asked the Minister for Finance if he is satisfied that the minimum steps which were set out in Paragraph 7.8 and 7.9 of Building on Reality, 1985-87, to halt the deterioration in the public finance position by 1987 have been achieved; and if he will indicate the correct action, if any, he proposes to take.
Ceisteanna—Questions. Oral Answers. - Public Finance Deterioration.
40.
Considerable progress has been made towards the objective of halting the deterioration in the public finances. As the plan itself recognised, divergence from specific targets might arise if the economic outlook developed other than as envisaged at the time. This is, in fact, what happened. However, progress has been made under a number of the heads listed in the sections to which the Deputy refers:
— the Exchequer borrowing requirement has been reduced from 15.7 per cent of GNP in 1982 to this year's projected outturn of 13.1 per cent;
— the public sector borrowing requirement has been reduced from a level of 19.9 per cent in 1982 to this year's projected 15.5 per cent;
— foreign interest payments have fallen from 4.9 per cent of GNP in 1984 and over 5 per cent in 1985 to this year's projected level of 4.3 per cent;
— the balance of payments deficit has been reduced to about half the level envisaged in the plan, in other words, a larger reduction has been achieved.
It is acknowledged that the current budget deficit has not fallen but the reasons for this have been made clear in a number of statements, most recently in the statement accompanying the publication of the end-September Exchequer returns.
The Government, on 16 October last, reaffirmed their commitment to make further progress towards reducing borrowing. The 1987 Exchequer borrowing requirement will be less than 11.8 per cent and the current budget deficit will be reduced to not more than 7.4 per cent of GNP. Furthermore, such a reduction in the borrowing requirement will mean that its non-interest component will be reduced to less than one-half of 1 per cent of GNP so that in effect almost all of our borrowing next year will go towards repaying interest on past debt. It is worth noting that in 1981 the amount we borrowed for non-interest purposes was 8½ per cent of GNP as against one-half of 1 per cent of GNP which is likely to be the case in 1987.
I note the Minister's selective reply to the queries. Could I ask him — I hope the Chair will bear with me as this is a statistical question——
I find it easier to bear with matters that are not in order during priority questions because people are wasting their own time.
It is a subjective viewpoint as to who is wasting time.
That is unfair to Deputy O'Kennedy, I object on his behalf.
We will make a judgment as to how much time is wasted by a contribution from any source in the House. I wish to address myself to the following targets in Building on Reality which were described as minimum steps. It said that the target for Government borrowing as a percentage of GNP was 9.75 per cent but, by the end of 1986, it will be 13.5 per cent. We were told that the national debt would be stabilised as a percentage of GNP at about 133 per cent but, at the end of this year, it will be 146 per cent of GNP reaching an all time record of £23 billion. We were told that the total current expenditure would be 46 per cent of GNP and it is already estimated to be over 50 per cent of GNP. We were told that the budget deficit would be 5 per cent of GNP next year but clearly it will exceed 8 per cent at the end of this year. We were told that taxation would not rise as a share of national output at 36 per cent of GNP but already the 1986 outturn represents 37.3 per cent of GNP. If that kind of increase on all the fiscal aggregates represents progress, minimum steps or otherwise, will the Minister acknowledge that the document has no relevance now? All the main targets in Building on Reality have not only not been realised but have been clearly abandoned. Does the Minister intend, even with the Government's last gasp, to introduce a new target to which we might be able to adhere?
As I have already indicated, the Government made decisions regarding the borrowing requirement for next year and for the current budget deficit for 1987. The position is that some of the targets set in Building on Reality have been under-achieved — not surprisingly the Deputy has not dwelt on those — but other targets have been overachieved. For instance, in the area of bringing down the level of the balance of payments deficit we have achieved more than that projected. The same applies to inflation. We have achieved more than was expected. Obviously, any plan of that kind is based on certain assumptions of what will happen in the world outside. Ireland is not an island in the world economy in the sense that it is unaffected by outside developments as 60 per cent of what we produce is exported. A number of external factors negatively affected our ability to achieve some of our targets.
On a point of order, if we are to be treated to a lecture on external factors it will take ten minutes. Could the Minister indicate which external factors put the plan off course? No doubt he will refer to falling oil prices which should have been a help——
One long statement leads to a longer one.
There are external factors in two senses, external to the country and to what the Government can directly control exclusively by their own actions. In regard to the former, there was a slow growth in world demand for goods in general and for Irish exports in particular——
That is not true.
Hence, there was a fall in tax levels. Furthermore, the volume of spending by Irish people and thereby the paying of value added and other taxes grew by only 19 per cent over the period as against a 26 per cent growth which was assumed in the figures underlying the plan.
Who is reponsible for that?
The Government also abolished the income tax levy which meant that there was a reduction in the level of assumed take from taxation. There was a reduction in non-tax revenue from the 4.4 per cent projected to 3.7 per cent. The main reason for this was the fall in the contribution to the Exchequer by Bord Gáis Éireann. Furthermore, it should not be forgotten that we had two exceptionally bad years in agriculture due to weather conditions and the contribution of agriculture to the economy is very significant in terms of taxation paid directly and indirectly——
The Chair has been very diligent on many occasions in ensuring that we do not have speeches in the House. The Minister is obviously engaging in propagandist misrepresentation. Could he be called to order? He should concentrate on specific points or make his speech outside the House.
I could say, Deputy——
I raised specific points.
Order, please. I could say, Deputy, that the Chair has no control over the way questions are answered and I would be stating a fact. However, in reply to Deputy O'Kennedy, who appeared to be appealing for latitude, I did state the position.
Is it not clear from these figures——
I was not finished. I want to make one more point.
I have heard enough. I feel I am sufficiently informed.
My replies are not for the Deputy's benefit; they are for the benefit of the House.
If that is information——
The final point I wish to make is that tax revenue has been below what was expected because the level of unemployment has been higher than was expected. This is due in part to the fall in the rate of growth in the economy and the relatively lower level of growth in private consumption than was expected.
Would the Minister not agree that the vast majority of the targets which were central to Building on Reality have not been realised? Any further statements of intention by the Government in 1987 are sheer nonsense and should be treated as such.
I do not think that is a question. It is a tendentious statement by Deputy O'Kennedy and, as is the case with many of his statements, it has no foundation.