Appropriation Bill, 1999: Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

I welcome this opportunity to address the Seanad today on the 1999 Appropriation Bill. The purpose of the annual Appropriation Bill is to give statutory effect to the Departmental Estimates for the supply services, current and capital, including all Supplementary Esti mates which were approved by the Dáil since the last Appropriation Act. The 1999 Bill appropriates to the various services listed in the Schedule for the year ending on 31 December 1999 the net sum of £14,913.294 million. This total amount comprises the original net Estimates of £14,248.82 million, as approved by the Dáil last June, and net Supplementary Estimates totalling £664.474 million which have been approved by the Dáil in recent weeks. In line with the normal practice, the Bill also seeks approval for the use of Departmental receipts, amounting to £1,397.162 million as appropriations-in-aid of the services listed in the Schedule. As I have indicated, that the Estimates and Supplementary Estimates included in the Schedule to the Appropriation Bill have been approved by the Dáil. The Bill simply seeks to give formal legal effect to those Estimates and Supplementary Estimates.

The Bill includes the same standard provisions as in previous years, apart from the provision in section 3 of the Bill dealing with the payment of the excise duty on tobacco to the Department of Health. This is a technical measure required in order to give the Revenue Commissioners the authority to pay the excise revenue directly to the Department of Health and Children rather than to the Exchequer as is normally the case.

The Appropriation Bill provides an opportunity to review the budgetary and economic position. We are all aware of the exceptional performance of the Irish economy in recent years. We have managed to combine strong economic growth with price stability and large gains in employment. Ireland progressed from having one of the worst performing economies in Europe to having the best. This good performance was maintained this year. Yet again, economic growth is set to exceed expectations. GNP growth of 7.5 per cent is estimated for this year, compared with a forecast of 6 per cent at the start of the year. Employment growth continues to be strong. Employment is expected to increase by 74,000 this year. As a result, the fall in unemployment has continued. The unemployment rate currently stands at 5.1 per cent. This is just over half the rate of unemployment which existed when this Government entered office – quite a remarkable performance in two and a half years.

Meanwhile, prices have remained under control. Inflation is expected to average 1.6 per cent this year – substantially less than the 2 per cent projected at the start of the year. The performance of the economy has transformed the public finances. We are now expecting a general Government surplus for the third year in a row. We are set to have a record surplus in 1999, equivalent to more than 3 per cent of GNP. As a result, the national debt has continued to fall rapidly. It is now projected to fall to 47 per cent of GDP. As recently as 1993, this figure was over 90 per cent of GDP.

The economic outlook for 2000 remains positive. On budget day, the Minister for Finance announced our latest set of projections – real growth in GNP of 6.25 per cent, strong employment growth with an increase of 54,000, unemployment to fall to below 5 per cent, and inflation to average 3 per cent.

In preparing its budgetary policy, the Government is taking account of the longer-term challenges we face. Many European countries face a pensions time bomb in the near future, an issue which the Seanad has been discussing with the Minister for Finance. Demographic developments have left them with an ageing population, with many people reaching retirement in the near future. The cost of providing for increasing numbers of pensioners at a time when the working age population is falling will put a major strain on public finances. Ireland is fortunate in this regard. With the birth rate peaking around 1980 we will not face this problem for another 25 years. However, the Government has already begun to prepare to face this problem. The Government has decided to put aside a sum equivalent to 1 per cent of GNP annually to pre-fund both public service and social welfare pensions. In addition, the bulk of the net proceeds from the sale of Telecom Éireann will be added to this fund, a sum equivalent to almost £3 billion in 1999. This far-sighted measure will substantially reduce the burden on future generations.

As the Minister for Finance mentioned on budget day, rapid economic growth is creating a new set of problems. House prices have risen rapidly, congestion is increasing in our towns and cities and labour shortages are emerging in the economy. These pressures must be relieved if the economic performance of recent years is to be maintained.

The increase in house prices, particularly in Dublin, has been the subject of much discussion recently. Prices have nearly doubled since 1996. This has made it very difficult for many people to afford accommodation. This must be a major cause for concern. However, the Government is taking action. Recommendations made in the Bacon report are being implemented. This is having a significant effect. Record numbers of new houses are expected to be built this year. As a result, the rate of increase in prices has slowed. This trend should continue as the supply of new houses begins to match demand.

Over the last decade, Ireland has benefited from a series of social partnership agreements involving a consensus approach to economic management based on prudent fiscal policy, moderate pay increases and moderate inflation. The Partnership 2000 agreement was the fourth in a series of economic development strategies implemented since 1987. It involves an active collaboration between the Government, trade unions, employers' organisations and the community and voluntary sectors. Partnership 2000 has built on the successes of its predecessors in achieving continued economic growth and employment creation, together with moderation in pay developments in the economy.

The stable framework provided by social partnership has proven very attractive to foreign investment which, together with an emerging indigenous sector, has driven forward growth, employment and real incomes. It has also enabled real and substantial progress to be made in tackling social exclusion.

It is easy to forget how much we have achieved in such a relatively short time. By any objective standard, Ireland's performance in recent years has been impressive, indeed remarkable. Social partnership has contributed significantly to this success. There are advantages for us in using the social partnership process to underpin steady sustained growth in the future. At the same time, the long-term sustainability of social partnership depends on its ability to adjust to changing demands and needs at both national and enterprise levels.

