I move:
That Dáil Éireann takes note of the 1988 Estimates for the Public Services (Abridged Version) and of the 1988 Summary Public Capital Programme.
It is widely accepted that the action taken by this Government since March represents a decisive turning point in our affairs. The problems of the economy are being tackled, and confidence is returning. We are working our way towards a better future, increased employment and improving living standards. The 1987 March budget was a decisive first step. Financial targets are being rigidly adhered to, interest rates have come down and both industrial production and exports are rising rapidly.
In the last ten days we have taken two further major steps to secure recovery. They are the Programme for National Recovery agreed with the social partners and the publication of the Book of Estimates for 1988. Both are integral to the Government's strategy. The broad financial objectives which we must set ourselves for the next three years were set out and agreed by the social partners in the programme, in particular the requirement that the relationship of the national debt to GNP should be stabilised and that consequently Exchequer borrowing would have to be brought down to between 5 per cent and 7 per cent of GNP. The programme provides for moderation in pay, for income tax relief and a commitment to job creation. The Book of Estimates for its part provides the basis on which an appropriate budget for 1988 can now be framed in accordance with the overall strategy and the economic realities.
The 1987 budget made significant progress towards our objective of reducing dependence on borrowing. Our work in preparing the 1987 budget showed us that expenditure would have to be reduced further in 1988 to halt the deterioration in the public finances. Ministers, therefore, initiated an in-depth review of all spending programmes in their Departments immediately after the budget.
It was clear that the normal Estimates process, by itself, would be inadequate to procure an adjustment on the scale required in the overall level of expenditure in 1988. That process traditionally secured savings in the levels of expenditure proposed by Departments as a routine exercise but what we had to do in present circumstances was to ensure that every single item of expenditure could be fully justified on its merits. If it could not be so justified it had to be either eliminated or reduced to a level where it could be. This involved the most detailed, meticulous and objective review of the whole range of Government expenditure ever undertaken.
What we sought was a major and significant reduction in Government spending while maintaining services which are essential at the best possible level. We had to identify schemes and programmes which had outlived their usefulness, or were no longer serving the purpose for which they were originally intended, were duplicating some other service or which were in effect a luxury we can no longer afford. We sought to identify and protect priority areas where services were of vital importance and curtail expenditure in other — lower priority — areas.
The first notable feature of the 1988 Estimates is that they have been published well in advance of the next financial year so that they can be properly debated and so that Departments and other bodies administering public funds know well in advance their allocation, and are able to plan their expenditure accordingly. In the 1987 budget expenditure reductions had necessarily to be implemented at short notice. That is not the position in 1988. There will be no excuse for saying that the Departments and agencies have not time to adapt and adjust to changes and reductions. The early publication of the Book of Estimates was attempted only once before, by the last Fianna Fáil Government in November 1982. While the Coalition published a White Paper outlining good intentions some years ago they were not, in fact, able to achieve anything in the four years they were in Government. The early publication of the Book of Estimates is an important landmark for the future, and a really significant achievement given the number of extremely difficult decisions that had to be taken. Now that the precedent has been established and we have shown that it can be done, we must ensure that this reform will be adhered to in future.
The critical situation of the public finances is well known to everyone. In the last four years the national debt doubled from £12.5 billion to £25 billion. We are now paying over £2.1 billion or nearly the whole of the revenue collected from PAYE just to service the debt. The debt is now equivalent to £28,000 per household, the equivalent of a substantial mortgage. And there was very little to show for all that massive borrowing. The unemployment situation deteriorated, emigration soared and taxation increased to excessive levels.
It is that millstone, the enormous cost of servicing the national debt, that is at the heart of our economic and financial difficulties. It is the principal reason for our present high tax rates, rates which involve 44 per cent of income tax payers now paying at more than the standard rate. The level of Government borrowing and the cost of servicing it are the major cause of our high real interest rates which, despite recent reductions, are still excessive and an impediment to investment. They are also a direct cause of the substantial financial outflows from the economy each year. They make us a high-cost economy. They are the single biggest constraint on further growth and development.
