Dick Spring
Question:2 Mr. Spring asked the Taoiseach if he has any intention of meeting the Irish Congress of Trade Unions in relation to job creation.
Ceisteanna — Questions. Oral Answers. - Budgetary Situation.
John Bruton
Question:3 Mr. J. Bruton asked the Taoiseach whether any meeting of the social partners is planned to discuss the budgetary situation and its implications for the expenditure commitments in the Programme for Economic and Social Progress; and if he will make a statement on the matter.
John Bruton
Question:4 Mr. J. Bruton asked the Taoiseach whether the public expenditure commitment in the Programme for Economic and Social Progress, and the timing thereof will remain intact in the light of the evolving Exchequer situation; and if he will make a statement on the matter.
Proinsias De Rossa
Question:5 Proinsias De Rossa asked the Taoiseach whether, in the light of recent comments made by a number of Government Ministers, he will outline whether it is the intention of the Government to seek a renegotiation of all or any part of the Programme for Economic and Social Progress; and if he will make a statement on the matter.
Proinsias De Rossa
Question:6 Proinsias De Rossa asked the Taoiseach if, in the light of the Minister for Labour's reported comments at the ICTU conference in Killarney, it is the intention of the Government to seek any renegotiation of all or any part of the Programme for Economic and Social Progress; and if he will make a statement on the matter.
Alan Shatter
Question:7 Mr. Shatter asked the Taoiseach whether he intends to initiate discussions with the social partners to review and revise the Programme for Economic and Social Progress in the context of (1) the continuing steep rise in unemployment and (2) the recent disastrous Exchequer returns; and if he will make a statement on the matter.
Alan Shatter
Question:8 Mr. Shatter asked the Taoiseach if he will outline the new initiatives which he intends to take to control the growing unemployment crisis; and if he will make a statement on the matter.
I propose to take Questions Nos. 2 to 8, inclusive, together.
I am very glad that Deputies have put down so many questions about the Programme for Economic and Social Progress because it gives me an opportunity to remind them of the benefits this Programme and its predecessor, the Programme for National Recovery, have brought to our economy.
There should be no doubt in anybody's mind about how correct we were to negotiate programmes of this kind. I know there are Deputies in this House who do not wish to be reminded of the object state of our economy in 1986 with zero growth, a balance of payments crisis with capital fleeing the country, public expenditure consuming 55 per cent of GNP and the biggest current budget deficit on record, the national debt virtually doubled in four years, unemployment up by 100,000 in four years and employment down by 70,000.
In the Programme for National Recovery and the Programme for Economic and Social Progress we succeeded in establishing an agreement between the Government and the social partners which had four essential and interlinked objectives to improve the fundamentals of the economy. The first was to correct the imbalance in the public finances which was unsustainable and threatened to undermine our ability to maintain essential services. The second was to restore our competitiveness as a trading nation by moderate pay policies, reduce taxation and lower Exchequer borrowing which brought down interest rates. The third was to supplement the competitiveness and resultant growth of the economy by specific sectoral measures to generate more employment. The fourth was to improve the social equity in our society by the reform of our social services.
We succeeded in all these objectives. Public expenditure has fallen to around 42 per cent of GNP as compared with 55 per cent in 1986. The Exchequer borrowing requirement has fallen from 12.8 per cent in 1986 to 2 per cent in 1990. This is one of the most radical changes in the correction of public finance deficits in the entire European Community.
Our competitiveness in world markets has been fundamentally improved. We have had a stable exchange rate within the EMS since 1987 — a fundamental need for a trading nation. Allowing for changes in exchange rates, wage costs in manufacturing industry will be only 18 per cent higher this year than in 1986, as compared with 47 per cent in the UK and 33 per cent in the EMS partners as a whole. The prime overdraft rate in the June quarter this year at 10.75 per cent is three points less than at December 1986. We now have one of the lowest inflation rates in the world. The fundamental changes we made in the economy under these programmes have created sizeable balance of payments surpluses in each of the past four years as compared to a massive deficit in 1986.
