That Dáil Éireann:
commends the Government on the progress made under the NDP as evidenced by the 2007 NDP Annual Report, particularly the substantial investment made in consolidating and enhancing Ireland's economic competitiveness;
acknowledges important economic and social progress made over the last decade and the fact that we face the present economic and fiscal challenges from a position of strength; and
commends the Government on the measures it is taking to address the current challenges, particularly the maintenance of policies that support economic and budgetary sustainability, thereby positioning Ireland to benefit from a future upswing in the global economy.
While we face short-term problems requiring action now, our future remains positive. The testimony to that is the national development plan and the progress the Government has made in delivering on that plan. The NDP 2007 report shows the Government's commitment to making the investment necessary to consolidate and enhance Ireland's economic competitiveness. It is clear that NDP investment is tackling our infrastructure deficits and providing the upskilling, training and education that our workforce needs. The NDP is also supporting our enterprise and innovation sector. The most visible progress under the national development plan can be seen in our steadily improving transport network and in the large-scale and ongoing investment programmes of the Dublin Airport Authority, the ESB, EirGrid, Bord Gáis and Bord na Móna. A highlight in 2007 included the completion of Pier D in Dublin Airport which can handle up to 10 million passengers a year.
The NDP investment will help firms in Ireland to produce high quality, value-added and innovative goods and services that will generate competitive exports and create over 9,000 new jobs in overseas companies located in Ireland. These and other investments under the NDP are necessary to continue to stimulate the economy and enhance the quality of life of people all over the country.
Unfortunately, the economic climate has deteriorated over the course of this year. On the domestic front, developments in the house-building sector have proven to be more severe than anticipated when the budget was presented last December and in broad terms this sector is depressing growth by about four percentage points. Furthermore, the sharp increase in the live register in recent months is related to developments in this sector and we all know that there will be further pressures on employment over the coming months.
There is understandable concern about the current conditions and the future prospects for the Irish economy. As one of the world's most open economies, we cannot expect to be immune from international trends and global downturns. Ireland today is feeling the impact of the global slowdown and after an unprecedented period in economic terms when Ireland caught up with and indeed surpassed many of our fellow European nations, we are now facing more difficult times.
People are paying more for their weekly food bill and for filling up at the petrol pump and many people are worried about the possible impact of the global downturn on their job prospects. The situation in Ireland is, of course, not unique as other countries are also experiencing difficulties. Listening to some people in recent days, one might think that the economic slowdown is exclusively an Irish phenomenon.
Internationally, there has been continued turbulence in global financial markets and consequential movements in interest rates; faltering economic growth in the US, the UK and other major trading partners; major exchange rate shifts in terms of the depreciation of the dollar and sterling; and unprecedented rises in oil and energy prices.
In Germany, unemployment has risen and retail sales have fallen for three months in a row. Some economists think Germany may show no growth in the second quarter. In France and Spain, the property market is also enduring turbulent times. In Portugal, GDP fell in two of the last three quarters. In New Zealand, the economy contracted in the first quarter. Denmark is in recession. A diverse set of international circumstances have combined over recent months to place our economy under much greater pressure.
I accept that the source of the problem will not be the primary concern for those people who are currently facing financial difficulties. However, it is important to say that the fundamentals of our economy are strong and will help us withstand this global pressure. The level of economic activity in the first quarter of this year remains at 2007 levels which last year saw GDP grow by 6%; in other words, activity remains at a high level by historic standards. Our workforce now stands at over 2 million, which is a doubling in two decades. A record level of investment in education has created a young dynamic labour force which is highly skilled and flexible. In the past decade, we have invested heavily in the knowledge economy through research and development. Ireland's low tax regime has been a key element in this package and remains attractive for foreign direct investment. Given the progress we have made over the last decade, we are well positioned to withstand the global downturn. We have ended forced emigration and we have achieved historically low levels of unemployment. The Government has used the boom wisely and saved while times were good by recording budget surpluses in ten of the last 11 budgets.
We used the boom to more than halve the national debt as a percentage of GDP, from 64% in 1997 to 25% in 2007. In 1997, €1 in every €6 of tax revenue went on servicing the national debt. By 2007, this had fallen to €1 in every €29 of tax revenue. If the assets of the National Pensions Reserve Fund are taken into account, the net debt position is about 12% of GDP. Over the past 11 years there has been unprecedented capital investment to provide key infrastructure such as roads, public transport projects and third level research facilities. This infrastructure has greatly increased our productive capacity and will be essential in returning the economy to a sustainable growth rate when global conditions improve.
We have also used the good times to give more money back to workers because we believe that they have worked hard for what we achieved and should share in the fruits of their labour. Billions of euro have been returned to Irish workers as a result of tax cuts since my party came to power in 1997. We reduced the tax on business because we believed it would increase investment, economic growth and the revenues that come to Government, and this has indeed been the case.
We have also used the good times to invest in public services. A total of 80% of current day-to-day spending goes on health, education and social welfare. We have significantly increased pensions, child benefit, the carer's allowance and other social welfare benefits. I am determined that a comprehensive welfare system will continue to support the most in need in society and those who are most at risk in the downturn.
