Appropriation Bill, 2001 [ Certified Money Bill ] : Second Stage.

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

Minister of State at the Department of Education and Science (Mr. Treacy)

I welcome the opportunity to address the Seanad on the Appropriation Bill, 2001. As Senators are aware, the core purpose of the annual Appropriation Bill is to give statutory effect to the departmental Estimates for supply services, both current and capital, including all Supplementary Estimates which were approved by the Dáil since the last Appropriation Act.

This Bill appropriates the net sum of £20,362,692,000 to the various services listed in the Schedule for the year ending 31 December 2001. The amounts in the Bill that relate to the year 2001 are in Irish pounds. In euro the equivalent net sum is €25,855,285,000. The total amount comprises the original net Estimates of £19,692,504,000 as approved by the Dáil prior to the summer recess and net Supplementary Estimates totalling £670,188,000 which have been approved by the Dáil in recent weeks. The Bill also seeks approval for the use of departmental receipts, amounting to £1,802,444,000 as appropriations-in-aid of the services listed in the Schedule. As I have mentioned, the Estimates and Supplementary Estimates which are included in the Schedule to the Appropriation Bill have been approved by the Dáil. This Bill seeks to give formal legal effect to those Estimates and Supplementary Estimates.

The Appropriation Bill also provides an opportunity to review the budgetary and economic position. My ministerial colleague, Deputy Cullen, spoke in this House recently in the context of the changed economic environment in which the recent budget was framed. A slow down from the exceptionally high rates of growth in recent years was perhaps inevitable, given the significant reduction in unemployment and the rise in overall labour force participation. Domestic and international events have meant the rate of slow down has been much more drastic than expected. The signs of economic slow down in the United States were further worsened by the sad events of September 11. Domestically, the impact of restrictions put in place as a result of the threat of foot and mouth disease can be seen, especially in the food, tourism and transport sectors.

While the economic outlook has changed significantly in recent times, we are well placed to take advantage of the recovery when it comes. The Minister for Finance, Deputy McCreevy, said in the Budget Statement that he expects GDP growth to slow significantly next year, to 3.9%. It is worth restating that this performance outstrips that of many of our European partners and reflects the success of the Government in building the capacity of the economy to grow in a sound and sustainable manner. Employment is expected to increase by about 1.5% annually to 2004. While unemployment may average 4.75% next year, this trend should reverse as economic conditions improve. Consumer price inflation is projected to ease in 2002, helped by lower imported inflation, before falling to 2.25% by 2004.

The Government has built up a sound economic foundation during its term in office. The recent budgetary measures announced by the Minister for Finance will contribute to our prosperity and competitiveness and will promote social cohesiveness. The measures in the budget will enable continued economic progress by further developing our infrastructure and public services, by promoting social equity and by continuing to encourage enterprise and investment. The Government is committed to deliver on these objectives in a way that sustains fiscal policy.

I will briefly outline some of the detail of this Bill. Section 1 gives statutory effect to the departmental Estimates for the supply services, current and capital, including all Supplementary Estimates which were approved by the Dáil since the last Appropriation Act. The Dáil approved the original 2001 net Estimates for departmental expenditure, which totalled £19,693,000,000, prior to the summer recess. In late November and early December, the Dáil approved a number of Supplementary Estimates for various Departments, totalling about £670 million. The extra amount brings the total grant for supply services expenditure in 2001 to £20,363,000,000. Section 1(1) appropriates this amount to the various supply services or Departments as listed in the Schedule to this Bill and section 1(2) provides for the application of a total amount of £1,802,000,000 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 need for Supplementary Estimates. Three Departments account for £595 million or 90% of the total Supplementary Estimates of £670 million. Net additional funds of £205 million were approved for the Department of the Environment and Local Government. Of this, £55 million was additional current spending on the local government fund. The balance of £150 million was in respect of additional infrastructural spending on road improvement and maintenance and water and sewerage services. The additional allocations were provided to fund accelerated development of the roads network. They will also allow for accelerated progress under the water services investment programmes which cater for a number of major schemes including waste water schemes in Dublin, Cork, Limerick and Galway. This extra funding brings this Department's total net 2001 estimate to £2,470,000,000, or 12% of the total spending approved by the Dáil.