We have turned around the trends as regards employment. In the three years to April 1990, employment in the private non-agricultural sector increased by 70,000, the largest increase in decades. We now have the largest number employed in that sector that we have ever had. This reflects the fact that industrial production rose by 45 per cent since 1986 as compared with only 25 per cent in the previous four years.
As regards unemployment, the live register is now some 10,000 greater than at the beginning of 1987. This contrasts, as I already mentioned, with an increase of 100,000 in the previous four years. Every Deputy knows that net outward migration virtually ceased in the past year and that this, in conjunction with returned immigrants, are now the major factors influencing the live register. Every indication is that employment has not declined. Therefore, the increase in unemployment on this occasion is not due to a decline in employment.
I have reviewed these developments at some length so that Deputies — and economic commentators outside the House — would face the reality of what has been achieved under these two programmes. If the Deputies cannot accept my assurances, I recommend that Deputies and others would read The Economist of last week which classified Ireland as the fifth most healthy economy in the world after Japan, Norway, Luxembourg and the Netherlands as judged by our growth, inflation and current account balance—the fundamentals of any economy for increased employment and living standards.
As I said at the outset, a primary objective of these programmes has been to maintain firm control of our public finances so that there is a steady reduction in the national debt to GNP ratio. As the Programme for Economic and Social Progress states:
This is an overriding principle of the Programme, it has been drafted in accordance with that principle and that principle cannot be infringed in the implementation of the Programme.
Because of the international trading situation which has had adverse effects on our economy and on the public finances, we will be taking the necessary measures to curtail Exchequer expenditure this year so that there is no serious deterioration in the balance of the public finances in the light of the end-June Exchequer returns.
It is relevant in this context that I should point out to Deputies that three of the largest economies in the European Community, namely Germany, France and Italy, are all having to make mid-term corrections in their public finances because of slippage due to international economic conditions. If such large economies can suffer such setbacks to their original forecasts and assumptions, it is not surprising that a very small open economy such as ours should have to make corrections. Fortunately, because of the fundamental soundness of our economy due to the programmes with the social partners we are in a better position than most to take the necessary corrective action.
The current concerns of the public finances are a matter for the social partners as well as for the Government since we are partners in the programme. In addition, the acute problem of unemployment arising from the cessation of emigration is a special concern for all participants in the programme. For that reason, I, with the Ministers for Finance, Industry and Commerce and Labour, will meet shortly with the Central Review Committee under the programme to discuss with them the current situation and outlook and consider together what new actions we might take. In particular, I would like to inform the social partners of the measures we are taking to curtail expenditure in the current year so that they may appreciate that we are taking measures open to us to safeguard the principles of the programme. I would emphasise that this meeting is not for the purpose of renegotiating the programme but is part of the normal process of reviewing progress in attaining the objectives of the programme which are so important for the continued welfare of our society as I have outlined to the House today.
I will call the Deputies in the order in which their questions are on the Order Paper. Deputy Spring.
The Taoiseach has taken advantage of parliamentary procedures in an outrageous response to questions put down. He wants the Opposition Deputies to be constructive. We could go back to 1979 or 1977. So what? That is no use to the unemployed people who cannot get jobs. The Taoiseach could have been a lot more constructive if he had looked at the problems surrounding him in his four and a half years as Taoiseach since 1987.
Ask a question.
I will ask a question, even if we did not get a direct reply to the questions asked, courtesy would also be in order. What is the Taoiseach saying at a time when 253,400 people are unemployed, more than the number to which the Taoiseach referred to in January? Will he now tell the House what the figures are estimated to be for the rest of this year for the unemployed in terms of policies? The Taoiseach said the Government would take corrective measures, perhaps he will outline them to the House? Are we talking about more redundancies, more hospital bed closures, more cutbacks in public sector employment?
I must dissuade the Deputy from making a speech.
I am encouraging the Taoiseach to have meetings——
The Deputy should ask brief, relevant questions.
Will the Taoiseach give an assurance that there will not be further public sector redundancies in the course of his corrective measures? Perhaps he will also tell us what the best forecast is by the Government for unemployment for 1991?