There are many serious challenges facing us both domestically and on foot of globalisation. In the new policy environment which membership of EMU brings, pay levels across the economy, in the public and private sectors, are even more crucial in determining competitiveness and employment. As a small, open economy which is vitally dependent on exports, any loss of competitiveness vis à vis our trading partners would be very serious for growth and jobs. Our recent economic progress has shown us that much can be achieved by all the social partners striving towards a common aim. There is an onus on all of us to meet these challenges in a constructive and innovative way.

The NESC strategy report was prepared in response to a request from the Taoiseach for a strategy report in relation to a new national programme of social partnership. It provides a valuable background and framework for discussions on a new national partnership agreement. The Government remains committed to concluding a new agreement with the social partners. A new agreement is essential to ensure the maintenance and, where possible, the strengthening of the conditions necessary for continued economic and social development in the interests of all the members of society.

We cannot take our current economic success for granted. We are faced with a number of key challenges to ensure that the progress we have achieved to date is sustained into the future. One of these challenges is to ensure that the significant improvement in the public finances which has been a major cornerstone of our success is not put at risk by excessive pay demands in the public sector.

The public service pay and pensions bill has increased substantially in recent years. In the five year period 1995-2000, it will rise by almost 50 per cent. This is before allowing any provision for the costs of a new pay deal to succeed Partnership 2000. As the Minister for Finance said in the Budget Statement, the Government considers that it must overhaul the present system of pay determination in the public service. We need to move towards a system that more clearly links pay to performance and away from the fixed internal relativities and analogues that are a feature of the present system. Too often, we are paying for agreement to change, not for the outputs from the successful implementation of change. The current discussions on public service pay, in the context of the negotiation of a new national partnership agreement, must address this issue. We must also ensure that a new agreement addresses the issue of industrial peace, particularly in relation to essential services.

I will outline briefly some of the detail of the Appropriation Bill before the House today. Section 1 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. On 30 June 1999, the Dáil approved the original 1999 net Estimates for departmental expenditure which totalled £14.249 billion. Since then, the Dáil has approved a number of Supplementary Estimates for various Departments which, in total, come to £664 million. This extra amount brings the total grant for supply services expenditure in 1999 to £14.913 billion. Section 1(1) appropriates this total amount of £14.913 billion to the various supply services or Departments as listed in the Schedule. In addition, Section 1(2) provides for the application of a total amount of £1.397 billion in departmental receipts as appropriations-in-aid of the grants for the supply services listed in the Schedule.

I will outline briefly the main factors which have given rise to additional expenditure and the requirement for Supplementary Estimates this year. Six Departments and offices accounted for £634 million or 95 per cent of the total Supplementary Estimates of £664 million. The main factors which gave rise to the additional allocations in these areas are as follows. A net additional £179 million was granted to the Department of Health and Children Vote. Of this, £107 million was required to cover the cost of settlement of the dispute on nurses' pay and allowances. A further £90 million was needed to deal with under-provision over a number of years in the GMS payments board in respect of services to medical card holders and £21 million was required for additional costs arising on the demand-led drug schemes. These excesses were partially offset by buoyancy in the appropriations-in-aid of the Vote.

An extra net allocation of £159 million was granted to the Department of Education and Science. A total of £47.5 million was provided for additional capital for schools and third level institutions, £44.5 million covered an expected shortfall in EU receipts, £21.5 million was for pay settlements, including arrears of pay in the universities and institutes of technology, and £20.25 million was allocated to cover the cost of a greater number of teacher retirements at primary and second level than originally anticipated.

Net additional funds of £107 million have been approved for the Department of Public Enterprise. An additional £80 million was provided for CIE's rail safety programme and £40 million was required to cover extra costs associated with the Telecom Éireann public flotation.

In regard to the Office of Public Works, the purchase of the Farmleigh Estate and Lansdowne House, in addition to a number of other properties held on long-term leases, required the provision of additional net funds of £103 million to the Office of Public Works Vote.

Net additional funds of £52 million were provided to the Department of the Environment and Local Government to fund accelerated development of the national roads network. An extra net amount of £34 million was provided for the Department of Agriculture, Food and Rural Development, most of which was required to meet additional animal health compensation and related costs and for higher headage payments.

I now turn to section 2 of the Bill. Article 17.1.2º of the Constitution requires that the Financial Resolutions of each financial year must be enacted into law by the end of that financial year, that is, by 31 December 1999 in the case of the financial resolutions passed on budget night, 1 December. However, Article 17.1.2º also allows for the 31 December deadline to be deferred if an Act to that effect is passed before the end of 1999. This section makes provision for this deferment option to be invoked. The provision in this section of the Appropriation Bill will maintain the normal statutory deadlines for passing budget measures into law, that is, 84 days for the completion of the Second Stage and four months for enactment of the Finance Bill. Identical provisions were included in the 1998 and 1999 Appropriation Acts.

Finally, I will deal with section 3 of the Bill. The Minister for Finance announced in the budget that the excise duty on cigarettes was being increased by 50p per packet of 20, with corresponding increases in other tobacco products, and that the resulting revenue increase of £132 million in a full year would be paid as an appropriation-in-aid to the Department of Health and Children. The increase in the rate of duty was provided for in the Financial Resolutions passed in the Dáil on budget day and section 3 of this Appropriation Bill now provides the statutory authority required to assign the proceeds to the Department of Health and Children Vote.

These proceeds will, as indicated in the Bill, be paid by the Revenue Commissioners to the Minister for Health and Children, who will take them to account as an appropriations-in-aid of the Vote. The dedication of this substantial tax increase to support health spending will drive home to smokers the message that the habit is directly harmful to their health. Smoking is a major cause of lung cancer, chronic bronchitis, emphysema and heart disease and thus creates very significant costs for the health services. In accordance with the "polluter pays" principle, smokers should make a particular contribution towards those costs.

