That a supplementary sum not exceeding £54,000,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1992, for Increases in Remuneration and Pensions.
I will begin to reiterating what I said yesterday. I congratulate you, a Cheann Comhairle, on your re-appointment to the Chair. I welcome back the Deputies who were in the last and previous Dála. I also welcome all the new Members and look forward to working with them. I particularly welcome back the Finance spokespersons from all parties who successfully made it through the election.
I welcome the opportunity which this brief debate affords this new Dáil to review the budgetary position now that the financial year is drawing to a close. It is both a conclusion and a beginning, a chance to review the past and to look forward to the future. I will start by reviewing the overall budgetary position.
In the budget presented to the House last January the Exchequer borrowing requirement was projected at £590 million or 2.4 per cent of GNP. The trends reflected in the end-September Exchequer returns indicated that the level of borrowing would be broadly in line with the budget target. The pressures on non-capital supply spending which were evident at that stage, particularly in the social area, have not abated. There was also, of course, the need to provide for the Christmas bonus to welfare recipients. However, at the same time, tax revenue should produce a surplus this year due mainly to a strong corporation tax performance. There are also likely to be savings on Central Fund Services. Taken together, these factors will mitigate the supply spending overrun, and while the EBR may not come in exactly on target, the eventual 1992 outturn should, overall, represent a creditable budgetary performance in what has been a very difficult year.
In particular, we can take a good deal of satisfaction in the fact that Irish fiscal performance in 1992 should again fall within the 3 per cent general Government deficit/GDP ration which is specified as one of the primary budgetary convergence criteria in the draft European Monetary Union Treaty. Steady downward pressure is also being maintained on the debt/GDP ratio, which has fallen from almost 117 per cent in 1987 to 94 per cent last year, and will again decline in 1992. We must not underrate these achievements which are likely to compare very favourably with the budgetary performance in many of the other EC member states.
The motion before the Dáil today requests approval for certain Supplementary Estimates. The Supplementary Estimates now required amount to a total of £93.784 million, the principal amount being £54 million required for Vote 44 — Remuneration.
The House has been supplied with details of each Estimate so I propose to confine myself to a few brief remarks on the Excess Votes and on the Finance Supplementary Estimates. Other Ministers will speak on their own Supplementary Estimates.
There are two Excess Votes before the House today relating to 1990. These concern the President's Establishment and Superannuation and Retired Allowances. The excesses, which are minor, arose because of under-estimation of the expenditure involved. An Excess Vote is a technical means of rectifying the position. The Committee of Public Accounts has already considered these excesses and has reported that it saw no objection to these excesses being sanctioned by the Dáil. As is customary, Excess Votes are taken in conjunction with Supplementary Estimates.
I will now deal with two Supplementary Estimates on my own Votes. In relation to my own Department's Vote, a Supplementary Estimate of £250,000 is required to help to reduce the outstanding loans taken out by the Irish Institute for European Affairs in Louvain. The institute is a non-profit body established under Belgian law in 1984. It plays a useful role in allowing Irish business, educational and administrative interests to inform themselves about the process of European integration. I am sure that the House will agree that it is of particular importance that the facilities of the institute are available to people and organisations from both parts of Ireland.
The institute owns the buildings of the old Irish College in Louvain which were made available to the institute on condition that they are used for the benefit of Irish people. Substantial loans were required to fund renovation and fitting out. Approximately £600,000 is outstanding and, while support for the work was received from business and individuals from both parts of Ireland, such sources now seem exhausted.
The grant of £250,000 provided for in the Supplementary Estimate before the House will be paid from national lottery funds. The Northern Ireland authorities have promised to match this grant at a future date.
In January this year, the Government announced a package of measures in relation to public service pay which involved the placing of ceilings on the general round increases due under the Programme for Economic and Social Progress, and the deferral of the outstanding phases of special increases. In the light of the emerging budgetary outturn for 1992, the Government has now decided to bring forward to 1992 the payment of the arrears of outstanding special pay increases due to be paid to certain groups of public servants in January 1993.
The Supplementary Estimate will enable such payments, so far as it is possible, to be made in the current year. Savings which have emerged on departmental Votes will be used to fund the balance of the estimated cost of £71 million. I might mention that the overall cost amounts to some £75 million but for technical reasons, some £4 million cannot be paid this year.