When we came into office we saw clearly that existing policies were not getting on top of the problem. Last autumn a serious loss of confidence caused a flight of capital and sent interest rates soaring. The situation had been reached where it was no longer possible to make economic progress on any front unless the fundamental financial problems were effectively tackled. Action had to be taken urgently and, no matter how much irritation or disappointment that action may understandably cause, there is, I believe, a general appreciation of what has to be done. The recent developments on the financial markets underline for us in a very dramatic way, if that were necessary, the need there is for us to put our own public finances on a secure and sound footing.
The 1987 budget was a milestone in the recent history of the public finances. The reduction in borrowing which the budget set out to achieve this year represents the largest reduction achieved in recent memory. That is no small achievement. Because of this dramatic reversal of the slide to disaster there has been a significant reponse throughout the economy; lower interest rates and reduced capital outflows; substantially increased exports and a greatly improved balance of payments. Confidence is slowly but surely returning right across the board.
Fianna Fáil will always seek a great future for this country and her people. We want to place Ireland in the mainstream of European and international development and not be a depressed region on the periphery of Europe subjected from time to time to a large flood of emigration. In the long term our political independence rests on a viable developing economy. I know and appreciate that the course we have to follow is a tough one, but it is an absolutely essential one. The things we all want, good incomes and employment, high quality public services, a caring system of social welfare and health, all depend vitally on our maintaining sound public finances.
In this small country we must try to resolve our problems together in co-operation and understanding and not at each other's expense. We can achieve nothing by deeply dividing our society. It was for this reason that we engaged in consultations with the social partners in order to establish a framework within which further progress could be made towards getting the economy and the public finances back on course.
Our approach has been to seek the broadest possible consensus on national objectives, and to invite participation by the social partners in deciding, without prejudice to the Government's responsibility to govern, how the principles agreed by them in the NESC report can best be implemented. Experience has shown that reductions in expenditure carried out in isolation and not related to an overall strategy which includes measures to promote development, to improve equity and to relieve the tax burden, would not command the degree of acceptance and support which is required for a major improvement in the economy. The nature of our difficulties is such that they must be tackled now, in the short term, with the greatest possible degree of unified national support.
The expenditure allocations for 1988 involved many difficult but necessary decisions. They reflect a balanced package of measures arrived at after the most careful consideration of all the options. A wide range of services is affected as the Government has sought to distribute the burden fairly across the board, husbanding scarce resources and protecting the weaker sections to the greatest possible extent.
The Estimates represent one side, a very important side, of the budget and of overall economic strategy. Government expenditure has been increasing steadily for most of the last 30 years. This trend could not continue even a year longer without a devastating impact on all our future prospects.
Already in this year 1987 Government expenditure has been reduced from 56.6 per cent of GNP to 55.2 per cent in 1987 and there will be a further substantial fall next year. This sustained fall is in marked contrast to the long-term upward trend of earlier years. It is one of the most significant changes in fiscal policy for decades. This is the first year in modern times that the expenditure Estimates are well below, in nominal terms, expenditure in the previous year. The nominal reduction is £412 million and the underlying reduction is nearer £500 million. I think it is accepted that the reductions for 1988 are spread across the board and do not fall disproportionately on any one area of activity.
We have been scrupulously concerned to ensure that the burden of adjustment is borne by those better able to bear it. One of the very few areas to show no appreciable reduction at all, and even a slight nominal increase is the social welfare area. We have been able to implement one of the important recommendations in the Commission on Social Welfare Report, the extension of the free fuel allowance to the long term unemployed, as well as proceeding with the extension of treatment benefits to the spouses of insured workers. In agreement with the trade union movement the interests of the low paid and of those on social welfare have been protected in the Programme for National Recovery and to the greatest degree possible in the Estimates. The Government have made a commitment in the programme to maintain the overall value of social welfare payments.
A number of the policy measures we are implementing are designed to improve equity in our society and to reduce social divisions by providing more and more equality of opportunity. Greater equity in taxation is being sought by measures like the new withholding tax, the taxation of farmers on the same basis as the self-employed generally, and the extension of PRSI to farmers and self-employed.
