Seanad Éireann debate -
Thursday, 20 Dec 2007

Vol. 188 No. 6

Appropriation Bill 2007: Second Stage (Resumed) and Subsequent Stages.

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

Senator Shane Ross

I am disappointed in the Bill and the Government's economic outlook. I say that as one who for many years supported by and large the economic policies and budgets introduced by the former Minister for Finance, Charlie McCreevy, and the Tánaiste and Minister for Finance, Deputy Cowen. What the two Ministers did during the Celtic tiger years was instrumental and helpful to the prosperity of this economy.

It is much easier, however, to manage an economy when it is prospering with external influences assisting it. I am concerned the Government shows little capability of managing the economy in more difficult times. It shows a great reluctance to recognise that the years of boom are over. It is no great shame that has happened. They had to come to an end. It is not necessarily the Government's fault.

On this morning's Order of Business I drew attention to the recent ESRI report. Not to put too fine a point on it, the ESRI has rubbished the Government's economic forecasts. These are the people who were dubbed by the former Minister, Michael McDowell, as the Government's house-trained poodles, which they no longer are. It is bad enough to rubbish the forecasts, but to do it within two weeks of the budget raises concerns. While I accept economic conditions are changing fast, one could understand a revision in three months' time but not within two weeks.

In The Irish Times this morning, Paul Tansey summed up well the situation. Some of the figures in the forecasts are dramatic. The ESRI forecasts a 3.7% decline in the volume of gross fixed investments in 2008 while the Department of Finance anticipates a fall of just 1.6%. That is an enormous and inexplicable difference. He continued to highlight the differences. The Government forecasts 5.6% for exports, the ESRI, 5%. On imports it is similar. The Government forecasts gross domestic product at 3%, the ESRI at 2.3%. The Government forecasts gross national product at 2.8%, the ESRI at 2.3%. The Government forecasts employment growth at 1.1%, the ESRI at 0.4%. The Government forecasts the unemployment rate at 5.6%, the ESRI at 5.8%. The Government forecasts the inflation rate at 2.4%, the ESRI at 2.8%

The pattern is clear. On every single figure, the Department of Finance makes a more optimistic prediction than the independent ESRI. I am reluctant to claim books are being cooked but one wonders why such an optimistic forecast in the Government's figures is not reflected in the ESRI's figures.

It was Mr. John Fitzgerald of the ESRI who was the first and only person to predict the fall in the property market in the past year. With a great deal of courage, he forecasted almost exactly what happened. His predictions at the time were pooh-poohed by Government spokesmen, apologists for the construction industry, auctioneers and banks. The ESRI has credibility in its forecasts, whereas the Government has different motives.

With the Appropriation Bill, I am concerned the figures and forecasts relevant to it are historic and irrelevant. I would like the Minister of State, Deputy Noel Ahern, to comment on this.

This morning, FÁS, another Government agency, made a dramatic statement on the minimum wage. It is not one of my favourite agencies. I have always regarded it as being benevolently cared for by the Government and have found it difficult to understand how it uses its budget. In an amazing report, however, FÁS warns that the Government should examine the minimum wage. When I heard the headline this morning I assumed it would say the minimum wage should be increased because the State agencies always say that sort of thing. I was astonished to hear that FÁS is standing over a report recommending that the minimum wage should be reduced. That is staggering. I would not advocate that and it is politically impossible for the Government to do that. It is a stark reminder of how FÁS sees the state of the public finances and the labour market.

Child care is crucial because it reflects so much of what is happening in the Celtic tiger economy. The budget and the Appropriation Bill have neglected two areas: how we cope with the real difficulties facing mothers whether at home or not, and the plight of autistic children. They appear to have been neglected once again in this budget despite promises, heavy lobbying and great efforts by politicians. It would take very little to make a major difference to autistic children who are not getting the right treatment.

Senator Dan Boyle

It is significant that we are debating the Appropriation Bill today because the Dáil chooses not to debate it every year and because we have an early day motion — one of the functions of the Seanad — to facilitate this important legislation connected with the budget. It gives us an opportunity to examine details on which previous speakers have commented. The most pertinent theme, however, is the variation in estimates by the Department of Finance and agencies such as the ESRI.

The Appropriation Bill is the legal framework to ensure the figures allocated are spent and in recent years the Government has spent what it intended to spend, as it said it would. There have been drags in income from tax receipts but there has been a reduction in Supplementary Estimates which indicates a control of public expenditure not seen in the past. Economics is an inexact science. I would like to see any economic forecast by any group that was accurate. The variation exists because no one knows what the future holds.