The Department of Health and Children was granted an additional net £197 million. This provides for additional spending in a number of areas, including £60 million for drugs schemes and £10 million for the cost of extending the medical card to those aged over 70. Nearly £35 million relates to additional pay costs for home helps, care assistants, increases due as a result of the Buckley report, agreements on incremental credit and unsociable hours and additional PRSI and pension costs. The expenses arising from the events of September 11 amounted to almost £24 million, including costs associated with the day of mourning, iodine tablets and medication associated with the threat of anthrax. Additional spending on a number of tribunals and inquiries was £14 million and medical indemnity and public liability insurance cost nearly £13 million more than forecast. There was a shortfall in appropriations-in-aid, mainly health contributions, of £17 million and an extra £23 million was spent on other projects. The total net 2001 Estimate for the Department of Health and Children was £4,720,000,000, or 23% of total expenditure approved by the Dáil.

An additional net allocation of £193 million was granted to the Department of Education and Science. Of this, £80 million was needed to cover a shortfall in EU receipts in 2001, £42 million was granted for early payment of capitation grants to schools, £16 million was for additional pay costs in the universities and institutes of technology, £15 million was for additional secretarial, caretaking and child care assistant costs at first and second level and £6 million was for additional pension costs.

There was additional capital spending of £33 million at first and third level which included a site purchase for the development of the Dundalk Institute of Technology and earlier than expected expenditure on first level school projects arising from early project completions. This additional allocation brings the total net 2001 Estimate for the Department to £3,728 million, which represents over 18% of total spending.

The Department of Justice, Equality and Law Reform was appropriated an extra £30 million for the additional costs of prison officer and Garda overtime. The Garda overtime arose from the preventative measures taken to stave off foot and mouth disease. However, this extra allocation is offset by other savings to give an overall saving on the Justice group of Votes.

The other significant Supplementary Estimates were for the Office of Public Works and the Department of Public Enterprise. The supplementary provision for the Office of Public Works was £32 million. This amount funded net additional spending of £16 million for refurbishment work and rental costs on properties for a number of Departments, nearly £7 million for preventative measures to stop the spread of foot and mouth disease and £9 million towards an office development purchase for a proposed one-stop-shop for immigration and citizenship.

The additional allocation for the Department of Public Enterprise was £17 million which concerned, inter alia, additional funding for CIE for public service provision and compensation for Aer Lingus for the post September 11 period when US airspace was closed. Smaller Supplementary Estimates of less than £3 million were taken on the Arts, Heritage, Gaeltacht and the Islands, Foreign Affairs and Taoiseach's groups of Votes.

I will now deal with section 2 of this Bill. Article 17.1.2º of the Constitution requires that the financial resolutions of each year must be enacted into law by the end of that year or by 31 December 2001 in the case of the financial resolutions passed on budget day – 5 December 2001. However, Article 17.1.2º also allows for the end of year deadline to be deferred if an Act to that effect is passed before the end of that year, in this case, before 31 December 2001. This section makes provision for this deferment to be invoked. The provision of this section of the Appropriation Bill will maintain the normal statutory deadlines for passing budget measures into law, namely, 84 days for completion of Second Stage and four months for enactment of the Finance Bill. Identical provisions were included in the Appropriation Acts of 1998 to 2000.

In commending this Bill to this House I would like to state that the level of funding provided by this Government in 2001 built on significant investments made since 1997. Since taking office this Government has increased net voted current spending by nearly £6 billion, or 57%. These funds have been targeted at the key social priorities of health, education and social welfare. We have also provided considerable resources for capital developments. The level of capital expenditure has increased by over £2.4 billion or 164% since we took office in 1997. This is indicative of this Government delivering on its promises to improve priority public services and to invest our resources wisely on behalf of the all the people.

Mr. J. Doyle

I welcome the Minister of State. It is always a pleasure to have him in the House and I know he enjoys coming here. The Appropriation Bill gives statutory effect to moneys approved under departmental Estimates for the current year. This Bill provides for £20 billion which is a staggering figure. The debate on the Bill also provides an opportunity to review our budgetary and economic position, particularly the Government's economic performance during 2001.

When speaking on last year's Bill I paid tribute to the Government for the excellent financial returns for 2000. At that time we had enjoyed economic growth for seven years and, in his Budget Statement 2000, the Minister for Finance, Deputy McCreevy, stated that he expected growth to continue. We now know that, sadly, this has not happened. However, I must acknowledge that two major events which were outside the Government's control during 2001 made a significant impact on the financial situation, namely, the outbreak of foot and mouth disease in early May and the terrible events of 11 September.

In his first budget speech in 1997, Deputy McCreevy outlined his political and economic philosophy when he stated that he would avoid creative gimmickry and lucky bag spending to win votes. He also stated that his budgets would have three characteristics, namely, control of public spending, the correction of tax inequities and the overdue acknowledgement of children and the elderly. One must admit that there was a certain amount of creative gimmickry and lucky bag spending in the last budget, with which I will deal when debating the Finance Bill. However, I wish to address the three issues which formed the Minister's political and economic philosophy.

