A Chathaoirligh, as it is my first time in this House since you assumed high office, may I take the liberty of wishing you every success, good health and fortune? We all wish the circumstances of your elevation were otherwise —we dealt with that at another time—but you have my sincere good wishes.
I welcome this opportunity, in the unavoidable absence of my colleague, the Minister for Finance, to address Seanad Éireann today on the 1996 Appropriation Bill. The annual Appropriation Bill gives statutory effect to the departmental Estimates for the Supply Services, non-capital and capital, including all Supplementary Estimates which were approved by the Dáil since the last Appropriation Act. The Bill appropriates to the various services listed in the Schedule the sum of £11,043 million. This total amount comprises the original Estimates of £10,794 million, as voted by Dáil Éireann last July, and Supplementary Estimates totalling £249 million. In line with the normal practice, the Bill also approves the use of departmental receipts amounting to £1,019 million as appropriations-in-aid.
Most of the focus of public debate on Government expenditure is on the level of spending on gross non-capital supply services. This relates to the day-to-day spending of Departments. The 1996 Estimate for gross non-capital spending as published in the revised Estimates Volume was £12,087 million which was subsequently increased by £50 million following the presentation of a revised Estimate for the Department of Agriculture, Food and Forestry, to provide £50 million in respect of EU disallowances. The Supplementary Estimates provided for in the Appropriation Bill add a further £131 million on top of this £50 million. These additions bring total 1996 gross current spending to £12,268 million. This is the figure for gross current expenditure referred to by the Minister for Finance in his statement on the publication of the 1997 Estimates last week. It represents an increase of 6.7 per cent in nominal terms or 4.8 per cent in real terms over 1995. It is likely that the actual 1996 outturn will be lower than £12,268 million since savings may emerge between now and the end of the year.
In his statement on the Estimates, the Minister dealt comprehensively with the reasons expenditure overruns have occurred this year which have necessitated the Supplementary Estimates included in the Appropriation Bill. The Minister explained in considerable detail the reasons spending has increased in 1996 in order to show that the criticisms which have been made recently that public expenditure is out of control are unjustified and misleading. The single biggest increases in current spending have been for the EU agricultural disallowances or beef fines and for additional spending due to the BSE crisis. These two items alone added £113 million to gross current spending this year. This additional expenditure was absolutely unavoidable and arose from circumstances which were entirely outside the Government's control.
It is true that the Government also decided to increase spending this year in a number of other areas where there was a clear and pressing need to do so. For example, it was necessary to allocate additional resources to the Government's anti-crime package. Also additional funds were provided to meet pressures in the health area in relation to the cost of the community drugs schemes and to reduce waiting lists.
I want to repeat in this House the assurance given by the Minister for Finance in the Dáil yesterday that the additional expenditure which has emerged this year does not in any way signal a weakening of this Government's resolve to control public expenditure. Spending is being closely monitored and controlled. The Government has taken steps to improve the expenditure management systems in Departments through a tightening up of the normal expenditure reporting arrangements. Further measures to improve the expenditure management process are being introduced as part of the strategic management initiative, to which I will refer in more detail later.
In his statement in the Dáil yesterday, the Minister for Finance gave a detailed outline of the position in relation to expenditure in 1997. I do not propose to go over the same ground today. However, one very important point which the Minister made is worth repeating and it is this: the fundamental measure of the health of the public finances is the level of the general Government deficit. The House can rest assured that, on this measure, the public finances are firmly under control.
There has been much criticism that the Government has exceeded the demanding targets which it set for itself to limit the growth in current public expenditure to an average increase of 2 per cent above inflation over the years 1996 and 1997. However, it is misleading and blinkered to look at the position on expenditure in isolation from the overall budgetary position. Government budgetary policy is very much on course to meet the requirements for participation in economic and monetary union. The Government's expenditure plans for 1997, as detailed in the Estimates published last week, are an integral part of the overall budgetary framework and are entirely consistent with the achievement of the Government's overall budgetary goals.
The budgetary framework which the Government has decided for 1997 and in a medium-term context will allow for a level of Government borrowing or general Government deficit which is well within the guidelines set out in the Maastricht Treaty and in the EU stability and growth pact, final details of which were agreed at last weekend's EU Summit in Dublin Castle. I would like to take this opportunity to pay tribute to the efforts and considerable skill of my colleague, the Minister for Finance, Deputy Ruairí Quinn, in successfully negotiating the stability and growth pact which will give a decisive further impetus to economic and monetary union.
