I wish to share my time with Deputy Foxe.
Private Members' Business. - Public Expenditure: Motion (Resumed).
The following motion was moved by Deputy McCreevy on Tuesday, 13 June 1995:
That Dáil Éireann, having regard to
—the mistakenly planned Current Budget Deficit in 1995,
—the out of control Public Spending,
—the lack of prudent financial planning,
—the lack of any coherent medium or long term economic strategy,
—the panic decisions of the Government as announced on Thursday, 8th June, 1995, and
—thead hoc policy announcements of Ministers
and in the light of the recent damning Annual OECD Survey on the Irish economy, condemns the Minister for Finance in particular for his imprudent mismanagement of the public finances and the economy and calls on the Government to implement the coherent and prudent fiscal, monetary and economic policies of Fianna Fáil-led Governments since 1987.
Debate resumed on amendment No. 1:
To delete all words after "That" and substitute the following:
"Dáil Éireann, having regard to
—the fact that this Government is the first to commit itself, inA Government of Renewal, to specific limits to increases in public expenditure;
—the commitment to ensure that adequate resources are available so as to promote additional employment, reward work and reduce taxation;
—the timely action announced by the Government on 8th June last aimed at ensuring that the Government's prudent economic and fiscal policies as set out inA Government of Renewal are maintained, in particular the target of 2 per cent real growth in gross current supply services expenditure in 1996 and 1997;
—the positive assessment of the OECD Economic Survey of Ireland which states that the economic outlook for Ireland in 1995/1996 remains favourable, with output growth projected at near 5 per cent and projected continued growth in employment and in real disposable income; and
—the acceptance by the Government of the public debt philosophy and targets set out in the Maastricht Treaty, including keeping the EBR prudently below 3 per cent of GNP and the Debt/GDP ratio steadily reducing towards 60 per cent,
has full confidence in the budgetary and economic policies being followed by the Minister for Finance."
—(Minister of State at the Department of Finance.)
I am sure that is satisfactory.
When in Government Fianna Fáil gave a high priority to tackling crime. This is illustrated by the fact that while Fianna Fáil proposed to increase public spending by only 4.5 per cent, it provided in its Estimates for the building of a prison at Castlerea, County Roscommon and a new women's prison in Dublin.
This Government came to office with the first budget surplus in 27 years, because of the work and commitment of the present leader of Fianna Fáil. It was, therefore, easy for the Minister for Justice to make public promises about tackling spiralling crime levels.
She promised the people a referendum on bail and solemnly promised in this House, as late as last Thursday, that there would be 210 additional prison places. Clearly, the Minister for Justice did not take into account that neither she nor Fine Gael have any real say in this Government.
Warning bells for Fine Gael members must have sounded when the Taoiseach, in a desperate grasp for a political lifeline, agreed to hand over the Finance Ministry to Labour with the Department of the Environment. The spending began then as if there was no tomorrow. Repeated warnings by the leader of Fianna Fáil that this would end in tears were met with jibes and contemptuous dismissal.
The decision not to proceed with the building of prisons at Castlerea and Mountjoy was taken in the absence of the Minister for Justice. The Minister for Finance cracked the whip and, as usual, the Taoiseach danced. It is an appalling situation in any Government that a decision as crucial and as vital as the building of these prisons should have been taken in the absence of the Minister for Justice. The propriety of this decision must be questioned. It is extremely significant that in public interviews the Minister for Justice has failed to deny that she told the Taoiseach she would have to consider her position. It is abundantly clear she should have done the honourable thing and resigned. Her plans for a referendum on bail are in tatters and her much heralded law and order package is in ruins. Fine Gael was once known as the law and order party. This reputation is now on the scrap-heap as well.
It is difficult to understand how any Minister could continue in office having been publicly humiliated by the Minister for Finance and the leader of her own party.
The Taoiseach and the Minister for Finance contemptuously dismissed all the best laid plans of the Minister for Justice. That is bad enough but what is worse is that they also contemptuously dismissed with one wave of the hand every proposal to tackle serious crime.
There is no point in the Minister, the Taoiseach or the Minister for Finance pleading that fewer prison places will be required because of the peace process. The most hardened cynic must have gasped when he heard the Taoiseach say that prison places would also be created by releasing those in prison for failure to pay fines and debts. Aside from the fact that there are very few people in prison for either of these reasons, the Taoiseach was also giving a slap in the face to the judicial process and creditors who are entitled to be paid what is due to them.
Promises of a reform of the prison system will ring hollow in the ears of the general public against the backdrop of cynicism and obfuscation being created by this Taoiseach.
Neither is there any point in the Minister for Justice saying that Fianna Fáil cannot have it both ways. Fianna Fáil favours containing public expenditure——
When in opposition.
——and this has been abundantly clear since 1987 up until December 1994. The Minister for Justice was extremely economical with the truth when she said it was Fianna Fáil which increased the national debt between 1977 and 1981. The unvarnished truth is that the Fine Gael-Labour Coalition — doubled the national debt and borrowed in excess of £12 billion between 1982 and 1987.
This Government has got its priorities wrong. Fianna Fáil was able to provide for the building of the prisons at Castlerea and Mountjoy in severely curtailed Estimates. This Government, which increased public spending by 11 per cent in six months, could not build the prisons. It is high time the Taoiseach, the Minister for Finance and the Minister for Justice realised they are no longer in Opposition. It is their bounden duty to prioritise projects. Obviously, crime does not figure high up on that list of priorities.
Fianna Fáil has illustrated its commitment to tackling crime not just in agreeing to build the prisons, but in introducing legislation on an almost weekly basis. It has introduced the Proceeds of Crime Bill, 1995; the Criminal Law (Bail) Bill, 1995; the Sexual Offences (Jurisdiction) Bill, 1995; the Criminal Law (Sexual Offences) Bill, 1995; the Fifteenth Amendment of the Constitution Bill, 1995 and the Criminal Procedure Bill, 1995.
In a mean-spirited response to the Criminal Law (Bail) Bill, 1995, the Minister for Justice said we were only tinkering around with the problem and that it was probably unconstitutional. I will leave aside the fact that we were neither tinkering around with the problem nor was the Bill unconstitutional. The Minister said what was required was a referendum. We responded to that challenge with our Bill, the Fifteenth Amendment of the Constitution Bill, 1995. In that Bill we have set out in plain language what is required. The Constitution would be amended to provide the following: "any person charged with an indictable offence may be remanded in custody pending trial if on the hearing of an application for bail, the judge is satisfied that there is a probability that the person will commit a criminal offence which is also an indictable offence if admitted to bail; any person remanded in custody pending trial by reason of a judge being satisfied that there is a probability that the person will commit a criminal offence which is also an indictable offence if admitted to bail shall not be remanded in custody for that reason alone for any single period greater than 90 days."
The Minister for Justice said we must await the Law Reform Commission report. That report has been coming for a long time and is just another empty promise from the Minister. We have had enough obfuscation, prevarication, indecision and procrastination from this Minister. All her promises are just a bottle of smoke and everybody knows that now. This Government has no intention of tackling the crime problem and the very best intentions of the Minister for Justice are being obliterated by her colleagues at the Cabinet table, including the leader of her own party.
I call upon the members of the Fine Gael parliamentary party to show a little pride and to tell the Minister for Finance he cannot continue cutting Fine Gael Ministers' Departments, even without their consent. The pride of the Fine Gael Party has been subjugated to the Taoiseach's greed for power at any price.
Since this Government cannot lead in the fight against crime it should at least follow. We would support any worth-while legislation or measures to tackle the crime problem, but, sadly, there has been none. Fianna Fáil is leading the fight against crime from the Opposition benches. Where legislation has been introduced we have been responsible for it. Where inactivity has been the order of the day we have produced the goods. If 210 prison places were needed on Thursday of last week, they are needed on Wednesday of this week and no amount of excuses or downright nonsense can hide that salient fact.
