Committee on Budgetary Oversight díospóireacht -
Thursday, 30 Sep 2021

Pre-Budget 2022 Scrutiny (Resumed): Minister for Public Expenditure and Reform

Chairman

Apologies have been received from Deputy Nash. Today the committee will engage with the Minister for Public Expenditure and Reform to discuss pre-budget 2022 scrutiny. Members and all in attendance are asked to exercise personal responsibility in protecting themselves and others from the risk of contracting Covid-19. Members are strongly advised to practise good hand hygiene and leave at least one vacant seat between themselves and other attendees. They should also always maintain an appropriate level of social distancing during and after the meeting. Masks, preferably of medical grade, should be worn at all times during the meeting, except when speaking. I ask for the full co-operation of members in this.

I welcome the Minister for Public Expenditure and Reform, Deputy Michael McGrath, Mr. Ronnie Downes, assistant secretary, and Mr. John Kinnane, principal officer. I am aware the witnesses have probably heard the notice on privilege many times but I must go through it again. Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. If witnesses are giving evidence remotely from a place outside the parliamentary precincts, they may not benefit from the same level of immunity from legal proceedings as a witness physically present does. They are again reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in regard to an identifiable person or entity, they will be directed to discontinue their remarks by the Chair. It is imperative they comply with any such direction.

Members of the committee are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the place which Parliament has chosen to sit, namely, Leinster House, to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting.

I invite the Minister to make his opening statement.

Minister for Public Expenditure and Reform (Deputy Michael McGrath)

I welcome the opportunity to appear before the committee today as part of its pre-budget 2022 scrutiny process.

Detailed work is ongoing in my Department to finalise the expenditure Estimates for budget 2022. Similar to the approach adopted last year, the upcoming budget will be framed in the context of continued sustainable increases in core public expenditure, with a focus on significant increases in capital investment and the provision of exceptional additional funding for temporary supports to address the impact of Covid-19 and Brexit. Since the onset of the pandemic, the Government has provided significant supports with direct expenditure measures to support incomes and employment and to fund key public services. When the measures announced in the economic recovery plan are taken into account, it is expected that €15 billion in direct expenditure supports will be provided in 2021, bringing to some €31 billion the amount made available across 2020 and 2021. This level of support, which has been essential in ensuring public services can respond to the challenges of the pandemic and in supporting people's incomes and businesses, has understandably had a major impact on the public finances. Despite this, I believe it was the right approach from the Government. However, we have been able to manage this shock due to the relatively strong position of the public finances before the pandemic and the co-ordinated approach at EU level in responding to the crisis.

As the public health situation improves and the economy reopens, we must start on the road to returning the public finances to a more sustainable position and the debt-income ratio must be put on a downward trajectory. Withdrawing the temporary supports put in place, as they are no longer required, is essential to this. However, we have been clear that this will be achieved in a carefully phased manner so as not to disrupt the ongoing recovery.

The summer economic statement, SES, set out the medium-term strategy inclusive of spending levels to 2025, and budget 2022 is being prepared in line with this strategy. This will see core expenditure grow by an annual average of just over 5% over the period to 2025, a level of increase broadly in line with the economy's estimated trend growth rate. The average annual growth rate in current expenditure is projected to be just under 4.75% over this period, with total capital spending growing by an annual average of more than 8.5%. The increases in capital investment in the period to 2025 build on the increases in recent years. Indeed, over the coming period, we will continue to support the recovery in the economy, including through record levels of investment in the capital programme. This will see total capital spending as a percentage of national income, as measured by GNI*, increase to roughly 5% in 2025. This level of investment reflects the Government's commitment to deliver on our key infrastructural priorities. The revised national development plan, NDP, is currently being finalised and it will set out annual expenditure ceilings for the initial five years for each ministerial Vote group, in line with the parameters set out in the SES.

The planned increases in core spending over the period to 2025 will see overall core spending grow from just over €70 billion in 2020 to almost €93 billion in 2025. This significant level of expenditure on services and investment in infrastructure requires that there is a continued focus on ensuring this spending delivers value for money and improved outcomes and that we ensure there is the capacity to deliver this significant level of investment.

