Seanad Éireann debate -
Thursday, 14 Jul 2016

Vol. 246 No. 15

Summer Economic Statement 2016: Statements (Resumed)

Senator Gerry Horkan

I thank the Minister. As one of the longest-serving and most senior Cabinet Ministers, it is great to see him here in Seanad to address us.

I welcome the opportunity to discuss the summer economic statement. Since its publication, the Brexit referendum has occurred, generating serious volatility in the markets. The Irish economy now faces a multitude of threats that demands strong government. Of all EU member states, Ireland will feel the biggest impact of Brexit and our economic strategy must reflect this dynamic and rapidly changing situation. It is vital we play a central role in exit negotiations. Our economic concerns need to be heard and fully understood and our interests fully safeguarded.

A key issue during the course of the election for every political party was the choices they would make, given the available resources. In simple terms, fiscal space measures the capacity of the Government, as the Minister outlined, to take discretionary tax and expenditure measures after accounting for all known commitments, for example, additional spending required by changing demographics or public sector pay agreements. The fiscal space for the next five years has increased substantially from €8.6 billion to €11.3 billion. That is some €2.7 billion more than anticipated during the general election campaign. Fianna Fáil supports a cautious and prudent approach in this regard. We will not be making commitments based on any additional fiscal space from a revised medium-term objective.

As the summer economic statement makes clear, there are a number of risks to the economy in the years ahead. There was a specific reference to the impending Brexit referendum. The surprise result has brought one of those risks to the fore. In a worst case scenario, a British exit could lead to the introduction of tariffs on trade activity with European states. Irish-owned manufacturing firms would be particularly vulnerable as they sell approximately 43% of their exports to the United Kingdom, compared to 11% for multinationals. An Economic and Social Research Institute, ESRI, report has estimated that bilateral trade flows between the United Kingdom and Ireland could fall by as much as 20%, with some sectors more affected than others. The agrifood sector, in particular, is much more dependent on the United Kingdom as a trading partner than Irish industry in general.

Some 54% of Irish beef exports in 2015 went to the United Kingdom. As well as the potential for the British exit to spark a recession in that country, it would most likely also be associated with a significant weakening of sterling against the euro, which would damage the competitiveness of our exports to the United Kingdom and the relative attractiveness of our goods in markets in which we compete with UK firms.

The economy has great strength, including our attractiveness to multinational firms, our skills and education base, the energy, productivity and innovation of the people and excellence in food and drink production. We also have a world-class tourism product and many domestic firms have grown into international enterprises. We have great potential to provide a good quality of life for people. The aim of Fianna Fáil is to create conditions that will support an increase in employment throughout the economy. We propose that this be done by delivering a tax regime that rewards individual effort and enterprise, tackles anti-competitive practices and enhances skill levels to support high-quality sustainable jobs.

Within the overall annual budget of approximately €70 billion, there are plenty of choices for Government and policymakers to decide on. One that will receive considerable attention is what happens to income tax and the universal social charge, USC. Fianna Fáil policy remains that we progressively reduce the burden of USC on all income earners. The total income tax take in 2016 will be over one third higher than the 2007 figure, while other taxes have not yet recovered to peak levels. This demonstrates the extent to which correcting the public finances has fallen on workers.

Income tax now represents 40% of all tax receipts, whereas it was 29% in 2007. The outgoing Government added to the already complicated nature of taxes on income in 2015 by creating an additional rate of USC. There are now four rates of USC for PAYE workers and five for the self-employed. Clearly, there is a need for a multi-year reform and simplification of USC. Our ultimate objective is to remove it from all income up to €80,000 per annum and that surplus income remain liable for USC.

We welcome the rainy day fund that will be established using unexpected proceeds from corporation tax receipts. As banking assets are sold in the next few years, we will consider putting some of these proceeds into the rainy day fund, as well as using them to directly reduce the national debt. Strict rules should apply as to how and when the rainy day fund could be drawn down.

It is our belief the focus of additional resources should be on improving public services and reversing some of the most damaging cuts, while at the same time outlining a pathway to reform taxation in the next three years. There should be a 50:50 split, unlike the pattern of two thirds expenditure cuts and one third tax increases which has been followed by the Government to date. Our core belief is spending on public services such as education, health, social protection and child care is progressive in nature as it benefits everyone in society, particularly those on low incomes. In contrast, cutting the top rate of tax for higher earners helps a far smaller number of people.

Ireland's housing crisis is not only the social challenge of our time for those caught up in the housing emergency, but it is also a key economic issue. Ireland is falling way behind the estimated 25,000 housing units needed a year. The Government has failed to provide any meaningful capital plan beyond reheated announcements. The failure to accelerate the transfer of NAMA units has also exacerbated the social housing waiting list and only 10% of homes earmarked by NAMA for social housing have actually been transferred to local authorities. Fianna Fáil proposes that €1 billion of the €2.5 billion in cash the Ireland Strategic Investment Fund is sitting on be immediately allocated for the construction of social housing. Data provided in the Dáil indicate that the average cost of construction of social housing units is €152,000 per unit. This indicates that upwards of 6,500 units could be made available under this proposal.

The health service has also gone through an enormous period of upheaval in recent years. Cuts of approximately €3 billion have been imposed and resources have been stretched to the limit. Health service staff deserve enormous credit for working under these pressures. Fianna Fáil believes available resources should be prioritised for services in mental health, discretionary medical cards and the recruitment of additional therapists that will provide much needed services for children, in particular those who need speech and language, physical and occupational therapies.

The public now wants to see action on issues of concern in their lives, such as the squeeze on household budgets, housing waiting lists, excessive mortgage interest rates, long-term mortgage arrears and deteriorating public services. I look forward to the debate on the summer economic statement and the other reforms in the budgetary process.

I again thank the Minister for his contribution.

Senator Rose Conway-Walsh

I thank the Minister for coming to the House. I wish to share my time with Senator Pádraig Mac Lochlainn.

Before I begin my contribution, I draw attention to the most recent economic announcement from the CSO this week. The 26% growth rate was mocked and derided around the world. There is a danger that economic announcements and forecasts such as those we are discussing today will become meaningless. Economic forecasts and statements from sovereign governments should be a source of confidence. The statement read as though it was the premise for a round of tax cuts that may happen in the future.