I wish to emphasise strongly that the Book of Estimates for 1988 as published will ensure that essential services are maintained. It was to be expected that vested interests affected in different areas would of course react vociferously. In some cases economies have had to be made which any of us would have wished to avoid and in other cases we have to stretch our limited resources very thin. Contrary however to the impression being created we will still have a sound educational system, an excellent health service with the best specialist care available to the public patient, an extensive social welfare system that provides for old and disadvantaged, and a reasonable provision for the maintenance of essential local authority services. There is no question of the many social advances of the last 20 years being seriously undermined. On the contrary, the action we are now taking to restore the public finances is absolutely necessary to protect for the future the basic structure of the services we have been able to build up and to ensure that we will be able to keep them financed in future years. The choice was between providing a level of services that we can afford to pay for or keeping a structure that would soon collapse because it could not be sustained.
We have identified a clear need for a major rationalisation of State agencies and services. The structure that has grown up over the years has become far too cumbersome with too much overlapping and duplication. We were not prepared to accept, without close examination, that all of them are still essential, or that their activities could not be scaled down. There are simply too many State agencies and authorities, each with their own heavy burden of administrative overheads. In some cases they are carrying out tasks in an elaborate environment that could be much more economically performed as normal functions of their parent Department. In other cases they were set up for purposes which have long since been accomplished. In some economic and social areas there are a number of agencies doing basically the same job. We simply have not got the resources to support this elaborate superstructure of agencies. We therefore examined the functions of all State agencies in a drive to eliminate duplication, overlapping, waste and non-essential activity. We also looked for areas where those who use a particular sevice should in fairness contribute more directly to the cost of that service.
It is quite untrue to suggest that we are protecting the administrators at the expense of the services. In January 1988 Civil Service numbers will have dropped by 6 per cent compared with January 1987. Over the whole Exchequer-financed public service, the reduction in numbers this year will be 9,000 which is four and a half times the 2,000 achieved in the entire lifetime of the previous Government. What is happening is that the reduction in the cost of pay is proportionately greater than the general reduction in expenditure which indicates that the balance is in favour of the preservation of the services. We can only have a public administration and a level of services that we can offord to pay for. It is in nobody's interest that we live beyond our means and keep going further into debt. This has nothing to do with ideology; it is simply a hard fact of economic life and survival.
There has been inevitable criticism of the job losses in the public service which are necessarily involved in major reductions of Government expenditure. Here the answer is the same. We cannot continue to employ more people than we can afford to pay. And we have formulated satisfactory redundancy provisions for those who will leave the public service.
In the Estimates volume, it is clearly stated that provision for the lump sum payments is not included and will be the subject of subsequent arrangements. The Government are discussing with the Central Bank appropriate arrangements that might be made to enable the cost of these redundancies to be met exceptionally and over a period. When these discussions have been concluded the House will be given full details. For the moment the full cost of redundancy lump sum payments cannot be ascertained and it is not therefore possible to finalise the arrangements.
In the Programme for National Recovery we have identified in some detail where the opportunities for job creation are to be found. I would like to reiterate that the Government are absolutely committed to the creation of employment within the economy, and to achieve and if possible exceed the projected sectoral job targets in employment. The job projections show what we believe to be attainable on a realistic assessment. We know what we want to achieve, sector by sector, and in most cases specific policies for this purpose are already in place. We have succeeded in getting agreement among the social partners to a public service pay agreement which is very moderate and realistic having regard to the general economic situation and the state of the public finances. Public service pay for 1987, which was already decided before we came into office, was 6 per cent above the figure for the previous year, 1986. That 1986 figure exceeded the target in the Coalition proposals in Building on Reality by £127 million and was largely responsible for the massive overrun on the current budget deficit in that year. I totaly reject as nonsensical the criticism which has been made of the present agreement. It is a sensible and moderate increase and infinitely preferable to the disruption that a unilaterally imposed pay freeze would have caused.
I do not think that sufficient emphasis has been placed by some commentators on the provisions for pay in the agreed programme, even though it has been widely hailed and endorsed in trade, in industry and in agriculture. A pay pause of six months after the expiry of the current pay agreements in the public sector will apply. The Estimates were framed on the basis that no further general increases would apply in 1987 and this position will now be realised when the current agreement expires.
