Skip to main content
Normal View

National Development Plan

Dáil Éireann Debate, Thursday - 17 May 2018

Thursday, 17 May 2018

Questions (3)

Barry Cowen

Question:

3. Deputy Barry Cowen asked the Minister for Public Expenditure and Reform if the Irish Fiscal Advisory Council was consulted on the growth projections and the money committed in relation to the national development plan; and if he will make a statement on the matter. [21728/18]

View answer

Oral answers (8 contributions)

We welcome the investment committed to in the national development plan.

The sum of €91 billion in Exchequer expenditure up to 2027 is most welcome. However, it is a ten-year programme based on projections such as, for example, a 4% annual growth rate from 2022 to 2027. The Government seeks the advice of the Irish Fiscal Advisory Council annually on projections for budgetary measures made by the Department of Finance. Was similar advice sought from the same body on these projections and investment over a ten-year period?

The figure the Deputy mentioned is not correct. For the latter half of the plan, the assumption underpinning the national development plan is 2% growth per year. We deliberately reduced our growth forecast for the second half of the ten-year plan in recognition of the fact that it was more difficult to forecast that far ahead into the future in view of the many risks, of which the Deputy is aware.

Regarding engagement with the Irish Fiscal Advisory Council, IFAC, the council assesses macroeconomic and budgetary forecasts published by the Department of Finance twice a year - in the stability programme update and the budget. While the Department of Public Expenditure and Reform was not required to consult the IFAC on the national development plan, the council stated in its fiscal assessment report of November 2017:

Public investment levels are expected to ramp up quite rapidly again, rising to levels that are among the highest in the EU under current plans ... Across all measures, this would be higher than present levels for countries such as France, the Netherlands, Germany and the UK as well as for the EU and euro area aggregates. Importantly, this is possible while still complying with the fiscal rules in later years.

It went on to state:

A commitment to stick to a specified level of public investment as a share of GNI* would be a sensible basis for fiscal policy over the medium term.  If adhered to, this approach could help to prevent forced cuts to public investment in downturns and excessive expansions in investment during booms.

We consult the Irish Fiscal Advisory Council when we are required to do so and it has offered a broad understanding of what we are seeking to do with the increase in investment levels in the economy. It is good to hear this being welcomed by the Deputy.

To clarify, there is a 2% growth rate, as the Minister says, and a 2% inflation rate. That amounts to a total of 4%. The Minister is saying the council was not specifically asked or consulted prior to publication of the national development plan. What provision was made for potential Brexit implications? Do the projections take cognisance of the reports on Brexit of the Economic and Social Research Institute and the Department of Finance or even the Copenhagen report on Brexit?

The Deputy referred to a growth rate of 4%. When we are considering growth rates in the economy so far into the future, we strip out the impact of inflation. The trend growth rate we have used for the second half of the plan is 2%.

It is 2% plus 2%.

The Deputy further asked whether we had been cognisant of the Copenhagen papers and how we had taken account of Brexit. I will make two points in that regard. The best response we can put in place to the period of uncertainty the economy could enter if the Brexit process becomes even more difficult is to increase capital investment across the period. That is what we are doing. We are seeking to increase capital investment next year by one quarter above the current position at the precise point the United Kingdom will be leaving the European Union. That is the appropriate response to something that will pose challenges for the economy. On the question of its affordability, the plan was affordable on the basis of growth figures for next year that have since been increased again on the assumption that it is possible for the United Kingdom and the European Union to reach a transitional agreement. The plan is affordable and is the type of response we should have when an open economy is entering a period of uncertainty.

The Minister's reference to Brexit and its potential implications for the economy and our ability to meet the demands of the plan is based on an assumption that there will be a transitional agreement that will not have a detrimental effect on the provisions he has made for capital expenditure under the plan. He says increasing capital expenditure by 25% will be sufficient to meet the demands of the plan over ten years. That is fine. I would have no problem with that if it were the case that the various bodies that produced these reports and the severe sectoral implications outlined in the Copehagen report, for example, could be referred to in the plan to ensure there is a safety net in place to guarantee the commitments made by the Government with regard to capital expenditure. That expenditure is badly needed and I accept the Minister's commitment to it in the face of Brexit, but there must be more openness and greater transparency on such reports which are very informative and, in some cases, alarming. There must be reference points associated with the national development plan to ensure the commitment to it, notwithstanding the effects a hard Brexit would have on the economy.

That is all contained in the Project Ireland 2040 strategy and the associated documents that were published. They lay out how we believe the plan is affordable. With regard to having a safety net, the best response in entering a period in which the economy could face further uncertainty is to make use of the levers we can fully influence. Increasing investment in higher and further education and public transport and increasing housing supply are things we have to do, but they are even more necessary if an open economy is facing a period of heightened uncertainty. All of the related economic assumptions were laid out when we published Project Ireland 2040. The implementation board that will oversee the plan has now met and engaged on how we will be able to prioritise projects and make them happen. Furthermore, we will soon have a meeting of a construction sector working group to examine how we can make use of all of the resources available in the economy to deliver projects in a phased and affordable manner.

Top
Share