This Government's record on controlling public expenditure stands up well to scrutiny when one looks at the position under the previous Government. The real increase in current public spending in the years 1992-94, inclusive, was an average of about 6 per cent per annum. This is significantly higher than the average of about 4 per cent per annum in the period 1995-97 under this Government. It is clear, therefore, that this Government, in line with the broad thrust of its stated policy, has achieved a considerable measure of success in slowing down the rate of growth in public expenditure.
The Government's commitment to maintaining firm control of the public finances and public expenditure in particular over the medium-term has been put in clearer focus by the move to a three year multi-annual budgetary cycle.
The new approach to framing the budget will mean that it will now be possible for the Government to examine policy changes on spending or taxation in the light of their impact on a clear and agreed benchmark and in the overall budget context. The overriding aim is to give the Government more effective control over the evolution of the major budgetary aggregates and the allocation of resources between spending programmes. The Minister for Finance is determined that progress will continue to be made with this approach to framing the Estimates and budget.
The strategic management initiative now under way in all Departments will widen and deepen this process. Under the new public expenditure and financial management system outlined inDelivering Better Government, which was launched by the Taoiseach on 2 May of this year, there will be a major devolution of responsibility to Departments for the expenditure programmes under their aegis. There will also be a strong emphasis on reviewing expenditure programmes to ensure the best possible value for money.
As the medium-term planning system is introduced and broad indicative allocations are settled by the Government for different programmes, Departments will be encouraged to improve the efficiency and effectiveness of those programmes. There will be a major incentive for Departments to make certain that they have in place management systems designed to produce the maximum value for money. On a broader level, the strategic management initiative continues to make progress in the Civil Service. A number of Departments and offices have already published a strategy statement—I received the Tánaiste's today —and several more will become available before the end of the year.
The general availability of statements of strategy for each Department and office marks a major step forward for the SMI. These strategy statements, by setting out the objectives and priorities for each Department, allow the business of individual Departments to be more rigorously scrutinised. Their availability also helps to bring greater clarity to the complex business of public administration and in this regard constitute a very valuable contribution to a better understanding of work in this area. Crucially, the SMI is also about delivering better services to the public, realising efficiencies and making the best use of our resources. I have no doubt that as SMI takes deeper root within Departments, and as the disciplines which it engenders become the norm at all levels of management, its impact will become increasingly apparent and will facilitate the delivery of cost effective and efficient public services.
The publication earlier this year of the programme of change,Delivering Better Government, has given renewed impetus to the SMI process. This programme is directed at achieving real and lasting improvements in efficiency and effectiveness in the civil and public service. Its aim is to ensure that only the best management practices are employed, practices which emphasise the highest standards of performance and the pursuit of excellence in service delivery and which recognise the primacy of the customer.
A key objective ofDelivering Better Government is the introduction of an enhanced framework for devolving responsibility and accountability. This will require amendments to the Ministers and Secretaries Act, and legislation will shortly be brought before the Oireachtas to give effect to this. The proposed framework will provide a legal mechanism for enabling responsibilities and accountability within the civil service to be clearly identified and assigned while preserving the ultimate responsibility of Ministers to Dáil Éireann, as required by the Constitution.
Delivering Better Government will also introduce improvements in other areas such as the better management of human resources, enhanced financial management systems and procedures to which I have already referred, as well as the better use of information technology and improved co-ordination between Departments in the management of key national issues such as child care and the environment. Overall, I am confident these initiatives will result in a more efficient and effective civil and public service which provides good value for money, and I know the Government can depend on continuing support from all sides of this House in progressing this important initiative.
Section 3 extends the termination date of the temporary £1,000 vehicle registration tax scrap repayment scheme introduced in the Finance Act, 1995. Under the scheme the Revenue Commissioners will repay £1,000 VRT to a person who, between 1 July 1995 and 31 December 1996, scraps a car which is ten years old or more and, at the same time, buys and registers a new car. The scheme will now run up to 31 December, 1997 on the same terms and conditions as currently apply. Senators will be interested to know that since July 1995, more than 23,000 cars have been scrapped under the scheme. More than 18,000 of these were in the ten to 16 years old age bracket but a number of vehicles 30 years old and over have also been scrapped.
The scheme has been a great success and has been very positively received by the public and by the motor trade. It has helped to remove many old and dangerous cars from the roads. The replacement of these older models by new cars purchased under the scheme has also benefited the environment through the consequent reduction in air pollution due to the latest levels of technology in the newer cars. In addition, vehicles which might eventually have been dumped or abandoned are scrapped, crushed and disposed of in a proper and environmentally friendly manner. It has not, however, increased the total car stock so it cannot be blamed for extra traffic congestion in our cities and towns.