The Minister has introduced long overdue reforms of the tax system. The rates of tax have been substantially reduced, tax credits have replaced allowances thereby introducing greater equity and tax bands have been widened. In 1997 a single person started paying tax at £77 per week, but, after the provisions of the last budget, a person can now earn £165 per week tax free. In the debate on budget night I expressed disappointment that the Minister had not gone all the way and taken all those on the minimum wage out of the tax net. By any measure, these changes represent a substantial achievement for the Minister for Finance, Deputy McCreevy, for which he can take credit.

Social welfare recipients have also received real increases. The Government has delivered on its old age pension commitments with an increased payment of £116 per week, £16 more than its target. The Minister has also improved the lot of senior citizens who pay income tax by increasing the allowances whereby a married couple can now earn £20,500 before paying tax. There have also been substantial increases in child benefit.

One of the sad aspects of the economy is that poverty remains, even though there has been substantial economic growth over the past number of years. The Minister claimed in his Budget Statement that he had looked after the less well-off, but CORI has made a strong case that many people remain on the poverty line. In an interesting recent article in The Irish Times, Dr. Ken Whitaker, one of the main architects of economic growth in the late 1950s and early 1960s, stated that while we had enjoyed significant growth over the past number of years, he felt that more should have been done to eliminate poverty. While I welcome the Minister's forecast of a 2.4% inflation rate, I hope it is not over optimistic.

The Minister and the Government have met their targets regarding two of their three political objectives, but they have failed utterly regarding the third objective, namely, the control of public spending. An alarming picture is beginning to develop regarding the public finances, particularly current spending. When the Minister for Finance, Deputy McCreevy, took office in 1997 he promised that public spending would rise by 2% ahead of inflation per year. In his recent Budget Statement, he admitted that current spending has risen by an enormous 79% during his five years as Minister. It was never realistic to expect the Minister or the Government to curtail public spending at the promised rate during an era of unequalled prosperity. However, the challenge was to contain spending at a level which could be sustained in the future so whoever forms the next Government would not be landed with a financial nightmare.

Further spending commitments are now so large that the next Government will face dire choices if the economy does not continue to grow rapidly, which is likely taking into account the international situation. The Minister informed us that the slowdown has been much more dramatic than expected. Projections for 2003 and 2004 are for deficits of at least €3 billion. The Government has failed to manage spending in a way that ensures its sustainability in the longer term. If it had done a better job, it would not now be projecting significant deficits for those years.

The Government inherited a booming economy but leaves behind one that could face serious problems. I will not be here for next year's Appropriation Bill but it is abundantly clear that the next Government will find it very difficult this time next year. Public spending is now almost out of control. If the economy does not begin to recover in the second half of the year, boosting revenues, then harsh measures will be required to keep the economy from going completely off the rails. This is a sad note on which to end my Appropriation Bill speech for this year, but the facts bear out what I have said.

Mr. Bonner

I welcome the Minister of State to the House. It is always a delight to have him here. I was disappointed to hear that this would be the last occasion on which Senator Doyle would speak on an Appropriation Bill. In the short four and a half years I have been a Member, I have been in the House on many occasions for finance matters and he has always been a real gentleman, which I know he is. I wish him well.

This Bill provides for £20 billion in expenditure – a staggering figure, as Senator Doyle said. I acknowledge his praise of the Government on two of the three aspects he discussed. He has always been reasonably fair. Time will tell about forecasts for later years. I believe in taking each year as it comes. While one can prudently provide for the future, matters can go outside one's control, as was proven this year with foot and mouth disease and the events of 11 September. Anyone who looks at the record of the Minister for Finance will see that he has done a tremendous job. I praised him the last day and I continue to praise him. He has always been his own man and has delivered everything that was in our election manifesto along with promises he made to the public. He has delivered on the programme for Government.

Taxation is a matter with which I deal on a regular basis, due to my profession. One of the matters about which I have always been concerned is the discrepancy between tax rates for those based in Northern Ireland and those based south of the Border. I could not have believed when I came here that the Irish tax rate would be down to within 2% of the top rate in Northern Ireland and Great Britain. That was achieved by taking 6% off both rates, 12% in the lifetime of the Government. The Opposition, with all its socialist connections, only presided over a 1% reduction in tax, as far as I remember, throughout all my years as an accountant.