I have no reason to believe that unemployment should go any higher this year. It is very difficult, as the Deputy will appreciate, to make forecasts of that kind. However, the latest figures, which the Deputy mentioned, were very heavily influenced by the advent of the large student population to the unemployment register in June.
Deputies
That happens every year.
I know that, I am not complaining about it, I am just stating a fact. I recognise that unemployment is at a very high, unacceptable level and the response of the Government is clear. We have taken a number of specific initiatives which I have already outlined in the House. That aspect will be part of our discussions with the Central Review Committee, which is the right way to proceed. With regard to the specific question of redundancies in the public service, I do not anticipate anything of that kind.
What about An Post?
That is a different matter.
I am calling Deputy John Bruton.
Would it be in order for me to congratulate the Taoiseach on a very promising essay for submission to the Joseph Stalin prize for the revision of history? When the Taoiseach is revising his essay for resubmission, will he consider including the following facts: that it was a Government led by him which trebled the national debt between 1977 and 1981; that the Economic and Social Research Institute showed in the recent report that almost all the problems Ireland suffered during the eighties——
Ceist, le do thoil.
Will the Taoiseach agree that the ESRI study showed that almost all the problems faced by the Irish economy throughout the eighties can be traced to the weakness of his Government in following up on his own television address in regard to the nation's finances in 1980? Will the Taoiseach recall that when I became Minister for Finance in July 1981, I had to introduce a supplementary budget within three weeks because this country was facing bankruptcy after he had left office?
Deputies
Hear, hear.
Speeches are not in order.
Deputy Bruton asked questions.
The worst Government we ever had was led by the Taoiseach.
That is something which Deputy Barry will never be able to say.
No, I will never be able to say that, I will never lead the worst Government this country will ever have. The Taoiseach has that record.
(Interruptions.)
The Taoiseach is showing all the sensitivity of a school yard bully in some of his responses.
If there is any bully in this House it is the Deputy.
Did I hear the Taoiseach say that he will outline to the social partners the measures he proposes to take to correct the imbalance in the national finances? If that is correct, why is he prepared to take the social partners — who are not elected — into his confidence and not to take Dáil Éireann into his confidence, given that——
A question, please.
That is a question; there is no answer.
There is an answer. The process in which we are engaged at the moment of reviewing Government expenditure with a view to its reduction will take some time. When that process is nearing completion we will be able to talk to the Central Review Committee about it but that will not be the sole purpose of our meeting with the Central Review Committee. The purpose in meeting the Central Review Committee will be to discuss the situation, outline the different aspects and seek constructive proposals from them as to how we should proceed.
Will the Taoiseach——
I am sorry, I now call on Deputy De Rossa.
I have two questions tabled.
Deputy De Rossa also has a number of questions and other Members have more than one question, too.
The Taoiseach chose to take the questions together. I have two questions down.
Do not bully.
So does Deputy De Rossa.
On Question No. 6 specifically which was addressed to the Minister for Labour in the first place because it was he who spoke in Killarney, will the Taoiseach say whether the reply he gave, that the purpose of the meeting with the Central Review Committee was not to renegotiate the programme, also means that the Government do not intend to renegotiate it? Will the Taoiseach agree that any attempt to make public sector workers carry the can for the overrun in Government expenditure will virtually sound the deathknell for any future centralised pay bargaining?
I do not think the Deputy should engage in pejorative statements of that kind. I have clearly indicated in my reply that the purpose of our meeting is not to renegotiate the programme. As the Deputy will be aware, the drift of my reply generally was to point out the advantages we have gained from the Programme for Economic and Social Progress and its predecessor. I believe that the provisions for pay in particular in both agreements have had maximum impact on the major feature in our favour at the moment, low inflation.
So it is not intended to renegotiate the programme?
It is not intended to renegotiate. We will certainly discuss with the social partners aspects of the programme to examine whether improvements can be achieved. The day I introduced the second programme I indicated that our aim was to achieve social advance paid for by economic growth. If economic growth is slowing down then we will have to discuss that with the social partners. That is a perfectly legitimate exercise, as already envisaged in the programme.