I thank Deputy O'Donoghue for agreeing to share his time with me. Over the weekend the people of County Roscommon were dumbfounded when the bombshell was dropped that building work on the prison at Castlerea was to be halted. We later discovered it was to be cancelled. When I first heard this news, I found it hard to understand that the Minister for Justice, Deputy Owen, would have made this decision. I have always had the greatest of regard for her as a down to earth and intelligent person with common sense. We were later informed it was not the Minister for Justice who made this ridiculous decision but another Minister. This made more sense. This is one of the greatest examples of Pale politics.
It was decided two years ago that the best way to combat crime was to increase the number of gardaí and prison places. It was also decided that the psychiatric hospital in Castlerea would be an ideal location for a prison and work commenced 12 months ago. Since then, £1.3 million has been spent in erecting a wall one mile long which is 20 feet above ground and nine feet below.
We now have a building in Castlerea which is no longer considered acceptable for use as a psychiatric hospital, and no prison. We have also lost a hotel to the Western Health Board which acquired it to house psychiatric patients. In addition, the board invested in other buildings and surrounds which would be used as workshops and so on for patients. It is a ridiculous and scandalous waste of money and shows an utter disregard by the Minister for taxpayers' funds. One Minister — not the Minister for Justice — said the reason for abandoning the prisons in Castlerea and Wheatfield is that because of peace in Northern Ireland there will be no need for extra spaces as there will be fewer political prisoners. That is a diabolical statement. Does that Minister think we have no common sense? There are about 2,300 prison spaces in the country and a mere handful are occupied by political prisoners. If the decision to abandon the prison in Castlerea is not reversed the wall built there will be a monument to the Government's stupidity and disregard for taxpayers' money.
On the other end of Roscommon county which borders Leitrim another bombshell was dropped. Leitrim has a population of 25,000 people. It has been ravished by emigration over the years, mainly because of the lack of policies of previous Governments, but I will not dwell on that now. The Masonite Corporation of Chicago was to locate in the south Leitrim-Roscommon area where 350 jobs would be provided. However, when work was almost ready to begin another Minister objected, mainly because he is concerned about the possible negative impact on the area's distinctive landscape. Anybody who drove through Leitrim in recent times or who worked in it, as I did for years, will be aware of the distinctive landscape — distinctive as it is bereft of human habitation because of emigration over the years.
I wish to share my time with Deputy Derek McDowell.
I am sure that is satisfactory.
I wish to address some comments to Deputy Foxe whose presence in the House is welcome. If he had seen the 6 o'clock news this evening he would have heard the Minister for Arts, Culture and the Gaeltacht, Deputy Higgins, set the record straight on the issue to which he referred. The Minister did not stop this project from going ahead. The appeals had been already lodged and he simply added his legitimate appeal, which he is statutorily bound to do having regard to his obligations. He would also have heard the Minister say that the matter will be satisfactorily resolved, that the environment can be protected and the project will go ahead.
I cannot afford the luxury of listening to the news.
The Deputy would have been better employed doing so.
This is a debate about the soundness or otherwise of this Government's management of the public finances and of the economy. It is critical that this House and the public are aware of the facts in considering these issues. Accordingly, I propose to address the main points of the Opposition motion. Views about the soundness or otherwise of Government management of the economy and the budget should not be formed on mistaken impressions, which is sadly the case. I propose to set the record straight on some basics.
The Opposition motion does not describe the Irish economy and budget of 1995. Opposition speakers have not talked about today's economy and public finances for which I have responsibility. They seem to be transfixed by nightmares of past horrors which they and their predecessors perpetrated on our society and the economy.
Once again, the EU Commission has said that we are one of only three member states out of 15 who are abiding by the Maastricht Treaty budgetary conditions.
The economy is expected to grow by between 5 and 7 per cent this year. Ours is the best performing economy in the European Union. Nearly 40,000 extra jobs will be created this year. I wish to address a matter to which Deputies Ahern and McCreevy repeatedly referred. The planned budget deficit is 2.4 per cent compared to last year's planned budget deficit of 2.7 per cent. This is a significant improvement on what Deputy Ahern planned and was on course to achieve this time last year.
There was no budget deficit at the end of the year.
The Deputy did not hear what I said. I am talking about the planned budget deficit. Let us deal with facts. The national debt is expected to fall by 5 per cent or more relative to GNP. I will give more facts that may be unpalatable. Last year the underlying current budget balance was in significant deficit — there was a good performance relative to preceding years, nevertheless there was an underlying deficit. To achieve a current budget surplus in 1995 from that starting point, while providing for the pro-jobs taxation and other measures which this Government introduced in the budget, would have meant keeping current supply spending, exclusive of the cost of equal treatment, below the rate of inflation. This would have required spending estimates far below those prepared by the outgoing Government last winter.
The net Estimates figure when I came to office was £8,706 million. The Estimates we published in January, albeit of a different composition, amounted to £8,702 million.
The problem arises with what the Government has done since then.
These are facts and I know Deputies opposite do not like to hear them. The Opposition motion talks of out of control public spending. One basis for assessing the validity of this charge is to compare the pace of increase in current supply spending planned this year with what happened in the past. Gross current supply spending will increase significantly this year compared with 1994 — by 5.6 per cent excluding the special £140 million payment of equal treatment arrears announced in March, or by nearly 7 per cent including those payments. This year's increase is considerably lower than the average increase of about 8 per cent over the preceding four years when Fianna Fáil Ministers were in charge of the Department of Finance.
Alternatively one might consider the relationship between current supply spending and national output. The share of spending in GNP rose over the period 1990-93, but fell last year. This year again gross supply spending is planned to be lower as a share of national income than in 1994, notwithstanding the £200 million being spent on equal payment arrears. These facts indicate that public spending is not out of control but being managed in a fashion which, over time, can release resources for much needed job supportive reform.
The Opposition motion talks of the lack of prudent financial planning and of any coherent medium or long term economic strategy. I am puzzled by these allegations. The signs are that this year's budget is on course. This motion has been put down in response to Government action taken with an eye to the future. The action announced last week is the very essence of planning ahead and is a clear contradiction of virtually everything Deputy McCreevy said last night. The Opposition motion talks of the panic decisions of the Government as announced on Thursday, 8 June 1995 and of ad hoc policy announcements of Ministers.
Was the Minister listening to Deputy Foxe?
The facts are otherwise. There is no panic. The actions taken stem from prudent reflection about 1996 and the medium term and are aimed at ensuring there will be capacity for further pro-employment action in 1996 and 1997.
The Opposition motion talks of the recent damning annual OECD survey on the Irish economy. Clearly Fianna Fáil Deputies have not read that survey because what they have said is nonsense. I will give some quotations from the survey.
The Minister should not be selective.
This matter will be debated in the Seanad but I will outline a sample of the quotes now. The survey states that, the economic outlook for 1995 and 1996 remains favourable, with output growth projected to be near 5 per cent.
The Minister is not quoting the riders included.
There will be no interruptions.
It also states:
Continued growth in employment and real disposable income should sustain personal consumption; ... Activity will also benefit from increased exports; ... Business investment in structures and buildings ... should increase; ... The expected growth should be sufficient to ensure a further reduction in unemployment; ... With Government borrowing remaining low, the debt-to-GDP ratio is projected to fall to 85 per cent by the end of 1995; ... Current expenditure targets are consistent with reducing the debt ratio towards 60 per cent by the end of the century.
The only concern that the OECD had about Ireland's future is that growth in employment and the accompanying decline in unemployment could be so strong as to prompt inflation and consequently a loss of international competiveness. Its judgment is that "if such developments are avoided, the economy would be firmly ensconced on a high-growth, low inflation path which might well continue until the end of the century". No fairminded reader can plausibly portray these as damning comments and conclusions.
As I have indicated to this House many times, the Government is firmly committed to containing the growth in public expenditure. This is a key element in our strategy to manage the public finances so as to support sustained employment growth and to conform to the parameters of the Maastricht Treaty. Far from being the spendthrift Government which certain Members of this House and certain outside commentators have labelled us, we are being responsible and firm in our management of the public finances. Last week's announcement represents a forward-looking step to disciplined and prudent expenditure planning — with the objective of overcoming the excessive growth trend in public spending of the last five years when Fianna Fáil controlled the Department of Finance.
