Fine Gael National Press Office Press Release

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The challenge to show courage - not borrow from the future to conceal the mistakes of the present - Kenny

Keynote Speech by Fine Gael Leader Enda Kenny TD to the Humbert Summer School

The biggest challenge facing Brian Cowen is his own incapacity to grasp a challenge when he sees it. That patent incapacity is what has characterised his first 100 days in office, giving them the inescapable hallmark of failure. Failure to deliver on Lisbon. Failure to bring the National pay talks to a conclusion. Failure to do anything other than talk about reform.

The incapacity to grasp a challenge when it should be grasped is not good at any time. In bad times, it's a lethal deficit. The external challenges facing him are huge, including, as they do, the challenge of solving Ireland's EU problem, the challenge of a by-election and, of pivotal importance, the challenge of creating an effective stimulus for the economy.

Critical for the development of our country is the proper management of the economy. We cannot have the services that keep this country going if we don't have a strong economy that serves the needs of the people, that delivers what we want, the Ireland we want all our children to live in.

The economy is the machine that delivers all of that. A key imperative in an economic downturn is to stay focused on the future, to remember where we want to go. If we know where we want to go. The Government clearly does not know where it wants to go and demonstrated neither clear direction nor urgency. Except, of course, when it comes to ensuring additional creature comforts for Ministers, at a time when plans are afoot to reintroduce third level fees and when on a daily basis patients are denied access to civilised, speedy and respectful care by aspects of the health system.

The spend on Ministerial comfort makes manifest precisely how out of touch with reality this Government is and how disconnected it has become from any view of what kind of Ireland we should be setting out to build.

You cannot call yourself a leader without the capacity to give that pivotal direction and articulate what kind of Ireland you want:

- I want an Ireland where people have to look up the word 'Quango' because they don't know what it means;
- An Ireland whose healthcare system is used as a case study in excellence in every medical school in the world;
- An Ireland that values hard work and enterprise - and is free of red tape, bureaucracy, duplication and intrusive pointless regulation;
- I want an Ireland where people in responsible positions are fired or demoted when they fail to serve the citizen. Where accountability is a function of daily life;
- An Ireland that leads the world when it comes to environmental protection (including flood protection) and exports its unique expertise and environmental products globally;
- An Ireland characterised by trust, not by consumption;
- An Ireland that cares for the people on the edges, not an Ireland with a harsh sense of entitlement, whose attitude is best summed up by the cosmetics slogan: 'Because I'm worth it';
- I want an Ireland where the State and the economy serve the citizen, not the system, where nobody feels abandoned and lost, where diversity is a strength, where children are protected, where we dream dreams and have the confidence and competence to turn those dreams into shining realities.

That's what I want. That's the place Fine Gael wants to get to. That's the outcome which will decide what we will do in power. The Government, in sharp contrast, seems transfixed by the present at the expense of the future. And it shows. Everywhere I've gone, these last few weeks, I've met people who feel beleaguered. Cheated. Abandoned.

Like the young woman whose builder employer handed her a choice: take a pay cut of €270 a month or find a new job. She's paying a mortgage of €1,600 a month and was just about managing it on her old salary.

Or the young couple who've rented out their home in Navan and moved back to north Dublin to live with his parents - because the cost of the commute was crippling them.

It's not just that people are increasingly coming under personal financial pressure. They're also baffled that none of this was anticipated by the people supposedly in charge, and astonished that the Government isn't doing something about it. The problem is that this Government has been so long in power, it has a diminished capacity to envisage anything different and has run out of imagination, innovation and creativity. Like a rabbit caught in headlights, it does nothing, sees no possibilities.

The facts of the present are grim. Public finances are suffering the worst deterioration in the history of the State. Growth in unemployment is at its highest since the 1970s. But of course, the EU and the US are in recession, so what can we expect?

I'll tell you what we shouldn't expect. We shouldn't expect that Ireland's much-vaunted economy would do markedly worse in the international context than most other countries. But that's what's happened. Ireland's economy and employment levels have taken the biggest fall of any advanced country.

We've done markedly worse than we should be doing. That's what you get when you don't manage an economy, when you don't ensure balance in an economy. When you just warm your hands at the heat coming off an economy: warm your hands and take the credit.

I have constantly pointed to the dangerous over-dependence on construction and the public sector. This decade, six out of every ten new jobs came from those sectors. Almost a quarter of our GNP was tied up in the building industry. We also pointed to the dramatic slowdown in productivity growth - it's now below the OECD average for the first time in more than 20 years.

Our Rip-off Ireland campaign nailed the upward drift of prices, which was making bits of our competitiveness. Two years ago, Ireland officially became the most expensive country in the euro area to live in or do business in.