Turning to the upcoming budget, this is being prepared in line with the expenditure parameters set out in the SES. This will see total voted spending of up to €88.2 billion in 2022. Of this, €80.1 billion will be for core expenditure, while up to €8.1 billion will be available for non-core, temporary supports to address the specific challenges of Covid-19 and Brexit. In line with the strategy adopted in budget 2021, this core and non-core spending will be dealt with separately, with allocations for temporary measures clearly outlined in the expenditure report.

There is a significant increase of €4.2 billion in core spending for 2022, an increase of 5.5% over the 2021 core amount. Some €3.1 billion of this will fund increased current spending next year, bringing overall core current spending to €69.2 billion. Within this additional funding, €2.1 billion is estimated to be required to fund existing level of services, ELS, costs, including for demographics, the public service pay deal and the carry-over of current year measures. My Department is working through the detail to finalise the exact ELS requirement, taking into account the expenditure position at the end of September. The remaining balance, currently estimated at €1 billion, will be available to fund new spending priorities next year.

The review of the NDP was brought forward under the programme for Government and the phase 2 report on this is being finalised. It is our intention to publish the review of the NDP on Monday of next week. This will set out revised sectoral capital allocations as well as providing a renewed focus on delivery of efficient and cost-effective public infrastructure.

An increase of €1.1 billion over the 2021 core capital allocation will see core capital spending rise by almost 12%, bringing capital investment, including spending on the national recovery and resilience plan, to more than €11 billion next year. This follows significant increases in capital spending in recent years. By way of comparison, in 2018, the first year of the current NDP, Exchequer capital investment amounted to just under €6 billion. These sustained increases reflect the priority given to addressing key infrastructure requirements, including for climate action, housing, balanced regional development and healthcare.

On non-recurring temporary supports, this allocation is targeted at addressing the specific challenges of Covid-19, with up to €7 billion available to fund relevant measures, including under the national recovery and resilience plan, with some of this amount to be held back in a contingency reserve to allow the Government to respond to the situation with the virus next year.

This funding will allow for the phased withdrawal of supports, additional expenditure on income supports as the labour market continues to recover, and spending on necessary public health measures required for the delivery of public services in a Covid environment. Decisions on specific measures to be covered by this funding and allocations to Departments will be made as part of the Estimates process. As in 2021, it is intended that all expenditure allocations related to Covid-19 will be separately identified in the expenditure report to ensure transparency. In addition, €1.1 billion of non-core funding relates to Ireland’s funding allocation under the EU’s Brexit adjustment reserve, BAR, for measures to address the negative impacts of Brexit. This funding will be allocated across budget 2022 and budget 2023 to support employment, businesses and local communities negatively affected by Brexit, including those in the fishing industry.

Budget 2022 is being framed within a complex setting. In light of this, I will seek to put together an expenditure settlement for next year that will support an effective response as we seek to deliver on our key social, economic, and environmental priorities, while also responding to the challenge of Covid-19 and the ongoing challenge of Brexit. Accordingly, significant resources will be available next year to support our people and our key public services in recovering from the impacts of Covid-19. In addition, we will also seek to ensure we continue to deliver meaningful improvements in key priorities in our core expenditure programmes. Building on budget 2021, adopting this approach will enable us to continue to provide incremental improvements in the delivery of core public services across Government within a framework that supports medium-term fiscal sustainability.

I look forward to Members’ questions.

Deputy John Lahart

As a former member of this committee, the Minister knows its work very well. I thank him for his presentation. I have some questions. On the front-line bonus, I got the sense in recent days that it was getting out of control from a media perspective. There were lots of expectations and the story surrounding the proposal was getting bigger. This meeting may be an opportunity for the Minister to contextualise this initiative and to offer his own views concerning how he sees this proposed bonus, where things stand with it and the Government's thinking in this regard.