How can anyone seriously criticise a provision in the programme which imposes a limit of 2.5 per cent on pay increases throughout the economy for the next three years? This definite limit enables the Government to approach the next three budgets with one of the principal elements satisfactorily settled. A significant feature is the agreement of the trade unions not to engage in industrial action in pursuit of claims in excess of the pay terms of the programme, which should contribute greatly to industrial peace.
The pay provisions of the programme contain a clear bias in favour of the lower paid. This is the first time that this has happened for many years. As I have already indicated, taking into account the 2.5 per cent agreed, the estimated total cost to the Exchequer of pay and pensions for 1988 will not exceed the estimated outturn for 1987.
I believe that this provision for moderate pay increases covering both the public and the private sectors for the next three years is one of the most important achievements of the Programme for National Recovery. Everyone knows that economic and social planning must include a pay policy which for the period involved establishes the level of pay increases. This aspect of economic and social planning is crucially important because salaries and wages represent 80 per cent of gross national product. Realistic planning therefore must be based on a clear understanding about the development of pay during the period of the programme. Uncertainty about pay can upset any programme. A recent study, by one of its chief architects, of the failures of Building on Reality shows that the failure to achieve the pay objectives of the plan was one of the main reasons why its fiscal objectives were never realised.
Certainty about pay enables the public finances to be coherently planned since pay represents almost half of Exchequer expenditure. In the private sector which is facing increasingly competitive trading conditions, certainty about the evolution of pay over three years in an atmosphere devoid of industrial disputes and unrest provides the best possible basis for investment in and the development of individual enterprises. This firm planning basis coupled with lower interest rates now provides the best opportunity in a decade for investment decisions leading to greater output and efficiency and increased employment. This is why one of our foremost economists considers that the pay agreement in the programme represents "a significant change in the economic environment".
Some spokesmen for the Opposition parties seem to favour overcoming our economic and social difficulties and achieving industrial peace by a general pay freeze. Let them tell the House whether in fact that is their position. Do they seriously think that that is a sensible approach?
The approach of this Government, the trade unions and the employers, is far more sensible. We have agreed on a moderate pay increase over the three years which is related to the position of the Exchequer and the economy as a whole. It is an increase consistent with our objective of stabilising the national debt/GNP ratio and consistent with the objective of the private sector to remain competitive with our international competitors. It is also consistent, when taken with the tax concessions, with the social objective of helping to protect the living standards of families as much as possible.
There has been some criticism of the distribution of expenditure reductions as between current and capital. But we had no alternative to making reductions both on the current side and on the capital side if we were to achieve the overall target we need. I must point out that in this year's budget we reduced the current budget deficit by 1.7 percentage points and now have the current budget deficit at its lowest level since 1980. We are in fact therefore concentrating heavily on reducing borrowing for current expenditure as distinct from capital expenditure.
I accept in principle that it is desirable to the greatest extent possible to maintain productive public investment. But the compelling need to reduce the overall level of Exchequer borrowing dictated that we must have the reductions proposed on both capital and current account.
There has of course been very substantial capital investment since 1980, which has cleared many of the major infrastructural bottlenecks and deficiencies. Major investment programmes have been carried through in energy, telecommunications, housing, school-building, hospitals and communications. There is of course a great deal to be done in some areas; to improve our roads network and to reduce environmental pollution, for example, but we have reached a stage where a strong case can be made for scaling down considerably, for the moment, some categories of infrastructural expenditure. In current circumstances all capital expenditure must be rigorously reviewed against its potential economic return. Important productive investment will as far as possible be maintained. In particular, we will do everything to support industrial investment and employment. All the promotional agencies will have to make the maximum possible use of their budgets and concentrate their resources where they are most effective. We do not accept that reduced budgets for an agency necessarily means reduced effectiveness; rather does it ensure that funds are concentrated where they are most effective. The taxpayer is entitled to full value for money in every area of the public service.
The Estimates for 1988 are an essential step towards restoring the country to economic health. If we fail to take these steps now, the hardship will be much greater in the long run, with reduced employment, exorbitant taxation and heavy reductions in public expenditure that would be bound to affect much more severely the least well off. High public spending, high taxation and high borrowing are no longer available as policy options.
