Vol. 370 No. 11
asked the Minister for Finance if the Government's economic strategy is now based on an acceptance of the fact that the central goals of the Government's economic plan in relation to unemployment and the current budget deficit which have been reiterated in recent budgets will not now be achieved within the lifetime of the present Dáil; and if he will make a statement on the matter.
19.
asked the Minister for Finance if the Government are reviewing their plans and strategy in relation to the unemployment crisis in view of the Government's failure to achieve their stated targets in this area in a number of Government statements and publications, including Building on Reality 1985-1987.
29.
asked the Minister for Finance if he accepts that the main targets in Building on Reality 1985-1987, will not be achieved; and if the Government have any proposals to publish any further economic plans.
35.
asked the Minister for Finance in view of the failure to achieve the main targets set out in Building on Reality 1985-1987, if the Government have any proposals to publish any further economic plans.
I propose to take Questions Nos. 13, 19, 29, and 35 together.
These questions all relate to Building on Reality, the continued relevance of the policies contained therein and the particular problems of the public finances and unemployment in that context. The general economic strategy contained in Building on Reality remains firm Government policy, but the inevitability of divergences from specific targets and projections, due to internal and external factors, must be accepted. In the case of Building on Reality, substantial progress has been made in certain respects while, in others, more remains to be done. With regard to the main macro-economic objectives, inflation now is much lower than anticipated and the balance of payments deficit as a percentage of GNP has been reduced to about half the level envisaged. The growth in output over 1985 and 1986 has been below expectations, due to the effects of adverse weather conditions on agriculture and tourism and slower growth in external markets, and private sector job creation has been slower, which has meant that unemployment will stabilise at a higher level than projected in the plan.
With regard specifically to the public finances, the central objective of the plan was to halt their deterioration and end the upward spiral of debt and taxation which had been in danger of becoming irreversible. Much progress has been made in respect of this objective. Exchequer borrowing has fallen from 15.7 per cent of GNP in 1982 to this year's likely outturn of just over 13 per cent. Although higher than envisaged in the plan, this represents an enormous improvement over what would have been the case had the Government failed to take corrective action. The Government have confirmed, in the statement of 16 October, their intention of reducing the Exchequer borrowing requirement to less than 11.8 per cent of GNP next year and of reducing the current budget deficit to not more than 7.4 per cent. As I have already mentioned in the House, 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. This in effect means that almost all our borrowing next year will go towards paying interest on past debt.
Tackling the unemployment crisis, as indicated in Building on Reality, is not a “question of establishing numerical goals” but rather of laying secure foundations for expansion of sustainable, productive activity. Although employment trends have been weaker than hoped for, the analysis in the plan and the policy approach outlined — curbing borrowing and strengthening competitiveness — remain valid. In addition to building a foundation for the future, the Government have been prepared, within the overall strategy, to act directly on employment, as evidenced by the October 1985 initiatives which are proving a tremendous success.
The Government remain convinced that the twin and inter-related problems of unemployment and excessive borrowing must be tackled together and are framing the 1987 budget in this light.
What was the unemployment figure which was targeted for in Building on Reality and what is the figure today?
The Deputy is as well able to read Building on Reality as I am and I am sure he is aware of the figure.
Does the Minister accept that the figure is now over 18 per cent?
I can give the Deputy the figure. The number of people projected to be out of work at mid-April 1987 was 210,000 or 15¼ per cent of the labour force. For 1986 on average the total projected to be out of work is 234,000 or 18 per cent of the labour force. As I indicated in an earlier reply the level of unemployment is higher than the Government had hoped would be the case.
Will the Minister tell the House what budget deficit was envisaged in Building on Reality and what it was at the end of the last financial year?
As I have already replied to that question I do not see any great need to reply to it again.
I would like an answer.
As the Deputy is well aware the position is that the budget deficit projected for 1987, in accordance with the Government's announcement in October, is 7.4 per cent. The Government had hoped in Building on Reality to achieve a current budget deficit in 1987 of 5 per cent of GNP. That will not now be achieved. This is the case for a number of reasons. The main reason is that the level of economic activity generally which generates both tax revenue and reduces the level of social welfare payments which need to be paid out has not been as high as we expected. For instance, we had been projecting a growth in world trade of 5 per cent.
You did not have the boom.
However it turned out to be only 3½ per cent. Ireland is a country which exports 60 per cent of what it produces. Therefore, when there is a deficiency in the anticipated level of growth in world trade Ireland, as an exporting nation, is disproportionately affected and that in turn affects the public finances. Last year and again this year we have had very poor weather conditions. This affected economic activity in agriculture and tourism.
Bad Government management.
And the cat got sick as well.
Does the Minister accept that having missed two central targets, unemployment and the current deficit, the plan is no longer of any use to the nation? Will he abort the plan and bring forward something more realistic?
The interests of all parties would be served by being realistic about the projections contained in the Government plan. The Government do not control the economy. They are not in a position to determine all the things that affect economic performance. The Government are just one, albeit an important one, of the factors affecting economic outcomes. What the document Building on Reality contained were projections and not promises.
You missed them all.
They were assumptions about what was likely to happen in regard to a number of variables.
You did not say that in 1982 about the budget deficit, the national debt or unemployment.
The only targets that were set as such in the plan was in regard to the current budget deficit. It comes ill from Deputy Brennan and others of his party to complain about the level of the current budget deficit.
Stick to your brief.
Every week we hear more promises of spending and higher borrowing from the Deputy's party. His party have enjoyed the facility of making contradictory statements day in and day out in the House.
Nine years in charge of the finances.
You missed every target.
On the one hand they are complaining about the level of borrowing and at the same time they are asking for more. Before the Deputy and his colleagues come into the House asking tendentious questions of this kind they should make up their minds as to where they stand as far as economic policy is concerned.