As we approach the end of this year and this millennium and look forward to the start of a new millennium, we can feel justifiably proud of the substantial economic and social progress that has been made, particularly over the last decade. This Government acknowledges the contribution which has been made at all levels of Irish society in helping to make this happen. Crucially, the fostering, through the social partnership model, of a consensus approach to dealing with economic and social issues, has played a hugely important role in bringing about our current favourable position.

The successful conclusion of a new national agreement with the social partners, together with the implementation of the ambitious national development plan and a continuation of the prudent economic and budgetary policies which have underpinned progress to date, will help to ensure that our current economic success continues well into the next century.

I commend the Bill to the House and I wish you, a Chathaoirligh, and all your colleagues a very happy Christmas.

Before the Senator proceeds, contributions will be confined to one speaker per group as agreed on the Order of Business, and may take up to 30 minutes.

I will not take 30 minutes because this matter will come before the House again in the new millennium under motion No. 10 on the Order Paper to which the Leader of the House referred.

I welcome the Minister and thank him for his comprehensive speech on the state of the nation. The amount of money to which the Bill gives statutory effect, £14.913 billion, is frightening. I am delighted the Minister came here to make a statement because we do not usually have the opportunity in this House to discuss the Estimates which give effect to that Vote, and this gives us that opportunity.

I congratulate the Government on the excellent financial returns for the year. Over the past six years we have enjoyed extraordinary growth. We are the envy of every European nation because of our economic growth and falling unemployment. This morning, two measures, the measure which we debated earlier and the measure before the House now, overlapped in some way, and many of the issues which were discussed earlier were discussed again.

There is one issue I want to take up, that is, the national debt which has been mentioned by the Minister. The Minister for Finance, Deputy McCreevy, also made a statement on it before he left the House. The Government of 1982-87 had to face very difficult times. Very imprudent measures had been taken by the previous Admin istration of 1977-82 which trebled the national debt. There were very severe redundancies in many industries in this city at that time. The motor industry went to the wall because of EU regulations. However, there was one famous motor industry in the Taoiseach's constituency at that time, Talbot Motors. All the employees in Talbot Motors, rather than getting redundancy payments, were put on the payroll of this State for the remainder of their lives, and we must not forget that.

The Government of 1982-87 was faced with difficult situations and had to borrow to meet the needs of citizens. What happened is extraordinary. In borrowing it provided housing, a telecommunications service, and, above all, education for our young citizens. That is bearing fruit now. That money was well invested and has shown a great return. I remember going to San José in 1985 with the present Taoiseach who was then Lord Mayor of Dublin to try to encourage American computer firms to come here. At that time some of our graduates from Trinity were finding employment in Silicon Valley, and we went over there. At that stage there were three American companies in Dublin dealing mostly in hardware. When President Clinton recently came to Ireland he noted that there were now 2,000 American computer industry firms based in Ireland and that, after America, we were the foremost country exporting software. We are now reaping the benefits of the education facilities this State provided for its citizens at that time. Therefore, we should not look at the 1982-87 Administration as a spendthrift Administration. It spent the money well. When it left office, the incoming Administration with the Tallaght Strategy followed the same prudent path and from then on there was support from all parties in relation to the finances of the State, and the State has grown to the prosperity we are now enjoying.

In our prosperity, there are certain infrastructural defects which still have to be addressed. Even though we have economic growth far better than our European neighbours, we fall well behind in our infrastructural facilities. The Minister for the Environment and Local Government has given me a commitment that major infrastructures for the city of Dublin will have his approval before the end of the year.

I worry about recent forecasts in relation to inflation. I see inflation beginning to rise again, and this concerns me. The Minister might comment on that. Inflation is now at 2 per cent and growing. As the economy grows and prospers, it would be terrible if inflation rose to a very high rate because that would destroy it.

In times of economic prosperity there are social needs to attend to. The Minister referred to the serious housing problem in Dublin. I do not think much can be done in the short term, but I hope that in the long term we can plan so that young people can get affordable social housing for which there is a tremendous need. I hope that when the Planning and Development Bill is passed we will be able to provide for that great need.

In the light of economic prosperity we must also look more kindly on refugees and asylum seekers coming here. We owe them that, given that we have, over many years, sent people abroad. We should now be more generous in our approach to people coming here.

In regard to the homeless, it is sad, given the current economic growth compared to what we had in the 1980s, to see people sleeping rough on our streets. That did not happen in the 1980s when we had less economic growth. Why are people are sleeping rough on the streets every night? It worries me to see so many people doing this in our capital city and it is a growing problem. If we have prosperity, let us deal with that problem. I attended a housing initiative for the homeless last week with the Minister of State at the Department of the Environment and Local Government at which a new home was launched. However, the Government needs to provide more funds in that area.

I hope the prosperity we have enjoyed at the end of this century continues into the new millennium and that we will continue to prosper as a nation. All Governments have contributed to achieving this. I thank the Minister for coming to the House this morning to address us. I thank him for the very kind millennium presentation he made to each Member of the House. It is a very striking presentation, and we are very grateful. I join in wishing the Minister a very happy Christmas.

I also welcome the Minister of State, Deputy Cullen, to the House. This is appreciated by the Members of this House. While we do not have a direct input to the Estimates, we do have an opportunity under the Appropriation Bill to discuss financial matters. I too compliment the Minister on this very comprehensive document.