As a Government we have had to initiate a major departure in fiscal policy. The situation we found on taking office left us with no alternative. In fact what we are now doing is consistent with the financial framework set out in our election programme which combined a stringent financial framework with development policies. The financial policy objectives we set out in that programme, however, have in the event required remedial action on a scale not previously envisaged.
One of the most encouraging developments this year has been the increase in the officially forecast growth from 1 per cent to just under 2 per cent. It shows that the deflationary effects of budgetary policies are being offset by increased economic activity, and indeed it would seem that a strategy based on reduced expenditure rather than increased taxation can have these very positive indirect effects.
The Book of Estimates is of course only one side of the Government's financial strategy for 1988. The Government's strategy for the 1988 budget and the general thrust of economic policy in 1988 will be outlined in the 1988 budget. The main objective of this budget will be to continue the adjustment process initiated this year and to introduce new selective developmental incentives where possible. Next year's budget will, therefore, take us nearer to stabilising the debt/GNP ratio by 1990. The recently published Estimates for 1988 are the principal factor in deciding the shape of the next budget. But the various pay, social welfare and income tax proposals in the Programme for National Recovery will also form an important component of the budgetary arithmetic. Even when all these known factors are taken into account, we foresee the Exchequer borrowing requirement showing a further significant fall next year. The 1988 Estimates and the Programme for National Recovery must be judged in this light and when they are, it becomes clear that they dovetail into an overall strategy aimed realistically at bringing about economic and financial recovery.
The Programme for National Recovery represents a major national achievement in tackling our economic and social problems in a realistic and effective way and makes an important contribution to improved confidence. I would like to congratulate all the social partners involved in the negotiations on their responsible approach at this difficult time and on their ability to agree on a realistic medium-term strategy. There is now in this country a broad consensus on the extent and nature of our economic and social problems and the approach required to tackle these problems effectively. This consensus was first articulated towards the end of last year in the very significant National Economic and Social Council study —A Strategy for Development 1986-1990.
NESC put forward an integrated set of recommendations to deal with our current problems in the areas of macro-economic policies including public expenditure control, the reform of the taxation system, the promotion of traded goods and services and the progressive removal of major social inequities. The council recognised that the achievement of a more rapid and sustainable rate of growth and the correction of the chronic imbalances in the public finances will require a considerable degree of sacrifice from society but they made clear that it is essential that such sacrifices are shared equitably across all sections of society.
It is significant that when the NESC study was published the previous Government issued a statement welcoming the report saying that "NESC's views are broadly in line with the Government's own analysis of both the outlook and the requirements for progress". Some of the major points in the NESC report, in particular the necessity of stabilising the national debt/GNP ratio, were incorporated in the Fianna Fáil election programme, and subsequently on behalf of the incoming Government on 10 March 1987 I endorsed the NESC report in the Dáil.
The Programme for National Recovery builds further on the foundations provided on the one hand by the NESC study and on the other the principles set out in Fianna Fáil's own programme. It translates the principles and recommendations agreed by all the social partners in the NESC study into the firm action that must now be taken to give effect to those same principles and recommendations. Consultation by the Government with the social partners ensures the widest possible support for the steps that must now be taken and it also ensures that the sacrifices required in the short-term to restore stability and growth to the economy will be shared equitably across all sections of the community. Given the very difficult economic situation facing the country the Government are firmly of the view that our success in overcoming these problems will only come about if the talents and abilities of all sections of our community are fully mobilized in a great, unified effort. We will continue to consult with the social partners in the implementation of the programme for that very purpose.
The programme provides for the maintenance of the living standards of those on social welfare. Given the necessity for continuous expenditure restraint this commitment underlines the importance the Government and the social partners attach to the achievement of social equity.
The moderate increase in public service pay negotiated under the programme, together with the voluntary redundancies envisaged, will make a major contribution to restoring stability to the public finances. There is, of course, room for debate as to where precisely the reductions needed in public expenditure should fall. To assist that debate I would like to enunciate the principles by which the Government were guided in deciding on the general pattern of reductions. These were, one, the need to protect the most vulnerable sections of the community when implementing the necessary policies; two, the need to ensure fairness between different sections of the community and, three, the need to maintain, to the greatest extent possible, the incentives for people to engage in the enterprise and undertake the effort needed to restore growth and stability.
