Today the Ulster Bank and Halifax and First Active have raised their variable standard interest rates for the first time since 2001. This development comes in the face of a further hike in interest rates by the European Central Bank when it meets on Thursday. This will make life very difficult for hundreds of thousands of people who currently feel the pinch of rising prices, fuel costs, threats of unemployment, cutbacks in frontline services and a deterioration in the value of their pensions and houses. In particular, 100,000 young people face the terrifying spectacle of their houses being lower in value than their mortgages.

I remind the Taoiseach that he bears responsibility for a great deal of the problem, despite the fact that he and his Government will continually argue that it is due to international events. I will quote his address to the National Mortgage Conference in January 2006 when, as Minister for Finance, he stated "there is certainly a consensus that the Irish mortgage and housing market has been strong over an extended period of years because the economic fundamentals of the Irish economy have been strong". In April 2006, speaking to the Real Estate Alliance property conference, he assured the public, particularly young people considering whether they should use their savings to buy a home, that economic fundamentals were "anchoring the performance of the property market". We now know there was no such consensus because in October 2005 the International Monetary Fund, backed up by the OECD, the ESRI and the Central Bank, stated the house price over-valuation in Ireland was large compared to other countries and could not be solely explained by economic fundamentals. During his term as Minister for Finance, the Taoiseach knew and was being advised by the best experts at home and abroad that house prices were grossly over-inflated. Does he accept any responsibility for this debacle and the position in which 100,000 young people, including many young couples, find themselves?

Will the Taoiseach explain what the Minister for Social and Family Affairs meant yesterday when she said the Government was there to help people who lost their jobs or got into difficulty repaying their mortgages? Was this an announcement of some new Government scheme for mortgage repayments?

There is an existing scheme which relates to mortgage interest relief. Mortgage interest relief was more than doubled in the past two budgets.

The Government will be obliged to double it again.

This was a proper response and it resulted in much greater benefits for a larger number of house buyers and those with mortgages than would have been the case had I taken on board some of the proposals put forward by the Opposition at the time.

I do not accept the point made by the Leader of the Opposition to the effect that I made an incorrect policy decision in choosing that option rather than proceeding with stamp duty reform at a time when house prices were appreciating. If I had instigated such reform, prices would have been hiked up to an even greater degree because it was then a seller's market. I continually made that point in the past and I stand by my assertion. The reforms I put in place in the most recent budget were introduced at the appropriate time.

On increasing interest rates, there is no doubt that difficulties in international markets and the lack of access to funds are causing problems in the context of the cost of the inter-bank rate for banks themselves. That cost is being passed on to consumers. I regret that this is a consequence of what occurred in international markets during the past eight or nine months. Ireland is not immune to what happens in those markets. Since joining the euro, we have enjoyed historically low interest rates. I do not underestimate the increased costs accruing to mortgage holders. However, the responses I brought forward in successive budgets in respect of increasing mortgage interest relief were appropriate and led to people benefiting.

The Taoiseach was dragged, very reluctantly, towards taking action in respect of stamp duty. When he finally took such action, it was too little too late. If the Taoiseach is stating that he knew in advance that mortgage interest relief would have to be available in abundance through the Department of Social and Family Affairs, this makes the reply he has just given even worse. He was advised by national and international experts that house prices in this country were grossly over-inflated. He stated in September 2007 that the economy was stronger than at any previous point in history. In April of this year, he said he was not concerned with regard to the slowdown in the construction sector.

The Taoiseach now appears to be expressing helplessness and stating that we are not immune to international developments. Such developments are not responsible for the highest increases in the cost of living in any of the eurozone countries since 2001 or the highest increase in unemployment among European Union states. Ireland has been steadily losing its market export share since 2001. These developments were not caused by international events and the Taoiseach served as Minister for Finance when they came about.