Deputy Michael McGrath

I thank the Deputy for his question. It is good to be back before the committee and it is doing excellent work, as always. On the recognition issue, the Government has on several occasions said we believe some recognition is appropriate and warranted in respect of the extraordinary efforts of so many people across society while we have been living with Covid-19 during the past 18 months. At the very front line of all that are our healthcare workers. The Government has acknowledged that aspect. It is important we approach this in a considered and careful way. Many people across society, in our health service certainly but also in other front-line public services, went above and beyond while doing their jobs during the past 18 months. Many of those people took considerable personal risk to protect the rest of us. The Irish people, and those on the front line specifically, have been nothing short of extraordinary during that time.

In addition, we all have a renewed sense of appreciation for the roles played by so many people in different parts of the private sector. I refer to people who are cleaners and those who collect our refuse, for example, as well as those who work in our retail, tourism and hospitality sectors. All those people took risks and went out on the front line in challenging and difficult circumstances. I raised this issue yesterday in a pre-budget meeting with representatives from the Irish Congress of Trade Unions, ICTU. I asked for their views, and they agreed with my assessment that what we need on this issue is a collaborative approach. Therefore, we will consult the social partners in depth to devise an agreed way forward that will allow us to deliver an appropriate form of recognition and that acknowledges and commemorates the fact that more than 5,000 died from Covid-19 in Ireland. We must do that in a way that also expresses gratitude to all those on the front line.

I am conscious, as I said last week, that solidarity has been the hallmark of our approach to Covid-19. As we exit the worst of the pandemic, we hope, it is important we maintain that social solidarity while at the same time finding a way to provide some special recognition of all those who have gone above and beyond in the course of their work. There is an industrial relations context here, as the members will be aware. Claims were lodged by the Irish Nurses and Midwives Organisation, INMO, and other unions representing healthcare workers. Those claims have made their way through the Workplace Relations Commission, WRC, and the Labour Court issued a recommendation last week. Its essence was to request the Government to engage intensively and to bring forward a proposal in the coming weeks. That process is under way and we will bring this issue to a conclusion in the coming weeks.

Deputy John Lahart

I do not have anything else to ask on that matter. One of the items in the Minister's contribution concerned the temporary supports being withdrawn over time. Will the Minister give us some more detail on that aspect, if he can?

Deputy Michael McGrath

As I said earlier, the estimate of the emergency level of expenditure is approximately €15 billion. That amount comes on top of €15 billion to €16 billion in expenditure last year as well. In total, across last year and this year, expenditure in this regard has exceeded €30 billion. The expenditure of €15 billion this year, however, will reduce significantly next year as the economy recovers and as all sections of our economy will now be allowed to reopen fully and to trade in as normal a way as possible. Significant improvements are being seen in the number of people on the pandemic unemployment payment, PUP, for example. Some 106,000 now receive the payment compared with a peak of 602,000 people.

The intention is that the €15 billion being spent this year will transition to a figure of approximately half that figure next year. There will then be around €7 billion of direct, Covid-19-related, expenditure. We have constructed that expenditure in a way that enables us to have a contingency fund. As next year progresses, therefore, and as we continue to have to live with the virus and perhaps also to deal with other unpredictable events, contingency funds will be in place to enable us to respond as circumstances unfold. Of that envisaged €7 billion, some will be allocated directly to Votes and the budgets of Departments, particularly in healthcare. Costs related to Covid-19 will continue to occur in healthcare, such as in test and trace, vaccination etc. Similarly, Covid-19-related spending will also continue to be required in education to protect our staff, pupils and students and in other sections of Government and across the public services.

That is how we intend to structure spending. We will allocate a certain amount, which could be up to €2.5 billion, and there will also be a significant contingency reserve. Built into that will be a buffer that will consider employment performance. As members will be aware, the level of unemployment forecast across next year is just over 8%. It could work out better than that, which we sincerely hope it will, or it could end up being worse. Therefore, we must have sufficient headroom to be able to respond as circumstances unfold. On budget day, we will be announcing more specific changes to vital schemes, such as the employment wage subsidy scheme, EWSS. It has been extended for another month, as the committee will be aware, at the current rates and with no changes. The Minister for Finance, Deputy Donohoe, and I will set out on 12 October what the plan is for the wage subsidy scheme in the months ahead.