We warned of disaster. And we were criticised as complaining for the sake of complaining. That was never true. Fine Gael have never shirked the taking or supporting of tough and necessary decisions either in Government or Opposition. The truth is that, as Minister for Finance, Brian Cowen wilfully ignored the underlying trends that have brought this country to its knees.

Trends like shrinking overseas market share. Irish exporters, throughout the nineties, built up a huge share in world markets. From a peak in 2002, it dropped 15% in three years. None of this happened suddenly. When, in 2004, Brian Cowen took over as Finance Minister, some of the grim underlying trends were already manifest:

- Rapid growth in debt.
- Inflation.
- Overheating in the property market.
- Problems in export competitiveness.

Mr Cowen's challenge was clear - to cut inflation and protect Ireland's hard-won competitiveness. But winning the next election mattered more to him than taking tough action. Property tax reliefs that had outlived their contribution and were now part of the overheating problem should have been scotched. Done away with. Ended. What did Brian Cowen do? Right. He extended them. Until after the election.

As with taxes, so with spending. For three years running - 2005 to 2007 - when the housing sector was already overheated and when the IMF, ESRI and Central Bank were warning against expansionary Budgets, he had a spending binge. Lashed out money at rates way above the growth rate of the economy. He misled himself and the public.

At the danger point - the point where the dire consequences were inevitable - Mr Cowen boasted that housing prices were based on 'strong fundamentals'. He boasted about a consensus that the Irish mortgage and housing market was in grand shape. There was no such consensus. In fact, only three months earlier, the IMF had explicitly warned him that the housing price overvaluation in Ireland, compared to other countries, could not be explained by economic fundamentals. But he continued down the path of self-delusion and national misinformation. And accused anybody who told the truth or commented about the deterioration of the national finances of national sabotage.

Brian Cowen was able to conceal the worst from himself and the electorate because the property tax windfall disguised just how badly the public finances were doing. He was able to convince the public that he was a tough-talking action man, when in fact he was slavishly colluding in Bertie Ahern's policy of appeasement. Of caving in to one vested interest after another. Of surrendering the future to buy the present.

In good times, you can get away with that. In tough times, appeasement comes home to roost. Because this Government has been a government of appeasement and denial, they cannot muster the strength they need. No action happened before they went on holiday. As if the world economy was going to hold still, while they were away. As if everything would hold still until they came back. What kind of Government is that?

The situation has worsened - as any economist could have told them it would. But they don't seem to be worried about it - perhaps because they plan to go the traditional Fianna Fáil route of reckless borrowing to shore up the problems caused by even more reckless spending.

They stand mute and passive in the face of unprecedented economic threat. They stand mute and passive amid the wreckage of great plans, like public service reform and the creation of a culture of performance management and accountability. All were left to wither on the vine. They stood idly by while a litany of waste happened - PPARS, eVoting, massive overruns on the Port Tunnel and the roads programme. At best we can hope the ESRI are right in suggesting that, with the right policies, the short-term shock to the economy from the housing bust could end by 2010.

But, no matter how much hope we place in such reports, the decisions we make, right now, must be clear, courageous and creative. Not just punitive. Not just going the infamous Fianna Fáil route of advising the mortgaged poor to tighten their belts further, to make up for a decade of Government appeasement and inaction. The decisions we make at this watershed in Irish economic history will ensure our survival and success as an economy. If they're the right decisions.

The best place to start is with an investment in truth. Telling the truth is what engenders trust. And if we're short, right now, on available cash, we're even shorter on trust. The Government needs to stop seeking euphemisms for the disaster we're in, stop trotting out soft words for the tough action they must take. It's a recession, not a downturn.

What's needed is real reform of the public service. Abolition of waste and duplication. Reward for performance and delivery. But what this economy needs is much more than cutbacks. It needs competitiveness.

Achieving competitiveness won't come about by attacking the poorest of the poor, the lowest-paid among the workforce. Competitiveness will come about when Big Government get the hell out of the way of Irish businesses. Big Government - and we've had it only in the last ten years - has forced business to run a gauntlet of red tape, regulation, bureaucracy, duplication and stealth taxes.

The manager of a small firm I met recently employing eight people told me that half of one person's time is devoted to filling out government forms. This Government has passed almost 50 new pieces of labour legislation during the last five years. Employment is regulated by eight separate bodies. Based on some estimates, we could save Irish companies up to €1.5 billion by cutting Government red tape by 25%, as has been done in the UK, Denmark and the Netherlands.

What's needed, right now, is a huge boost for the self-reliant, for the problem-solvers, for the dauntless innovators. That means simplifying the multiplicity of agencies involved. It means convincing anyone who thinks "I'd like to set up a company" that the State will help, not hinder them.