It is the firm belief of Sinn Féin that tax cuts are not a stimulus for economic growth, rather they are a cumulative year-to-year cost on the Exchequer. As we know, it is very difficult to raise taxes after they have been cut. Capital spending can be adjusted year-to-year in the light of external factors and, therefore, is a more fiscally responsible method of stimulating growth. Capital spending stimulates job creation and pays much more back into the economy than tax cuts. Last year we saw a major increase in corporation tax receipts which rose by 41% ahead of projections. Much like 2015, we are all at a loss to explain the spike. We cannot build a sustainable recovery on such random fluctuations in Exchequer returns. Last year ten companies accounted for 40% of corporation tax receipts. One of the strange facts to come out of the most recent GDP figures is that it appears that Ireland's industrial base has doubled in the past year. If we looked for the tonnage figures from Irish ports, would they correspond with the seemingly amazing expansion of Irish output? To put this plainly, I ask the Minister whether the figures represent actual physical exports from the island or merely reflect the number of companies using our country and island as a flag of convenience to process money.

Last February the European Commission flagged aircraft leasing and inversion deals as not being reliable variables for measuring GDP growth. Sinn Féin has also received replies to parliamentary questions from the Minister's Department which have stated specifically that aircraft leasing should be considered GDP neutral. It is, therefore, necessary for the Government to issue a clear line on Ireland's forecasted growth in order to restore confidence. This statement is nothing more than an attempt by Fine Gael to squeeze its narrative into the fiscal space. My party has never supported these rules in the first place and it is great to see many organisations coming around to our position in opposing them, whereas the Government seems to be fixed on spinning its way around them. I also note the Minister has referenced the fiscal rules as an excuse for not spending more on capital investment and, therefore, splitting spending with tax cuts. He has said he is constrained by them and almost has no choice in the matter, yet the Nevin Economic Research Institute in its recent quarterly review refuted this and stated it was merely an excuse to promote tax cuts for the better off ahead of capital spending.

I note from the statement that higher levels of investment are crucial to support balanced regional growth, eliminating capacity constraints and enhancing the growth potential of the economy. Even with the proposed spend of €5.1 billion in capital investment, Ireland will still be among the countries with the lowest level of capital investment in the European Union. The Minister has a choice. He could abandon the plan for major tax cuts and reliefs for the better off amounting to €331 million and instead begin investment that could help to ease the neglect of the west.

I ask the Minister to consider designating the area around Knock Airport and other neglected and marginalised areas of the country, in particular the west, a zero-tax base in order to attract multinational companies that would provide employment. I was alarmed at the recent economic dialogue to hear the narrative that we were almost at full employment. How, then, can we explain how, when four or six jobs were recently advertised by Mayo County Council, 1,608 applications were received? Things do not add up. Rural Senators will back this up.

The narrative being given from Dublin and the east of the country bears no resemblance to what is happening in the west. The CSO figures on emigration show that we got the figures wrong and underestimated the extent of emigration. Communities and counties are being left without their young people. They are being left marginalised and without jobs and I ask the Minister to use the fiscal instruments available to him to address this as a matter of urgency.

Since the summer economic statement was discussed in the Dáil, Britain has voted to leave the European Union. As a public representative from the west, I am particularly worried about the impact of Brexit on the agrifood industry. This industry has been one of the success stories of an all-Ireland approach to industry. I want to know what contingency plans the Minister's Department has put in place to deal with the fallout that will affect specific sectors of the economy. Many schemes in the west and Border region depend on cross-Border EU funding. Has his Department assessed the potential fallout from such funding being withdrawn? I hope in the years to come this statement and the Minister's agenda of tax cuts is not cited as one of the warning signs we should have spotted before repeating some of the mistakes made in the recent past.

Senator Pádraig Mac Lochlainn

In terms of economics, it seems like an eternity ago during the first week of the general election campaign that every person in the country was speaking about the fiscal space and exactly what it was and meant. Given that the Department of Finance now advises that the figure of adjustment over the next five budgets will be €11.3 billion, we in Sinn Féin consider that this space should be prioritised towards rebuilding public services and key investment in infrastructure. That Fine Gael is still even contemplating abolishing the universal service charge, USC, for all is remarkable. We certainly agree with reducing USC for low and middle income earners, those that suffered most from the years of austerity. However, to abolish it for those who can afford to pay it most at a time when we have an unprecedented housing crisis, a continuing and never-ending crisis in our hospitals and starvation of investment on any scale over the last eight years and more is quite foolish.

We anticipate if the 2:1 spending to tax cuts use of the fiscal space available, as outlined in the summer economic statement, is followed through it will mean €333 million directed towards reducing USC for higher earners. That money could build a lot of badly needed new homes across the State. This rainy day fund which we believe will amount to €3 billion of the €11.8 billion available is very questionable. To apportion such a large amount of money into what may turn out to be nothing more than an electoral slush fund is simply not acceptable. We in Sinn Féin recognise the need for economic prudence and agree with a €1.5 billion fund with strict spending criteria as set out by us previously. We deem this figure to be more than sufficient.

From a tax point of view, there are certain positives. We welcome the proposal to increase the self-employed tax credit as we suggested. Reducing capital gains tax for start-ups has the potential to revitalise communities and local economies and introducing a PRSI scheme for the self-employed is also to be welcomed. However we will await the detail.

Looking at capital investment or perhaps more appropriately lack of capital investment in terms of health, housing, transport, broadband, etc., over a nine-year period, every region and part of Ireland is crying out or funds to develop their areas and escape past neglect. Government plans do nothing to address this massive under-investment in recent years and the Government seems to be agreeable to continue our terrible status as one of the worst investors in capital investment in the European Union. Investment needs to be seen for the multiplier effect it has on local economies.

The Minister of State will have seen the preliminary report from the CSO. It is no accident that in areas where population is growing, like the Fingal area of Dublin, my home county of Donegal, Mayo and other western counties, one can see people voting with their feet and leaving because they do not see an economic future. That needs to be reversed and it will mean infrastructural investment in our public services and capital infrastructure, particularly in the west.

Senator Kieran O'Donnell

I welcome the Minister, Deputy Michael Noonan, who has just stepped out and the Minister of State, Deputy Eoghan Murphy. The economy has recovered very well in the past few years. There has been much debate about the CSO figures in the last number of days. The underlying figures we should be looking at are consumer spending, which has gone up by about 5%, and unemployment which is down to 7.8%. Nevertheless, I am a little perplexed as to why the CSO, which is an independent body, would publish such figures. They present an inaccurate reflection of the true position which is a very positive one. It is incumbent upon the CSO to go back and come up with a presentation which sifts out the exceptional factors and gives us a true picture which is probably in the order of between 5% and 6% growth last year.