Ireland in 2008 is very different from how it was in the dark days of the 1980s and the credit for this transformation goes to the Irish people. Their vitality, ingenuity and hard work have made Ireland one of the world's most remarkable economic success stories. Irish people deserve all the success they have achieved and I am determined to do my best to ensure that the citizens of this country continue to prosper.
Those intent on talking down our economy at a time when we want to maintain confidence in this country, against the background of a general global economic slowdown, diminish themselves and their cause. I ask Deputies to be constructive in their comments in this debate and not to take the soft option of simply playing partisan politics with our economic prospects.
This is not a time for disingenuous criticism nor is it a time for complacency. While we must not overstate the difficulties, equally we must not understate the necessity for decisive action. The eyes of the international community are now firmly on Ireland from a variety of perspectives, politically, economically and from a trade and investment point of view. By making the right decisions, we have a greater opportunity to emerge from the current difficulties within the next two years and return to a positive stable growth rate, as predicted by the ESRI and other independent commentators.
Anybody who experienced the difficulty of getting a job in the 1980s will understand why we are taking tough decisions now to ensure we continue to enjoy the fruits of our hard work. The wrong decisions based on short-term gain will only result in persistent negative consequences. We must act responsibly now to secure Ireland's future and this Government is determined to do that.
For many years we have operated on the basis of engagement within a framework of social partnership. We recognise that the effectiveness of the decisions that we take in the interests of the people is greatly enhanced when they take place in the context of a broader understanding and a co-ordinated approach.
To that end, I wish to make it clear that the Government believes that a renewed consensus in a new partnership agreement is in the best interests of the country. At the same time, it is necessary to caution against sectional interests being elevated above those of the whole community. It is incumbent on all of us to make the compromises necessary to ensure that Ireland emerges undamaged from the current difficult global environment. I should be absolutely clear that within the framework of democratic accountability, we will not abdicate our responsibility to take decisions that are in the best interests of the people.
In taking the corrective action necessary to ensure the period of reduced growth is as short as possible, the Government is committed to the following principles. Our primary emphasis will be on making every effort to maintain employment. Over the past decade, responsible social partnership has delivered a record rate of employment growth. All the evidence suggests that having a job is the most important positive influence on people's well-being. Unemployment in Ireland remains at approximately half the level it was in 1997. We must minimise the negative effect of the current difficulties on employment and avoid any increase in long-term unemployment. We must continue to emphasise securing high quality jobs for our citizens. We will promote sustainability in the economy. We will ensure we take decisions that are in the long-term interest and not merely for short-term gain. We will proceed with those capital investments which will have the greatest impact on stimulating the economy and enhancing the quality of life of our citizens, but we will pay strict attention to achieving value for money. We will prioritise front line services for current expenditure while achieving greater efficiencies across all services. We will examine measures to reduce the cost of doing business in Ireland to stimulate export-led growth and enhance productivity per capita. We will explore initiatives to increase competition to enhance consumer value and dampen rising prices. We will support those on the margins of society for whom the adverse global conditions are making life difficult.
Yesterday, the Government agreed an important step in implementing these principles, specifically in regard to the management of the public finances in the face of reduced revenues due to lower economic growth. After careful deliberation, we have developed a range of measures to limit spending increases. Spending is still increased compared to 2007 but, through a range of measures such as not implementing pay increases recommended for Ministers and senior public servants, we are underlining our commitment to keeping the public finances secure.
The total savings planned for 2008 are €440 million. This includes a saving of €50 million through measures identified as part of the efficiency review process carried out across Departments, which I announced in the budget for this year. A saving of €21 million will come from savings on advertising, public relations and consultancy expenditure. A further €10 million will come from payroll savings.
The remaining €360 million will come from savings on non-front line programme expenditure. This will include a saving of some €85 million which will arise on the allocation for the introduction of the fair deal nursing home scheme. That expenditure will not now be incurred in 2008. Savings of €38 million will arise from the slower than expected roll-out of the package of new developments provided for in the Department of Health and Children's Vote for this year. Savings of €25 million will be secured under the Department of Social and Family Affair's Vote as a result of its continuing anti-fraud initiative.
Given the projected revision to gross national product and other factors, there will be savings of some €45 million this year in the allocation for overseas development aid. The revised total contribution in 2008 will be more than €200 per citizen, totalling some €900 million. Ireland, therefore, will still be far ahead of almost all developed nations in our rate of contribution to overseas development aid and in line with our commitments for this year. There is scope for savings of some €10 million in the Department of Enterprise, Trade and Employment, including in respect of FÁS apprenticeships, where the number of participants has fallen. Finally, responsibility for the REACH programme has recently transferred to the Department of Finance, which will result in savings of some €2.5 million this year.