While I have a great deal of respect for the ESRI, its report is excessively doom laden not only because of its economic figures but in the way it deals with the proposed 3% cut in carbon emissions. This is an ambitious target and may not be achieved but the commentary in the report on the effect of working towards that figure showed no understanding of the economic benefits of reducing carbon's domination in the economy. The commentary colours the other figures for the general economic indicators.

The budget has been produced on the principle of prudence that should inform all budgets. The only quibble arises on the hope that inflation will be in the region of 3% in 2008, down from today's 5%. That assumption is based on the belief that we have come out of the cycle of 18 European Central Bank interest rises in a row and that there is no indication of further increases in the next year. Interest rates may even drop which it is hoped will have an impact on our inflation rate. Even if growth is between 2% and 3% next year, that is still significantly higher than that in any European country.

It remains growth at a time when the global economy is uncertain. We will produce a net increase in jobs and many thousands of houses will be built next year. No one predicts an economic collapse for 2008. The only debate today is whether the figures from the Department of Finance or those from the ESRI are more likely to come true. I am prepared to wait and see.

Compared with sets of figures produced in the past, both sets are based on reality but they remain educated guesswork. I am optimistic that the assumptions underlying the budget are intended to protect and enhance economic performance in 2008 and that we will reach and possibly exceed some of its targets. It was also framed in such a way that those on the margins of society receive the most protection which should be one of the underlying principles of any budget. The appropriations allocated in this Bill reflect that. A total of 70% of all public expenditure is in the areas of health, social welfare and education which shows how we see public services and how the business of Government should be organised. If there is disagreement about that we should have a debate, but I do not sense that from the other parties or the Independent Members of the House. We all recognise instead that the focus of public expenditure is right and that the targets generally are being met. The only question is whose statistics are correct, the Department's or the ESRI's. When we return to this debate next year we will know the answer but I am confident that the variance will not be great.

Senator Alan Kelly

I welcome the Minister of State to the House. My party will facilitate the passage of this Bill. This is a time also to reflect on the budget. I welcome the unified approach to the budget this year and spending in specific areas, including the national development plan.

I was intrigued to hear the previous speaker say that economics is not an exact science because some Ministers speak as if they knew the exact figures. The ESRI has been nearly always more accurate in recent years. We will have to wait and see whether the spending and revenue will be in line as the Minister says, although I doubt they will. We are heading into stormier waters and it is accepted that growth rates in this country will be above comparable European rates. However, we should compare like with like on the basis of the growth Ireland has had and examining trends is the most useful method of measurement.

There is a large difference between the views of the Economic and Social Research Institute, ESRI, which predicts growth of 2.3% and the Government, which predicts growth of between 2.9% and 3%. There are also significant differences in predicted unemployment rates and this is worrying for a number of reasons. People have made a variety of comments on stormy waters ahead regarding pay awards and so on.

On the Order of Business, I mentioned comments made by FÁS and I share Senator Ross's sentiments regarding that organisation as I believe it has significant problems including a terrible industrial relations record. FÁS conducted a survey of the Irish labour market and its comments in this regard are startling. It suggests that we must examine the minimum wage but the way we approach this matter reflects our society and is very positive. Many argue that the minimum wage is not high enough and I do not think we should debate its reduction. FÁS's outlook may signal where the country is heading.

I welcome the increase in certain areas of national development plan, NDP, spending but I take issue with the air of self-congratulation evident in various Government speeches regarding parts of the budget. The Government has congratulated itself on a 1% reduction in the primary school pupil-teacher ratio but I do not believe this is warranted because, as someone married to a teacher, I do not believe it will come to pass.

I agree with Senator Twomey on the issue of health care and believe the statement was coded in fairly specific language. It states, "waiting times for most common procedures have been reduced to between two and five months". This could mean anything as a reference to "most common procedures" says nothing. Besides, the statement is neither realistic nor true.

We have spoken of provisions for mental health on many occasions in the House and a number of professionals in the area have said the budget provision in this regard is not adequate. There is a crisis in this area and I hope the Government examines this topic again early next year as it must be addressed.

I have spoken to the Minister of State previously regarding provisions for decentralisation as I genuinely do not know where this programme is going. I have read the reports but I am still confused about this matter, particularly regarding State agencies.