The importance this Government attaches to strict control of public expenditure is manifestly clear in the commitments we have made in A Government of Renewal to limit the growth in current supply services expenditure to 6 per cent in 1995 and to an average of 2 per cent in real terms for the remaining years 1996 and 1997. We are firmly committed to ensuring that the fruits of economic growth are not fully absorbed by higher public spending, as has been the case in recent years, but are used in substantial measure of tax reform which will favour the incentive to works, to tackle the poverty trap and to encourage enterprise and growth.
The difficult and painful correction to the public finances which took place in the 1980s, involved severe retrenchment in Government expenditure programmes and, consequently, in public sector employment. It also allowed, however, for a significant improvement in the state of the public finances and for some real reduction in the burden of taxation. The lessons from that period clearly demonstrate that control of public expenditure is of crucial importance if real progress in reducing our debt and the burden of taxation is to be achieved.
Since 1990, public spending has risen much faster than inflation for three reasons: the deferment of special pay agreements and payments; the introduction of some new or improved services like childcare or reducing the pupil-teacher ratio and the relative absence of cost-saving productivity improvements in public services. Since 1990, current supply services spending has increased by over 8 per cent per annum on average. The increase in real terms was over 5 per cent per annum on average and this rate of growth simply could not be sustained.
Labour along with other successful socialist parties has changed and we know how to manage economies in a manner that will ensure we will achieve social justice as well as prudent economic management.
Sound financial management requires also that we look ahead to the prospects for 1996 and beyond and, in particular, to the outlook for observing the target of a 2 per cent real growth in current supply services spending. A review of spending trends which my Department has conducted on the basis of the cost in 1996 of existing programmes and policies, seven months before 1996, has indicated that current supply services expenditure in 1996 could be running a little bit ahead of the 2 per cent limit. It was necessary, therefore, to take action to avert that risk. In essence it was forward-looking and prudent to do so at this stage.
The interim measures announced last week will ensure that we remain on course to stay within the 2 per cent limit for 1996. These interim measures were not a panic-reaction to so-called out of control expenditure, as has been suggested, but were rather deliberate and cautious decisions taken on the basis of careful analysis of the emerging expenditure outlook for 1996. Their primary purpose is to ensure that the 2 per cent limit to current spending will not be breached. This surely is the essence of planning for the future.
The decision that all Ministers must identify measures to control spending within their Departments in 1996 will enable timely decisions to be made on the adjustments necessary in specific programmes and schemes to ensure that the required savings in 1996 materialise. Early action in identifying areas where savings can be found is no more than prudent and sound financial planning. It will enable Ministers to review their spending plans in a controlled fashion as part of the overall strategic management approach to the allocation of resources in 1996 and later years within the constraints imposed by the Government's spending target.
There has been much public comment on the Government decision to restrict additional recruitment to the public service. The Government has no intention to curtail services introduced in recent years which have benefited the general public. However, the increased staffing levels required to provide these services are very significant and must be fully funded on an ongoing basis by the Exchequer out of general taxation.
Our first priority is to take whatever steps are necessary to ensure that we can continue to maintain these service improvements in the years ahead. This can best be achieved by building on the overall budgetary discipline that has so benefited the economy over recent years and remains essential for continued economic and employment growth in the future. The present rate of growth in public service numbers is incompatible with the Government's 2 per cent real limit on public spending in 1996 and 1997.
The Government has, therefore, agreed to introduce a measured and balanced policy to stabilise overall public service numbers and ensure that public servants are deployed to the best possible effect. This policy involves a restriction on recruitment where such recruitment would have the effect of increasing the numbers of posts funded by the Exchequer above that on 9 June, unless there is specific prior Government approval. The implementation of this decision will, of course, give due regard to the Government's social priorities, especially as regards poverty, as set out in the programme for renewal. In addition, recruitment to maintain the existing level of staff complements may still proceed. This policy will also allow for a strategic review of the allocation of staffing resources on a sectoral basis thereby ensuring greater efficiency and effectiveness in the delivery of services to the public.
As I indicated already, the OECD survey on the Irish economy is very positive. There are criticisms but these are in general constructive, in that the concern of the OECD is to ensure that the present successful policies are maintained. Indeed, the key criticism of the OECD in relation to growth in public supply services expenditure is of growth in the recent past, not with the Government's plans to contain growth in public supply services expenditure to 2 per cent in real terms during the next two years.
It referred to 1995.
Domestic demand is forecast by the OECD to grow further this year. The combined effect of the changes in this year's budget in tax and pay-related social insurance contributions and continued growth in numbers at work will translate into significant growth in incomes. Aided by transfers from EU Structural and Cohesion Funds, I expect the volume of fixed investment to rise by over 9 per cent following a real increase of 7.25 per cent last year, adding to the productive capacity of the economy. Overall, I expect growth in the volume of GNP to be about 5.25 per cent in 1995 and some commentators have taken an even more optimistic view.
This strong economic growth is leading to higher employment. At budget time I anticipated that in 1995 total employment would grow by 31,000 or 2.6 per cent, with non-agricultural employment expanding by 37,000 or 3.6 per cent. I have no reason to change these forecasts. All the indications are that employment is growing rapidly and may exceed our cautious forecasts at budget time. For example, notified redundancies for the first five months of the year are 25 per cent lower than for the same period last year; employment-related revenue receipts are on target; employment in building and construction — an important barometer of the economy's health — is 7.4 per cent higher than a year ago; and according to the IBEC monthly survey, business employment expectations are now the most upbeat they have been in over four years.
Undoubtedly, the Government is delivering on jobs. Indeed, our employment performance is the best in the European Union. This robust employment growth is leading to lower unemployment. Last month the live register fell by 7,000. Since the beginning of the year unemployment has fallen by over 11,000. Unlike some previous periods of falling unemployment, employment growth rather than net emigration seems to be the main factor.
According to the OECD's report the prospects for a continuation of this strong employment growth and falling unemployment are good. The Government shares this optimistic assessment. However, we are conscious of the need to build on our considerable successes to date, to further increase sustainable employment and reduce the unacceptably high level of unemployment.
The public finances are too important for party political point scoring. The fact is that all parties have learned the hard lesson that Governments, like households, cannot indulge in unrestrained borrowing. We have been to the brink, and have successfully turned away as a nation. I would like to believe that all parties have gained in political maturity in the process.
It is true that there has been a limited upward movement in the annual EBR since 1990, but it remains firmly under 2.5 per cent of GNP and there is no evidence, under either previous or present Administrations, that we are in any danger of forgetting the lessons of the 1980s.
The limited upward movement in the EBR since 1990 reflects several factors. Demographic factors and shrinking employment opportunities abroad, combined to increase the level of unemployment from 13 per cent in 1990 to a peak of some 16 per cent in 1993. The public service pay bill increased significantly to accommodate arrears deriving from the deferral of pay increases during the initial years of fiscal correction, while pupil-teacher ratios and health services were improved in line with commitments made in the context of successive national agreements with the social partners for continued moderation in pay — moderation which has improved the competitiveness of Irish industry and contributed a great deal to the strong performance of the Irish economy. Such factors must be taken into account in any fair examination of the evolution of public spending, just as the current budget surplus of 1994 should be portrayed as an underlying deficit.
In formulating its 1995 budget, the Government's focus was on the need to maintain fiscal discipline while maximising sustainable growth in output and employment within a low inflation economy. Accordingly, the budget set the Exchequer borrowing target at 2.4 per cent of GNP and within that constraint identified three primary objectives, reward for work, promotion of enterprise and the strengthening of social solidarity.
The tax and PRSI changes made in the budget, combined with the pay increases agreed under the Programme for Competitiveness and Work, will lead to an increase in take-home pay of approximately 2.5 per cent above inflation for a single person on the average manufacturing wage. The profitability of business should be enhanced through the budgetary measures to reduce taxation on labour and profits. In the medium term, the prospects for 1996 and subsequent years are for continued growth in the international economy, with inflation projected to be relatively subdued.