In relation to public servants, the Deputy will have to acknowledge that a crucial feature in our budgetary difficulties this year is the need to meet special pay awards. Those awards have accumulated. In 1987 we were all very glad that the public service unions were prepared to postpone those special pay awards until this year but now, unfortunately, they are with us and we have to meet them. They are a major part of the budgetary problem that has arisen this year.
In the context of the various economic indicators given by the Taoiseach, will he agree that no programme is a success economically if it results in more than 20 per cent of the workforce being unemployed? The fact that there are now 262,000 unemployed, which is the correct number, is indicative of a failure in the programme. Will the Taoiseach tell the House when he will meet the Central Review Committee? Is he aware that as the level of unemployment increased in recent months Fine Gael constantly asked that such a meeting take place to review the programme? Will the Taoiseach further indicate when the mid-term corrections he has suggested for implementation will be taken, and will he say whether there will be cutbacks or the imposition of additional taxation by way of a mini-budget?
I shall take the final point first. The Government's approach is to endeavour to solve the budgetary difficulty by means of reductions in expenditure. We have gone away from the days of Governments allowing expenditure to rise without restraint and then just piling on more taxes to meet the situation. That, if I may say so without being tendentious, was what Deputy Bruton did.
The Taoiseach just said they were out of control.
(Interruptions.)
The Deputy has just told us that three weeks after coming into office — and he did — he brought in a drastic draconian supplementary budget. It is the Government's philosophy not to do that.
It is the Government's philosophy to spend money——
(Interruptions.)
I cannot make myself heard.
Questions will proceed in an orderly fashion. There are too many Deputies offering. I wish to dissuade Deputies from the notion they may hold about debating this matter now. They may not. I propose to take brief questions from the Deputies who asked questions. I shall take one round more of supplementary questions and that will be the end of the matter.
I wish to ask the Taoiseach questions in relation to three aspects. I realise that there are some difficulties in forecasting unemployment figures for the rest of the year but, given that forecasts were made in January which are 25,000 off plus approximately 8,000 on preretirement schemes, what figures does the Taoiseach have available from Government advisers in relation to unemployment for the rest of the year? Secondly, it is obvious that economic growth figures have had to be revised downwards and will the Taoiseach indicate whether that will be the trend for the rest of the year or whether an economic uplift is expected? What kind of economic growth is envisaged for the rest of the year?
I have to insist on brevity, Deputy Spring.
I am about to be brief. I believe the Government had two Cabinet meetings since the Minister for Finance made a statement about corrective measures. Will the Taoiseach outline to the House what measures the Government are examining because the House will not have an opportunity to discuss the measures between now and 4 p.m. on Friday?
Recently confirmation was received that the original figure for economic growth will be somewhere near being maintained. The most recent forecast has been better than some of the earlier ones, which were quite pessimistic. There is also a general view that the international economy should pick up later this year. If that is so, we are certainly in an ideal position to benefit from any such pick up. On the review of expenditures, I assure the Deputy that that will take place right across the board. Every Department and every subhead is being examined to find out where substantial reductions in the overruns can be achieved now, half-way through the year.
Surely the Taoiseach can give us some indication in regard to unemployment?
I cannot give the Deputy any more information.
(Interruptions.)
That is something we are going into very closely, naturally. The original figure was for about 60,000 extra for unemployment generally. That figure will be examined very closely. The Government are not satisfied that that will be the figure.
There must be some figure available?
The way I look at the matter is that it is not likely to go any higher than the present level.
Why did the Taoiseach not make adequate provision for the special pay awards that were to occur this year in view of the fact that it has been known since 1987 that they would occur this year?
We did.
Is the Taoiseach giving the House an assurance that all the commitments in regard to public sector pay entered into and agreed to by the Government will be met in full on time?
The special pay awards were taken into account in this year's budget. I merely pointed out to Deputy De Rossa that they are one of the major factors that had to be met this year. The general intention is that all arrangements made in the budget for public service pay will be adhered to.
May I ask another supplementary question?