The high rates of income tax that prevail here at relatively low levels of income are a major disincentive factor. We have agreed, therefore to reduce income tax by £225 million over the period of the programme. In that context we will also be making significant progress in achieving the Government's objective of bringing two-thirds of income tax payers on to the standard rate. Farmers will now be taxed on income on the same basis as other self-employed income tax payers. Ultimately the effectiveness and fairness of any tax system will be judged on the operation of the system of tax collection and enforcement. The Government have already allocated additional resources to improve further this side of our tax system and we will continue to give a high priority to combatting tax evasion.
An efficient revenue collection system is also an essential element in achieving the Government's aims of bringing about a tax structure suited to our development needs, and closing the gap between revenue and expenditure.
The Programme for National Recovery sets out a series of specific measures to achieve equity in the tax system.
The Revenue Commissioners are to draw up, as a matter of priority, a programme and timetable for the reduction and elimination of arrears. The Government are committed to the introduction of a form of self-assessment for corporation tax and income tax for the self-employed; the details of a new system extending tax clearance conditions to the payment of certain grants and introducing a requirement to give tax numbers on application for all grants are close to finalisation. The Law Reform Commission have been examining the whole area of debt collection and the Government will consider their recommendations immediately on receipt with a view to identifying what additional steps can reasonably be taken to speed up the process of tax collection.
The economic difficulties which have beset the country have meant a major increase in the numbers dependent on social welfare benefits. To cope with this increase presents a major difficulty in managing the budget, the extent of which is very often ignored by commentators in this area. Social welfare recipients are among the most vulnerable in our society and the extent to which those in real need can be protected from the sacrifices now required will be a measure of our sense of responsibility as a community. The Government are committed to doing this under the national programme. The overall value of social welfare benefits will be maintained and special provision made, within the resources available, for greater measures for those receiving the lowest payments.
Our economic and social prospects ultimately depend on the further development of the productive sectors of the economy, agriculture, forestry, fisheries, manufacturing, tourism and other internationally traded services. The programme has a strong developmental dimension. It identifies those areas of the economy which offer the best opportunities for growth and development. These are also the areas with the greatest potential for job creation. The Government will be concentrating on these over the next three years to see what further initiatives can be taken to accelerate their growth and expansion.
The measures already taken since the Government took office and those now being put in place under the programme will immeasurably improve the climate for investment in the traded goods and services sector of the economy. Interest rates have already fallen and this has contributed greatly to an improvement in the operational costs facing Irish enterprises. Confidence in the Government's handling of the economy has already brought forward a significant number of investment projects.
Tourism is set to break all previous records this year in terms of increased visitors and revenue. Bord Fáilte predict that visitors this year will be over a quarter of a million up on last year generating over £90 million in increased revenue and over 3,500 additional jobs. The Government acted quickly and effectively at the start of the season to boost the industry this year through the provision of investment incentives and cheaper access transport costs and we will reap further benefits from these measures in future years. We will publish a new development programme for the industry in the coming months, building on what has been achieved this year and reviewing policy with a view to recovering market share lost in previous years and making the tourism industry a much stronger instrument of job and wealth creation.
The manufacturing sector must remain at the centre of any programme for national recovery. We have now developed in this country a cadre of young, well-qualified, professional managers who can supervise a significant take-off in the development of the indigenous sector of Irish industry — a sector which has to date, with a few notable exceptions, failed to achieve its full potential or to fully exploit the opportunities for development on home and export markets.
Manufacturing exports from this country represent only a little over one per cent of the EC market. In many markets our share has actually fallen in recent years. Without the contribution of overseas firms located here our export performance would be very disappointing indeed. As a small nation relying for jobs on our exports we must go all out to change the present unsatisfactory situation. We have, accordingly, outlined in the national programme the steps the Government will take in contributing to this.
The State industrial promotional agencies have already been looking at new job creating opportunities in a number of specific sectors of Irish industry including the food industry and bio-technology, wood-processing, fish-processing, clothing, electronics and mechanical engineering. Job-creating projects in these and other sectors will be further developed under the programme.