The scheme has also provided a boost for sales of new cars and has brought the purchase of a new car within the grasp of some car owners who might not otherwise have been able to purchase one. The scheme has helped increase car registrations in 1996 to record levels with in excess of 114,000 new car registrations expected by the end of the year. Other factors have also played a major role. These include the low interest rate environment, the increase in consumers' disposable income, the stable economic climate and the fact that further economic growth can be relied upon and one can invest in a new car with some degree of confidence in the future.
Senators will be aware that the motor trade had asked for the scheme to be renewed for a further year. While the scheme clearly assists those selling cars, this was not the determining factor in the decision to extend the scheme. The quality and the age profile of our national car stock needed to be addressed. Furthermore, the continuation of the scheme for another year will dovetail with the Government's announcement in October that it will introduce compulsory car testing from 1998. Owners of cars of ten or more years will have a final chance to dispose of them under the extended scrap repayment scheme especially if they fear their car is unlikely to pass the proposed tests without expenditure on repairs or improvements.
There has been some coverage in the media of dealers who have sold cars worth more than £1,000 traded in under the scrappage scheme instead of scrapping them as is required. In those instances, the dealers have not informed the customers of their old vehicles' intended fate. I hear from the trade this may have happened in no more than 20 cases at the most. While I do not condone such action, Senators will appreciate this must be seen in the context of nearly 23,000 payments to date. In cases where cars were sold on, the required certification of destruction was not issued and the £1,000 payment of VRT was not made to the dealer.
While there does not appear to have been any revenue loss, customers may feel they have lost out by selling a car for less than it is worth. This practice is totally against the spirit and the intention of the car scrappage scheme and the Minister for Finance has made this view clear to the trade. I am pleased the Society of the Irish Motor Industry has directed its members that if a garage wishes to sell on a car surrendered under the scheme, it should only do so with the consent of the customer and that all cars offered and accepted under the scheme should be scrapped. This assurance is welcome and the Minister for Finance has asked the Office of the Revenue Commissioners to monitor the situation. This scheme was one of the more enlightened initiatives in the public arena in the recent past. It had its doubters both in official circles and in the trade but it has been successful. I have no doubt the scheme will generate the same enthusiasm in its final year as it has in the past eighteen months.
The Appropriation Bill is normally one of the last items of legislative business to be dealt with in any year. As such it presents a good opportunity to review the performance of the economy during the year. The economy continues to perform exceptionally well. Economic growth in 1996 as measured by the increase in GNP is expected to be around 6 per cent. This rate of economic growth is well in excess of the average of our EU or OECD partners. The economy is expected to continue to grow strongly in the coming years but perhaps not quite at the very high levels of recent years.
Consumer confidence remains very buoyant. This is clearly evident in all the major towns and cities. Consumers are spending more because interest rates are at historically low levels, more jobs have been created and people have seen an increase in their real disposable incomes. Retail sales in the first eight months of 1996 were nearly 7 per cent higher in volume terms than in the same period in 1995. Investment by industry and business generally has also recorded a further substantial increase this year, underlining the high level of confidence in the economy. This confidence derives largely from a belief that the Government's management of the economy and of the public finances will continue to steer us on a path of low budget deficits and high economic growth. The Government is determined that this course is followed.
Ireland's inflation rate for 1996, as measured by the average increase in the consumer price index will be 1.6 per cent, a very satisfactory performance. Export growth this year has slowed down somewhat, reflecting the sharp fall in some of our European markets in the first six months of the year and also the effect of the BSE crisis on agricultural exports. Export growth of 10 per cent in volume terms, however, represents a very satisfactory performance.
On the employment front, in 1996 alone, it is estimated that 50,000 new jobs were created which is a remarkable achievement. The increase has been strongest in the fast growing services sector. Industry also recorded appreciable job gains, particularly in high technology areas of manufacturing. I acknowledge that unemployment, particularly long-term unemployment, remains an intractable problem. However, the Government has taken important steps to tackle this problem through the allocation of substantial additional resources, both this year and in 1997, for FÁS training and employment schemes, including the community employment scheme.
As we approach the end of the year, I take this opportunity to mention the successful conclusion of what has generally been acknowledged to have been an outstanding Irish Presidency of the European Union. I believe all those involved—the Taoiseach, the Government and public officials alike—can be justifiably proud of their achievement. It has reflected very well on the Irish public service and I personally to extend my thanks to all those who worked so hard to make it a success. From attendance at Council meetings in Brussels and chairing conciliation meetings, I am aware of the work carried out by our public servants, at home and abroad, over and above the call of duty. In no small way their tremendous commitment to the governance of Ireland and its role in Europe helped to make our Presidency a success. As Minister of State with responsibility in this area, I thank them for their great commitment to the success of Ireland's Presidency.
I commend the Bill to the House. I wish the Cathaoirleach and Members a very happy and peaceful Christmas.