The remainder of the €440 million will comprise capital savings in 2008 of €140 million arising from projects which are being rescheduled to later years. These include the deferral of the gateway innovation fund, which will yield savings of €40 million; €75 million from the deferral of some projects under the decentralisation programme which have not been advanced to date; deferral of the national sports campus project, making a saving of almost €3.9 million; and savings this year across a range of capital projects in transport which are expected to yield €20 million. These measures are clearly focused on tangible general savings through efficiency, better use of resources, cutting out waste and duplication, streamlining delivery of public services and focusing capital resources on those areas that will return us to our potential growth rate as soon as international circumstances improve.
Some commentary in recent days has suggested that the public service is inherently wasteful and inefficient and is, in some way, the source of our current economic difficulties. On the contrary, the recent comprehensive review by the OECD shows that the public service is relatively modest in size, efficient in its activities and effective in its outcomes in comparison to most OECD countries. However, the review also showed that in Ireland, as in all OECD countries, there is significant scope for improvement in the efficiency and effectiveness with which public business is transacted. The report indicated some areas where the scope for improvement seems particularly significant by international comparison.
That the OECD report was undertaken at the invitation of the Government shows our determination to improve the value and impact of public services in partnership with those who work to serve the public across all sectors of the public service. I announced on my first day in office my determination to give priority to public service modernisation and renewal. All that I have heard since from public servants and their representatives is a welcome for that focus and a willingness to engage in achieving even more for the citizen.
There are many examples of good practice and good value throughout the public service. Many of our services are world class in their performance. I refer in particular to the performance of the Revenue Commissioners, the implementation of the new system of payments to farmers under the Common Agricultural Policy and the e-Cabinet project, which has attracted international attention. Likewise, we have seen improvements in the administrative processes which support the transaction of public business. These have produced substantial efficiency gains in areas like shared services and improved management of procurement. For example, in my own Department, we have joined with the Department of Justice, Equality and Law Reform in its shared services operation, which now manages my Department's payroll.
Similarly, by bringing together three separate agencies in the National Economic and Social Development Office, we have reduced the cost of overheads and streamlined activities, while enhancing the benefit of co-operation and co-ordination in three organisations which play an important role in the broader social partnership process. Similar examples of good practice can be found in areas like the operation of outpatients departments and accident and emergency departments in our hospitals and the management of the planning process in our local authorities. These examples of good practice, and many others, must now become the norm. We must quicken the pace of reform and progress. The best of breed in each part of our public service must become the norm.
In pursuing that goal, it is right that we empower local management and staff to make changes that generate the best outcome for the citizen and the taxpayer. They are the people who understand best how their services work and where changes could be made to best effect. That is why we are implementing these changes in ways that afford flexibility to organisations to approach the reduction in payroll costs and the streamlining of the activities of agencies and State bodies. The alternative might have been to impose a rigid, centralised regime which would seek to control every decision from Merrion Street. That would be ultimately self-defeating, and it would also deny the opportunity to public servants to show their commitment and capacity for change and development.
I am confident this is the better strategy and that it will produce enduring results in terms of achieving greater efficiencies while also delivering more effective services for the citizen. Reductions in planned expenditure are designed so as to minimise the impact on front line services in health and education. These proposals represent a measured and reasonable response to current challenges and I am confident the people will see that we are pursing a sensible course of action.
As I have said, the savings deliver €440 million in 2008 and €1 billion in 2009. Even with these savings, however, the fiscal position in 2009 will be demanding and all spending will have to be rigorously controlled. As we prioritise, we need to show care and common sense in the adjustments that we make. The measures we are taking will help steer this country through a temporary period of challenge and enable us to resume quickly a substantial growth rate in line with our strong economic potential and thus resume prudent but significant increases in desirable public spending.
The Government has sought to prioritise those areas of spending which contribute most to our capacity to weather the period ahead and to respond promptly and strongly to the emergence of more benign international conditions. Equally, we are giving political priority to those who are most vulnerable and most dependent on public spending programmes. This means that everything else must be a lower priority. Again, we make no apology for that. The public will recognise and support that combination of competitiveness and fairness which current conditions require. The prophets of doom would have people believe that this is the worst of times, in the narrow hope that such an approach might gain them some political advantage. The Government sees the bigger picture and we want people to know that despite the negative short-term forecast, our economy is better placed to emerge from the current difficulties than it was in the past. This is why it is imperative that we take the right corrective action at this time. It is a down payment on a prosperous future.
In the past decade, this country has experienced extraordinary success built on the hard work and ingenuity of the people. The Government is fully committed to ensuring that the progress made during this period is secured. Moreover, I am committed to creating the conditions under which we can take advantage of the inevitable upturn in the international economy. While the current circumstances are challenging, I wish to make absolutely clear that the Government is determined to take whatever decisive action is necessary in the best interests of the country.
This is important because all the fiscal projections indicate that if we can stand firm, deliver responsible Government and control public spending, this will give us the capacity to keep Ireland on a stable and upward economic growth path. It is in our hands to ensure that this country remains in the best possible position to withstand that global downturn. As Taoiseach, I pledge to the House all my energies in working towards that objective. I commend the motion to the House.