Key Questions about the Crisis

Here are some frequently asked questions about the Congress approach to this crisis:

What is the best way to tackle this crisis?

In a word, jobs. The more people we keep at work, the more revenue Government takes in tax and the less demand there is on social welfare. To date, Government has done virtually nothing to tackle the jobs' crisis, even as unemployment has risen to 450,000. Contrast the €7 billion that has been handed over to Anglo Irish Bank - money we will never see again - with the paltry quarter of a billion that the Government put into a small, limited scheme to help firms trading in the export sector. That is a shocking illustration of where Government priorities lie.

Indeed, when Congress proposed a €1 Billion Job Creation & Protection Plan we were told that there were no resources available.

In at least eight other European countries, Governments have intervened to protect and support jobs threatened by the economic crisis. In Germany, an estimated 1.4 million have been kept in work through one such, very successful initiative. The scheme uses social insurance money - social welfare - to make up any difference in wages for workers on short time. This maintains spending power and helps maintain domestic demand. Even traditionally conservative voices such as the Financial Times have stated that economies that adopt such measures are coping far better with the recession. There is no reason why we cannot introduce a similar scheme here.

Equally, prompt Government intervention could help prevent a 'wipeout' in the construction industry and simultaneously fill gaps in our social and public infrastructure. And the delivery of new schools and clinics and better public transport could be funded through the setting up of a National Recovery Bond.

In short, tackle the Jobs' Crisis with the same level of energy and ingenuity that has been devoted to the banks and all else will start to fall into place.

Government says it must cut €4 billion in December's budget, but Congress says there is a better, fairer way to deal with the crisis. What is the alternative plan?

The Congress plan comprises a number of different elements. First and foremost, we need to give ourselves a little breathing room and should not impose huge new burdens on a society already straining under the weight of huge job losses, high debts, repossession threats and income cuts. There is a limit to the load that people can bear. We must approach this problem from the perspective of a society peopled by citizens, not an economy comprised of units.

There is no iron law that says we must cut €4 billion from vital services in the December budget. And there is no iron clad rule that says that our 'period of adjustment' must be completed by 2013. That timeframe is the result of a political decision and, like all decisions, is liable to change.

Congress has proposed stretching the period of adjustment over a longer timeframe. In doing so, you remove the need to cut hard and fast, softening the impact and scale of cuts. When the figures are examined, it is clear that our capacity to borrow is better than many other countries in Europe. That means we can borrow over a longer period of time and use the money to invest in a stimulus package for the economy - to create jobs and upgrade infrastructure.

Other countries have adopted this approach - Britain plans to run its period of adjustment over eight years, while France recently indicated that it would run until 2015. And even right-wing think tanks like the Bruges Group have proposed 2020 as a target date by which EU countries would seek to bring down their borrowing levels.

Why is Ireland alone contemplating such harsh medicine, is it just to impress the EU or is it 'collateral damage' from the banking crisis? The Government won't say. It is our belief that the 'short, sharp shock' treatment currently being planned by Government will take so much money out of the economy that it could bring it to a shuddering halt. The Japanese tried a similar approach during the 1990s and entered into a decade long depression.

But critics of the Congress plan say it will lead to higher costs for the taxpayer because we will have to borrow more money over a longer timeframe. Is that true?

The real question is not about higher interest costs. It is about choosing a course of action that gives us the best chance of emerging from this crisis and not repeating the mistakes of other countries, or the mistakes that brought us to this pass. If we opt for the short sharp shock treatment, we risk a decade of slump and depression. By opting for a longer recovery, we allow time for other measures to take effect - rebuilding our tax base to provide greater revenue, the benefits of a global upturn etc.

In that context, it seems sensible to opt for a longer recovery period. In addition, those who warn of the increased cost of borrowing base their predictions - or speculation - on consistently pessimistic assumptions and worst case scenarios. In the event of an upturn, the cost of servicing the debt will be far less problematic and less painful. Figures from the EU Commission show Ireland's debt rising to almost 80 percent of GDP next year, compared to 82 percent average in the EU15, 101 percent in Belgium, 92 percent in US, 82 percent in the UK and an astonishing 194 percent in Japan. We have room for maneuver and the greater good of our society demands that we use it.