The Minister has taken 380,000 people out of the tax net. By introducing the system of tax credits he has made the system more equitable. If he returns he will investigate the poverty trap to which Senator Doyle referred. The increase in the tax band rates also contributes to the equity of the system and gives better opportunities to those on lower pay than the cutting of tax rates. It is interesting that of the £4.8 billion in cuts given by the Minister over the last five budgets, 43% has consisted of increases in basic allowances, 22% in taking 370,000 people out of the top tax band and 16% in reducing the standard rate but only 11% in reducing the top rate.

Currently, social welfare expenditure is approximately £7 billion. In 1997 that figure was only £4 billion. The Minister for Finance has, through the Minister for Social, Community and Family Affairs, increased social welfare spending by £3 billion. The Minister stated that the contributory pension would increase to £100 per week in the lifetime of the Government and it was unbelievable that he reached that target last year. The pension is now £116 per week. There have been other social welfare increases: a 40% increase for those dependent on social welfare assistance, a 50% increase for those receiving a contributory pension and a whopping 60% increase for widows over 65. This is a good start in helping those who are less well off and those, now pensioners, who contributed to society for so long. I do not know what planet I am living on but nobody else seems to see this.

Despite all the doom and gloom, there is £79 million extra for national roads with a total of £750 million being spent this year. That is three times what was spent in 1997. Yesterday I attended a meeting of my local authority about housing. We have not only allocated the 1,040 starts decided upon for the period 2000 to 2003, but we are seeking another 130 through the new programme in which contractors provide housing for the council. The Minister of State, Deputy Molloy, has always said that the problem is not lack of funding but the slack administration of local authority housing.

Education expenditure is 4.5 times what it was in 1997. The spending on waste management, which will be a huge issue in years to come, is seven times what it was. My only fear is the forecasted infrastructure cutbacks. I have already told the Minister for Finance that if things do not pick up next year, although I am sure they will, I hope that the areas which have always suffered will not suffer again. I refer to places such as the area from which I come in the BMW region. While there have been major improvements in road infrastructure over the last five years, there is still much work to be done over the next four to five years. If there are to be cutbacks, I hope they will not affect the people who have never really gained from the Celtic tiger.

I mentioned the Minister's simplification of the tax system. In the not too distant past I spent long hours working on bogus tax accounts. When the last 20 years is viewed in hindsight one realises how complex the system was and how the high rates of tax and complex system were a disincentive to working. However, the PRSI system is still relatively complex, although I know the Minister is working on it. I did returns under that bogus tax account and it took me longer to carry out reviews of small PRSI and levy calculations for what people owed than it did for those who made substantial payments through the system of income tax.

I welcome some of the measures provided for in the Appropriation Bill which were announced in the budget. I welcome the tax relief made available to the sports capital programme to enable private investors to donate funding to sporting bodies. I welcome the announcement of the capital programme by the Minister for Tourism, Sport and Recreation, Deputy McDaid. The applications are now available and have to be submitted by 4 January with the hope that schemes will be up and running by the end of February. A perennial problem with both central and local government is the lateness of funding being made available so that one cannot get on with a job in the current year and this has been tackled for the first time.

It is unfortunate that the Minister, Deputy McCreevy, is not here this evening but I know the Minister of State, Deputy Treacy, will bring all points to his attention. I am sure this point affects the Minister of State, Deputy Treacy. I welcome the increases the Minister made in the extension of urban renewal schemes, but I make a plea for County Donegal that it be allocated a rural renewal scheme similar to that of the upper Shannon region. After a slow start that scheme has really taken off and with the tourism element that is attached along the River Shannon, residential and other properties are able to avail of the tax relief. Regeneration has been given a major boost in those areas and I ask for the same for my county. It is cut off from the rest of Ireland apart from three miles in County Leitrim and we rely totally on visitors from Northern Ireland. Rather than the urban renewal scheme which gives the same benefits to towns on the outskirts of Dublin, it should be replaced by a rural renewal scheme, particularly for an area such as west Donegal where I come from.

I am sure the Minister would not like me to raise the issue of Eircom but it cannot be ignored. So many pensioners and first time investors lost money in that debacle. Whether we like it or not they were encouraged to invest by the directors and the publicity. They were guaranteed a secure risk free investment with the hope of reasonable gains, as had happened with other flotations. I know income tax and capital gains are two separate matters and that one can get tax relief for losses against future gains but many of those who invested in Eircom were first time investors with no other investments to realise profits on to net off their gains. I urge the Minister for Finance to consider the possibility of giving 20% tax relief on a specified maximum amount of £500 or £1,000. At least those people would have £200 out of £1,000 or £400 out of their £2,000 investment back. I am not looking for relief for those who can well afford to suffer those losses.