The Appropriation Bill gives statutory effect to the moneys that have been provided under departmental Estimates and Supply Services for the current year. It is an extraordinary amount, just short of £15 billion in 1999. This country has come a long way in the past 20 years and more particularly in the past ten or 12 years. In the 1980s and early 1990s we could not have thought we would have an unemployment rate of just over 5 per cent. Some would say that given that percentage we do not have an unemployment problem. I know that is not true, but a rate of 5 per cent is a yardstick which is used internationally.

The rate is 30 per cent or 40 per cent in some areas in Dublin.

I take the point that the percentage is higher in some areas and it is important that in the context of social justice we continue to identify those areas and ensure equality of opportunity.

The focus is on social partnership, which is so responsible for our current situation. I am very pleased with the statements made by the Government, and in particular by the Minister for Finance, that the minimum wage will be implemented in the coming year and that those in society who feel they have not benefited as much as others from the Celtic tiger will be looked after and seen to be looked after in the new social partnership agreement.

An additional 50,000 were employed during the year, with the prospect of an additional 74,000 being employed in the coming year. These are extraordinary figures and show a country on the march. We have moved to a situation where we are the envy not only of Europe but of the western world in general. I consider this in the context of three issues which will be very important over the next number of years. The first issue, which I spoke about earlier this morning, is the national debt which was a problem we thought we would never face down some years ago. This is no longer the position, with the national debt decreasing as a proportion of GDP from 90 per cent to 47 per cent, and continuing to decrease. This is quite extraordinary and I compliment those involved in achieving it.

At a time when we have reduced the national debt so significantly we are investing in the pension funds for the future. In legislation this morning we decided to put 1 per cent of growth into pre-financing our funds out of which pensions will be paid in 25 or 50 years' time. Included in that fund is the money raised from the sale of certain assets which are being privatised. This is good housekeeping and the decision to provide such funding is very important. In addition we have brought forward a national development plan which will invest £40 billion over the next six years. It is an extraordinary situation when we take the reduction in the national debt, the funding of future pensions and the national development plan side by side.

Compliments must be paid to the Minister for Finance and the Government on their innovative thinking in dealing with the public finances and making provision for the future. These three issues will impact greatly on the future. The national development plan is most welcome when taken in conjunction with the Objective One status for 13 counties, including my own. The west, north, Border areas and the midlands felt they had not received all the benefits which have been accruing in recent times. However, the decision to give Objective One status to these areas, thereby drawing down extra finance from Europe, was very important. Coupled with the national development plan it will bring prosperity to those regions which has not previously been seen.

I disagree with those who say we are not investing in infrastructure. Major funding is being invested in road, rail and broad band services in the west, something which we welcome. This is not confined to communication as there is also funding being provided for the health services and many other areas. The Government is addressing the issues nationally, not sectionally. I believe the next six years will bring major prosperity and improvement to the livelihoods of those in the Objective One areas. In this context I think of national roads, including dual carriageways, and the gas grid which are so important to the future economic well-being of the country.

I listen sometimes to the negative public comment on how the public finances are being handled, but we would be very foolish to think that as a country we could spend like drunken sailors as if there were no tomorrow. The Minister for Finance and the Government who would preside over such spending would be castigated and ridiculed in future years. The current Minister for Finance will be complimented on his legacy in handling the public finances, especially when the true benefits of the legislation on pension funds, which we passed this morning, and the national development plan are felt by the people.

I know we will have a further opportunity to contribute when we discuss the Appropriation Bill early in the new year. For now I compliment the Minister of State on his comprehensive contribution this morning. He comes to the House on a very regular basis and obviously takes the business of the House seriously. He has always shown great respect and has been one of the finest contributors in the House. Today is no exception.

I join my colleague, Senator Doyle, and the Minister of State in wishing everybody a happy Christmas and good luck and fortune in the new millennium.

Mr. Ryan

I wish people a happy Christmas and the compliments of the season at the outset as it might sound a bit hypocritical at the end of my contribution.

The Government ought to be embarrassed to bring this legislation before the House because of the shamefully low level of public expenditure. For example, the population of Northern Ireland is approximately one-third of this State, but the combined spending of the British Government and the Northern Ireland Executive will be proportionally 50 per cent more than we will spend – it may be one-third more as it is difficult to compare the figures. However, it is undoubtedly true that the level of public expenditure in Northern Ireland is spectacularly higher than in this State, which is why the North has a better health service, schools which are better equipped and older people who are better off when they need institutional care. The one exception is the income of our elderly people and some of the allowances for fuel. Its public services are better than ours because it is prepared to spend money on them.

It is time the Government stopped fighting the battles of the 1980s. We are not a country on the verge of financial crisis or without resources. There are so much resources available to the State the Government does not know what to do with them. We have the £4 billion fund, with which I do not disagree in principle, but the Government still does not know what it will do with it. It is being put into a temporary fund until it figures out what to do with it because ideological rigidity says that public expenditure is a bad thing.

It is an unarguable fact that our railways are in a mess. They are under-funded, under-resourced, under-capitalised and dangerous. What will the Government do? The national plan states that it will buy 20 new carriages. The Government is resistant to public expenditure, about which it boasts. We are heading towards US levels of public expenditure which are completely out of line with the rest of civilised Europe.

There are a number of small civilised countries in Europe, including the Netherlands, Finland, Norway, Sweden and Austria, each of which is prosperous in terms of private prosperity and the quality of its public services. One will not find homeless people sleeping in the doorways of the principal shopping street of Stockholm, for example.

One will find them.