I find it unusual that back in March, just over three months ago, the CSO projected a 7.8% increase in GDP and a 5.7% increase in GNP for 2015. Suddenly those figures become 26% and 19% three months later. It is an independent body which needs to take its work seriously.

It has been reported in the media that Philip Lane, the Governor of the Central Bank, contacted the CSO about his concerns about the figures. We are in a very strong position. The growth rate is probably 5% or 6% and unemployment is down to 7.8%. Full employment is normally around 6%. In public finances, debt to GDP was 123% not too long ago. It was 93% prior to the publication of these figures by the CSO and the CSO is now saying it is about 72%. Either way it is moving in the right direction.

I take on board the comments made today by the head of the National Treasury Management Agency who said that our national debt is still very high at €200 billion. It is something people must be cautious of. The fundamentals are very sound in terms of growth, consumer spending, employment and unemployment. Nobody likes to see unemployment but it is incumbent upon the CSO as an independent body to come back with a report which takes out the one-off items. The CSO needs to clarify whether that in any way impacted on the figures for Q1 where we see GDP slightly down and GNP up. The devil is in the detail. It is not always reported but it is extremely important.

I will touch on a couple of items from the economic statement. The first one is mortgage arrears. There has been a general reduction, however, there is a hard core of people, about 30,000, who are in dire financial trouble and two years or more in arrears. I am led to believe that in terms of the statutory regime, in some cases the appeal mechanism may not be operating to the level of effect we would like. They are a group that need to be looked at.

Infrastructure is vital. I was glad to hear the Sinn Féin leader in the Seanad speak earlier. She spoke in general terms but when it came to the specifics of her area she was very progressive in her outlook on taxes, which I welcome. I will do likewise on my area of Limerick. The Limerick-Cork motorway is a critical piece of infrastructure.

I have raised the matter with the Minister for Transport, Tourism and Sport, Deputy Shane Ross, and it needs to be progressed. It is a very big project, but I know that the TII, the inheritors of the NRA, is actively looking at completing the project in stages. As part of the mid-term review, it is extremely important that the project be fast-tracked. It is ridiculous that there are occasions where one can drive from Limerick to Dublin as quickly as from Limerick to Cork and yet the latter is half the distance.

I wish to move on to discussing the risks of, alas, Brexit. Today, sterling has rallied against the euro and that is to our benefit in terms of exports. The improvement was partially due to the Bank of England signalling that it would reduce the interest rates by 0.25% in this coming period.

I will outline the key issues for us. I would like to see the referendum re-run in the United Kingdom. It would be the best thing for the public in the United Kingdom and the European Union. However, based on the new UK Government, another referendum may not happen, but I would still like it to happen. The most important thing for us as an economy is that the United Kingdom is a huge trading partner for us and many Irish people live there.

We must be aware of the following in Brexit discussions. The 12.5% corporation tax rate must be retained and is sacrosanct as far as I am concerned. We need to ensure the SME sector which is the lifeblood of the economy and from which I came will continue to export into the United Kingdom. It is also extremely important that we keep a close eye on exchange rates to make sure Irish businesses can maintain their competitiveness. Certainty is also critically important, particularly for parents who have students studying in the United Kingdom, for the health system and for the energy system.

Another element of the economic plan is housing. Last night we debated the slightly unrelated issue of disabilities. The Government, in terms of the housing programme, needs to do two things. First, I understand local authorities are not required to publish or provide figures for either the Department or the Government on the level of allocations they make in any one year. It should happen because one could benchmark and see the numbers allocated.

Second, many of the Part V funds have not been spent. We have to find out the level of Part V funds that councillors retain on their books in terms of it being used in the disabilities area for housing and also in the provision of housing in its own accord.

I welcome the rainy day fund mentioned in the economic statement. The fund is dear to my heart. Between 2007 and 2008 I raised the matter repeatedly in the Dáil and I am glad that it has now happened. The fund should be put in reserve and comprise a huge amount of capital. In terms of how the fund is used, a rainy day fund is necessary to counteract external shocks.

In terms of our discussions on Brexit and economic discussions, it is important that we examine fiscal rules and ensure there is scope for capital spending specifically. I look forward to further debates with the Minister for Finance and his Minister of State, Deputy Eoghan Murphy.

Senator Alice-Mary Higgins

I welcome the Minister for Finance and the Minister of State. In the Minister's statement we saw an acknowledgement of the recent anomaly in the published GDP figures that claimed there had been 26% growth in the economy. The figure has been roundly mocked and led to unwanted attention on a global level. In the debate since we have been urged to focus on other figures such as the consumer spending figure of 4.5%, as being a more real and notable indicator. I note that the Minister said, "Given the distortions in the GDP data, I view employment and unemployment data as the best indicator of trends in the economy." I wish to state, while bracketing first an aside that I share the concerns expressed by Sinn Féin about what this means in terms of our relationship with corporations and our international reputation, the fact that false money inflated the figures, that this is mockingly called leprechaun economics and that moneys such as this turn to ashes in people's pockets, it is important we address the anomaly, the message it sends internationally and the concrete cost it could have in terms of Ireland's EU contributions.

I will return to the real indicators. I suggest that, as well as employment, unemployment, consumer rates and consumer spending, we look at figures such as the in-work poverty level in Ireland that stands at 18%. We should also look at the gender pay and pension gap, both of which have widened in recent years. The gender pay gap now stands at 14.4% and the gender pension gap has widened from 35% to 37%. Even though both figures were mentioned in the programme for Government, they were not mentioned in the spring and summer statements. I urge that these indicators which were discussed in the programme for Government be reflected as indicators of economic trends and our well-being.

We should also look at the Gini coefficient figures in terms of income and equality. We know that the OECD has found that Ireland has some of the highest levels of income and inequality before social transfers and tax. Global research is available and not just analysis such as The Spirit Level but concrete research from entities such as the IMF. The IMF conducted research in 170 countries over 30 years and found that a 1% increase in income for the 20% on the lowest incomes, that means the bottom quintile, will raise a national economy and an equivalent increase for the wealthiest quintile lowers the economy. We have direct evidence from 170 countries over 30 years that shows a trickle-down approach does not work. It is building and raising the foundation that works. With that in mind and given the important role that tax and social transfers have had in redressing the balance in Ireland and it has been acknowledged that this country has redressed the matter considerably, I am concerned that we would do anything to hollow out the income tax base that has done such work in redressing inequalities, especially given that such redress has traditionally been used as a defence when the OECD and others raised the issue of inequality with us.