Deputy John Lahart

We all have a picture in our minds of the bulk of those hundreds of thousands who have come off the PUP. We also have some slight sense of the people remaining on the payment being mostly in the arts and entertainment, air, travel and hospitality sectors. Which sectors does the Minister think will remain most in need in this regard? What kind of information is coming into the Department of Public Expenditure and Reform concerning which sectors may remain the most reliant on State supports for a little longer?

Deputy Michael McGrath

I thank the Deputy for the question. It is fair to acknowledge that the recovery will not be even across all sectors. It will be gradual in several sectors. We are seeing an example of that in the aviation industry and with all the main airports. Even international assessments conclude that the recovery of the aviation sector will be gradual. There is, of course, an unknown factor as well in the form of changed work practices and the move to blended working. We might wonder, for example, if we will see less international business travel in future. Uncertainties exist, therefore. Aviation is an example of a sector where there will be a recovery, but it will not reach 100% in the coming year.

Therefore, there are uncertainties there. That is one sector where there will be a recovery but it will not be 100% in the coming year. In addition, we anticipate that the recovery in the night-time sector, in arts and entertainment, will be gradual and we need to take account of that in the Covid-related supports we provide.

I can give assurance that the additional funding that was provided in some sectors last year will be considered in the context of this budget. There will be a continuation of some, but not all, additional funding next year for Covid-related measures for sectors that we believe will need extra assistance to help them in their journey to recovery. However, 106,000 people, who were in work in March 2020, are still out of work because of the pandemic. It is a top priority for the Government to help them in their journey back to employment.

We need to be honest and acknowledge that it may not necessarily be back to the same job or to the same sector. Some changes have been accelerated over the past 18 months of living with Covid-19. However, the Pathways to Work programme, which is fully funded, involves thousands of additional training places, work experience placements and educational placements. All those will be rolled out by the relevant bodies through the Intreo offices, SOLAS, and the further and higher education sector. The Ministers, Deputies Harris and Humphreys, are implementing that Pathways to Work programme, which is designed to help people in their journey back to work. Certain sectors have many job vacancies. We need to match people's skills with vacancies and the new opportunities that are undoubtedly opening up across the economy.

Deputy Mairéad Farrell

I thank an Aire for that. Deputy Lahart asked a few questions that I was interested in. I will ask a few different questions and then I might tease out further some of the points Deputy Lahart raised. The Irish Fiscal Advisory Council, IFAC, recently noted that the tax revenue appears more buoyant than in the summer economic statement. As a result, does the Minister expect a lower deficit than was anticipated in the summer economic statement?

Deputy Michael McGrath

On budget day, as the Deputy knows, we will update the forecast deficit for this year and the following years up to 2025. As she correctly said, the summer economic statement made a forecast for the deficit for the current year of just over €20 billion at 5.1% of the general Government balance. It is fair to acknowledge that we have experienced strong tax receipts across a number of different headings. Tax receipts are running well ahead of forecast. In addition, we have some underspending in the capital programme because of the impact of the public health restrictions during the pandemic. It is fair to acknowledge that the deficit will be better than was forecast in the summer economic statement. The White Paper, which the Deputy knows will be published a number of days in advance of the budget, will update the deficit projection for 2021. We will be doing better than that but I cannot put a precise figure on it at this point.

Deputy Mairéad Farrell

I thank the Minister. I did not expect a precise figure. What he said is helpful in itself.

I also ask about the Brexit adjustment fund. In January, the Minister stated that in the following weeks he would set out how we would maximise the benefit of the Brexit adjustment fund but he never gave us the plans for how this would be allocated between Departments. Obviously, I would anticipate that it will go to those sectors and regions that have been most heavily impacted by Brexit, including agriculture etc. However, do not know how it will be allocated and I ask the Minister to speak about that. This is something that is important to us as members of the Committee on Budgetary Oversight. Last year, figures were being bandied about and then a few days later they all seemed to change. I am sure these things can happen but just for the transparency and the good working of this committee, it would be helpful if the Minister could speak about the Brexit adjustment fund.

