asked the Minister for Finance if his attention has been drawn to the views expressed by the ICTU that economic growth will ensure that the debt/gross national product ratio is stabilised in the near future and that it would be an error to embark on another round of cuts in public expenditure; and if he will make a statement on the matter.
Ceisteanna — Questions. Oral Answers. - ICTU Views on Economic Growth.
1.
I am aware of the views of the Irish Congress of Trade Unions, as expressed on a number of occasions, in relation to public expenditure and other aspects of economic and social policy.
The Government decisions on public expenditure have been, and will continue to be, taken in the context of the strategy set out in the Programme for National Recovery which has been agreed with the ICTU and other representative organisations. The programme identified the stabilisation of the National Debt/GNP ratio as the key requirement for putting the economy back on the path to long-term sustainable economic growth and indicated that this would require reducing the Exchequer borrowing requirement to between 5 and 7 per cent of GNP. It further stated that measures to control and curtail public expenditure were necessary to bring this about.
As a result of the progress in implementing the programme strategy and in creating conditions conducive to economic growth, the prospect is that the underlying Exchequer borrowing requirement this year will emerge at around 7 per cent of the GNP. This is well within the budget target of 8.2 per cent and brings the level of borrowing to the upper end of the range specified in the programme.
Of course, on account of the exceptional proceeds of the tax amnesty, the actual EBR in 1988 will be well within and probably below the 5 to 7 per cent range. Consequently, the National Debt/GNP ratio at the end of this year is likely to be of the same order as at the end of 1987. This is a most welcome development but, as I have already indicated, the prospective Exchequer borrowing requirement for 1989, in the absence of the expenditure measures contained in the Estimates, was set to be above the range of 5 to 7 per cent of GNP. The public expenditure decisions taken by the Government are, therefore, essential to the achievement of the central objective of the programme, namely, to stabilise the National Debt/GNP ratio by 1990.
Are we to take it from the Minister's reply that he is not going to have any regard for the views of ICTU in the context of the forthcoming budget?
No. The Deputy was not listening to what I said. We have been involved with the ICTU and others in the preparation of the Programme for National Recovery and one of the items that we are all agreed upon is the necessity to stabilise the debt/GNP ratio and what that entails, and that there would be a necessity for public expenditure reductions. That is the process we undertook in 1987, continued in 1988 and have again proposed for 1989. We have taken full account of the discussions and views expressed by the ICTU at the Central Review Committee on the Programme for National Recovery.
Now that the ICTU and ERSI have indicated that further cuts could be harmful, is the Minister prepared to take on board those views in his forthcoming budget proposals?
I do not want to get into a long debate as the Deputy is very reasonable in his questions, but we have to realise that we are still borrowing huge sums of money and that that cannot be sustained. Our first priority under the Programme for National Recovery as agreed by the social partners has been to stabilise the debt/GNP ratio by 1990. We are well on course to achieve that. Nobody can deny that to achieve that means that we have to continue to control public expenditure. It is as simple as that.
(Limerick East): It was quite appropriate in drawing up the Programme for National Recovery to set a target which is effectively a range from 5 to 7 per cent. I am sure the Minister has more precise information at this stage as to at what point the debt/GNP ratio will be stabilised. The ESRI report last year suggested 4.9 per cent. Can the Minister confirm that stabilisation will be achieved at the lower end of the range in the Programme for National Recovery or at the higher end? Can he give a more precise figure or range on it at this stage?
There are a number of factors involved and we can only wait and see how we make the desired progress.
(Limerick East): I am not asking for the Minister's intentions for the budget. I know he cannot reveal that. I am asking if the Department of Finance have now got a more precise vision of the target which would be required to stabilise the debt/GNP ratio and if the Minister can confirm that the ESRI are right and that it will have to go down to 5 per cent or slightly below before that would happen.
We are still staying in the range of between 5 and 7 per cent.
Does the Minister agree that the debt/GNP ratio can be stablised without equating Exchequer borrowing requirement as a percentage of GNP with actual growth of GNP in any given year, and that it is not a matter of merely adding inflation and growth and equating the EBR to that and that stability could be achieved at a higher rate than the simple addition of those two totals? Will the Minister agree that what we are talking about is not so much achieving a paper stability but achieving a tenable position in economic terms and that simply stabilising the debt/GNP ratio does not provide a tenable long term target in terms of public finance stability?
There is no doubt that we have to go further and anybody who thinks otherwise is under a serious delusion. While we have a national debt of about £25 billion it has to be serviced and it costs £2 billion to do that. If any of us even had a tenth of that sum to spend we could definitely have a little bout with the electorate. This is an enormous burden on the annual budgets for any Government in the foreseeable future. While the Deputy is correct about the EBR and its relationship with the debt/GNP ratio, the effect is that it is the Exchequr borrowing requirement which either adds to or substracts from the overall debt. It is a factor, although it is not the only one.