I was disappointed with a simple line on the second page of the summer economic statement that reads, "Given that personal tax rates in Ireland are too high". Unfortunately, no rationale is given, no argument is made and no case is put forward as to why personal tax rates are too high. If we wish to be taken seriously on a European or global level and show we are serious about the economy, we need to put forward serious economic figures and arguments for a range of taxes rather than allow assumptions to be made and our economic situation to be taken for granted.

I express my concern about income tax. In terms of income tax being too high, it is barely high enough to meet the demographic projected spending on public investment projects. I am particularly concerned about proposals to cut USC for higher and middle incomes. I make the plea that when we talk about the economy, we must remember that the median income in Ireland is €28,500, that half of the population earns less than €28,500 and that any tax concession in budgets and our economic planning needs to begin by focusing on that half of the population.

I note one positive element which is the plan to phase out PAYE tax credits for higher earners. It is a small gesture, but there is also a need to address the problem of marginal rate tax reliefs on pensions which disproportionately benefit higher earners and work against the stated Government goal of closing the gender pension gap.

I also note that while cost-neutral language is thrown around about social housing and we are told that a cost-neutral solution must be found, we do not hear cost-neutral language concerning tax reliefs. For example, has the change to inheritance tax been tested for cost neutrality? These matters require more rigorous examination and more transparent debate.

I want to focus, in particular, on responding to the current context of Brexit and the insecurities therein. At this time, we need to maintain our income tax base on a solid and secure foundation as we move forward into a period of uncertainty. Income tax is our greatest counter-cyclical guarantee of continued and sustained revenue. This week I was frankly alarmed to hear IBEC's proposal on shares and dividends - the idea that stock options and shares might be changed vis-à-vis taxation. That is a dangerous proposal that risks hollowing out our income tax base. For example, someone who might have been paid €200,000 may now be paid €150,000 with €50,000 in stock options, which is a huge drain from our revenue base.

The recent experience of the capital gains tax waiver - an experimental move which, we were told, was a sweetener to invite investors into Ireland - turned out to bring vulture funds upon us. It led to a rapid overheating of the property market and the current housing crisis. We need to be cautious about measures with such a high potential to distort the core fundamentals of the economy.

In responding to Brexit we should not chase a lowering of standards in the United Kingdom but rather invest in decent wages. In that way we can ensure the local economy will provide those who purchase in towns and villages across the country with a steady income. One of the best ways to diffuse money emanating from our indigenous goods market is to ensure people are paid decent wages and thus have money to spend. All the evidence shows that those on lower incomes spend locally.

We should also consider investing internationally, drawing on opportunities not just to chase banks and other financial institutions but also looking at academic investment. People are drawn to relocate in Ireland by opportunities and the quality of life here. Those relocating to Ireland now are much closer to huge levels of European investment in research and development funding. Our academic institutions could invest in bringing the brightest minds here if they were given the necessary resources directly instead of waiting for the implementation of dubious proposals. The brightest persons would also bring with them a large amount of revenue in terms of potential international research and other funding. Ireland has been punching below its weight on international research and development. That sector requires positive and constructive investment, which has spillover effects on society.

Child care is a key priority which is entirely missing from the summer economic statement. Effectively, it is social infrastructure which is long overdue. It is a key focus in every economic discussion, but it is yet again under-represented in this document.

I support IBEC's proposals on capital investment. Having critiqued one proposal, I do believe IBEC has some solid ground with the idea of examining capital investment. The European Union has previously critiqued Ireland's low levels of capital investment. It has pointed out that we are at a dangerous level in this regard. A strong case needs to be made to the European Union, therefore, that we need to push forward with capital investment.

It would be welcome if future summer economic statements included the position adopted by Ireland at a European level. As all of these discussions are in a European context, it would be useful to know what position Ireland is taking on some of the fiscal pressures. As regards the Europe 2020 goals of smart, sustainable and inclusive growth, we should consider the weighting placed upon them in the semester process versus the weighting on short-term fiscal goals.

As I realise I am short on time, I will skip a few points.

Acting Chairman (Senator Frank Feighan)

That would be very helpful.

Senator Alice-Mary Higgins

We mentioned the rainy day fund, which needs further examination. We also need a much clearer debate on what is constituted by it and what its rules might be. We also need future-proofing in other areas such as procurement in order to protect our policy options. I have spoken to the Minister of State, Deputy Eoghan Murphy, about this matter. In addition, we require equality-proofing, which is a fundamental commitment in our budgetary process. Shockingly and unfortunately, however, there is no mention in the summer economic statement of equality and gender-proofing. I would like to see that commitment deeply embedded because it is the seed for our future.

Senator Gerald Nash

I welcome the Minister for Finance, Deputy Michael Noonan. I am pleased to contribute to this debate. It is important to have an opportunity to discuss the development of budgetary proposals and frame priorities for the year ahead. We pioneered this approach last year and it is continuing now. The proof of the pudding will be in the eating, by which I mean the capacity of the Government to take on suggestions from this House and the Lower House on how we should spread the proceeds and fruits of our economic recovery.

We are at an important point in our economic recovery and social development. Strategic decisions must be taken by the Government about what type of country and society we want to promote. We need therefore to consider long and hard how we will allocate the hard won resources we now have. My own party served in government at an unprecedentedly difficult time. We did not have opportunities to invest in public services to the extent that we would have wished. However, as the economy recovered, growth stabilised and options became more attractive, we took the opportunity to invest proportionately more in public services with the available resources as against targeting tax deductions. The Minister who also served in that Government understood and supported that approach. I am glad that much of that Minister's analysis earlier on focused on the necessity to increase or at least retain the momentum of the Action Plan for Jobs process. Institutional change and changing our approach to enterprise policy development has made a huge contribution to jobs growth in recent years. I am proud of the role I played in rolling that out. By distilling the Action Plan for Jobs approach into the regions, thus creating a series of regional action plans for jobs, we ensured balanced economic and social development across the country.

Frankly, I am baffled that, given the demand in society to invest more in developing and supporting social infrastructure and public services, Government policy as reflected in this summer economic statement is so disappointing. IBEC, trade unions and other stakeholders have pointed to the absolute need to address the savage public and private housing supply problem. If we fail to do so, there will be ongoing social and economic consequences, yet the summer economic statement illustrates that public spending will only be a fraction of the anticipated growth in GDP.