Deputy Michael McGrath

I will provide as much information as I can now. My departmental officials are available to provide whatever additional information and briefing we possibly can on the Brexit adjustment reserve. As the Deputy knows, this comes from an EU fund with a total value of almost €5.5 billion in today's prices. The 2018 value was set at about €5 billion and it then got reset in today's prices. For Ireland the current value is €1.165 billion. About 80% of the total reserve comes in the form of prefinancing.

There is a certain eligibility period for the expenditure, which is backdated to 1 January 2020 and must be spent no later than 31 December 2023. The bulk of our allocation will come in the form of prefinancing with about 40% of it to be paid in 2021, 30% in 2022 and 30% in 2023. There is a degree of flexibility as to how and when we spend that but that is how we will receive the cash from the European Union. The fund is subject to stringent EU funding requirements. We believe it will get formal approval in October and we are currently awaiting that.

We will set out our plan for the Brexit adjustment reserve in broad terms on budget today. It will come as no surprise to the Deputy that fishing communities and the fishery sector will be a significant beneficiary because they have been at the coalface of Brexit and have borne the brunt of it in many respects. While some of the impacts of Brexit have not fully hit the agrifood sector yet because of postponement of the implementation of different aspects of the new regime, there is a Brexit impact and there will likely be a further Brexit impact, which will be taken into account. In addition, certain sectors across the enterprise economy will also benefit.

We need to demonstrate a direct link between how we allocate the funding and the negative impact of Brexit. That work is ongoing in my Department. I do not anticipate we will be allocating in granular detail the full €1.165 billion on budget day, but I anticipate that we will give a very clear statement as to where the funding will be going in overall terms. I would be happy to provide any additional information we can.

Deputy Mairéad Farrell

That is brilliant. Gabhaim buíochas leis an Aire.

Deputy Lahart spoke about the different payment supports, a matter the Minister mentioned in his opening statement. We know that the EWSS will continue until the end of the year but we are not aware of what will happen in January. The Minister has said that he will outline that on budget day and not at this committee. For clarity, when the Minister was responding to Deputy Lahart, did he say he was allocating €2.5 billion to payment supports? I understand that is not just the EWSS but I ask him to clarify that point for me.

Deputy Michael McGrath

We all acknowledge how vital the wage subsidy scheme has been since it was introduced in March 2020. The Exchequer has paid over €8 billion across the two wage subsidy schemes in that period. Even at this moment, we still have approximately 300,000 workers whose wages are paid in part or in full under the wage subsidy scheme. There is a significant cost at over €400 million a month. This is not a scheme we can sustain over the medium to long term. Therefore, we will need to make changes and taper off the scheme over the coming period. On budget day we will set out our precise plans on that.

Not all the €2.5 billion that we have earmarked for potential allocation to Votes on budget day will be for income supports. It will include, for example, funding on transport, education, justice and health and will also carry over the training and activation measures from the July stimulus of 2020 where implementation was in some instances delayed due to the resurgence of the virus. That is where we intend to place in broad terms whatever amount of the €2.5 billion we allocate.

We are retaining a contingency of the order of €2.8 billion and it is out of that contingency fund that we will allocate some funding for the extension of the employment wage subsidy scheme. We also will have to hold back some money for the uncertainties of what may present over the course of next year. The income supports will come out of that contingency fund.

Deputy Mairéad Farrell

A Chathaoirligh, do I have another moment?

Chairman

You have just under a minute.

Deputy Mairéad Farrell

I can wait and come back in, if it is easier, after the other speakers.

Chairman

Thank you, Deputy Farrell. I call Deputy Durkan.

Deputy Bernard J. Durkan

First, I welcome the Minister to the committee and congratulate him and his colleagues for the safe handling of the Covid crisis. It took a lot of courage and commitment to do so. The Government responded bravely and I compliment it on that.