I call Deputy De Rossa.
The Chair allowed other Deputies to put supplementary questions.
Deputy Bruton, please obey the Chair. I call Deputy De Rossa.
(Interruptions.)
I indicated clearly to the House what I proposed to do and I am doing that. I call on Deputy De Rossa.
Sir, please——
Deputy Spring was allowed three questions after you said he would be allowed only one.
That is what friends are for.
I did not think you were friendly.
Could I clarify with the Taoiseach that, in view of the fact that something like 80 per cent or more of the public service workers who are due these special awards have already accepted a deferral since 1987, they will be paid what they are due under the Programme for Economic and Social Progress as agreed, and that there is no question of them being asked yet again to take a deferral? Most of these workers are on less than £150 a week take-home pay.
The Government are very well aware that the majority of public servants are not overpaid. The majority of them are in the lower paid category. In any action we would take at any time we have to have regard to that. What I have said to Deputy Bruton applies. They can be assured that the provisions made in this year's budget which are related directly to the Programme for Economic and Social Progress will be adhered to.
All of them?
Order, please.
Could that "yes" be on record?
A Cheann Comhairle, the Taoiseach did not respond initially and I want to give him an opportunity to respond to a very simple question. Would the Taoiseach not acknowledge that 262,000 unemployed, over 20 per cent of the workforce, indicates a disastrous failure in Government economic policy?
The Deputy's figure is wrong.
It includes the 9,000 on retirement benefits and credits which are disguised. The Total figure is 262,000.
It is not.
Would the Taoiseach not only agree that it is a disastrous failure in Government economic policy but tell the House by what date these mid-term corrections will be made? Will they be made at the end of July or the end of August? Is there a date and a time fixed by which the Cabinet deliberations will end and the specific measures will either be implemented or discussed with the Central Review Committee?
I will give the Deputy a broad answer to that. I would say it would certainly be within this month.
Can I ask the Taoiseach whether he would agree that the reduction in Exchequer borrowing between 1981 and 1987 of almost 11 points from 21 per cent to 10.75 per cent is about half as much again as what has been achieved net since 1987 with this year's likely result of 3.5 per cent? Would he secondly agree that some 200,000 people now unemployed who have emigrated have had to do so because of the loss of growth in the eighties through the policies pursued between 1977 and 1981? Would he agree that, inflation having been reduced to 3 per cent by 1987 — this Government have of course maintained it since — in March 1987 when he took over office he found he was in a position of rapid growth which was maintained for several years thereafter; and would he finally say why in this year's budget the figures involving comparison between last year and this year have been distorted by £220 million by transferring £110 million of EC money due in last year into this year's accounts thereby hiding the planned increase in the underlying deficit which is doing such damage?
In so far as the Deputy is asking me to agree to various propositions and allegations which he is putting forward, the answer is no.
I want to bring this matter to finality.
(Limerick East): Arising from the Taoiseach's original reply, would the Taoiseach agree that his essay on Government policy since he came back as Taoiseach in 1987 actually falls into two parts? We would all agree progress was made in the first two years but what has happened now is that in the last two years public expenditure has risen by £1.1 billion, that is 14 per cent of an increase, against an inflation rate of 6 per cent. Would he further agree that the programme he is now defending has built into it the same kind of increase in expenditure over inflation for the next three years? Would he finally agree that that is just unsustainable?
I said when I launched that programme that in so far as the programme provided for social advance, that could only be paid for by economic growth——
(Limerick East): Jargon.
——and if there was not the economic growth then we would have to go back to the drawing board.
I am calling Question No. 9, Deputy John Bruton's question.
On a point of order——
I will hear no point of order. We are dealing with questions.
I have been offering for over a half an hour——
That may be so but I have called the next question.
Deputy FitzGerald and Deputy Noonan did not have any question down. I am entitled to ask a question. I have been offering from the very beginning. I had a question down that was transferred from the Minister for Labour to the Taoiseach.
I have called the next question.
I want to ask a brief supplementary of the Taoiseach which relates to the early part of the first question concerning emigration.
We are on the next question.