Radical reduction in unnecessary regulation must be matched by lean, mean effective support for indigenous industry. That doesn't cost money. It just needs understanding of what makes things happen and the determination to make them happen. If it means running a coach and four through every Government Department, regulator and Quango, it has to be done and done quickly. Instead of such radical shearing away of unnecessary cost, the indications are that another weak appeasement option of amalgamating some Quangos will be chosen. Amalgamation is failure to get to the root of the problem. The Taoiseach must have the bottle to close down the wasteful Quangos and do it quickly.

We can no longer afford appeasement of vested interests that hold back better services and lower prices in key sectors like public transport, energy and communications. Energy companies in Ireland are now swimming in cash - at the expense of customers. One of the challenges facing Brian Cowen is to open up these sectors to real reform and competition.

He must also have the bottle to instruct bloated inefficient organisations like the HSE not to cut numbers, because that inevitably goes to the front line, where we have too few numbers, but to cut 20% of their management by Christmas. That action alone would make the HSE less costly, more efficient - and raise the morale of the front-line staff delivering care against the huge obstacles provided by a bloated bureaucracy. All of that requires courage:

- The courage to say "This doesn't work. Stop it."
- The courage to say "This is costing too much. Stop it."
- The courage to say "This is being badly managed. Stop it."

The question is: can Brian Cowen, as Taoiseach, drum up courage he didn't have as Minister for Finance? When Ministers failed on the key strategic agendas like Dublin transport, climate change, energy security, health, consumer welfare, broadband, the knowledge economy, all Brian Cowen did was provide further injections of cash. He didn't cut out the botched regulation by his colleagues of strategic economic sectors like transport, energy and communications. That botched regulation strangled competition, while giving inefficient monopoly service providers unearned cash windfalls.

Combine Brian Cowen's recklessly inflationary policies at the macro level with the death of reform at the micro-economic level, and what you get is a vicious, debt-driven, boom/bust cycle that leaves tens of thousands of young families paying full whack for a house worth three quarters of what they're shelling out.

You get the national finances grinding to a juddering halt. You see tax receipts falling from €47.3 billion last year to €44 billion this year. But the cost of delivering existing services and welfare commitments in 2009 will rise to €48 billion - €3 billion more than the likely tax take.

In July, my colleague Richard Bruton, on behalf of Fine Gael, set out our fiscal strategy for recovery, Recovery through Reform. It stressed:

- Keeping taxes on work and investment low;
- Maintaining the level of capital spending;
- Cutting growth in current spending in 2009-11 to 4%;
- Cutting each Departmental Vote by 1% each year to make room for priority service and welfare improvements;
- Implementing ambitious public sector reform, involving:
o an accelerated eGovernment programme,
o staff mobility across Departments and Agencies,
o cutting the number of Government Agencies,
o driving efficiencies into procurement,
o establishing a performance management culture,
o ensuring accountability with consequences, greater Oireachtas scrutiny and transparent cost-benefit analysis.

Brian Cowen, in sharp contrast, coughed up a panicky package of scams, cuts and accounting wheezes:

- More borrowing to fund the inexorable growth of day-to-day spending by an unreformed public sector;
- Suspending payments into the National Pension Reserve Fund, even as public sector pension liabilities reach frightening levels;
- The once-off grab on the assets of State agency pension schemes;
- Deferring vital capital programmes, like the Schools IT Programme.

In addition, there were promises like the one to cut the public service payroll by 3% by the end of 2009. Brian Cowen might start by reversing his junior ministerial inflation: we now have 20 Ministers of State.

The denial of the truth continues, by the way. In July, the Government tried to conceal the breakdown of the cuts. It's now clear the biggest cuts are in health and education spending. Health cuts hurt the poor, the old and the sick. Education cuts hurt the future Fianna Fáil is already borrowing from...

Another issue that concerns me - and must concern us all - is that, as this Government dithers and public confidence disappears, house prices could fall much further, creating another vicious circle of falling bank collateral, a worsening credit crunch and rising unemployment it could take years to break out of. Tightening credit is already offsetting the impact of falling house prices on the ability of first time buyers to enter the property market, and curtailing productive investment by enterprise.

Fine Gael would further cut stamp duty for ordinary families trading up and down. We'd fund it by ending stamp duty loopholes for wealthy buyers, landowners and developers. We'd consolidate the various affordable housing products into one, new, improved home equity product that would bring many first time buyers into the market.

The banks should be pressurised to declare and write off bad loans and, if necessary, raise more capital to strengthen their balance sheets to maintain the availability of credit throughout the economy. They have not yet done nearly enough.