Between 2016 and 2021 nominal GDP is likely to increase by approximately 29%. Over the same period the planned growth and gross current spending will be just under 10%. Taking account of the faster increase in capital spending, total gross spending increases by 13.3%. I am concerned, therefore, that the Government plans to allocate just over two thirds of the fiscal space available to spend on increases. The Labour Party is on public record as stating it favours in the region of three quarters in this regard. A substantial proportion of the Government's available space will go to the elimination of the universal social charge. By definition, that will sadly favour the much better off in society. Regrettably, there is no provision for indexation in terms of tax rates.

I am puzzled at what will be left of the available fiscal space, approximately €3 billion, and the amount to be allocated to the so-called rainy day fund - that very few people believe we need - if we simply stick to the fiscal rules to which we signed up. It is a missed opportunity, to put it mildly, to remit €1 billion each year for three years from 2019 onwards into a rainy day fund. I am of the view that a substantial minority of Members of this House and, I dare say, the majority of members of the public would prefer to see that money invested in social infrastructure such as, for example, housing. It is difficult to make the case for a rainy day fund when public services are under so much pressure and when the requirement to restore and develop public services and renew and invest in housing critically is so obvious and necessary.

I ask the Government to reconsider the admittedly very eye-catching proposition of a rainy day fund, given the experiences we have had in recent years. It is eye-catching, as I said, but I do not believe it is necessary, given that if we stick to the fiscal requirements which I am absolutely adamant we should do, the Exchequer will be in good nick, as it were. It is in the interests of society that we focus a much greater proportion of the available fiscal space on social infrastructure as opposed to tax cuts or any other approach that might be taken. That is something to which the Government should give serious consideration in the interests our society and the country's continued economic development.

Senator Maria Byrne

I welcome the Minister of State, Deputy Eoghan Murphy. In recent years the State has been confronted by some of the greatest economic challenges with which it has been obliged to deal since its inception. It is a testament to the legacy of the previous Government and the resolve of the current one that I discuss a very positive set of plans for the economy. Following the decision by Britain to leave the European Union, we must ensure our economic recovery is preserved and sustainable. We must avoid the mistakes of the past. The public finances are in a much better position than they were during the years of the crisis and they have been placed on a sustainable path. The era of boom and bust is never coming back and has been confined to the dustbin of history.

The strengthening pace of the economic recovery has confronted us with the next set of challenges which require the full attention of Government such as investing in the education and health systems. We must remember that every challenge presents an opportunity. The profound recovery in our economy is most evident in the labour market, with unemployment having been cut in half since the high of more than 15% in 2012 to an eight-year low of 7.8% in 2016. Our budget deficit has declined sharply from one third of economic output at the height of the crisis in 2010 and the national debt is in freefall having declined from 120% of GDP in 2012 to just less than 94% in 2015.

It is welcome that the economy is predicted to expand strongly by 4.9% of GDP this year and 3.9% next year. This rate of growth will ensure the public finances continue to meet the needs of an expanding economy. It is welcome that the budget deficit is expected to fall by 1.1% of GDP this year and that it will be completely eliminated by 2018. The challenge ahead is to ensure the public finances remain on the right path towards sustainability and durability. The fact that the Government has committed to a medium-term budgetary objective of 0.5% of GDP is positive. The national debt is always shouldered by those who come after us and it is neither fair nor desirable that our children and grandchildren would be obliged to pay for the recklessness of our generation. Keeping growth in Government spending below the rate of growth in the economy is an example of the prudence with which this Administration is operating. This will ensure we do not spend more than is reasonable.

In terms of spending on education, we face many challenges in providing a decent education for all our citizens. The continued growth in the Irish birth rate will require the Government to build and provide more primary and secondary schools. As more and more students choose to study at third level, we face a real dilemma in funding third level institutions in order to maintain our world-renowned standard of education. The Government's capital plan for 2016 to 2021 outlines €42 billion in capital expenditure. It is my hope that within this plan we can put the resources needed in place to provide much needed school places and refurbish many school buildings throughout the country. As part of A Programme for a Partnership Government, the Government has committed to spending and additional €6.5 billion on public services by 2021. This will be instrumental in allowing extra teachers to be hired, thereby leading to a reduction in class sizes and allowing for an increase in the number of special needs assistants and guidance counsellors in schools.

I would like to conclude by looking at taxation. It is welcome that the Government has committed to a programme of income tax reform. The economic justification for lower marginal tax rates speaks for itself. Lower rates of taxation encourage entrepreneurship and innovation, which is responsible for a considerable amount of job creation in Ireland. The phasing out of USC will mark another positive step in making work pay. USC was an emergency tax for a time of crisis. Now that the crisis has passed, it must be reduced and, ultimately, eliminated. Middle income earners have shouldered the burden of the economic crisis. They have seen a reduction in the public services offered by the Government, while having to contribute more in taxation as a result of the prices.

In an increasingly competitive international environment, it is important that we have a competitive tax system that not only encourages foreign direct investment but also encourages people, with their broad range of skills and expertise, to stay here and contribute to the ongoing economic recovery. Taxation receipts continue to beat expectations and are currently running ahead of the profile for the year. This clearly proves that there is ample opportunity for us to reduce tax on work and give the hard-earned fruits of the economic recovery back to the people.

I thank to the Minister of State for listening. I certainly look forward to contributing to the debate later.

Senator Brian Ó Domhnaill

Like other speakers, I welcome the opportunity to speak about the summer economic statement which provides an opportunity for a mid-term reflection before the budget on where the country is heading. It is one of the good things that has come out of the new European framework on economic recovery and oversight of member states. The European Commission and the European Central Bank were very slow to react, as has been commentated upon widely, to all of the chaos of the financial crash that we experienced in Ireland. However, one of the proactive measures taken relates to the new fiscal rules. In itself, that brings strength and stability to public spending and keeps Departments and public indebtedness in check because there are clear targets which must be met.

We are debating the summer economic statement in the aftermath of the debate which took place on it in the Dáil. I understand the latter occurred before the referendum on Brexit.

Now our debate is taking place in a changed economic climate. The result of the Brexit referendum will bring economic benefits and challenges to this republic.

The flexibility of having fiscal space which was being bandied about during the general election campaign is not now achievable unless the international economic factors at play are favourable. We have seen the benefits of the 14 quarters of positive economic recovery, largely due to exports to other markets, including about 17% of our overall export trade going to the UK market. The Brexit result has the potential to impact on consumption in the UK markets. In addition, currency fluctuations will affect our trade with the United Kingdom. We now operate in a changed climate. The UK equivalent of the ESRI in Ireland carried out a study of the impact of a vote to leave the European Union on GDP and suggested it could result in a negative fluctuation of 2.3% to 6% in the UK economy and that every 1% deflation in the United Kingdom would have a 0.2% negative impact on Ireland. That is a real consequence of Brexit.