The location of new overseas investment here will continue to be promoted on a specialised basis. Over the past three or four months there have been clear signs of a recovery in interest by overseas investors, and "site visits" by potential investors have increased as the determination of the Government to tackle the fundamental problems of the economy became clear.
The financial services area is another example of a sector which the Government identified as one of significant employment potential. Since taking office the Government have moved expeditiously on the development of the Custom House Docks site. Very great interest has been shown by investors in the development of the site and has resulted in eight substantive submissions for the full development of the site within the parameters set out in the Authority's planning scheme. The interest expressed in the development of the site and the impressive nature of the submissions received bear testimony to the potential and attractiveness of the site for inner city redevelopment. The submissions are at present in the final stage of evaluation, and development on the site will proceed before the end of the year.
Total construction investment in the site will amount to £250-£300 million. Over the next four years up to 1,500 construction jobs will be provided at peak construction. Serious discussions are under way with 40 key companies who plan to establish in the financial services sector in which it is expected that some 7,500 jobs will be provided over the next five years with additional employment in support services. The development of the site will include a range of commercial, residential and recreational facilities of top-class design which will revitalize this part of the city and enhance the role of Dublin as the capital of our country and as an important international centre.
The Government are very conscious of the continuing vital importance of agriculture to the economy and has put a whole new emphasis on quality food production. A notable feature of our Programme for National Recovery has been the involvement of the farming organisations in the negotiations with the social partners. Lower interest rates, too, will be of particular benefit to farmers.
The latest available data from the Central Statistics Office in this regard is for July 1987 and it shows agricultural output prices up by over 5 per cent on the same period last year with input prices down by over 2.5 per cent. This evidence that the cost/price relationship has moved significantly in the farmer's favour is a very welcome development. The Government have established Roinn na Mara with a view to reversing the systematic neglect of marine matters in previous years. The main marine concerns, fisheries, shipping, harbours, marine safety, conservation, recreation and amenity aspects have been transferred to the new Department with the purpose of co-ordinating policy and planning, downstream economic development and legislative reform. A start has been made in all these areas.
Policy objectives are being set for the fishing and aquaculture industries, and strategies and programmes to achieve these objectives are at an advanced stage of preparation.
The Government are determined to exploit with greater vigour our natural resources. Oil exploration has tapered off in recent years, and despite a large number of wells drilled over the past 12 years no oil province has been definitely established. Despite some revisions in terms by the previous Government, the relative attractiveness of Ireland was not being maintained. I made it quite clear during the election that our licensing terms would have to be made fully competitive with those offered by other producers in Northwest Europe, and that we have now done. We need to give a new impetus to oil and mineral exploration. That is the primary national consideration and we believe the nation will derive considerable benefit from these changes which would not have materialised otherwise.
In our Programme for National Recovery, we promised that we would put science to work. This Government have implemented a new approach to science and technology aimed at producing rapid results in terms of growth. In appointing a Minister for Science and Technology we paved the way for the initiation of many new science and technology programmes in 1987. These programmes, which will be further developed and expanded in 1988 include a national programme in biotechnology, a new national programme in advanced manufacturing technology, a new “teaching companies programme” and a pilot programme in the south east region to utilise and bring together the human technology skills in the region towards its economic and social development.
We are looking very closely at the concept of a national science park, which will bring together the talents and facilities available in our third-level institutions with the appropriate advanced technology industries which require or benefit from that sort of interaction.
The Government are anxious to exploit the development potential of the commercial State companies. Where any agency can bring forward projects which have a clear prospect of providing an adequate rate of return the support of the Government will be assured. Such projects can be financed by the State company itself or the National Development Corporation or involve joint ventures with private sector enterprises, which can bring financial or business resources to the project which would not otherwise be available. Such joint ventures can be extremely useful in bringing forward the development of infrastructural projects.
In the context of the Government's Programme for National Recovery we asked the State companies to submit proposals for new development projects which would create employment and be commercially viable. A list of the projects received are included as an appendix to the programme, some of which show considerable potential. At present the projects are being evaluated with a view to supporting those which satisfy normal criteria of economic viability.