Mr. Ryan

Perhaps one homeless person. The Finnish Government decided some years ago to halve the numbers of homeless people living on its streets and it has done so. I read a letter recently from an Irish emigrant living in Finland who wanted to come home. Contrary to the Government's ideology, it was not the level of personal taxation which kept him in Finland but the appalling quality of services for his children, such as oversized classrooms, under-equipped and poorly maintained schools and a housing crisis which was foreseeable five, six or ten years ago. Once the Government decided in 1987 to stop building public housing and to force local authorities to sell off their land banks, the housing crisis was inevitable.

We now have spectacular economic growth and a Government which is terrified of the prospect of using its resources. We need £500 million a year for a proper child care service for pre-school and school going children, like that in all the civilised countries of northern Europe. We need a proper programme of support for old people in their homes, not a Mickey Mouse home help service which pays £2.20 an hour. We need a proper service for handicapped people, but the Department of Finance announced this week we cannot afford it. This country is awash with money, yet it cannot afford to guarantee the minimum services needed for a dignified life for handicapped people.

We can afford it. It is only the ideology of the Department of Finance and the Government which says we cannot afford it. We can afford anything we have dreamed about. All that stands between us and a society of which we can all be proud is the ridiculous ideology of the Government which believes it is a good thing to have public expenditure trailing down towards 25 per cent of gross domestic product. That is wrong and obscene as it cements fundamental inequalities. The only way one can do it is by giving huge tax breaks to the already well off, such as me. My wife and I got a tax break from the Government which will enable us to pay for a continental holiday next year. I did not ask for it, I do not want it and I will not vote for the Government because of it. The alternative was either to run up an even more enormous surplus or to give money to those at the bottom of the heap who have been the victims of our society for so long. However, the Government has consistently decided not to do the latter.

The fundamental reason the health service is in a mess is that we will not spend enough money on it. We have the lowest number of doctors per 1,000 of population in Europe. The reason our housing is in a mess is that we have the lowest number of houses per 1,000 of population in Europe. The reason our public transport system is in a mess is that we have the least subsidised public transport in western Europe, outside the almost equally primitive United Kingdom.

We can choose to go one of two routes. The first is the American route, which deals with homelessness by turning the police on homeless people and hunting them off the streets. An attempt is made, as Mayor Giuliani has done, to take their children off them and to make it illegal for the providers of hostels to allow them to stay if they do not take a job. The second route is to recognise that people who are homeless are victims of an unfair and unequal society. One cannot have it both ways.

Nobody has built a compassionate society on the levels of expenditure the Government is determined to pursue. This only canonises greed and rewards success, not effort, in our society. Some 200,000 people struggle to work for low wages and their efforts far exceed those of any Member of this House. They put up with the boredom and worthlessness of their job and the long hours for low wages. We have no interest in rewarding their efforts. It is an euphemism for saying we will reward those who are successful by reducing their taxes.

This is a catalogue of missed opportunities. We should be witnessing a dramatic increase in the level of public expenditure in the State. My party believes the 4 per cent rule is gloriously out of date, utterly pointless and is doing an enormous amount of damage to social cohesion, to the possibility of partnership and to the lives of large numbers of people.

I invite the Minister of State to explain how the Department of Finance decided we could not afford to make legal obligatory provision for the handicapped in our society. How dare it say that. Did it ask the people if we could afford it? Did it come before the Houses of the Oireachtas and ask for their opinion on this matter? It did not. The Department of Finance, with the approval of the Minister, said we could not afford it because it does not believe in public expenditure. I heard an official of that Department say at a committee meeting that it is always good to reduce taxes.

I saw in the budgetary provisions that the Department of Finance is back to its old trick of classifying education as social expenditure. Investment in education is productive investment, not social expenditure. The trouble is that if education is taken out, there would be a ridiculously low level of social expenditure. This country has benefited spectacularly from every penny we have spent on education. It is perhaps the most productive investment. It is a distortion of reality for the Department of Finance to continue to classify it as social expenditure.

We have more money than we could have dreamed about. The Government can make post facto adjustments to the budget which are greater than what was usually the sum of the entire budgetary changes. When it has a problem, it can give £125 million here and £125 million there. It can in the process break the rule about the budget which has been sacrosanct in this State since its foundation – that budgetary announcements are made to the Oireachtas. This Government makes them to a meeting of the parliamentary party instead.

The Minister for Finance has more money than he could have dreamed of, money which could have guaranteed that not a single house in this State would be without running water or an indoor bathroom, that there would be no schools without such facilities. It could guarantee that the children of low to middle income families, who desperately want to go on to third level education, had proper grants. The Government refuses to make the money necessary for those guarantees available. I do not want to hear about increases of 5 per cent or 10 per cent. The truth is that no student from a poor background can live on the grant this State pays. We could pay them but we will not because we do not approve of supporting students. Civilised countries in the European Union and elsewhere believe in that.

There is overwhelming evidence that it is possible to use wealth constructively to build a decent society. It exists in Norway, Sweden, Finland, Austria—

Norway? The Senator must be joking. He should go and have a look.

Acting Chairman

We will wait until Committee Stage before we debate the matter.

