point today is that we don't want the €2 billion savings that we are taking out of the system today to impact on services and on people who depend on those services: our elderly, our pensioners, the people who need our health care service to work for them.
We don't want to disrupt services to that extent and reduce the level of services that they will look forward to this year. Therefore, we have to ask those who are employed by the State, people who have a pension entitlement at the end of their working lives to see if they can make a contribution towards the cost of providing that pension. We have come with the idea of this pension levy because if we came with a straight pay cut we would also be affecting the amount that pensioners today who have completed their working they would have reduced pension.
By doing it this way we are asking those in the working population of the public sector to make this commitment and to affect pensioners today. I recognise that this is an imposition, that it is an unpalatable decision, that it is one that people will not immediately like, but I also believe that there is a recognition in this country today by everybody, including people who work in the public sector looking at those in the private sector losing their jobs, or those who have seen their pension funds totally depleted as a result of the financial crisis and its impact.
People understand that we all have to make an adjustment, that we all have to make a contribution commensurate with our ability to pay. That will be an ongoing commitment and obligation to try to be fair and equitable in all the circumstances as we see it.
I am particularly and acutely aware that in every community there are families who are really concerned about maintaining jobs in their families, or businesses being able to contend with the real difficulties that they now face but we will do all we can and look at everything afresh to see what steps we have to take to support those people who may find themselves unemployed and who find themselves in harder times than they have experienced up to now. That is our obligation and our commitment.
That is why we are working social partners, by the way. Everybody who has a stake in society has a contribution to make, through their own direct experience of the workplace, about how we can pull together and come up with innovative ideas and changes that will help people to make more training places for people, through upskilling, in green-tech industries, in more labour-intensive capital investment, to see how we can help to improve their prospects.
That is what government is about today: starting on this process, taking some steps back so that we can go forward again. We know that if we don't make these decisions, if we defer, if we don't have the necessary commitment to making those decisions, we go back to the cycle that we saw in the past in the 80s with a previous generation with higher unemployment, higher taxes, an uncompetitive economy, job losses and even forced emigration. We don't want to go back there. I believe that we have a stronger economy now: more people at work, twice as many people at work as when we faced that challenge.
Our strengths are a good business culture, a good enterprise culture, a good sense of community, continue to invest in education and many more steps to be taken like today. I am confident that this country will pull together behind this challenge and make sure that we overcome this particular difficulty, not unique to Ireland, part of a wider problem. For us, we have to concentrate on finding the solution in our homeland and by doing that we have a better chance of competing and getting out beyond this recession as we will pass through this problem.
Question and Answer session
Q: How fair is it to impose a second a levy on some groups likes nurses and teachers who are making substantial contributions?
A: It is a difficult situation. I accept that, but I would make the point that our taxation policies during the good times have taken 400,000 people who used to pay income tax out of the tax net altogether: more than 38 per cent of our total workforce don't pay income tax because of the very progressive nature of our income tax. This levy, of course, is not welcome in terms of being another imposition on people but it is a necessary way of doing the correction that we have to this year.
Remember, everyone is agreed that this €2 billion adjustment has to be made. Social partners agree, perhaps we didn't agree the detail. We didn't get full agreement on the detail, but everyone agreed that the bulk of the adjustment had to be made on the pay and pensions side. Otherwise, we disrupt the services for those who depend on them. In that sense, it is seeking to provide the burden of adjustment to those who are best capable of taking that burden.
Q: Do you regret that you didn't do it your way some months ago, rather than spending so much time with social partners when the position of the country was deteriorating so rapidly?
A: No, I think it was the right thing to do. I want to say this very much so: the partnership element of this was good. It is a necessary part of social engagement. It is necessary. It is good. It is part of building a common analysis as to the scale of the problem. We are agreed that this €2 billion is required. We are agreed that a large share of that burden has to come on the pay and pensions side.
We didn't agree the precise detail early this morning. I respect that. But they will also respect that government has to govern. We have to get on and make the decisions, but we do so against the backdrop of really sincere engagement with people whom I respect, trade union leaders, employers who are creating wealth and jobs in this country; people in the voluntary sector, the farming organisations who are helping to organise our rural communities.
That is the way that we sort our problems in Ireland. That partnership process will continue. We have to continue to work in co-operation, rather than generating confrontation because that will only put at risk all of the adjustments that we have to take in the interests of all of us and in the interests of our children who are coming afterwards.
Q: Can you confirm that the levy will apply those who took the pay cut in Budget 2009, i.e. yourselves. How do you propose to respond to threats of industrial action?
A: Yes, this is addition for those who took the 10 per cent pay cut as a demonstration of the seriousness of the situation we are facing. Yes, this levy will be in addition to that pay cut. That is as it should be. People in leadership positions have to lead from the front.
Obviously, I am on a high enough income to do that. I very much recognise that people who are on lower incomes would see this as animposition.
I respect the trade unions movement in this country. It has been a force for good and part of the reason why we have been so successful. I have spoken passionately over recent weeks and months about my commitment to social partnership. It is not diminished because we didn't agree on everything last night, far from it. I believe that that role of social partnership is crucial to us finding the innovative ways in which we have to deliver public services, new ways, more efficient ways, how do we get work practice changes except through co-operation and through persuasion of many trade unionists up and down the country and committed managements working with them in partnership.