I welcome the opportunity to speak today. There are many other matters I could raise but I will leave them until we are dealing with the finance Bill itself.

Minister of State at the Department of Education and Science (Mr. Treacy)

I am very grateful to both Senators for their contributions and the very positive endorsement they have given to the Appropriation Bill, 2001. It is very important constitutionally, legally and politically that we make a clear distinction within Parliament as to the role of Parliament in appropriating the funds expended from the Exchequer on behalf of the taxpayers.

The quality of the contributions from both Senators has led to a most informed debate on the economy and the priorities facing the country as we enter 2002. I am delighted to have the opportunity to participate in this debate and to respond to the points raised.

We have seen a rapid turn around in our economic fortunes in 2001 and have to accept that in a small open economy external influences such as economic changes in our main markets will have an impact on us. Our challenge is to respond appropriately to these changes. Our goal must be to remain competitive and build on our success to date while ensuring that the fruits of that success are fairly distributed. We must and will continue to invest in our future.

I am confident this Government's foresight in planning our investment priorities over the medium term will strengthen our economy and enhance the quality of life for everyone over the coming years. The continued development of our infrastructure is one of the key elements of our national development plan between now and 2006. This is our blueprint for investment over the medium term. I am sure we are all agreed on the plan's vision that Ireland remains competitive on the international market place and that our economic success is distributed more equally at regional level.

The Government is committed to the future sustainability of the public finances. It has the foresight to prudently provide for the future through the establishment of the National Pension Reserve Fund, a very historic decision showing huge vision on the part of the Minister for Finance and the Government in endorsing it.

Learning from the experience of our European Union partners the Government has committed 1.1% of GNP to this fund annually and has honoured its commitment despite the prevailing economic conditions. The Government has also prudently used the fruits of our economic success since 1997. Reflecting the infrastructural priorities of the national development plan, investment in capital spending has increased by more than 160% over that period. From 2000, in the first three years of the national development plan, in excess of £8 billion in Exchequer and EU funding will have been allocated for infrastructural priorities.

While Senator Doyle speaks of public spending it is also useful to look at the areas where our resources have been invested. In the area of health, gross spending has increased by more than €4.5 billion between 1997 and 2002. After many years when spending on health was behind that of our EU partners it is now on a par with the European average. Senator Doyle also acknowledged our success in the area of social welfare. The social welfare measures in Budget 2002 cost €1.08 million in a full year. All weekly social welfare increases will now be paid with effect from 1 January next. We are conscious of the need to improve the overall management of public expenditure and focus on achieving value for money. Increased expenditure is not always the way forward and we have to be careful about how we manage it.

I thank Senator Bonner for his contribution and acknowledge his input as a professional in the field of accountancy and as a public representative. I endorse what he said about the Minister, Deputy McCreevy. I agree the Minister has done an outstanding job and will go down in history as one of the best Ministers for Finance this State ever had. His acknowledgement of our role as politicians and professional colleagues as Members of Parliament will be remembered. His recognition of the key role between the permanent administration of the State, society itself and the citizens we represent has been fundamental to his careful planning for the future and all of us collectively have a role to play in that. Parliament is about equality of opportunity, for everybody having their individual contributions in a collective consensus to ensure that the country goes forward in a positive manner to sustain us going forward. Future generations will take account of the historic achievements made and the contribution made by our current population.

I thank everybody for their contribution and will mention the matters raised by the Senators to my colleague, the Minister for Finance, Deputy McCreevy. I am sure he will reflect on them and if at all possible will respond to them. I compliment the Cathaoirleach for the leadership given to this House in recent years and wish him and all the Members and staff of the House a very happy Christmas and a very successful year and years ahead.

Like Senator Bonner, I am disappointed that Senator Doyle will not go forward again. He is one of the great gentlemen of politics and I thank him for his contribution in both Houses and as a distinguished first citizen of this country over many years. I wish him well and bring greetings from all his many cousins in east Galway. I am sure they too will be disappointed he will not go forward again. I wish everyone a very happy Christmas and successful new year. I hope it will be sustainable and successful for all of us and that we will be back again to serve the people for as long as they believe we are good enough to do the job.

Míle buíochas daoibh go léir. Guím Nollaig faoi shéan is faoi mhaise daoibh agus athbhliain nua freisin.

Seanad Éireann debate -
Tuesday, 18 Dec 2001