Mr. Ryan

According to the official figures, we have now approximately the same per capita GDP as Sweden and Finland. Even when the transfer of resources is removed, we are still at 90 per cent of their levels of per capita GDP. This is a rich country full of poor people, poor services and poor roads, which is ruled by a poor Government. It is so ideologically obsessed with reducing public expenditure and taxes for those who did not even ask to have their taxes reduced and with not giving money to the undeserving poor that we are left in a mess. We are in such a mess that considerable social strain is starting to appear. The number of people who are homeless has risen spectacularly. There are now three times as many homeless people than there were five years ago in this city. People are lying on hospital beds in casualty wards for a week at a time. We have the smallest number of doctors per thousand of population in all of civilised Europe. We boast about that in our programme for the European Union. We go to our betters in European Union and brag about the pain we are inflicting on our own people just to prove that we are financially correct.

This issue must be dealt with in a realistic fashion, not by replying that Senator Ryan wants the Government to go on a spending spree. I do not want that. I know, however, what defines civilised society and this Government is determined that we will not become such a society. It is determined that we will be like the United States, riven by greed, inequality and hostility from one group to another. There is no country in the western world which has achieved social cohesion at the levels of public expenditure this Government is determined to maintain. The one figure quoted is Switzerland and that country has a wonderful solution – it deals with its problems with the number of migrants it allows to stay or forces to leave. Outside Switzerland no country in the civilised world has managed to look after its people at the levels of public expenditure this Government is determined to pursue.

The perpetual incantation about public sector pay would be better served if there was an intelligent breakdown of the cost increases caused by larger numbers, incremental pay increases and by global pay increases. I am fascinated that every time my Dáil colleagues ask for that information, the Department of Finance says it is not possible to give that sort of breakdown. If a Government decides to increase the number of people working in the public sector, and it should, public sector pay bills will rise. This may have come as a surprise the Government, because it writes speeches about it as if it was, but when people are employed they have to be paid and, therefore, there is a bigger public sector pay bill.

If there is a clear out of public sector workers, as there was in the late 1980s, those who stay on because they had not been the job long form a greater proportion of the work force and they will be on incremental salaries for a considerable number of years. The wages bill, therefore, increases as they move up the incremental scale.

There may be problems with some areas of the public sector. I was not enamoured of the gardaí refusing to operate a computer system which would make their jobs easier. The Minister and the Government should be careful, however, to avoid waving big sticks over issues about which they are singularly uninformed.

The area of the public sector in which I work would not function if it had waited for Government leadership on the profound changes which have taken place. Every person in third level education taught himself or herself about information technology and drove the demand for access to that technology. The Internet evolved from the efforts of the public sector in the United States and then through the European Nuclear Research Centre in Switzerland. If there are groups in the public sector which resist modern technology, the Government should deal with those groups but it should lay off the vast majority of teachers who have grasped every opportunity and whose major frustration has been the refusal of Government to provide the funds and training to make the best possible use of IT.

If the Minister was to read any teachers' journal he would see the problems they have getting access to a photocopier. The Government should cringe with embarrassment that every primary school in the State does not have photocopier and the budget to run it. It should think of the unthinkable – that every primary school in the State should have a scanner, which would cost £250, and a good colour printer for another £250.

The Government should not come in here and say the problem is caused by inflexibility on the part of public sector employees. The problem is caused by the inflexible Department of Finance which refuses to spend the money to give people in the public sector the resources which will enable them to do the things they want. It is a classic tactic to pick a soft target, talk about it in general terms and not deal with the specifics.

Where are the public servants who have refused to change? This House and every other Government is awash with modern technology. The third level education is as awash as it can be under State provision with similar technology and uses it constructively. It was way ahead of any Department in identifying areas of need. There are many skilled graduates in the State because the third level sector told the State it was necessary to train people, not because a wonderful, forward looking Government identified the problems. State agencies catch up after a few years on what is happening in education and then claim credit for it. Despite what is said about it, we have an excellent primary and secondary education system run by people who are among the best paid teachers in Europe. People who believe in the market economy, as the Government does with ideological zeal, wonder why if we have good teachers we have a good education system. We get good teachers because we pay them properly. It also means that teaching has a status in society that has been lost in other countries.

Again in pursuit of its ideological zeal, the Government is determined to end that. It wants to introduce something called performance related pay. If it believes in this it could start in Leinster House. How will it pay the Members of the Oireachtas who all get the same salary whether they are here for one year or 40? The Government should start a debate on this issue with Members of this and the other House. People will answer back and the Government knows what they will say. In many cases it is impossible to quantify.

I increasingly realise that the Government does not live in the real world but one at which it looks through ideological glasses. Everybody in the public service is on a form of performance related pay because they are not guaranteed their increments. People in the public sector have been refused an increment for under-performance.

What does the Government want? For example, does it want to pay me for my work in the Cork Institute of Technology on the basis of the numbers who pass examinations? If I wanted to I could guarantee that everybody would pass and no external examiner or other body would be able to work out what I was doing. I could also fail half of the candidates. In many areas one is ultimately dependent on the professional integrity of people. If the Government tries to force them into an artificial concept of performance related pay it will mean that everybody will do what is needed to achieve the performance related targets because they will be devised by people who do not know what they are about.

I have no problems in dealing with people in the public sector or elsewhere who do not do their job. That is not an issue and it never has been. Perhaps the procedures are long winded, but it must be repeated that the driving force for much of this nonsense is the Department of Finance, all of whose members have a security of employment which they apparently wish they could take from others.

Let us deal with the issue. For example, if teachers or others are not performing let us address that problem. However, it must be asked what is meant by performance related pay and how is performance measured? How is it possible to measure the performance of a child care worker dealing with profoundly handicapped children? How is the performance of a teacher who chooses to work in a school where all the children come from appalling backgrounds to be compared with the performance of a teacher who chooses to work in a school where every child comes from very privileged backgrounds, as is the case with my children, and whose parents have the time, money and inclination to support their education? How is this measured in a sensible way which does not devalue the work of those who deal with the worst off? I have not heard about it.