Recovery requires more than cutbacks. Particularly in the employment area. The Government is silent on how it intends to help the tens of thousands of people currently losing their jobs. Silent. According to FÁS, almost half of all workers still employed in house-building are in danger of losing their jobs by the end of 2009: 50,000 people now in work will be made redundant.

Already, some 2,000 construction-related apprentices have been laid off before completing their training. That number is expected to double. Unqualified apprentices can't find skilled work abroad or in other sectors. With new apprenticeships disappearing, a traditional route to well-paid employment has been closed to thousands, particularly in the regions.

The vast majority of the people being laid off in the construction sector are under 30, have leaving certs, significant work skills and experience. They're ideal candidates for retraining and upskilling. Yet the Government has taken no concrete steps to help these workers. They have lost contact with the human realities behind the economic statistics. They give no indication that they care.

Instead, they're cutting spending on vital infrastructure projects that employ large numbers. They're letting social and affordable housing programmes collapse. They're slashing funding for FÁS training and apprenticeships when re-skilling construction workers should be a national priority. A little imagination could provide new job opportunities for the vast majority of people being laid off. Just a little imagination.

For example, in the face of rising home energy costs and ambitious green house gas reduction targets, their skills could be redirected to improving the energy efficiency of Ireland's housing.

As a start, the Government could expand pilot FÁS programmes in Sustainable Heating Systems in order to upskill laid-off plumbers, electricians and fitters. Currently, these programmes are available only on a pilot basis to classes of 12 in two FÁS training centres. They're over-subscribed. Hugely oversubscribed. Similarly, FÁS has a "Building the Smart Home" retraining module for electricians to meet the growing need for energy-saving software and appliances in the home.

FÁS and Sustainable Energy Ireland should also work together to retrain construction workers to become assessors for Building Energy Rating Systems, and help Ireland to comply with new EU building regulations. Thousands will be needed.

FÁS should quickly expand apprenticeship places in non-construction related crafts, such as logistics and technical engineering, where demand for skilled staff is still growing. And if FÁS can't move quickly on these issues, the Government should bypass them and give vouchers directly to the unemployed to buy retraining from the private sector.

If he did all of this, Mr Cowen's call for wage moderation might be more acceptable. But it must also be backed up by a credible strategy to cut price inflation. Those on low pay need to know that if they agree to pay moderation, their living standards won't be eaten away by higher prices. It was Brian Cowen's lack of a credible strategy to control prices that made it impossible for trade unions to agree to a moderate pay deal. In contrast, Fine Gael's strategy would significantly reduce inflation by cutting VAT, freezing State charges and overhauling the regulation of transport, energy and communications.

Pay increases for the public sector must hinge on public service reform that sets real delivery and efficiency targets for public agencies matched by genuine accountability. We also need a more confident and influential Central Bank, and more structured interaction between the Central Bank and the Oireachtas. I am concerned that the Central Bank did not use its regulatory powers and moral authority with sufficient determination in recent years to protect the stability of the Irish financial system and wider economy.

Fine Gael proposes a new Financial Stability Framework, to be implemented by the Central Bank that would automatically require lending institutions to put aside greater levels of capital when asset growth exceeds a target level, linked to the inflation target, the long-run economic growth rate and structural changes in the bank lending/gross domestic product.

All of these radical steps would require courage. Fine Gael has that courage.

All require measurement and interrogation: Is this working? If not, why not? What's the right corrective action and how quickly can we take it?

In addition, it would require interrogation of what the best in the world are doing, right now. New Zealand, for example, overhauled its budgeting and HR processes to allow scarce resources to move to new priority areas. That's what Ireland should do. We should cut every Government Department's budget by 1% to make room for priority service and welfare improvements. We would also learn from New Zealand on making budgets for individual agencies dependent on delivery of specific, quantifiable efficiency and service quality targets.

Fine Gael would cut unnecessary paperwork as the Scandinavian countries have. We would learn from the UK's experience in driving efficiencies into procurement at central and local Government level. And we'd do as Northern Ireland has done: establish genuine performance management in the health services - accountability with consequences

Imagination. Emulation. But above all, we need a new view of Ireland as a nation filled with boundless potential, a nation with the capacity to lead, not follow, a nation where appeasement is a thing of the past and we invest in the future of our children, not rob from them. Postponement is not an option. Action is an imperative.

What we must do is ensure that the actions taken to drag the economy back up off its knees are not simply punitive, are not simply cutbacks. Positive, flexible, joined-up Government thinking and action are what's needed. Because, while house prices may drop and the construction industry may return to a reasonable and sustainable size, the real upside, the real hope for the future, is that this country never runs out of potential, energy, the willingness to pull together for the greater good.

That's what we must harness, if we plan to turn these tough times into a learning, rather than a crippling, experience.