I will conclude by reminding the House about the terms of the amendment. In contradiction of what Deputy Ahern said last night, this is the first Government to commit itself in advance to specific targets for the growth in current supply services expenditure. This is the area of expenditure which, if properly controlled, can yield significant benefits in terms of room for manoeuvre in tackling incentives for work through the tax and social welfare systems and in terms of keeping downward pressure on borrowing and, thus, on interest rates and inflation. This disciplined approach will provide the resources to promote additional employment, reward work and reduce taxation.
The OECD economic survey projects a favourable economic outlook, with continued growth in employment and real disposable income. The Government has accepted the public debt philosophy and targets set out in the Maastricht Treaty. The general Government deficit is projected at 2.7 per cent of GDP this year. We have maintained Ireland's position as having one of the best fiscal performances in the European Union, the best rate of employment creation and the best overall performing economy. In short, the amendment in my name reflects the reality of the careful planning that has gone into this Government's fiscal and economic management. In those circumstances, I commend the amendment to the House.
I will put my cards on the table by saying I believe in maintaining public services and that we as a people have a duty to provide for those who cannot provide for themselves. We have a duty to provide a health service for the sick and, in the words of the editorial of last Friday's issue of The Irish Times, we owe it to our young people to ensure that our educational standards are improved. We also have a duty to invest in our future, in roads, public transport, telecommunications and training, the infrastructure which makes our economy work and which directly and indirectly leads to economic growth. None of this can be achieved without public spending and as a result we as a Government have a duty to make that spending available.
All of this should be obvious, but it appears it is not. From the tone of much of what has been said and written over the past week it is obvious that many commentators and Opposition Deputies believe public spending is some sort of evil, a demon that must be slain. I am proud of the improvements in public services that have taken place since my party came to power in 1992 in coalition with Fianna Fáil. I am proud of the reduction in hospital waiting lists and the improvements in the education service, particularly for children in disadvantaged circumstances. I am also proud of the resumption in local authority house building, the improved funding for the arts, civil legal aid and many other areas. I welcome the infrastructural investment which has been made possible by Structural and Cohesion Funds.
Since 1992 we focused on areas where improvements are both needed and affordable. There has been no revisiting of 1977, the nub of the matter. Public spending is not inherently bad, nor is it inherently good. What happened in 1977, and the following years, was irresponsible and wasteful. Jobs were created in the public service which we could not afford and, worse still, jobs were created for clerical officers and clerical assistants when there was very little for them to do.
Who created most of the jobs in the mid-1980s?
Most public spending serves its purpose but, equally, it is clear that there has been, and still is, great waste within the public service and public spending and the Minister is correct to tackle it.
On the current position my immediate reaction is to ask what all the fuss is about. What crisis is it that people are talking about? There is no budgetary crisis or crisis in public spending. I do not believe there is any difficulty in regard to public spending. I accept the Maastricht guidelines and that we must endeavour to reduce our Exchequer borrowing requirement in the next few years. The debt-GNP ratio is too high and must be reduced progressively. In short, we should only spend more if we can afford to do so, but this is where I have some difficulty. The debate over the past week focused on the gross level of spending and failed to refer to the much more important question of whether we can afford to spend more. It took no account of tax revenue, the borrowing requirement or the level of growth. It ignored income and concentrated exclusively on spending. This is an economic nonsense, but those who would conjure an economic crisis can scarcely do otherwise. It is difficult at this time of the year to make accurate forecasts of the 1996 outcome, but the economic indicators are unambiguously positive. The optimistic growth rate predicted at the time of the budget may be exceeded with obvious implications for tax revenue. There is no indication that the budget targets will not be met, the opposite is true.
What about the £1.6 billion?
It would be dishonest of me not to acknowledge that the Government contributed to the current debate by imposing on itself a guideline of a 2 per cent real increase in spending on supply services next year. It will be clear from what I said that I regard this guideline as less important than the guidelines contained in the Maastricht Treaty. I would go further and say that the 2 per cent limit is, of itself, not very important. What matters is not the gross level of spending but rather the level we can afford.
Of course, there is another argument against increased spending. It is argued that public spending increases are dangerously inflationary, especially at a time when our economy is doing well. Those who advance this argument usually claim that the 1995 budget was excessively pro-cyclical, that our economy is in danger of overheating. I do not accept that argument. There is no evidence that our economy is overheated, nor is there any evidence that there are inflationary pressures at work. This annual OECD survey is positively effusive on that point. Nonetheless I accept that concern on this count is real and certainly would not dismiss the argument out of hand. In any event, we are all aware that our colleagues in the Department of Finance and the Central Bank are skilled at spotting inflationary pressure at some distance. No doubt the Minister would take prompt corrective action were it to become necessary. However, I contend it is clearly not necessary at this time.
I hope I will be forgiven if I engage in an aside: is it not remarkable that the people and the parties who expressed concern about the inflationary effects of public spending are the very same people who argue for income tax cuts and all that they entail in terms of inflationary pressures and increased demand?
We did in 1987.
Those individuals, indeed the social partners, would do themselves more credit were they consistent in their arguments.
Speaking of consistency, it would be remiss of me not to refer to the absurdity of this Fianna Fáil motion. For Fianna Fáil to suggest that public spending is out of control is effrontery of a quite remarkable kind. Social spending this year will rise by 4.7 per cent compared with an average of 8 per cent over the preceding five years. Public service pay will rise by 5.6 per cent, compared with 8.5 per cent over the preceding five years. For Fianna Fáil to try to stand those figures on their head is really rather silly and convinces nobody. It might well serve Fianna Fáil better were they to take credit for the real achievements of the last Government rather than refashioning the record of that Administration to suit the prejudices of their present spokesperson.
An interesting feature of this debate is that the record of former Minister for Finance and Deputy MacSharry has been the subject of so much praise. We are told he did the business by cutting spending and reducing the number of public servants. No doubt some of that praise is deserved but it is also important to maintain a sense of perspective. It was former Deputy Ray MacSharry who gave us the empty hospital wards, who gave us the obscenity of people dying on trolleys in hospital corridors; it was he who cut spending on health so much that subsequent Governments have had no choice but to increase spending to redress that damage. The experience of the MacSharry years is also instructive in relation to public service pay. Certainly, the level of public service pay was stabilised but was achieved largely by postponing special increases to later years. In fact the action of former Deputy Ray MacSharry contributed in no small measure to the increases in public service pay in the years following 1989.
In reading the OECD survey this week one is struck by its uncommonly positive tone. It seems to me to be quite extraordinary that Fianna Fáil, who clearly could not have read it, or are deliberately distorting it, should draw entirely opposite conclusions.
I should like to share my time with Deputy Ned O'Keeffe and with the Progressive Democrat Party.
I am sure that is satisfactory and agreed.
The present Minister for Finance is a great talker and, as I speak, has left the House. I admire the manner in which he put together his contribution this evening.
It is obvious that Deputy Derek McDowell has not even read the OECD survey because they had this to say:
As the economic cycle in Ireland is further advanced than on Continental Europe, being closer to that of the United Kingdom, the need to tighten monetary conditions in order to avoid a build up of inflationary tensions is arriving earlier than it is in other ERM countries.
whereas Deputy Derek McDowell has just stated the opposite. Deputy McDowell also stated that, when there is revenue buoyancy, it is a nonsense to control public expenditure.
I did not say that.
I think the Deputy should consult his colleague, the Minister for Finance, because I do not think that was the type of comment he made earlier.
I might comment on the state of our economy, one with a mistakenly-planned current budget deficit in 1995, with out-of-control public spending, with a lack of prudent financial planning, with a lack of any coherent medium or long term economic strategy, an economy bedevilled by panic decisions on the part of the Government as witnessed on Thursday last, 8 June. Indeed the predictions of the Minister for Finance last week did not come to anything.
I might quote from the introduction to the recent damning annual OECD survey on the Irish economy, to which others have already referred but it is sufficiently important to be placed on the record:
... despite its good performance, the Irish economy continues to face high levels of public debt and unemployment ... tighter control on public expenditure appears to be necessary in order to sustain progress in reducing the debt to GDP ratio as specified in the Maastricht Treaty and to make room for a further reduction in the tax burden.