The main groups to benefit from arrears payments include teachers, nurses, prison officers, gardaí, junior hospital doctors and principals and assistant principals in the Civil Service and related grades. The Supplementary Estimate of £54 million for Vote 44— Remuneration — which I have introduced to the House will, if approved, help to reduce the difficulties faced by any incoming Administration.
I will now turn very briefly to the budgetary outlook for 1993 which will undoubtedly present a very difficult challenge. In the absence of a dramatic improvement in the international economy, the budget arithmetic will have to accommodate further increases in unemployment against the background of slack tax revenue buoyancy. There could be a change in the international position during 1993 but, having listened to all my colleagues outline their position at the ECOFIN Council in Edinburgh on Friday and having seen the reports from the IMF, OECD and the EC which predict an increase in unemployment in Community terms to 11 per cent during the course of 1993 and a growth rate of between zero and 1 per cent, that is not likely. There is a number of issues which will help as the year goes by; if there is a strengthening of the American dollar there may also be a strengthening of sterling.
I have stated many times both here and at the ECOFIN Council meetings and in the concluding debate of the 26th Dáil that it will be 1994 before matters improve, and I still hold that view. It appears from the global budgetary examinations being carried out by the IMF, the OECD and the EC that there will be a recovery in 1994 and thereafter but not in 1993.
In addition, there is a number of factors which have a negative impact on the revenue outlook for 1993, and Deputy Bruton referred to them yesterday. The inauguration of the Single European Market will involve the elimination of VAT at the point of entry and capital liberalisation requires the modification of the deposit interest retention tax, known to us as DIRT. The cash flow loss in 1993 from the VAT change should be partially mitigated by alternative measures within the VAT area, but significant losses will accrue from the DIRT adjustment.
There will also be considerable challenges on the expenditure side in 1993. We can almost certainly expect that there will be a continuation of the pressures in the social area which emerged this year. There will have to be an increase in the Social Welfare Vote and my colleague the Minister for Social Welfare, Deputy McCreevy, will deal with that later. All the indications are that the unemployment figure for 1993 will be significantly higher than in 1992.
As regards the 1993 Estimates, the Government has examined departmental demands in detail and has taken certain steps towards improving next year's opening position. Nonetheless, there is a considerable amount still to be done and bringing forward the arrears of special pay increases will assist in this regard.
As we do not intend to publish an abridged Estimates volume or summary public capital programme at this stage, I will not go into detail on any of the decisions taken on the 1993 Estimates; that will be a matter for the incoming Government and the Minister for Finance of the incoming Government.
In regard to the Exchequer borrowing requirement and the European Monetary Union targets, the EBR target for 1993 will, of course, be settled in the context of preparing the forthcoming budget. At the same time, I urge that all necessary steps be taken to ensure that this country continues to meet the budgetary convergence criteria envisaged in the draft European Monetary Union treaty. In that regard, the critical measurement is the general Government deficit/GDP ratio which is set at 3 per cent.
I would be less than honest if I, as Minister for Finance, did not say that a difficult task lies ahead and that many difficult decisions will have to be made. I hope the good work done by successive Governments and Ministers will achieve that position.
I thank Deputies Quinn and Noonan for their co-operation on the currency issues over the last five or six weeks. During the Adjournment Debate on the last day of the 26th Dáil I asked them not to make that a political issue during the election campaign, and I thank them for their co-operation in that regard. I am sure the House is aware that this morning, the Central Bank set its rate for overnight support to the money market at 16 per cent, that is down from just over 20 per cent. As the House is aware, that is the Central Bank's key short-term facility and the STF interest rate has been suspended. Each morning the bank indicates to the market the overnight rate for that day, and that is the figure which reached 100 per cent on 30 November last, but thankfully the rate has now dropped back to 16 per cent. The Irish inter-bank rates have fallen again this morning as a result of the Central Bank's move. The key one month rate is now approximately 20 per cent; yesterday it was roughly 5 per cent or 6 per cent higher, depending on the time of day. The three month rate, the rate which concerns businesses was 17 per cent or 18 per cent this morning. The policies this House adopted in this regard — with great difficulty I might add — are a move in the right direction, but I would be less than honest if I said the pressures have eased. That is not the case. However, I appreciate the co-operation I received on this matter.
In conclusion, I commend the Supplementary Estimates and Excess Votes to the new Dáil.