I want to ask a couple of questions. One of the things our friend, the late Professor John Kenneth Galbraith, used to warn about was inflation in the wake of inducements, incentives or assistance in any case. This was necessary assistance but it could have the same impact. We see signs of inflation. Some of it may be associated with Covid but some of it may have a life of its own. Can the Minister indicate whether any particular specific remedies come to mind, other than a short sharp cut, which would have a negative effect on the economy. Of the two options available, how is it proposed to protect the economy, encourage the recovery from Covid and at the same time try to ensure that we do not contribute to further inflation in the measures to be taken?

Deputy Michael McGrath

I thank Deputy Durkan for his question. We are seeing an increase in inflation. I believe the latest figures from the Central Statistics Office, CSO, put it at 2.8% in the period to August of this year. In a sense, it was an inevitability in the immediate rebound coming out of Covid and the burst of economic activity that we have experienced on foot of the pent-up demand, as many sectors and services were either impaired or fully shut down over the period of Covid. We are now seeing the outcome of all of that play out.

There is also a range of international factors. We are all witnessing the increases in electricity prices and in fuel costs generally. We acknowledge as a Government that this places an obligation on us to take account of that and to respond in the context of the budget, and that is what we will do.

We also acknowledge the comments made by the European Central Bank and its monitoring of inflation across the eurozone. In broad terms, it is fair to say that it believes the current trend is a temporary one. The European Central Bank is monitoring very closely what it regards as the underlying inflation trend across the eurozone because, of course, we have benefited very significantly from the bond purchase programme.

The exceptional interventions of the European Central Bank in the markets have helped to keep borrowing costs low for Ireland over the past 18 months or so. Undoubtedly, that is what has helped us to fund the additional spending on services and on income support for households, businesses, etc. We equally acknowledge that this will not continue forever. The European Central Bank will keep a very close eye on inflationary pressures across the eurozone and will stand ready over the course of next year to adjust its policies accordingly.

From our perspective, we see recovery taking hold in Ireland over the period ahead through a number of means. We will have a really ambitious public capital investment programme and will be spending approximately €11 billion next year on that capital programme, in health, in education, in housing, in transport and in climate action measures to name but a few. We will spend up to €50 billion of direct Exchequer capital over the next four years, from 2022 to 2025.

There is, of course, risk in the way in which we will taper off and gradually unwind the Covid supports. There may well be businesses that are surviving by virtue of those supports. The removal of those supports over time may well raise fundamental questions for some of those businesses but that day will have to be faced at some point in time because these supports cannot continue indefinitely.

Overall, we recognise that there is a strong rebound under way. We anticipate that this will transition to a strong recovery. The fiscal advisory council has, I understand, endorsed the latest economic forecasts that have been made by the Department of Finance and those will be published imminently. There are strong grounds for optimism that both in terms of foreign direct investment and in the domestic economy, the recovery is sustainable. We face challenges for sure, but the Government is determined to work its way through them and to help the recovery through its investment and through its supports and by not prematurely or abruptly ending the supports that are such a vital lifeline for so many businesses around the country.

Deputy Bernard J. Durkan

I thank the Minister. Given the expenditure levels across Europe, particularly in the eurozone, and the indications of inflation and the need for a full recovery from Covid, can I further inquire as to the possibility of there being a contradiction in the actions required? Are we as well placed as anybody else in the eurozone or throughout the European Union in relation to borrowing requirements for capital purposes, bearing in mind that extended borrowing cannot last for ever, particularly for current purposes?

Deputy Michael McGrath

I thank the Deputy. That is absolutely correct. That is a key part of the strategy for the public finances that we brought forward in the summer economic statement. As the Deputy will be aware, our intention is that, by 2023, we will only be borrowing for the public capital investment programme. In fact, some of the public capital investment programme will be funded by revenues that the State is collecting. We believe that by managing the public finances in this way and by having an investment-led approach to securing recovery, we can help the Irish economy in its different sectors to recover and reduce the deficit gradually over time. For example, we anticipate that, by 2023, the deficit will be less than 2% of GDP. For us, that is very significant progress.