My so-called socialist comrades in Britain are engaged in the idiotic nonsense of measuring it by examination results. The achievement of a school is measured by what it does with the intake it gets, which means that to proceed on that basis the quality of the intake to a primary school must be measured. I would like to see the Department of Education and Science being given the funds to undertake a proper evaluation of the stage of development of every child in junior infants and then measure their progress through each year according to a proper scientific evaluation and not by the use of cheap tests. If we did that we might have the framework in which to talk about performance related pay.

Does somebody who achieves a 5 per cent improvement in the performance of a child who is intellectually handicapped rate better than somebody who achieves a 15 per cent improvement in a child who is both mentally capable and also comes from the same kind of background as my children? It cannot be done and if it is attempted it will mean becoming involved in all kinds of odd nonsense – I use the phrase advisedly – the purpose of which is to force a break in some of the relativities, some of which are out of date.

Somebody picked up the phrase "performance related pay". I do not know if it was from the airwaves, the Internet or The Sunday Telegraph. It allegedly works in the private sector. Every blockie on every building site in the country gets approximately the same rate of pay because they look after each other. Similarly, every builder's labourer working on every unionised construction site gets the same pay. Virtually everybody working in the restaurants from here to Grafton Street and who has been working for the same period of time get the same pay.

I have the good fortune to understand the private sector, unlike a considerable part of the Government which claims to believe in it. It is not the jungle some people refer to. It is often based on loyalty, personal relationships and trust, where people do not abuse each other, do not tell people they are doing 20 per cent better than the next and then ask them not to mention it. IBM attempted that and the organisation almost collapsed. It created a conspiratorial atmosphere where no two people in the organisation were allowed to tell each other how much they were paid.

If the Government wants this state of affairs in the public sector, in areas of public provision such as hospitals and schools, so be it, but it will not succeed. Like most civilised countries we are fortunate to have a strong trade union movement. Furthermore, when the public sees what is to be recognised as performance, it will reject the concept because it knows that however we reform the public service and make it more efficient, we will not do it by creating conditions where people are forced to compete with each other.

I thank all who contributed to the debate and I will do my best to respond to the points raised, especially by Senator Ryan. Senator Joe Doyle expressed concern about inflation and his analysis of the issue is correct. It is an important factor within the economy and in terms of the Government's fiscal policy we are mindful to ensure that the levels of inflation, which have been low and below the European average, will be maintained in the years ahead because it is one of the pillars underpinning competitiveness in the economy.

Nobody in the Seanad or the Dáil should seek to misrepresent or misunderstand why the economy is in its present position and why there has been such an enormous fall in unemployment and growth in employment. This has arisen because the competitiveness in the economy on an international basis has been central to growth. That growth and the contribution by the increased numbers at work is allowing us to do many of the things we could only dream of years ago.

Senator Ryan is a man of some intellect, yet his rhetoric is in a time warp. He seems to be locked in the 1970s and 1980s and appears to have lost the capacity to recognise the Ireland of today. I will address some of his points. Unfortunately he has left the House, which is disappointing.

Senator Joe Doyle referred to the housing crisis which has been arrested. Over the past few years the growth in the cost of housing, especially in Dublin, has concerned all in the political domain and in the public and private sectors. The implementation of many of the Bacon report recommendations is taking effect. We always knew it would take two years for this to happen. The root of the problem was the relationship between supply and demand. The Minister for the Environment and Local Government intervened as best he could in the marketplace to make land available and this has had an enormous effect in different parts of the country. Land has been released and money has been provided to service it. Supply is now beginning to meet the demand and this is reflected in the slowing down of the increase in the cost of housing. This is to be welcomed.

I thank the Senator for his kind remarks about the desk and pocket diary produced by my Department. I hope Senators and Deputies will enjoy it as a special millennium piece. We have sold about 20,000 copies, which is extraordinary and I commend the officials in my Department who came up with this idea.

Senator Finneran was correct when he spoke of employment black spots. We can talk about unemployment falling to 5.1 per cent but the figure is higher in some areas. In Dublin and in major centres such as Cork, Limerick, Galway and my own city of Waterford there are areas suffering from high levels of unemployment which need particular measures to address the problem. While we can see this problem in large urban areas, it would be a mistake to think that such circumstances do not exist in rural Ireland too. The Government's approach in addressing this problem in recent budgets is having its effect. I do not accept that only part of the population is benefitting from our economic success. There is real benefit right across the board and this is something we should be proud of.

Senator Ryan ignored the publication of the national development plan which is an unprecedented spending package for the next six or seven years and is in addition to normal Government spending. I reject what Senator Ryan says about social inclusion. The Government, as all recent Governments, has put social inclusion at the centre of Government policy. Each Department is required to be conscious, when formulating policies, of their effect on social inclusion or exclusion and to discriminate positively in favour of social inclusion. We do not wish to see society further divided as a result of the economic boom.

Senator Finneran was correct in identifying the fiscal prudence that has been exercised in recent years. How can anyone suggest that it was not fiscal prudence which allowed us to create an enterprising society? We are able to give people a role in society and pride in themselves by getting them back to work. What better way to solve most of society's social ills than by giving people the opportunity to earn an income and make independent decisions for themselves.