That is how we will get over this problem. We will not get over this problem by dividing into sectional interests. We can have disagreements, and we can have mutual respect in those disagreements but we must also get on with doing the job that we have to do because the people would not thank us if we deferred the necessary decisions now in their interests not because I feel I am making anybody any happier by making those decisions but I believe that the respect of the people will be available to those who tell the people that this is necessary, that we have done a common analysis of that problem and that it is beyond dispute that it is part of necessary steps forward for rectifying the problems that we have in this economy.
It is in that spirit that we will continue to work together, and I hope that we obviously avoid industrial action because industrial action does not bring a win for anybody. We have to get on and do the job to the very best of our ability together.
Q: What do you say to angry teachers, nurses and gardai out there who feel that they are already stretched in this economy, while those who made unprecedented millions out of the boom are not being targeted at all?
A: Everyone has to pay according to their abilities. The burden has to be spread in as equitable and as fair a manner as possible. That is not in dispute. I say to people who have this extra imposition coming down on them down the track that it is necessary in the interests of the State to be able to continue to employ people in the numbers that we have been able to employ. We have seen, quite rightly, in our good times through social partnership improvements in take-home pay, improvements in rates of pay, in conditions of work. That is right that that should be the case. When we have prosperity our people have to share in that gain. But now when we are in a very difficult situation none of those people would thank me if I didn't say to them that I believe genuinely that we have to take these steps now, these corrective actions now so that we can go forward again, so that we can have better times again.
Those who have the ability to pay will have to pay, of course. We have in this country a very progressive system of taxation. The lowest-paid do not pay tax because we don't want the burden of taxation on those who are the lowest-paid. How long we can continue with that system depends on what emerges from the Commission on Taxation. But those on higher earnings, and the highest earners are paying proportionally far more now than they used to pay because we have brought in changes to our tax system to that effect.
That is an important point to make. That question of equity and fairness is an ongoing political judgement that must be made in the context of how we maintain jobs and avoid a very high taxation regime which would kill enterprise, kill jobs and kill businesses. We have competitive issues. We have to get reductions in our energy prices. Minister Eamon Ryan is committed to working with the Commission for Regulation and all the players in that industry in the coming weeks and months to get the benefit of reduced commodity prices and get them passed on to businesses and to residential customers.
We also recognise that we have to help people who have mortgage problems and we are going to put a statutory code in place so that banks have a mediation facility in place and those who do engage with the banks are helped and that they keep security of their homes as they try to find a new career forward if they lose their job.
Government is energised and committed because of the social partnership process. There is a recognition on a whole of range of initiatives.
Q: Does the fact that the talks process broke down reflect on your ability to lead and bring people along with you?
A: Look, the bottom line is this: we didn't get agreement because we couldn't get all parties to agree. That's the reality of the situation. We tried earnestly and sincerely and to the very best of our ability, but it just wasn't possible on this particular issue. But I have to say that there was sincere engagement on that issue; that there was a recognition that this would have to be part of the solution even if the detail wasn't agreed. Partnership is not dead.
Social partnership is alive and well in Ireland and is fundamental – and I say this sincerely because it is my political belief and philosophy – to us helping to solve the problems particularly on the scale and magnitude that we face today. That is my belief. And I stick to that. There are those who criticise me for it, there are those who try to suggest that it is a way of diverting attention from the real issues. Far from it. We now have greater buy-in, let me say, in terms of the nature of the problem, of the scope of the problem and the actual initiatives that we need to take to deal with the problem.
The fact that we don't agree on everything 100% doesn't mean that social partnership has died. I contend very much to the contrary, and I don't agree with political opponents who suggest to the contrary. I think that they are wrong. Perhaps if they had had the privilege of being in government for some of those years and seen the benefits that come from that process they would perhaps have a different view.
Q: How much will you save in 2009? And is it sufficient?
A: €1.81 billion for 2009. The Department of Finance work on annualised figures so in the ten months of this year because of taking this decision, 1.8. But on an annualised basis, €2.1 billion. We said in our framework document we agreed last Friday of the order of €2 billion. We have been also been able to say that we can see a contribution from the capital programme because many of the competitive tenders coming in now are up to 20 per cent less than they were recently, so that means that we are getting the same output so that we can reduce our capital programme by six, to seven per cent and still ensure that we have even greater output than we have planned for. That is important because these are building blocks for the future. These are real competitiveness building blocks that have to be proceeded with.
This year is simply a stabilisation. We are just stabilising the situation. It is a reaction to the deterioration in the last quarter which saw Exchequer returns which were worse than expected and which required immediate action. I believe that the month that we spent in discussing and analysising that issue with social partners will reap benefits, not only in respect of the fact that we made decision today taking account of that account. But it has set the framework in which we will continue to engage with them on all of the issues that need to be done. There are going to be decisions that will have to be made weekly, monthly in the months and years ahead and that process is robust enough to withstand the disagreement that we have had on this particular issue.
Q: Some union leaders think there will be further discussions?
A: Congress, like political parties have constituent members who have greater enthusiasm for particular policies than others. Remember why we are going this road. It is to avoid serious disruption of services in the non-pay area. If I were to try and take €2 billion out of non-pay with a total spend of €15 billion that would be too great a burden on delivery of services.
We will be enacting that legislation in early March. I will be available at any time for discussions but I want to make I clear that the €1.4 billion is what we want to get. I would never say to anybody that I am not prepared to discuss it. If people want to come constructively to the table and discuss it further with me it can be discussed.
But let us be clear: the political decision has been made today that there will be a saving from the pension levy of €1.4 billion. I have brought it into the public domain that proposal which was rejected by Congress.
If there was a tweaking that would help bring them onside with their approval of course I would listen to attentively that but I would make the case that the overall position is as it is and we have to proceed on that basis."