Hasn't our public spending grown out of control in recent years?

There is no doubt that public spending has grown in recent years, just as our population and our economy has grown. More people means a greater demand for services like schools, transport, roads and hospitals. That is a fact of life in any society. But to say public spending has 'spiralled out control' or that the public sector has become 'bloated' and 'swollen' is completely untrue. Ireland's public spending is among the lowest in the EU 15 and is comparable with levels often found in the poorer accession states. In 2007, the average spend for the EU 15 - as a proportion of Gross Domestic Product (GDP) - was 42.5 percent. In countries like France and Sweden it was higher, reaching 48.2 and 49.3 percent, respectively. In the United States it was 32 percent. And Ireland? We struggled in at 30.2 percent.

Our problem is not that Public Spending has spiralled, it is that our tax base - which provides the revenues to fund services like health and education - has collapsed. To look at public spending as the culprit, is to look at this problem from the wrong angle entirely leading, naturally, to the wrong solution. The real question is why the revenue from the tax base collapsed and why it must be rebuilt.

Why is there such a dramatic fall in our tax revenue?

There are a number of reasons and, naturally, the recession is partly to blame. If less people are at work, that means there is less income tax paid every year. Equally, if people are spending less the Government gets less from taxes like VAT. In every country that has been hit by this recession, Government income from tax has fallen. Ireland is not unique in this respect.

But we do differ from other countries in the size of that drop, nowhere else has there been such a huge drop in tax income. And this happened not because of external factors, but because of decisions made over the last decade. In 1999, for example, then Finance Minister, Charlie McCreevey, cut the top rate of tax - 48 percent - for high earners. Over subsequent years Government continued cutting the rate back to its current level. And other taxes were also cut - the rate of Capital Gains Tax was halved by Minister McCreevey. Congress opposed this, but it was the congratulatory voices of a delighted business community along with lobby groups for the rich that Government listened to. In addition to lowering taxes on high earners and business, Government then introduced or extended a series of tax shelters and tax breaks that benefited the same, small numbers of people: tax breaks for business, for property, for horses and for private hospitals.

However, this left the tax base dangerously dependent on consumption taxes - VAT - and property related taxes like stamp duty. Common sense would have dictated that you cannot base a country's future development on taxes that are liable to fall over time, it is not sustainable. But common sense was in short supply at the time.

The prevailing consensus - across Government and business - was that low direct tax and tax breaks would stimulate greater investment and even stronger economic growth. Indeed, in the early years of this decade the argument was frequently heard that low taxes were the very foundation on which we had built our new-found wealth. In fact, the reverse was the case. In a 2004 publication - Tax Cuts did Not Create the Celtic Tiger - Congress showed clearly that the real boom of the 1990s provided the growth and the revenue that allowed Government to introduce and extend that plethora of tax breaks and cuts. The boom preceded the tax cuts. And as we now know, their introduction stimulated nothing more than Europe's biggest property bubble and the biggest financial crisis in the history of the state.

If we are to rebuild and rebuild in a sustainable manner, the tax base will have to be reconstructed.

But won't big cuts help us bring down our borrowing bill?

In the short-term, yes. But the purpose of a recovery plan is not just to bring down borrowing, but to bring about a national recovery. The problem with imposing huge cuts is that it would almost certainly collapse what is left of the economy. And that would ensure that Government would have to resort to even greater levels of borrowing in the near future.

If we cut incomes - welfare rates or wages - we are guaranteed only one outcome: more jobs lost and even more people dependent on social welfare. That point is conceded by bodies such as the ESRI.

Almost half 48 the Irish economy is made up of people purchasing goods and services. With an extra 200,000 people out of work since 2007 and others worried about the future, it is not surprising that spending is down - by almost €8 billion in the last 12 months. This has contributed to the surge in unemployment in the last 12 months. It is a vicious circle. Simply cutting spending will not solve the enormous problems we face. Over the last 12 months, the Government has introduced two budgets, both of which took money out of the economy. But the situation has not improved, it has worsened.