Social partnership has been a crucial element in the development of the economy. We have had four very successful partnership agreements and the next is being negotiated. The conclusion of a successful agreement for the years ahead is vitally important for the well-being of all who live in this society. Over the coming weeks, the various elements of social partnership must find a solution that is fair and reflects across the spectrum the fruits of our economic growth, but in a way which protects that growth and ensures that it continues.

I reject much that Senator Ryan has said. He spoke about Northern Ireland. This is a wonderful time for Northern Ireland but what would its people not give to have an economy such as we have today? To suggest that extra-high spending in Northern Ireland is more beneficial to the people there and that we are lagging behind is not true. Senator Ryan did not mention the high levels of unemployment, social deprivation and the legacy of 30 years of serious troubles. Government spending in Northern Ireland is higher in some areas for the obvious reasons on which Senator Ryan did not reflect. He suggested that public services in Northern Ireland are better than here. I completely reject that. We have one of the finest health services. We should remind ourselves that in 1994 the level of spending on health was £2,100 million, then a substantial sum of money. Today that spending is £4,200 million, a 100 per cent increase in five years. Has Senator Ryan been living in some other country for the past few years, failing to recognise what has been happening in Ireland?

Senator Ryan says we do not know how to spend our extra money, although he made no ref erence to the visionary provision the Government has made for the funding of pensions in the future. The measure provides for the use of substantial moneys for public sector and social welfare pensions and ensures that we do not overburden future generations when the demography of the country changes.

He did not mention where the money came from either, or how we got so rich.

That is true. How ironic that the two economies he selected for criticism, the US and Ireland, are probably the two most successful economies in the world today. They are both successful in driving down unemployment and raising employment. What better way for a society to involve everyone in the fruits of its success than by being able to offer productive work. Senaor Ryan's was an extraordinary dissertation.

We have addressed child care and related issues in recent budgets. I accept that our changing economic circumstances have made this a central and important issue. The Minister for Finance introduced a magnificent and extraordinarily visionary budget some weeks ago. On the night of the Budget Statement I had the privilege of listening to the budget debate in the Seanad. Since I became a Member of the Oireachtas in the mid-1980s we have faced every year the problem of the anti-work ethos created by our taxation system. The pro-work quantum leap taken by the Minister for Finance in this year's budget could not have been dreamt possible, even three years ago.

It is right to reflect on the fact that certain issues remain to be addressed but we have become impatient and it is time we regained some patience. One budget cannot be the answer to all our problems and the Minister for Finance did not suggest that it could. We cannot achieve all we want in one moment and we have not solved all our problems in one moment. It takes 100 years to grow a forest but it can be burnt down in one day. That applies to the Irish economy. As a society, therefore, we must be patient. We should remark and reflect on what has been achieved and protect that growth into the years ahead, not for ourselves but for future generations.

Prudence in fiscal policy is an essential ingredient in that regard, coupled with the imaginative and far seeing policies introduced by the Minister in this budget. If there was doubt in the minds of the public, that has been addressed and more will be done over the next two budgets to be introduced by this Government. However, we must be patient about achieving everything overnight. That cannot be done but we must support something that is an imaginative and extraordinary reward to the enterprise that exists in the Irish economy. It will stand the test of time.

I was surprised to hear from Senator Ryan that the 4 per cent ceiling being maintained by the Government is now no longer Labour Party policy. The policy now appears to be spend, spend, spend and the old rhetoric of the 1970s and 1980s appears to be creeping back to the top of the agenda. I am not aware that the Leader of the Labour Party subscribes to the new policy espoused by Senator Ryan that we should abandon fiscal prudence and forget about jobs. He also appeared to suggest that the growth in job creation is unnecessary.

He only joined that party because he thought he would get a nomination for Europe.

This is nonsense. Growth in employment and in business is what the economy is about.

Another extraordinary comment was his assertion, in the context of education, that education is only productive and has nothing to do with the social economy. That is one of the most extraordinarily nonsensical assertions I have heard in public life. It is so far from reality I must wonder where it originated, particularly given that the Senator is involved in the education system.

The gift of education and the investment in education, which was maintained even in bad economic times, was the single greatest contribution to including people in society. The reason the Irish economy is so successful is that its young people have the highest level of education in the western world. The social benefit to the economy and to our society from the investment in education is so obvious and is so well recognised throughout the world that no further comment is required to knock the Senator's assertion on the head.

Perhaps I got a little excited about the Senator's contribution but his remarks demanded a response. He also spoke about Scandinavia. I know a good deal about Scandinavia as I am married to a Dane and have been visiting the area for the last 20 years. Scandinavia is bursting at the seams as a result of their burdensome social economy. It is simply not working because they got the balance wrong and the Scandinavians will admit that. The Senator made no mention of the huge local government tax structure that exists there and in most of Europe to support these things. If we wish to go down that road, that choice is available. I am often amazed when I visit these countries with political colleagues to hear them marvel at the fantastic facilities at local level. There are extraordinarily high levels of local taxation in these countries. I am not saying there is anything wrong with that but if we wish to examine these issues, certain choices must be made.

I am pleased to introduce this Bill and with the complimentary responses of various Senators. We are on the right track. We are mindful of the future, of the global economy in which we work, our involvement in the European Union and our involvement in the euro. We are intent on ensuring that should any shocks occur in the European or global economy we will have the capacity to absorb them as a result of the prudent fiscal policies that have been maintained by successive Governments. Those policies will be maintained by this Government and will lead to continued growth and a continued reduction in unemployment to unprecedented levels. Every household will be involved, something we never had before, in making a positive contribution to the continued growth of this economy.

Question put and agreed to.
Bill put through Committee, reported without amendment and passed.