We will be making every effort to ensure that the Government's approach to national economic recovery and to putting the public finances on a sound basis will have the full understanding and support of the European Community.
The performance of the Irish economy in the eighties has been disappointing not merely by reference to our own performance in earlier decades but also by reference to what other economies have been able to achieve in more recent years. The current overriding problem that we face with the public finances has contributed to, and has been exacerbated by, the weak performance of the Irish economy. Between 1980 and 1986, real GNP fell by about 2 per cent, a consequence both of sluggish output growth and the increasing drain of debt service payments abroad.
The Government have now set out clearly their strategy for correcting the public financial imbalances both in 1988 and over the years to 1990. We have stated clearly that we will do so in a way that will not give rise to or exacerbate social inequities, that will allow an improvement in the incentive to work through reducing the impact of personal taxation, that will reduce interest rates, arrest the outflow of capital from the country and restore confidence in the general overall management of the economy.
The Government have now clearly set down specific, well targeted development measures to improve the economic performance of the economy and to contribute in an important way to increased job creation. The essential requirement for this process which links it firmly to the Government's public finance strategy is to restore confidence to the country and to the economy.
The most important thing in restoring confidence is to let everybody see that the Government are governing, that they have a clear view of the economic situation and what needs to be done to put it right, that their policies and actions are directly aligned on that aim and that they will implement their policies with firmness and consistency and not be deflected by difficulties or criticism.
We are recovering from a long period of low morale and uncertainty and a sense of failure. Most of the mistakes made in the past in fact arose out of a genuine enthusiasm for economic development but, as a result, we now have to undergo a difficult, corrective process. We have to get back to the realism of living within our means, of identifying clearly in the different areas exactly what we can afford and what we cannot.
Returning confidence must be based on a realisation that the Irish economy is still one with enormous potential if our resources and our affairs are properly managed. We have considerable natural resources awaiting intelligent development. Among our major advantages is the fact that we are a full member of one of the major economic communities in the world.
The policies which we have adopted are dictated entirely by the fiscal and economic realities. I wish to state again categorically that they are not being undertaken for any ideological reason or political motives. They are not policies of the left or the right, but policies dictated by the sheer necessity of economic survival. All over the world governments with totally different political philosophies are all compelled to follow the same course of action that we are following because they have no alternative but to do so in order to survive.
Some are already well on the way to solving their difficulties. I have been talking in depth with the Prime Minister of Australia. His Labour Government have had to tackle exactly the same economic problems as we have and they have done this by steadily reducing Government expenditure, wage restraint and specific programmes of sectoral development.
Fianna Fáil have never been a party of the right, but a party of social progress. We have been the architects of social advance and that advance will be resumed as soon as our present difficulties have been overcome. But it is in nobody's interest to have waste or duplication or a structure of services which are unrealistic because we cannot afford them. The reductions in Government expenditure needed were of such a magnitude that they had to be comprehensive and far-reaching but we have sought to the greatest possible extent to protect the weakest sections of the community.
The time is now right for investment in Ireland. The Government are providing the context in which positive investment decisions can be made with renewed confidence. The increase in confidence which is taking place has created the right kind of climate for individual companies and institutions to start actively considering investment again and they are, in fact, doing so.
Many of the basic indicators of the Irish economy are now favourable. Inflation is running at less than 3 per cent, which is below the rate of many other EC member states. The balance of trade is now running a surplus of well over £1 billion over the last 12 months, and the volume of industrial exports is expected to grow by about 12 per cent in 1987.
The Government are relentlessly pursuing the achievement of soundly-based economic recovery. We are getting the public finances right. Overall, through decisive action on the public finances and through decisive positive Government we have created a new climate and a new belief in the very process of government itself. We cannot simply force development and growth to happen but, with the active support of all the principal participants in the economy, I am confident that we can succeed in getting economic recovery perhaps sooner than many can at this stage foresee. We are on the right road. I challenge anyone, inside or outside this House, to prove that we are not.
I also ask this House to face up to the reality and the requirements of our situation with maturity and responsibility. Future generations of Irish people would not forgive us if we did not do our duty to our country now without fear or favour and no matter what the political consequences for any of us might be.