The Taoiseach previously stated that we should engage in some straight talking on these matters. Straight talking was the mark of the Deputy Cowen of old when he occupied the seat to his left in which the Minister of Health and Children is sitting. What is the position? Does the Taoiseach accept responsibility for the situation where 100,000 young people, single and couples, face the terrifying prospect that the value of their houses and pensions are deteriorating? People's mortgages are now greater in value than the houses in which they live. They are the mortgaged poor and have been made such by what was a phoney economy.

The Taoiseach holds responsibility in respect of this matter because he led the economy to which I refer. As Minister for Finance, he introduced successive budgets which were reckless in nature and which gave rise to inordinate levels of public spending. The banks lent money, left, right and centre, and it was a case of "easy come, easy go" in the economy because it made people cheerful and helped win votes.

Does the Taoiseach accept that the position in which we currently find ourselves was compounded by the actions he took when Minister for Finance? The people to whom I refer are approaching Deputies on all sides of the House to voice their concerns regarding their mortgages and the threat of unemployment and the cuts in front-line services. The problems to which I refer were created on foot of the construction of a phoney platform designed to get the Taoiseach's party through another election on the basis that people would assume that all was rosy in the garden when, in fact, that was not the case.

Will the Taoiseach see to it that the Ministry for Finance will not again become a tool used to encourage people or give them false hope, as was the case when it was claimed that the construction economy was built on a sound platform? He was responsible for the economy for the past three years and he will now be obliged to suffer the consequences. At least 100,000 people are going to find themselves in dire straits as a result of the actions he took when he served as Minister for Finance.

I reject all of the assertions put forward by the Leader of the Opposition and I defend the actions I took when I served as Minister for Finance. On the question of reckless spending, the national debt fell from 30% of GDP in 2004 to 25% last year. Debt service as a share of tax revenue fell from 4.7% in 2004 to 3.4% last year. In the years 2005, 2006 and 2007——

What about the way forward?

I am answering Deputy Kenny's question on reckless spending.

The Taoiseach should be allowed to reply.

We are looking forward, not back.

I would like to answer the question and I listened in silence to what Deputy Kenny had to say.

The Taoiseach is spoofing.

In the years 2005, 2006 and 2007 there was a current budget surplus of €22 billion. That gives the lie to charges of reckless spending. We increased capital spending and I stand over the decision taken in this regard.

Did the Government obtain value for money?

It is important that we continue with capital spending. I make no apologies for increasing the old age pension by €66.

Good.

What is the Government going to do in 2009, 2010 and 2011?

I doubled financial supports for parents with children under six years of age.

Very good.

I also doubled the provision relating to special needs education. In addition, I increased the social welfare budget by 40%. I stand over the decisions I made in this regard.

Does the Taoiseach stand over the €60 million spent on voting machines?

Deputy Kenny claimed that I was profiting and misspending. He should indicate where I spent too much, as far as he is concerned, in the areas of health, education and social welfare.

Did the Government obtain value for money?

It is his responsibility to do so if he disagrees with my assertions.

What about the money spent on voting machines and PPARS?

The Deputy also suggested the economy——

The Government created the monolith that is the HSE, which is costing €15 billion and the level of service has worsened.

——can be characterised as a building site and nothing more. Our economy is sophisticated and developed. One quarter of the jobs currently in existence in Ireland were created during the past ten or 11 years when this Administration was in power.

We will face into the international downturn——

It always comes back to the international downturn.

——in a far stronger position than previously. We will be obliged to ensure that we take prudent corrective action. We must not defer the necessary corrective action because if we do so, we will face more difficult times in the future. We will make our decisions in this regard on the basis of the publication of the mid-year Exchequer returns tomorrow. The Minister for Finance will make a statement on those matters and the Government will make its decisions appropriately, prudently and quickly as a result.

More cutbacks.

Stealth taxes will be introduced when the Dáil goes into recess.

We will discuss these issues in the House next week.

Those in government are not taking responsibility. They are headless chickens.

Will the Taoiseach lead by example? Will he forego his pay rise?