This morning, the Minister for Finance revealed that we are living beyond our means despite the fact that, some weeks ago, he stated that this was the way in which people wanted us to go. We have been led into the middle of an economic swamp by the most disastrous Government of the past 40 years. Confidence in the economy has fallen and there is no strategy or plan to get us out of this situation.

Just six weeks ago, the Government set out a projected borrowing in 2009 of €13.4 billion. Given yesterday's figures on Exchequer returns to the end of November, the projection will be out by at least €5 billion, meaning a possible borrowing of up to €20 billion. This morning, the Minister for Finance stated that only a certain amount of taxation can be levied and that he does not expect further tax increases in 2009.

The Government has established another subcontractor to make recommendations on how to rein in public spending. If there are to be no further tax increases in 2009, does the Government intend to rectify the economy by cutting public spending by €5 billion and revisiting the national pay deal?

The measures we took this year in terms of expenditure mean our expenditure plans will come in broadly on target. The problem that has arisen relates to the serious decline in tax revenue across nearly all tax heads, a reduction in the order of 13% this year. This will have an impact on our opening position next year also.

Our strategy involves a collective effort by all stakeholders, including the social partners. Regarding the framework of the pay agreement, its operation is continually discussed in partnership. However, it is important to point out that continuing with our strategy of investing in public programmes, an investment that amounts to twice the European average, proceeding with public sector reform and using the people appointed by the Minister for Finance to examine other expenditure programmes and public service numbers are all part of a strategy to bring our public finances under control.

It is a serious situation, which we have indicated by bringing forward an early budget. Since then, there has been a further deterioration in our public finances. In an interview this morning, the Minister for Finance outlined how, given the relatively weak revenues accruing, he will not seek to raise tax revenue next year in addition to the budgetary arrangements already made. In a credible timeframe, we must consider how to bring the current budget deficit under control while continuing with the capital investment programme. Had the Government decided against the strategy of continuing record capital investment, the figures would be quite different. We are not prepared to postpone building capacity in the economy because it is part of our strategy to be ready for the upturn in the economy.

This morning, the Minister for Finance justified bringing the budget forward by a number of weeks on the basis that people should be informed of the seriousness of the situation as if they were stupid in their perception of the state of the economy.

Deputy Kenny has no perception.

The Taoiseach was the Minister for Finance for three years prior to assuming his current office. He saw the warning signs and knew that, given information received from the housing industry, spending programmes would lead to this situation, yet he ignored those warnings. Jobs are being lost at a rate of 10,000 per month and, despite the fact that 2 million people are at work, consumer spending is not confident. The Government exacerbated the situation by imposing a VAT increase. This has devastated a swathe of countryside 50 miles south of the Border because the British Government has gone the other way and reduced its VAT rate.

There is no plan. The Government should inform the House as to whether it intends to go back to the drawing board to examine the fundamentals of the budget's structure. If the Minister for Finance will not introduce a mini-budget in the spring or increase taxes in 2009 on top of the 17 imposed in the budget six weeks ago, the Taoiseach, as Head of Government, must inform the House as to whether the Government will propose a reduction in public expenditure of €5 billion.

I have provided three alternatives. The Government should reconsider whether to reduce investment in the capital programme by almost €1 billion. Infrastructure is critical. The VAT increase is devastating thousands of retailers within 50 miles of the Border. In light of the Minister for Finance's comments on the national pay deal this morning and given the way in which it was negotiated and the current financial circumstances, does the Taoiseach intend to revisit it and plough savings from it into public infrastructure, retraining, upskilling and the protection of jobs?

To answer Deputy Kenny directly, he makes the case that there should be €5 billion in cutbacks next year. That is a matter to be decided by Government in terms of the credible timeframe in which——

No, it should be decided by both sides.

——we can restore balance in the budget without damaging the economy unduly. We have set up a process by which we will do this and we have ensured that our expenditure programmes this year have come in on schedule. A difficulty has arisen in that 13% of projected revenue was not raised this year. We must react to this position, but we should not do so by adding taxes to the economy because all tax heads, not just those relating to construction——

The Government is adding taxes.

Approximately 17 taxes.

I am talking about over and above our current budgetary position. We have introduced an income levy and some minor changes in capital taxes as part of our balanced approach and in light of a gross return on revenue of €2.3 billion. We also had cutbacks in the context of the July decision, which will have an impact of €1 billion. Further economies were also brought about as a result of the processes relating to the budget and the Estimates. We achieved a balance between raising taxes and introducing expenditure cuts.

I want to return to the point Deputy Kenny made about who has a strategy. He spoke about the need for a reduction of €5 billion——

I was referring to the figures available. Tell us what you are going to do.

As part of his solution to saving €5 billion he told me to spend an extra €1 billion on the capital side.

If there are no tax increases, how does the Taoiseach propose to encourage——

I presume this makes for a total of €6 billion. The Deputy also stated that the rate of VAT should be reduced. The difficulty in respect of cross-Border trade does not relate to VAT.

The problem is that the Taoiseach has no plan.

The exchange rate between sterling and the euro is causing that problem.

I do not want to become involved in an argument with Deputy Kenny. That is not the game I want to play.

The Taoiseach wants Ireland to have the highest rate of VAT in Europe.

I want to be straight and outline where we are at.

The Taoiseach will be borrowing €20 billion and there will be no tax increases.

Deputy Kenny does not have a strategy.

The Taoiseach and the Government did not know what they were doing six weeks ago.

The Taoiseach should be allowed to conclude, without interruption.

I wish to make a point in passing. Fine Gael's finance spokesperson has stated we should have a deficit of 5.5%. For the past six weeks, Private Members' motions have decried every cutback and economy we have been had to introduce and make in order to achieve a balance.

That is because they were wrong.

The Taoiseach has gone the wrong way.

What I have stated is a fact. Those in Fine Gael are speaking out of both sides of their mouth. However, they can do so because that is the luxury of being in opposition.

In August I was criticised by Fine Gael's finance spokesperson for not concluding the pay agreement. In September I was congratulated by him for concluding it.

What does the Taoiseach propose to do now?

He then stated in October that there should not be a pay agreement.

What does the Taoiseach propose to do now?

My position is simple. We will continue to examine the operation of our pay arrangements in partnership with the stakeholders and not throw away partnership as Deputy Kenny suggested.

I never said that. The Taoiseach's assertion is completely false.

The only way this matter will be satisfactorily resolved——

Such comments are beneath the Taoiseach but they are typical of him. This is the way he usually operates.

The difference between Deputy Kenny and me is that——

The Taoiseach should be allowed to conclude.

The Taoiseach should be ashamed of himself. He should resign.

Those on the Government benches have gone mad.

The difference between us is that I believe the social partnership process is a problem-solving process, not a problem avoiding process.

I also believe that.

I recently engaged in discussions with IBEC and the Irish Congress of Trade Unions, ICTU. Collectively, we will bring forward an approach that will best guarantee our way through this problem.

That is what I said should be done.

We have done so for the past 20 years, in good times and in bad. We are the authors of the partnership process, which Fine Gael has always decried. We will again prove them wrong in respect of it on this occasion.

The Taoiseach does not know what is going on.