If we take the figures of the Treasury and the National Institute of Economic and Social Research in the United Kingdom, one is looking at a potential decrease of 0.5% to 1.2% in our GDP projections. That is alarming but there are beneficial factors also. I would like some of those to be exploited. I would like to know what is happening in the Departments of the Taoiseach and Finance to capture some of the potential financial jobs coming out of London. We know from reading the British press that major companies are looking at moving out of London and going to another European city - presumably a country where English is spoken would be beneficial to those companies. We have a housing crisis in Dublin that does not lend itself to attracting some of these companies.

There are major challenges which have been documented in the summer economic statement published by both Departments. These challenges revolve around housing. There are major issues around mortgage arrears and the courts are clogged up with people who are being taken to court by financial institutions. While it appears that the banks are sending the signal that they are being proactive, I do not think that is happening in reality. There is a lot of blocking taking place. One can blame the banks, but blame can be apportioned to both sides, including to the borrower who is refusing to pay.

Projected demand for health services up to 2021 will cost an extra €6.75 billion. That would eat up a lot of the fiscal space that has been talked about. We have a growing population and people are living longer and these factors will be a major challenge to the health service. We are spending more on health per capita than any other OECD country but yet the outcomes are not what they should be. That is a major challenge that needs to be robustly taken on not just by the Department of Health but by a cross-departmental body which should be established to look at providing and driving efficiencies and effective outcomes for patients and all consumers of public services in the country. It is clear that we are not getting value for money in the health service. New hospital groupings have been established to drive efficiencies but in my area, the north-west region, administrative costs have increased by one third. There are major challenges which need to be taken on. While the Government response to driving efficiencies has been to reduce cost and we saw that across the local authorities where the Government took local representatives out of the system, saving €400 million, however, the service being provided for the public has not been what it should be.

We need to adopt an holistic approach in terms of value for money. There is a need for an agency to drive that approach in government. Perhaps that is an issue we might debate on another day.

Senator Joe O'Reilly

I welcome the Minister of State, Deputy Eoghan Murphy, and wish him continued success in his new appointment. As we look at a much improved economic position for the country, it merits offering our warmest congratulations and acknowledgement to the Minister for Finance, Deputy Michael Noonan, for the work he and the then Minister for Public Expenditure and Reform have done for many years in this sphere. Those acknowledgements merit recording as we look at a very healthy scenario.

It is really encouraging that the official growth rate for 2015 was 7.8%, that we have the deficit down by 2.3%, that we have exited the excessive deficit procedure and that we are now at the stage that our debt-to-GDP ratio which was 120% to 100% at the beginning is now at 88% of GDP in 2016 and that we are falling below the euro average. We are in the position of committing €1 billion a year to the rainy day fund, which in itself is a great concept to avoid the mistakes of the past. We are at the point of considering phasing out the universal social charge, focusing on the lower and medium income groups. These are all very tangible and real achievements.

The ultimate objective of economic endeavour is to sort out the unemployment problem. While there are still too many people unemployed, we have reduced the unemployment rate from 15% down to 7.8%. The Department hopes to see 50,000 new jobs created this year. It is a good news story on employment and ultimately we are about creating employment. Work is the way to break the poverty barrier and it gives great dignity to families. It has a whole set of good effects on the individual, the family and the community. Providing work for people is the key to everything. All of our economic endeavour is predicated on it.

The improvement in the financial position will create a space for improved services and infrastructure. It is wonderful that through prudent management and taking the country back from the abyss, we are at the point when we can consider spending money on services and infrastructure. If I were to identify an area of infrastructure - there is nothing revolutionary or radical about what I am going to say but it merits repetition - the one area in which we have to invest is broadband provision. It has to be given the maximum priority. It is the great infrastructure deficit across tracts of the country and in rural areas. We had a very good debate and productive discussion with the Minister for Communications, Energy and Natural Resources, Deputy Denis Naughten, last week. That impetus has to be maintained and we need the Minister to ensure every home in the country will have broadband as quickly as possible. It is important that the roll out be quick and that we control the roll out. I understand the rationale for the key involvement of the private sector, but it is important that we control pricing and that we also control the process and ensure it happens efficiently.

I do not think there is a person in any assembly in the country who is not absolutely au fait with all of the reasons we need broadband.

One of the issues the Senator overlooked is that we have so many students around the country now who are commuting to colleges. In many cases it is an economic necessity for them to commute. They require broadband to access information, prepare papers and do other work. Such requirements, apart from employment creation and other reasons, make broadband critical.

In addition to services and employment creation, the new budgetary scenario offers great potential to do much more to keep people out of hospitals. The carer's allowance has great potential that has not yet been realised. The budget should radically increase the carer's allowance and carers' fringe benefits. We should put the caring profession on a very high status, thus giving it more recognition and making it more attractive. In that way, more people would want to work as carers in their own homes, thus reducing the cost of institutional care. I humbly suggest that if it were properly analysed, it could be more than cost-neutral. Apart from the economic issues, there are also social reasons for doing this, including the potential for job creation. If someone leaves a job to become a full-time carer that in turn creates a job. Home helps and home care packages could be used much more to keep people out of hospitals.

Are we nearly there?

Acting Chairman (Senator John O'Mahony)

I am told we are in injury time.

Senator Joe O'Reilly

In discussing the use of the new budgetary space, broadband and home care should be the two great priorities.

Following Brexit, the good work has started to attract industries through IDA Ireland. I want to see more of those industries-----

Senator Aidan Davitt

In Cavan.

Senator Joe O'Reilly

Yes, absolutely, in the Border region, specifically in counties Cavan and Monaghan.

Acting Chairman (Senator John O'Mahony)

The Senator has made his point. I understand Senators James Reilly and Michelle Mulherin are sharing time.

Senator James Reilly

We should have five minutes each.

Acting Chairman (Senator John O'Mahony)

I am told that I must call the Minister of State at 3.25 p.m.

Senator James Reilly

We will do our best to make it as quick as possible in order not to delay the Minister of State.

The summer economic statement is very positive on our economic position. I was pleased to hear the Minister for Finance, Deputy Michael Noonan, speak about the social agenda. The economy is but a means to a fairer and more just society. Without a strong economy we cannot create the jobs we need and we have been successful in doing that. Figures trip off the tongue, including 15.1% unemployment down to 7.8%, plus 160,000 new jobs. However, for every single one of those jobs a person has independence and a family can look to the future with greater confidence.