Of course all of those facts were avoided by the Minister for Finance in his selective quotation from that survey. The sad fact is that this rainbow Coalition Government, in the light of that hard-hitting OECD survey, is only beginning to open its eyes to the massive surge in public spending which is and will continue to place unbearable pressure on all sections of our economy, business community and individuals nationwide. It is sad that this Government had to wait until this OECD survey hit its desk before sitting up, taking notice and panicking. It is sad that this Government have not learned anything or listened to anything the Fianna Fáil Party has said on the state of our economy in its very positive contributions. The sad fact is that this amalgam rainbow Coalition Government cannot manage our economy. The truth is that it is a bad amalgam, like a poor dental filling — a short term solution that does not work properly.
It is difficult to hide the truth: good economic management is hard to find and certainly was lost when this Government took office. Sound economic, fiscal and monetary management had been the order of the day until the Fianna Fáil-led Administration left office in December last. Unfortunately, mismanagement of our economy has become the norm over the past six months but the truth cannot be escaped.
When Fianna Fáil left office, more particularly when my present party Leader, Deputy Bertie Ahern, left the Department of Finance on 15 December 1994, our economy was in good order, all trends were positive and we had the first balanced current budget in almost 30 years. As a direct result of the prudent fiscal, monetary and economic policies of Fianna Fáil-led Governments since 1987 employment had been steadily growing, consumers had more to spend, and at long last our citizens were beginning to feel good about the state of our economy. Christmas 1994 came and went, so too did the firm hand on the spending steering wheel which had been the forte of the Fianna Fáil-led Government.
Only a short few months ago, the incoming Coalition Government promised firm management of the public finances. In his Budget Statement of 8 February 1995 the Minister for Finance said:
We will need firm discipline and strict adherence to our commitments if we are to meet the targets which we have set for ourselves in A Government of Renewal.
How all of that has changed within the intervening four short months, all of us are learning to our cost. That firm discipline and strict adherence to commitments have gone so that the limp hand that was on the spending steering wheel at the beginning of the year has now fallen off.
We in Fianna Fáil have complained and argued against the totally unnecessary reintroduction of a current budget deficit, sending totally wrong signals to the markets. Without doubt it is a political scandal that this Government, within a few weeks of its first budget, decided to breach its public expenditure limits by a huge margin. Even if the Government decided to ignore the calls of Fianna Fáil, the breaching of expenditure limits within a few short weeks of taking office was grossly irresponsible on several counts. First, it undermines the credibility of Irish financial policy by placing a question mark over the ability of this Government to adhere for any time to the limits they clearly set for themselves for which, unfortunately, a heavy price will be paid by all our citizens in higher interest rates and taxation.
In addition, increased expenditure and borrowing reduce the scope and wherewithal for reducing the tax burden in future years. It is clearly evident that this Government appears to reverse continuously into a cul-de-sac of high spending. Clearly its priority has been to maintain the scope for spending increases, with tax relief a poor second. An armada of business and industrial lobby and pressure groups has echoed Fianna Fáil's calls for a reining-in of public expenditure. This is only to be expected since the state of the nation's finances has risen to the top of the agenda. Despite the warnings and predictions of a myriad of domestic financial market analysts and of a variety of other groupings, only now has the Government gone into reactive mode and panicked, pretending that it has also practised good management and calling for panic streamlining and the skimming of moneys from Government Departments.
Six months ago, Fianna Fáil had left in place the lowest inflation and interest rates for decades, a current budget surplus for the first time in 30 years, employment rising steadily, rising economic growth and a national development plan which would channel over £7 billion into the economy. A country should not be run by mismanagement, panic decisions or late night press releases. We deserve better than that. In December we were known as a Celtic tiger. It seems we could now become a Celtic crock but, unfortunately, there is no pot of gold at the end of this rainbow.
I wish to share my time with Deputy Michael McDowell.
I am sure that is satisfactory and agreed.
I wish to apologise if my remarks will no longer be current by the time I conclude my contribution. As reported in this morning's Irish Independent, the Minister for Justice told the Dáil last week of her plans for anti-crime initiatives and more prison places. Two hours later, the Cabinet announced cuts in Garda recruitment and the scrapping of plans for new prisons.
The 1995 budget promised to keep the increase in current expenditure to 6 per cent over last year. In fact, it wrote the words "we have done so" in stone. In his budget speech the Minister for Finance said:
We must also keep expenditure to levels which we can afford within this constraint. We said we would keep the increase in current expenditure this year to 6 per cent over last year, and we have done so.
The claim of continued budgetary discipline was hollow then and is empty now. It must be remembered that, as the Minister pointed out, the budget benefited from certain once-off factors which will not arise in future years. Even with that once-off aid the target is no longer achievable and only four months have passed.
Four months ago in this House the Minister stated: "...planning for the next three years is not enough. We need to lift our eyes and focus upon the horizon of the near future, which will take us into the next century". I will not mention the Minister's projections for the year 2010. As I said last February, I wish to share the Minister's vision even though I warned that the 1995 budget would not fulfil those aspirations. I stated at the time: "I wonder, at the end of the term of this rainbow Coalition, with all its colours, what answers will it give when this economy is led into the ground and buried in debt". The answer I received then from the Minister of State, Deputy Rabbitte, was as follows:
This is a reforming budget and I want to confront Fianna Fáil head-on regarding the contradictory and inconsistent nature of its charges against Democratic Left and Labour, the left wing parties in this Government of renewal. On the one hand we are charged with the crime of fiscal recklessness — Deputy O'Keeffe repeated the charge that we are adding to the public debt. With Democratic Left and Labour now in Government the charge is that the public finances are in dangerous hands, that we are, as a nation, going back to the spendthrift days of the past.
How true that is. In his further remarks, Minister of State Rabbitte coined the prophetic phrase "reckless reds". If he wants to be called that, I cannot object. The truth must come out.
As recently as 24 May the Minister for Finance informed me in a written reply that the budget day estimate of current account expenditure was revised upwards by £111 million to £11,963 million. In the light of last week's announcement it appears the Government no longer has any expectation of even this revised outcome. The planned 6 per cent increase for 1995 is long gone.
As the House knows only too well, the Minister for Social Welfare, Deputy De Rossa, did not wait 24 hours to increase the Minister's £60 million provision for equality pay in 1995 to £200 million. A £140 million per day error rate is over £50 billion per annum.
Current expenditure is out of control and the Minister is right to try to correct it. However, this Labour Minister for Finance seems to act first and think later. An example of that is the issue of the ACC Bank board of directors and section 153 of the Finance Bill, which the Incorporated Law Society of Ireland said was unconstitutional. The Attorney General, when eventually consulted, agreed. The Minister reduced corporation tax to 38 per cent at a cost of £43 million per year. This benefit to small companies and business would be self-financing and an enormous boost to the Exchequer.
The 1995 budget was built on the 1994 budget with a percentage increase and other special items such as equality pay. Did the Minister not find anything in 1994 and earlier years that was no longer relevant? The Minister knows business but he does not know enough to realise that adding a bit on to last year's figures is not something that even former inmates of Castlerea would counter as good book-keeping.
In addition to having the economy under control, crime prevention is the next most important task facing this tripod Administration. Fianna Fáil's bail Bill was voted down and the plan for the new Castlerea prison was scrapped behind the face of the Minister for Justice — a non-resigning issue. What is even more odd is that this prison was being financed from capital account and the Minister is, rightly, seeking to control current expenditure.
Is the Minister's announcement a panic reaction? I believe it is. This is the only occasion in my time as a Member when the Government promised cuts during a by-election campaign. These cuts or savings are only promised. Some were cancelled yesterday, according to this morning's Irish Independent. Can we be confident that Minister De Rossa will not do the same again having got away with it in the budget?
Savings and discipline are necessary where current expenditure is involved. Across the board embargoes such as those implemented by the former Taoiseach, Garret FitzGerald and the former Minister, Ritchie Ryan, do not give the best results. History seems to be repeating itself. Some areas such as Justice and Health require more people and this could be done by reducing staffing in other areas — not by across the board crude measures.
In 1996 does the Minister for Finance intend to revert to the current budget surplus approach he inherited from Deputy Bertie Ahern. Until Deputy Ahern is again Minister for Finance we will not have a booming economy. Under the present administration it is giving cause for concern.