We are looking at the overall trends in terms of foreign direct investment. The pipeline is healthy. We continue to see welcome and significant announcements of new jobs coming to Ireland and, indeed, expansions by multinationals that are already here. That has a very positive spin-off effect for the wider ecosystem in the enterprise sector in Ireland and for SMEs here which support and provide services to the foreign direct investment, FDI, sector. We are conscious that many of the domestic sectors are the ones that suffered the most, including in tourism, hospitality and retail and those are the sectors that will require careful attention and support from Government over the period ahead. By implementing the economic recovery plan and through the measures that we intend to bring forward in the budget, it is about striking the right balance.

We believe that overall, the outlook for the Irish economy is quite positive. We need to be sensible in the way we manage the finances. That means reducing the deficit over time. We have the plan now to do that and it is really just about implementing it over the period ahead.

Deputy Bernard J. Durkan

Have I time for another question?

Chairman

You have just under a minute.

Deputy Bernard J. Durkan

I will try to perform that task in a minute. To what extent will the Minister be relying on economic growth to bring about a reduction, by proportion, in borrowing relative to GDP?

Deputy Michael McGrath

I thank the Deputy. That is a really good question. In general terms, the real relevance of the measure of national debt is debt expressed as a percentage of national income. For Ireland, we have two key measures of debt, the first being as a percentage of GDP and the second being as a percentage of GNI*. Of course, the debt looks a lot more healthy as a percentage of GDP than it does as a percentage of GNI*. However, we need to get it on a downward trajectory. We believe that we will do that, primarily through growth in the Irish economy. I refer to all of the international forecasts that we are working to, from the OECD and the European Commission, which are complemented by domestic forecasts.

They point to a level of confidence that Ireland as a small open trading economy, which is well positioned to benefit from a recovery in the international economy, will see continued growth over the coming years. It makes it all the more important that in the coming years, we stop adding to the national debt. It will hit €250 billion next year. By 2025 it will hit €280 billion. Coming into Covid it was approximately €200 billion. This will represent an €80 billion increase in the national debt over the course of a five-year period. This is a reality we cannot escape. This is why our plan on the public finances is to close the budget deficit in order that we stop adding to the national debt and then that we grow the economy over the next number of years so the debt relative to the size of the economy shrinks. These are the twin strategies we have to pursue to make sure our debt is sustainable in the medium and long term.

Deputy Richard Boyd Barrett

On the reward for essential and front-line workers and for people generally who sacrificed during Covid, I very much welcome this conversation. It has become controversial. It may be somewhat difficult for the Minister but it is very good that we are having a difficult and controversial conversation. Many people went unacknowledged and unrecognised for a long time as to the importance of the work they did to keep our society going. Generally, the right approach in terms of the immediate recompense is the engagement with the various groups that the Minister is now speaking about. Obviously, there are different groups of workers, whether they be front-line health workers, most importantly, but also public transport workers, local authority workers, retail workers and carers. They all had different experiences, played different roles and had different difficulties and challenges. We need to talk to them.

I will give an example in which I was particularly involved which demonstrates something about how we need to listen to people on the ground. This is the case of Dublin Bus workers. After all they did for us during Covid, a proposal was put by the NTA and the company that would fundamentally attack their conditions of employment and lead them to work much longer hours. Somebody dreamt up a plan for how to reconfigure Dublin Bus services which in the process would destroy the quality of life of the drivers. They give a resounding "No" to that. This is an example of how we have to listen to workers on the ground to see what their experiences are.

Beyond the immediate reward, what many people out there are looking for, whether they were on the front line or just sacrificed terribly because they could not work, is longer-term recognition of their importance, which has sometimes been undervalued. The arts and music sector is an obvious area. There are many others. In many cases our supermarket workers are chronically low paid. They suffer precarity and the issue of low pay more generally. I would be interested to see whether these types of recognition are part of the longer-term lessons we learned, as well as the short term.

I would add to the Minister's consideration that some people who were under-recognised did a huge amount for us and sacrificed a lot for us and lost out in one shape or form during the pandemic. Others did very well. Some sectors of our economy saw profits go through the roof. I wonder in the context of the budget should there not be serious consideration given, as some countries have done, to a Covid solidarity tax on those who did very well. I ask the Minister to comment on this.