It is a well known fact that the best way out of poverty is a job. I will focus more on the social elements. I could not agree more that affordable child care is important and that has been provided for in the last budget. I have no doubt that it will continue to be provided for in future budgets, as a country-specific recommendation from the European Union two years running stated we must attack that issue.

A number of Senators mention that lower taxes would not help, whereas the reality is that the less tax there is on work, the more valuable work becomes and the more likely people are to take up work. Rather than raising wages in an ever-increasing spiral and making ourselves uncompetitive, we must ensure workers take more money home, particularly lower-paid workers. The last budget underscored that with a further reduction in the number of people paying USC, an increase in the threshold before one enters the marginal rate, and other measures.

Senator Alice-Mary Higgins commented on a lack of evidence to support the suggestion that taxes were too high. I can point immediately to the health area and the fact that we cannot attract consultants. That is not because we are not paying them enough. They are making as much and more than they make in the United Kingdom, but taxes here are so high that they are better off if they stay in the United Kingdom and it is difficult to attract them back.

Infrastructure is very important and I could not agree more with Senator Joe O'Reilly's comments. However, road and rail infrastructure, including the metro, are very important areas that must also be addressed. All in all, we do have a positive way forward. The first half of the job to restore the economy and get people back to work has been progressed in a major way. The second part of that job is to repair services and restore society.

Senator Michelle Mulherin

I thank Senator James Reilly for sharing time. I welcome the Minister of State.

The Minister for Finance's address provided us with a positive story. It is a vindication of some tough decisions that had to be made in the lifetime of the last Government that we are here looking at 160,000 jobs created since 2012 when we had the high point of unemployment at 15.1%. Some 50,000 jobs are projected to be created this year, with a reduction in the budget deficit. All the targets that we need to achieve are being overachieved. We had an additional 9% increase in tax for the first six months of this year, which is 3.5% above the projected profile. It is all good news and means that we have got the sort of space to discuss public service investment, as well as the sort of country and society we want.

We should reflect on the census figures released today, which tell a story. They also paint a picture of migration in the west because jobs are being created not just in Dublin but other big urban centres. The regional action plan for jobs has been welcomed as a targeted way to grow the regions economically, but we need a proper spatial strategy. That would recognise that Dublin and other big urban centres are under pressure for housing, schools and other public services. However, in County Mayo we have empty houses and a population decline because people are getting jobs in cities. Some rural schools may close due to vacant places. There is, therefore, a complete imbalance. From an infrastructural viewpoint, above a line from Louth to Galway city, there are no major interurban routes or high-speed trains. We have one gem in Knock airport which needs more investment.

As regards the rainy day fund, I would like a guarantee or confirmation about much needed investment in health services in place like Galway University Hospital which is our centre of excellence for cancer treatment. As the hospital has capacity issues, it should receive the required investment. In addition, Mayo University Hospital needs an extension to its emergency department and extra medical beds. Ballina District Hospital also requires investment in the male ward to bring it up to scratch. I hope these places will not be neglected in favour of a rainy day fund. The much needed infrastructure I have mentioned should take place because it is needed as part of the solution.

As regards the suspension of water charges, over €40 million of long overdue capital projects are coming into County Mayo. How will this be funded for the nine months? What arrangements are being made between the Exchequer and Irish Water to fund this? I understand they have succeeded in borrowing some money.

Are we facing penalties by virtue of this suspension of water charges, or has some comfort been received from the European Commission concerning the charges? We know that the Commission stated we have no derogation and must implement domestic charges. I presume that not to do so would be a breach and may result in penalties.

I would appreciate it if the Minister of State answered my questions.

Senator Aidan Davitt

Quite a few Senators have mentioned the GDP figures, but by the Department's own admission, they are distorted. We are talking about approximately 20% of the 26.3% being down to multinationals and inversion deals.

It accounts for a huge part of the GDP figures. Many of these companies are locating in Ireland because of the low corporation tax rate. We need to think outside the box and perhaps consider the introduction of a small tax on the turnover of such companies, from some of which the tax return is very small. Many companies, particularly in the aviation industry, are manipulating the figures and buying stocks and so on to avoid paying tax in their home countries. Perhaps we might look at the introduction of such a tax to benefit the State's finances.

Minister of State at the Department of Finance (Deputy Eoghan Murphy)

I am pleased to be here to discuss the summer economic statement. I thank Senators for their contributions which have been very constructive. The summer economic statement demonstrates that Ireland is moving further along the road to recovery. We have put the public finances on a sustainable footing and restored our competitiveness and are making significant progress in bringing the economy back to full employment. Before addressing some of the points made by Senators, I would like to reflect for a few minutes on how far we have come in the past few years.

The recovery is now well established. The CSO figures published this week suggest the economy grew by 26% last year. However, as pointed out by Senators, this figure is heavily distorted by the impact of multinational activity. Data from the CSO for net national income suggest the economy grew by a more plausible figure of 6.5% in 2015. This is, arguably, a more reasonable figure which is proximate to actual activity levels within the State. The current forecast is for a growth rate of around 5% this year, which is likely to be at the top of the growth table for the third consecutive year. This more plausible outlook is the basis on which we will undertake future policy decisions.

The expansion in economic activity, initially led by the exporting sectors, has become more sustained, with domestic factors now also driving growth. This is important as the domestic sector is employment and tax rich. Importantly, the recovery has been jobs rich. There are now an additional 155,000 people in work in Ireland since the launch of the Government’s Action Plan for Jobs initiative in early 2012. Encouragingly, the employment figure is set to exceed the 2 million mark this year for the first time since 2008. The level of unemployment has fallen by almost 160,000 since the peak. As a result, the unemployment rate was 7.8% in June. We have stabilised the public finances. Figures set out in the summer economic statement project an underlying deficit of 0.9% this year, a decrease on the peak of 11.5% in 2009.

The debt-to-GDP ratio has fallen from a peak of over 120% in 2012 to 94% last year and is projected to decline to 88% in 2016, bringing it below the euro area average. Irish sovereign debt is now rated investment grade by all of the main credit rating agencies. The yield on ten-year Irish Government bonds is now trading at below 1%, well below the figure of 14% seen in 2011. The economic and fiscal strategy set out in the summer economic statement will build on these achievements and help to deliver a solid and sustained recovery in the years ahead. As Senator Joe O'Reilly said, these are just numbers and there is a lot more behind them which I will address. Of particular note is the Government's plan to establish a rainy day fund. After achieving our medium-term objective in 2018, from 2019 onwards €1 billion will be remitted to the fund each year. This could be utilised to support activity and employment should the economic situation deteriorate. This would act as a counter-cyclical instrument to help smooth out the business cycle and act as a fiscal support to the economy.