I thank the previous speaker for sharing time with me. This Government motion is complacent, built on a completely false appreciation of our present position and offers nothing but the prospect of further decline in our standards of budgetary management. The sad fact is that over the past five years, inflation has been less than 15 per cent but public spending has increased by well over 35 per cent. Manufacturing earnings in the same period of time have gone up by 23 per cent but public sector pay and pensions have increased by 50 per cent. Even allowing for the 11,700 people who were taken on to the public service payroll between 1989 and 1994, it means that average public sector pay has gone up by approximately 40 per cent in a period where the competitive, exposed private sector payroll has gone up by 23 per cent.
It can be argued that the period from 1989 to 1994 was unusual because in the period 1987 to 1989 we had the Programme for National Recovery which held back some public sector wage increases. However, if one aggregates the Programme for National Recovery, the Programme for Economic and Social Progress and the Programme for Competitiveness and Work and asks what they have done for this country, the answer is that they have driven up public sector spending by a huge amount and that the engine in that growth is public sector wage costs.
There is little point in trying to allocate to any particular party in this House a monopoly of virtue or of vice in this matter. Every party is to some extent responsible for the three programmes to which I have just referred. Taken together they represent a phenomenon which we have to look at with a cold sceptical stare. A succession of agreements between the so-called social partners when put together, mean the cost of running this State has exploded during a period when competitive pressures have been keeping down wages and costs in the real economy, that is the non-State economy. Money is being spent as if it grows on trees.
What is it about jobs in Packard that make them less important than jobs in TEAM Aer Lingus? What is it about jobs in Sunbeam that make them less important than jobs in Irish Steel? Why do the social partners, using committees and hidden understandings in these so-called national agreements, exert massive pressure to subsidise employment in one place and at the same time expose vulnerable jobs to competitive pressures, high tax costs and a very substantial tax wedge without any apology to the people who will lose their jobs in these areas? We should remind ourselves that in 1994 the Packard Electric plant in Tallaght, which employed 800 workers, had a total wage bill of £15.5 million, of that the Government took 35 per cent in PAYE and PRSI. If that plant had been located in Newry or Wales the Government's share would be substantially less.
All that money creates what is referred to as revenue buoyancy. Ministers stand up and talk about revenue buoyancy as if it is a good thing when it is a bad thing. Revenue buoyancy means that 10 per cent growth in the economy means an 18 to 20 per cent growth in tax yields. A viciously regressive tax system takes more and more from those who are at work and throws it into the Government coffers. By the same token, if one looks at what Government has been doing to contain its spending one finds in the five years 1989-94 it allowed its overall expenditure to go up by 35 per cent during a period when inflation was 14 per cent.
If we permit the Government to continue spending, sucking in by viciously anti-work taxes more and more resources to fuel this increased expenditure and allow it to go unchecked, we will return precisely to the same economic malaise from which the country suffered between 1982-87. It will not be characterised by doubling the national debt as it was on that occasion but by the failure of the economy to mobilise itself and prepare for the period during which we will no longer receive massive transfer payments from the European Union.
We have a golden opportunity between 1995 and the turn of the century to revolutionise this economy and make it an enterprise economy. During that time we have to transform our system of taxation and social welfare to make it far more worthwhile to work than not to work and our system of taxing the corporate sector so that the taxation rates of non-manufacturing firms are comparable with those across the Border. We have also to tackle the tax wedge to make sure that a factory in Dundalk is not at a fiscal disadvantage compared to a factory in Newry. If we do not take the opportunity to revolutionise our system of taxation on work during these five years Ireland, as a member of an enlarged European Union will find it has a very high dependency ratio, a very low earning cohort, a depressed state of enterprise and an absence of entrepreneurial spirit. Those are the choices we face in strategic terms. Time is running our for this country to shape up and face up to the facts of economic life.
Our economy is not in a healthy condition. It is worth remembering that in the United States the percentage of those who are long term unemployed as a percentage of all unemployed people is in the low teens whereas in Europe as a whole it is in the low 40s which suggests that Europe has a big problem with unemployment. This is as a result of high taxes on work coupled with a high welfare safety net. Whereas this combination of factors has meant that long term unemployment in Europe as a percentage of total unemployment is in the low 40s in our poor benighted peripheral country the percentage of long term unemployed is 60 per cent. We are the sickest of the sick in economic terms. We are the country with the biggest problems, and the lowest participation rate by our potential workforce; yet we tax work out of existence as if it is a luxury. There must be a different attitude and it will have to start with a number of fundamentals. First, that the social partners cannot ever again sit around a table and conclude an agreement to allow public sector pay over the life of an agreement to increase at 2.5 times the rate of inflation. No matter how powerful the public sector unions are, they must be challenged if they think they can get away with that kind of comparative advance over other sectors. No matter who their political allies in office are they must realise the game is over. We need a realistic approach by the trade union movement which will concentrate on the issue of real take home pay, on reducing the burden of taxation on work, on participation, investment and enterprise. None of that is possible unless this country faces up to the fact that while Government spending grows demand for extra taxation on work cannot be controlled.
During the period 1989-94 if public sector pay had increased at precisely the same rate as private sector pay there would have been in this year's budget an extra £780 million to apply to reducing the tax bill. If we had simply kept public sector pay in line with private sector pay during that period we would be in a position to have a tax revolution. From my experience of this Government since 1994 — and my party participated in abortive negotiations on the formulation of this Government — it has embraced the philosophy of high expenditure, recruiting more and more into the public service.
Finally, it has decided, as Deputy Ned O'Keeffe was saying, to engage in the most extraordinary proposition of scrapping capital projects such as Castlerea Prison while taking extra prison officers into the prison service. That is the economics of the mad house and it is symbolic of that kind of economics that we have a half built wall around a former psychiatric hospital.
This parliament faces fundamental decisions and will continue to over the next five years. The opportunity exists for a majority here to put in place at the next election a Government which will take on the issue of public spending, which will ask trade unions, workers and businessmen to concentrate on take home pay, which will say we will live within our means and that the benefits of economic growth shall be given back to the people by lower taxation, and which will not resort to the recruiting office or to expenditure as a way out of its political problems. That opportunity is coming.
The Government's amendment to the Fianna Fáil motion is so complacent and out of touch with reality that I cannot wait for the electorate to get an opportunity to set us on the right road. The sooner this Government falls apart the better. The sooner the internal divisions that are beginning to appear manifest themselves more clearly in a way which will bring this Government down the better. We cannot wait to get rid of this Government. The country cannot afford to keep it in office any longer, and the sooner the people have an opportunity to speak decisively on the three-party Coalition which is now in office, the better.
It is rather ironic to hear Deputy McDowell call the people to be given an opportunity to go to the polls. There is a by-election pending in Wicklow but I do not see too many Progressive Democrats posters
We will have our day.
There is a reference to the OECD report in the motion and the Leader of the main party in Opposition referred to it at considerable length last night. I wonder is that the same report I read earlier this week. For the first time in the history of this State a Government in its programme has committed itself to spending limits. Last December the policy agreement between the three parties set out clear policy parameters constraining the growth in spending to a maximum of 6 per cent in nominal terms this year and an annual rate of 2 per cent in real terms for 1996-7. The OECD report states that the expenditure targets of the Government are consistent with reducing the debt ration towards 60 per cent by the year 2000 and it points to a favourable outlook for the coming years. The report I saw seems to favour rather than condemn Government policy.
There is a fundamental contradiction between what is stated in the motion and the day-to-day reality in this House where Opposition spokespersons call for further resources for health, education, social welfare, agriculture and a host of other schemes requiring the spending of public money. The speech for all occasions is still very much part of the Fianna Fáil agenda. The art of being on two sides of the same fence at the same time has been perfected by Fianna Fáil in recent weeks with particular reference to this motion.
The Government has recognised the overshoot and has acted accordingly to ensure that targets as laid down are met. The gap is less than 1 per cent of the 1995 gross non-capital supply services allocation, and by having the Ministers identify priorities in a report by this weekend rather than acting recklessly, and indeed to avoid any panic, the Government is engaging in an exercise of discipline, care and realism.
