Vol. 545 No. 2
40 Mr. Howlin asked the Minister for Finance if his attention has been drawn to the concern expressed by a range of economists quoted in a newspaper (details supplied) on 17 November 2001, which questioned the wisdom of continuing to set aside money for the National Pension Reserve Fund while cutting back on infrastructural spending; his views on the issue; and if he will make a statement on the matter. [29955/01]
I am aware of the article to which the Deputy refers, and have read it with interest. It is inaccurate, however, to suggest that I am cutting back on infrastructural spending. In fact, current projections will see another year-on-year increase in capital spending to ensure infrastructural deficits will not cause us to lose competitiveness.
The Government remains committed to implementing the NDP especially in the key area of infrastructure. The recently published AEV honours the Exchequer's obligation to funding of the infrastructure operational programme of the NDP. Based on the Estimates published and the outturns for 2000 and 2001 there will be a total Exchequer investment of some 8 billion over the first three years of the plan in the infrastructure programme which is in line with that promised in the published programme.
Regarding the payment to the national pensions reserve fund, I am statutorily required to put at least 1% of GNP per annum into the fund. It would perhaps be useful if I briefly set out the reasons for the establishment of the fund. Due to increased life expectancy and declining birth rates we are set to experience a significant ageing of our population over the next half century. This increased dependency ratio will give rise to serious budgetary issues. In particular, it will put severe strain on the capacity of future Governments to continue to fund social welfare and public service pension liabilities on a pay-as-you-go basis. During the debate on the National Pensions Reserve Fund Act, I set out for the House my Department's projections on the likely scale of increased pension costs as follows. The Exchequer cost of public service and social welfare pensions in the year 2000 was 4.7% of GNP; by 2026 the Exchequer cost of broadly maintaining this level of pension provision will rise to 8.1% of GNP; and by 2056 this cost will have risen to 12.4% of GNP. The increase which we are facing in pension costs is a known liability. I take the view that one should budget for such known liabilities. The establishment of the national pensions reserve fund marks a radical departure in the management of the public finances and introduces a new strategic long-term element into budgetary planning. The statutory 1% contribution is central to the success of the fund and I remain committed to it. The credit rating agency, Standard & Poors upgraded Ireland's long-term sovereign debt rating to triple A this year. In announcing the upgrade, Standard & Poors stated, "The sustained decline in the public sector debt burden and the creation of the national pension reserve fund provide ample fiscal flexibility to meet the challenge of an ageing population. This places Ireland, with its relatively favourable demographic profile, in a better position than most EU members".