I would like to address some of the points made by Senators. Housing was mentioned as a necessary point of investment as we look to the years ahead. The action plan for housing and homelessness will be announced shortly. I look forward to discussing the financial elements of the plan at the relevant time. In so far as infrastructural investment is concerned, an additional €5 billion in capital investment spending was committed to in the programme for Government. This is in tandem with the existing capital plan which will be reviewed next year. The European Investment Fund or, as it has been referred to in some quarters, "the Juncker fund", has been leveraged by the State to invest in primary care centres around the country. There are future opportunities in other areas also in that regard.

In so far as the economic indicators are concerned, we do not just look at one figure when calculating plans. Policy is never made on the back of one figure. Senator Alice-Mary Higgins pointed out that we should be looking at other figures such as that for the gender pay gap. That is important. The equality proofing of plans to assess the potential impact is necessary. It is proposed that proofing form part of the programme of work of the new Budget Oversight Committee and office in the context of its review of Government figures. I look forward to engaging in debates on these matters at the appropriate time.

The tax base has and does help to redistribute wealth and income across the State and it does so proportionately. People work hard. Their work is important and it is important that that work be fairly rewarded and that people do not feel penalised by the taxation system. The entry point to the marginal rate of tax is too low. Those on the average industrial wage are paying at the marginal rate of tax which does not happen anywhere else in the industrial world. We have to look at this if people are to be fairly rewarded for the work they do. Taxation policy has been focused on for the lower paid for the past five years and this will continue during the term of the Government.

In regard to plans put in place post-Brexit, share-based remuneration might be a necessary tax option or tool to help to attract more business and people. We have to be competitive in this space if we are to make gains in creating employment and attracting investment which are reflected in taxation levels which can be utilised by the Exchequer in the appropriate ways. I use the word "might" because this idea has not yet been fully examined. I take on board Senator Alice-Mary Higgins's points in so far as potentially there may be a negative impact further down the line. We will look at this, as we look at all plans for taxation, as well as other issues that may arise following the Brexit decision.

As regards the content of the summer economic statement and future statements, this is a new and welcome process and we will learn and improve as we progress. The national economic dialogue that took place this year following publication of the summer economic statement was the second such dialogue. We had learned from and improved on the first dialogue. The announcement yesterday of the mid-term review and expenditure ceilings and baselines for next year also constitutes a new process. That documentation and information had not previously been published in the budgetary cycle. We are now making them available publicly because we want to have an open and progressive debate, with inputs feeding into improving the process next year. We will do this. I agree with Senator Gerald Nash that we should embrace this new process.

A number of Senators spoke about the rainy day fund, the purpose of which is to make quasi and counter-cyclical interventions, as required, to smooth out the natural ebb and flow of the economic cycle. It is when things are not going well that such a fund is deployed. The hope is it will not be required. It is, however, prudent to provide for such a fund in case it might be needed. Any suggestion that it might be employed as an electoral slush fund is nonsense. As the Minister for Finance, Deputy Michael Noonan, said earlier today in this House, a paper on how the fund will be structured and deployed will be published. There will be consultation with both Houses on how best to leverage it. A fund is often put in place in the hope it will not be used. However, if there was a risk of cuts having to be made to services and spending commitments, the fund would be deployed, such that the cuts would not have to be made. The scope of such a fund and how it would operate will be discussed with everybody, following which a conclusion will be arrived at and brought before both Houses.

Senator Maria Byrne spoke about the challenges we were facing and how they required full Government attention. They actually require the full attention of each and every one of us. In the post-Brexit world we face huge challenges and opportunities. We have to take an approach that will support and bring into line all pillars and agents acting on behalf of and within the State. That is the approach we intend to take.

There is some flexibility on the fiscal rules on a country by country basis, but the key aspect is the rules are an important break on imprudent decision-making which we saw in the past to our cost.

On Brexit and budget 2017, we do not yet know what the impact will be on GDP in the United Kingdom of the Brexit decision; therefore, we do not yet know what the impact will be on Ireland, although some figures have been produced for possible or potential impacts, but we have not yet seen them. The factors which feed into plans for budget 2017 are robust. While the summer economic statement takes into account the possible impacts of Brexit on the Irish economy, we do not foresee an impact on the overall fiscal plans for next year.

Of course, there will be some opportunities post-Brexit and it would be remiss of the Taoiseach not to try to ensure the country capitalised on them. That will require a response from business, the Government and all stakeholders in working together.

Senator James Reilly and other Members made some budget suggestions. They are welcome and noted. Senator James Reilly talked about how we could not simply focus on the numbers and he is right. I was pleased that the theme of the national economic dialogue was centred on growth towards a just society. The numbers are important because they mean something, but it is time we focused on what they mean and on what they could potentially mean. Let us suppose €850 million is allocated for public spending. That is spending on the public good, on teachers, hospitals and gardaí. We have to talk about why we deploy the money in that way, why these are the priorities of the Government and what this means for people who are at the other end of the impacts made with that money.

Senator James Reilly referred to job increases. One outcome of the increases is that people are working, getting a salary and having the economic freedom to make decisions and live their lives in the way they choose. It is important that people have this economic freedom and that they believe they have a meaningful stake in our recovery and society.

Reference was made to the census figures. We can grow the regions. In fact, we can use financial services to do this. I have already taken the opportunity to see the type of work being done in the financial services and payments sector in places like Letterkenny and Kilorglin and it is impressive. There is more we can do in that sector. Infrastructural investment will unlock huge parts of the country outside urban centres. That is something to which we are looking.

Reference was made to Irish Water. The suspension of household water charges creates a pull or draw on other resources in the State and that is something of which we have to take cognisance.

The economic and fiscal outlook is encouraging, but it is important to acknowledge the numerous sources of uncertainty. Ireland has a small open economy and it is important that we be cognisant of the risks. The potential economic impact for Ireland resulting from the vote by the United Kingdom to leave the European Union is of particular note. The best way of addressing the risks is through prudent management of the public finances and competitiveness-oriented policies, as well as through open and transparent debate and informed decision-making. That is what the Government will continue to do. We have moved further along the path of recovery and must stay on that path.