It is obvious that we are coming near the end of term. Having had a bad report so far, Fianna Fáil needs some straw to grasp. The Wicklow by-election is thinly concealed in the motion and, having dialled 999 repeatedly, fortunately there is no fire.
I wish to share my time with Deputies M. Ahern and McCreevy. Prudent management involves a carefully thought out budget, tight control of public spending, no borrowing when one is handed a budget with a surplus of £15 million, and identifying the priorities for available spending. Unfortunately I do not have the time to deal with the priorities the Government identified, which are not the ones it should have identified in the interests of the people with which our Leader, Deputy Ahern, dealt last night.
Stop-go policies are retrograde in the extreme for the people who deliver the services and, above all, for the people who need the services. To provide an allocation for a year and, four months later, radically alter that allocation causes serious problems particularly for those who depend on the caring services of health and education. The Minister for Finance is looking for a saving of £77 million and an embargo on appointments to the public service. Why was that not done on 8 February? A former Minister for Finance, Deputy MacSharry, whose name was mentioned earlier, did not tell us four months after introducing a budget that we would have to go back to some other plan. It is gross mismanagement and incompetence on the part of this Government which was warned often enough by Fianna Fáil and by economic commentators during the past four months that the predictions in the budget were unsustainable. I blame the ideologies in the Government. There are extremes of ideology and one cannot, therefore, expect a co-ordinated and integrated policy.
I accuse the Government particularly of having no commitment to rural Ireland. In the Border region it paid lip-service at the time of the ceasefire but there was no action. INTERREG money provided by the taxpayers of Germany and France which was supposed to be additional comes as part of our normal allocation. Another example of the lack of commitment to the rural areas is the abandonment of the prison at Castlerea. Who would consider it good management to build a wall at a cost of £1.2 million, leave it there, close the hospital and buy a hotel for the psychiatric patients?
The Minister for Arts, Culture and the Gaeltacht, Deputy Higgins, is intervening to block the building of a factory in Leitrim. The Minister for Agriculture, Food and Forestry in a high-handed and precipitate manner suspended the control of the farmyard pollution scheme. They are further examples of Fine Gael-Labour policy on rural Ireland. In 1982 they abandoned decentralisation and in 1987 Fianna Fáil reactivated it and many towns and counties have been revitalised as a result.
Where is the Minister of State with responsibility for the west? I was disappointed not to hear him in this debate attempting to justify the decision in regard to Castlerea. It is interesting also that the Minister for Finance, Deputy Quinn, never once mentioned Castlerea or tried to justify the decision in regard to it. Prudent management is not a stop-go approach or a panic reaction such as we saw last Thursday. Prudent managment is for a Minister for Finance to bring in a budget that will last 12 months, not 12 weeks.
I support the Fianna Fáil motion. In 1987 Fianna Fáil inherited a shambles of an economy after the national debt increased in the previous four years from £12 billion to £25 billion, despite what the Minister for Justice, Deputy Owen, said last night on television when she got her dates mixed up. Between 1987 and 1992 a Fianna Fáil led Government reversed that trend resulting in a current budget surplus outturn for the first time in many years. Fianna Fáil Government policies in those years led to low inflation, low interest rates, increased confidence in the business sector, a reduction in unemployment levels, an increase in the numbers at work and an increase in economic growth but what happened since December 1994? There is convincing evidence of the lack of economic leadership. There has been no sense of direction or responsible financial management. The country has not been governed properly by the rainbow Coalition. In the Democratic Left Party — perhaps it should be "Democratic Right"— we have evidence of a Damascus like conversion of representatives who, in Opposition, depicted themselves as the champions of the poor and downtrodden. However, their recent actions show they are lovers of the trappings of power. The manner in which their leader, the Minister for Social Welfare, treated the unemployed and pensioners will rank as one of the greatest——
The Deputy is right.
——sell-outs of the century. Democratic Left will not be forgotten in the Wicklow by-election or at the next general election. In the last Administration, the Labour Party understood the need for strict control of public expenditure to ensure continuing low interest and inflation rates and economic growth. However, when political expediency called it was not found wanting nor was it slow to change tack and throw responsibility to the winds.
Fianna Fáil locked them out of Government Buildings.
Rather than face up to tough decisions, the Labour Party went for the political soft option of the Rainbow Coalition. In recent days this expediency has come home to roost and the Government is now forced to draw back from its profligacy and batten down the hatches, much to the chagrin of its followers.
How can Democratic Left or Labour supporters trust their leaders who are like leaves in the wind, blowing in one direction today and in another tomorrow?
Blame the civil servants.
Fine Gael was viewed as a responsible party representing big farmers and business and legal sectors but its followers are cringing as a result of the direction taken by the party recently. In Opposition it condemned the appointment of programme managers and special advisers but in Government it espoused their appointment with Pauline fervour. During the Cork by-election the Taoiseach promised that if the party won the seat and was returned to power he would license south coast television. However, he has failed to do so in the last six months. He cannot do this but he did not have any qualms about promising it when he was looking for votes.
Is that not something Fianna Fáil would do?
Irish Steel awaits investment of £50 million but the Government is dragging its heels on this. Will it close Irish Steel before it goes out of office? Will it do what it did to Sunbeam?
Sunbeam is safe.
(Interruptions.)
It is clear that the Government's words do not match its actions. Its supporters will note its actions rather than its fine words. We have a Government comprising three parties who twist and turn to remain in power and are not capable of working together.
One could be forgiven for feeling that nothing has changed over the past few months. It is as if one went asleep on 20 November 1994 and woke up on 20 May 1995.
It was just before the 20th that Fianna Fáil went to sleep.
Listening to the debate on the Fr. Brendan Smyth case and the Attorney General's office one would be forgiven for thinking the same debate was continuing and that there had not been a change of Government.
Something happened — they were given cars.
I said last night we are going down the road we took in the 1970s and 1980s. I stated there was nothing wrong with trying the experiment but when it is proved beyond doubt that a current budget deficit does not work in an open economy such as ours every party should learn from that. It has been recognised that this is not the correct road to take. Certain events in the last few weeks remind me of what happened in 1982 and 1987. I refer to the contribution made by the then Minister for Finance, Deputy Dukes. He set Exchequer borrowing requirement targets for a particular year but the Tánaiste, Deputy Spring, who was hospitalised, disagreed with them and made the Taoiseach, former Deputy Garret FitzGerald, back down. From that moment the Government lost control of public expenditure.
When the Estimates were published I and other speakers said they were not realistic. I make no apology for saying that to plan for a current budget deficit again when we had a balanced budget for the first time in 27 years was daft.
It was an accident.
There is a difference between an accident and a disaster.
Ten days after the introduction of the budget the Minister for Social Welfare decided to spend an extra £140 million. As a result of fancy accounting the position will not change. Last week the Minister for Finance stated "minor adjustments" will be made while newspaper headlines spoke of "Taoiseach gets tough on spending".
It was reported in the newspapers that there will be additional cutbacks amounting to £70 million but the Tánaiste, who was abroad, stated that did not apply any more. Following a briefing by the Minister for Justice, we understand that the adjustments announced last week do not count for anything. That is how the Government of 1982-87 behaved. Whatever one might say about the Government from 1987-89 under the then Taoiseach, former Deputy Haughey and Minister for Finance, Deputy MacSharry, it adhered to its decisions. I faced thousands of angry parents when cutbacks were made in education. Whatever my differences were with Deputy Haughey over the years he was the first to do anything about the problems which existed.
To plan irresponsibly for a current budget deficit given the growth rate in our economy for the last number of years is economically stupid. When the rainy day comes the Government will not be able to prime the economy. We were not in a position to do it between 1982-87. It was not good from a macroeconomic or any other economic point of view. The Government has adopted the same approach on this occasion. There is a slow down in the UK and US economies and there is a marked slow down in the German economy. If it is necessary to prime the pump with more expenditure the Government will not be able to do this.
I always believed that the electorate was prepared to follow a Government which administered the proper medicine. It accepted the cutbacks which had to be made post-1987 on the basis that no future Government, including a Fianna Fáil Government, would go back down that road. Political parties will pay a heavy price for the irresponsibility shown by the Government over the past six months. I would make the same point if a Fianna Fáil-led Government had taken this course.