The area of tourism is often not examined when it comes to provisions for the year and I have a special interest in it as I am the Labour Party spokesperson on this subject. I spent two hours with the chief executive of Tourism Ireland yesterday and was intrigued by his views on the future of tourism, the spending required of Government and the areas most in need of funding. I will contact the Minister regarding the areas that require increased spending to make us more competitive. There have been increases in spending but they were very modest. We must examine the US tourist market as this will see increased competition next year due to the fall in the value of the dollar. The issue of access is important and we have been promised on a number of occasions provisions for Shannon Airport to promote regionalisation and access to the west, whether through the open skies agreement or the assessment of the impact of Aer Lingus changing its service in the region. I would like to see direct provisions in this regard because, while resources have been set aside, we do not know the actual amount. We need information in this respect and generally should examine areas that will make us competitive in the field of tourism.

The Government has been self-congratulatory regarding social welfare and there were some good points in the budget in this regard but, as far as I am concerned, the tax code still discriminates against families. The child care threshold of €15,000 is still in place and I think this is unacceptable but I find the fact that Ministers are congratulating themselves on granting an extra week in the area of fuel allowance hilarious. On that note I wish everyone a happy Christmas.

Minister of State at the Department of Finance (Deputy Noel Ahern)

I thank the Senators for their comments. In addition to overseeing €45.1 billion, a key responsibility and challenge is to control spending to ensure quality of service, value for money and the effective use of resources. Building on the value for money measures introduced in recent budgets, the Tánaiste and Minister for Finance, Deputy Brian Cowen, announced in his recent Budget Statement that the Government has agreed to an efficiency review of all administrative spending across the public service. This process is to begin immediately with a view to providing a comprehensive list of specific actionable proposals that will maximise efficiency. All Departments are to put forward measures to be considered by Government in the coming months.

Senator Twomey suggested the economy is going backwards and in the spirit of Christmas I will not be nasty in my response. There were bad days in the past but the worst were in the mid 1980s when my party was not in power.

Senator Liam Twomey

The Minister of State will not wash his hands of responsibility that easily.

Deputy Noel Ahern

I am sorry but I thought I should gently remind the Senator.

We accept that the country is entering a new cycle and that growth of 4.75% is low compared to growth experienced in recent years. Next year the rate will be around 3% and we are in a slight downward spiral but these figures are still impressive and most of our European partners will be impressed.

The Senator may be critical but I am glad he acknowledges that this year's budget, expenditure and revenue receipts have come in broadly on target. The past few years have been marvellous and few predicted how successful the country would be. Historically we were locked in a mindset that saw annual economic growth of 4% to 5% as huge and noting that the Government and Department of Finance did not estimate growth of 8% to 10% as a hollow observation.

The extra revenue that has been available in recent years has been put to good effect. The national debt was a major topic of conversation for the man on the street 20 years ago but much of the revenue received in recent years has been used to pay off part of it. This has given us a base to allow us handle future problems, challenges and opportunities.

Senator Liam Twomey

In reality, rather than clear the debt the Government has transferred it to the people of Ireland.

Deputy Noel Ahern

We have been very successful regarding the national debt.

Senator Ross referred to the ESRI and anyone can criticise and make projections but the Government must make projections also and we will see in 12 months who was right. Certain agencies are always inclined to be slightly pessimistic, negative and conservative but the Government, by its nature, must lay out its policies and face the challenges ahead. The national development plan is the big policy that the Minister for Finance has pledged to finance into the future.

I am amused by Senator Ross's comments, referring to the ESRI as though it were the greatest organisation in the world. I was previously a Minister of State with responsibility for housing and I was concerned about 100% mortgages and so on.There were concerns about how credit had an inflationary effect which could lead to everything ending in tears, etc. I was only a mere Minister of State so I accepted various agencies and some of my own people——

Senator Liam Twomey

They should have listened to the Minister of State.

Deputy Noel Ahern

The media and others, such as economists, were rubbishing——

Acting Chairman (Senator Paul Bradford)

I advise the Minister of State that by order of the House, we are due to conclude all Stages within the next minute or two.

Deputy Noel Ahern

Economists amuse me in that although they are very learned men and women, when I spoke about 100% mortgages I was told to go back to them when quantified research data was available. If a person wants to know what the weather is like, it is sometimes better to look out the window rather than look up what gurus are saying on computers.

I thank Members for their comments this morning. Outside of our political chat, I wish everybody here a happy Christmas, and we can resume in the new year.

Senator Liam Twomey

We wish the same to the Minister of State.

Question put and agreed to.

Bill reported without amendment, received for final consideration and passed.