They had nine years.
Wait for it. It is only a couple of weeks away. Call an election and we will give you full freedom——
Order, please. Deputies might allow their own spokesman on finance to speak.
Since the Minister has taken one of my priority questions now I should like to pursue it.
The Deputy can pursue it in priority time.
Why did the Minister not answer that aspect of my tendentious question which asked if in view of the death of Building on Reality the Government have proposals to publish any further economic plan? The Minister took both questions together. That is a specific question which I should like him to answer.
We have no plans at this stage to publish an economic plan.
Dick will not let you.
Any plan must be based on firm decisions which have been taken. A plan simply explains the likely consequences of those decisions. The most important priority for us all is to ensure that decisions are taken to reduce the level of public spending in such a way as to reduce Government borrowing so as to help reduce interest rates in our community and thus give a sound basis for extra job creation. My priority at this time is not the preparation of a paper document called a plan but is rather to have decisions taken by the Cabinet in regard to the 1987 budget and to laying out the lines of subsequent budgets into the next decade. Those decisions are far more valuable in their long term effect than the publication of any document by anybody.
The Minister has now acknowledged that you cannot have a plan without decisions and that no decisions have been taken. Will the Minister give some indication of what prospects the people may expect from a Government who cannot take decisions much less put forward a plan? The Minister acknowledges that no decisions have been taken.
We are now in priority time. No questions may be asked by anyone other than the Deputy.
I want to have a reply to that question. The Minister indicated that the main target of Building on Reality was and still is with the Government, that is that unemployment and excessive borrowing would be reduced simultaneously. Would the Minister like to explain to the House and to the nation how he can reconcile that with the fact that those two elements are the elements which have grown at the most enormous rate, unemployment up to 240,000 and total national debt up to over £23 million, almost doubled since this Government came into office? Is that the Minister's notion of simultaneous reduction in unemployment and borrowing?
When the Minister mentions that unemployment is stabilised at a higher level than projected in the plan, would he not acknowledge that that is a very unhealthy form of stabilisation, particularly if account is taken of the fact that in stabilising, even at this higher level than projected in the plan, we have had to export over 120,000 of our youngest, finest and best? Could we have a formal funeral service for Building on Reality, perhaps at less cost than the formal ceremony in Dublin Castle, to launch this nonsense. It was launched at great expense, a great lavish production — Metro-Goldwyn-Mayer never did anything like it. I can assure the Minister that there would be thousands attending.
Hear, hear. Joan of Arc.
No big cigars and no champagne.
The Deputy asked about decisions that had been taken by the Government, important decisions in regard to the 1987 budget. First, the current budget deficit will not exceed 7.4 per cent of GNP and the Exchequer borrowing requirement — that is the total amount the Government will borrow — will not exceed 11.8 per cent; likewise, the Government have decided that there should be no overall increase in taxation.
They decided that each year and did the opposite.
In order to implement those general decisions, a number of decisions have already been taken by the Cabinet in regard to the level of spending on particular services. The bulk of the Votes in the Book of Estimates for 1987 have already been decided on by the Cabinet. However, a number of important decisions remain to be taken and these are engaging the attention of the Cabinet at the moment.
Sure.
As far as the targets referred to by the Deputy are concerned, I should like to make the following point and I think it is an important one. The references to unemployment were contained in page 26 of Building on Reality in table 1 (2) and if the Deputy looks at his copy, which I see he has before him——
I go to bed with it every night. It gives me nightmares.
——he will see that the reference and the heading of that table is "Projections in regard to Employment"— not promises, simply projections.
I did a better job.
As the Deputy is well aware, in public administrations all over the world, for instance, the US Government are publishing projections about the US economy virtually on a monthly basis, those are produced on the basis——
On a point of order——
Is it a point of order?
I believe it is.
The Ceann Comhairle will have to wait to hear it.
Please, I think the Deputy should let me reply. I did not interrupt his long rambling question.
The Minister has mentioned page 26 of Building on Reality in which he refers to projections.
This is becoming a debate across the Floor.
On a point of order, is it a projection when one gets an assertion as follows: "This will mean that between the end of this year and April 1987 employment creation will have absorbed the whole of the labour force and achieved a start to the reduction of unemployment." Is that not a statement of fact?
The Deputy is out of order.
That is not a projection. I am not going to listen to misstatements of fact.
These are elaborations of projections. As the Deputy is well aware, Governments all over the world are publishing projections about how the economy will perform on a monthly basis almost, certainly on a yearly basis. The EC, for example, publishes projections every year in its annual report about what is likely to happen to unemployment in each of the member states. If that is not achieved, nobody says to the EC that it broke its promise because the particular projection was not achieved in the particular member state.
I have three more questions to be answered.
If the Deputy were to achieve the situation he seems to want to achieve, which is that any projection made by a Government about anything is immediately converted for political debate purposes into a promise, then no Government would ever make a projection about anything. That, to my mind, would not be desirable because the Government have information available to them which is useful in assessing economic policy. Sometimes things do not turn out as expected——
They certainly do not.
——sometimes they turn out better. In the case of inflation and the balance of trade the results were better than those expected in Building on Reality. In the case of other matters such as unemployment, the results were not as good. However, I see no reason that we should not publish projections of this kind and revise them from time to time. I have already indicated in my reply to the Deputy's question that this projection has been revised, is not going to be achieved and that there is no attempt here at concealment on the part of the Government. I think it is better for all of us to debate matters of this kind on the basis of a true appreciation of the up to date situation, rather than attempting to rake over the coals for purely sterile party purposes.
Spoof. I did not mean to upset the Minister so much. Obviously, he is in a very serious position.
He is facing Beecher's Brook for the second time.