Amendment put.
The Dáil divided: Tá, 74; Níl, 62.
Tá
- Ahearn, Theresa.
- Allen, Bernard.
- Barry, Peter.
- Bell, Michael.
- Bhamjee, Moosajee.
- Boylan, Andrew.
- Bradford, Paul.
- Bhreathnach, Niamh.
- Bree, Declan.
- Broughan, Tommy.
- Browne, John (Carlow-Kilkenny).
- Bruton, Richard.
- Burke, Liam.
- Burton, Joan.
- Byrne, Eric.
- Carey, Donal.
- Connaughton, Paul.
- Connor, John.
- Costello, Joe.
- Coveney, Hugh.
- Crawford, Seymour.
- Creed, Michael.
- Crowley, Frank.
- Currie, Austin.
- Deasy, Austin.
- Deenihan, Jimmy.
- De Rossa, Proinsias.
- Doyle, Avril.
- Dukes, Alan M.
- Durkan, Bernard J.
- Ferris, Michael.
- Finucane, Michael.
- Fitzgerald, Brian.
- Fitzgerald, Eithne.
- Fitzgerald, Frances.
- Flaherty, Mary.
- Flanagan, Charles.
- Gilmore, Eamon.
- Harte, Paddy.
- Higgins, Jim.
- Higgins, Michael D.
- Hogan, Philip.
- Kavanagh, Liam.
- Kemmy, Jim.
- Kenny, Enda.
- Kenny, Seán.
- Lowry, Michael.
- Lynch, Kathleen.
- McCormack, Pádraic.
- McDowell, Derek.
- McGahon, Brendan.
- McGinley, Dinny.
- McManus, Liz.
- Mitchell, Jim.
- Mulvihill, John.
- Nealon, Ted.
- Noonan, Michael (Limerick East).
- O'Keeffe, Jim.
- O'Shea, Brian.
- Owen, Nora.
- Pattison, Séamus.
- Penrose, William.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Ring, Michael.
- Ryan, John.
- Ryan, Seán.
- Shatter, Alan.
- Sheehan, P. J.
- Shortall, Róisín.
- Taylor, Mervyn.
- Upton, Pat.
- Walsh, Eamon.
- Yates, Ivan.
Níl
- Ahern, Dermot.
- Ahern, Michael.
- Ahern, Noel.
- Aylward, Liam.
- Brennan, Matt.
- Brennan, Séamus.
- Browne, John (Wexford).
- Burke, Raphael P.
- Byrne, Hugh.
- Callely, Ivor.
- Clohessy, Peadar.
- Connolly, Ger.
- Coughlan, Mary.
- Cowen, Brian.
- Cullen, Martin.
- Davern, Noel.
- Dempsey, Noel.
- de Valera, Síle.
- Doherty, Seán.
- Ellis, John.
- McDowell, Michael.
- Moffatt, Tom.
- Morley, P. J.
- Moynihan, Donal.
- Nolan, M. J.
- Noonan, Michael (Limerick West).
- Ó Cuív, Éamon.
- O'Donnell, Liz.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Batt.
- Flood, Chris.
- Foley, Denis.
- Foxe, Tom.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Seán.
- Hilliard, Colm M.
- Hughes, Séamus.
- Jacob, Joe.
- Kenneally, Brendan.
- Keogh, Helen.
- Killeen, Tony.
- Kirk, Séamus.
- Kitt, Michael P.
- Lawlor, Liam.
- Lenihan, Brian.
- Leonard, Jimmy.
- Martin, Micheál.
- McCreevy, Charlie.
- McDaid, James.
- O'Keeffe, Ned.
- O'Leary, John.
- O'Malley, Desmond J.
- O'Rourke, Mary.
- Power, Seán.
- Quill, Máirín.
- Ryan, Eoin.
- Smith, Michael.
- Wallace, Mary.
- Walsh, Joe.
- Woods, Michael.
Tellers: Tá, Deputies J. Higgins and B. Fitzgerald; Níl, Deputies D. Ahern and Callely.
Amendment declared carried.
Question put: "That the motion, as amended, be agreed to."
The Dáil divided: Tá, 70; Níl, 63.
Tá
- Ahearn, Theresa.
- Allen, Bernard.
- Barry, Peter.
- Boylan, Andrew.
- Bradford, Paul.
- Bhreathnach, Niamh.
- Bree, Declan.
- Broughan, Tommy.
- Browne, John (Carlow-Kilkenny).
- Bruton, Richard.
- Burke, Liam.
- Burton, Joan.
- Byrne, Eric.
- Carey, Donal.
- Connaughton, Paul.
- Connor, John.
- Costello, Joe.
- Coveney, Hugh.
- Crawford, Seymour.
- Creed, Michael.
- Crowley, Frank.
- Deasy, Austin.
- Deenihan, Jimmy.
- De Rossa, Proinsias.
- Doyle, Avril.
- Dukes, Alan M.
- Durkan, Bernard J.
- Ferris, Michael.
- Finucane, Michael.
- Fitzgerald, Brian.
- Fitzgerald, Eithne.
- Fitzgerald, Frances.
- Flaherty, Mary.
- Flanagan, Charles.
- Gilmore, Eamon.
- Harte, Paddy.
- Higgins, Jim.
- Higgins, Michael D.
- Hogan, Philip.
- Kavanagh, Liam.
- Kemmy, Jim.
- Kenny, Enda.
- Kenny, Seán.
- Lowry, Michael.
- Lynch, Kathleen.
- McCormack, Pádraic.
- McDowell, Derek.
- McGahon, Brendan.
- McGinley, Dinny.
- McManus, Liz.
- Mitchell, Jim.
- Mulvihill, John.
- Nealon, Ted.
- Noonan, Michael (Limerick East).
- O'Keeffe, Jim.
- O'Shea, Brian.
- Owen, Nora.
- Pattison, Séamus.
- Penrose, William.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Ring, Michael.
- Ryan, John.
- Ryan, Seán.
- Shatter, Alan.
- Sheehan, P. J.
- Shortall, Róisín.
- Taylor, Mervyn.
- Upton, Pat.
- Walsh, Eamon.
Níl
- Ahern, Dermot.
- Ahern, Michael.
- Ahern, Noel.
- Aylward, Liam.
- Brennan, Matt.
- Brennan, Séamus.
- Browne, John (Wexford).
- Burke, Raphael P.
- Byrne, Hugh.
- Callely, Ivor.
- Clohessy, Peadar.
- Connolly, Ger.
- Coughlan, Mary.
- Cowen, Brian.
- Cullen, Martin.
- Davern, Noel.
- Dempsey, Noel.
- de Valera, Síle.
- Doherty, Seán.
- Ellis, John.
- Flood, Chris.
- Foley, Denis.
- Foxe, Tom.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Seán.
- Hilliard, Colm M.
- Hughes, Séamus.
- Jacob, Joe.
- Kenneally, Brendan.
- Keogh, Helen.
- Killeen, Tony.
- Kirk, Séamus.
- Kitt, Michael P.
- Lawlor, Liam.
- Lenihan, Brian.
- Leonard, Jimmy.
- Martin, Micheál.
- McCreevy, Charlie.
- McDaid, James.
- McDowell, Michael.
- Moffatt, Tom.
- Morley, P.J.
- Moynihan, Donal.
- Nolan, M. J.
- Noonan, Michael (Limerick West).
- Ó Cuív, Éamon.
- O'Donnell, Liz.
- O'Donoghue, John.
- O'Hanlon, Rory.
- O'Keeffe, Batt.
- O'Keeffe, Ned.
- O'Leary, John.
- O'Malley, Desmond J.
- O'Rourke, Mary.
- Power, Sean.
- Quill, Máirín.
- Ryan, Eoin.
- Sargent, Trevor.
- Smith, Michael.
- Wallace, Mary.
- Walsh, Joe.
- Woods, Michael.
Tellers: Tá, Deputies J. Higgins and B. Fitzgerald; Níl, Deputies D. Ahern and Callely.
Question declared carried.