On the health service, perhaps the Minister could be a bit more specific about the lessons he has learned on the increased areas of expenditure he is considering. We know our ICU levels were some of the worst as a proportion of population in Europe entering Covid. Will we rectify this and get to the previously recommended levels? At least we should get up to the EU average. So we do not just respond in an emergency way and are desperately clambering, will we get our public health teams up to the levels they should be at so there are permanent increases in capacity? All of these were recommended pre-Covid but in some cases we learned to our cost what the cost can be if we do not have the capacity when we hit an emergency. Perhaps the Minister will say a little bit more about what the permanent areas of increased expenditure to deliver increased capacity in health will be.

I ask the Minister to clarify some matters on housing. The figure of €4 billion per annum over the course of Housing for All is being bandied around. Is this direct Exchequer funding? Can we have a little bit more detail on what this €4 billion is and where it is coming from? Is it €4 billion additional or is it €4 billion in total to the Department? What I want to know is how much of it is directly going into the direct construction by local authorities and approved housing bodies of new public and affordable housing. How much of it will continue in the rental accommodation scheme, the housing assistance payment, leasing or other expenditure that is not about directly delivering housing? Perhaps the Minister will say a few words about that.

A lot of borrowing is being done. It was justified to borrow to meet the challenges we faced. There is a danger in borrowing because it has to be paid back. We have always argued, as the Minister knows, that we should think more about taxing increased contributions in the area of profits, financial transactions and employers' PRSI in order that we increase our revenue but not at the expense of ordinary working people who suffered so much during this period. Has the Minister drawn conclusions about needing to rebalance our tax system in this way, and making corporations, the very wealthy and financial services pay a bigger contribution in tax rather than having to rely on very high levels of borrowing?

Deputy Michael McGrath

I thank Deputy Boyd Barrett. There is much to cover there and I will be as brief as I can but as helpful as I possibly can. The Deputy is right to point out that in coming to an appropriate answer on the question of recognition it is not about the Government having a conversation with itself. We do not have all the wisdom on this issue. Our country's approach to Covid was characterised by a collective effort and incredible solidarity by and large throughout the country. This is a complex and difficult issue. We recognise there is a need for special recognition to be given for the efforts of so many people. No one could dispute that front-line healthcare workers are at the very top of that tree in terms of the exposure and work they did. Others did an awful lot too and went above and beyond. It is challenging and complex. We need to come up with an answer and we will do this in a collaborative way. We have a Labour Employer Economic Forum, LEEF, process. It is a very suitable forum for us to discuss the issue in an open and honest way with trade union representatives and employer bodies.

The Deputy touched on carers. This is the point I made last week. Many carers had to carry an enormous burden over the course of the pandemic when disability services stopped and were shut down overnight on public health grounds. Carers had to provide 24-7 care. Many of them will point out they do this in normal times anyway but a far greater number of them had to carry this. How do we compensate and acknowledge their efforts?

It is impossible. We cannot put a value on it, and that is the truth. The long-term legacy is better public services generally, and that is certainly something I and my party strongly believe in.

On the issue of working conditions and the issue of having a genuine appreciation for the role of people in society on whom we really rely, I believe we understood that in a very clear way over the course of the 18 months. The Deputy mentioned a number of those sectors. That whole agenda is one the Government is committed to, and we will make progress in regard to low pay, working conditions generally and providing as much support and opportunity as possible for people.

In regard to health, the additional spending, both last year and into the future, is first and foremost to build up the permanent capacity of the public health service. Last year, for example, the funding we provided was sufficient to increase the number of acute beds in our hospital system by more than 1,100 in a single year, which was a very significant step. It will not be fully met in delivery but it will be largely met, and the outturn will go a long way towards that. The funding that was provided for that last year will be considered as part of the Estimates process. If they were not able to spend it this year, the intention would be to allow them to keep that funding so they can implement fully next year those reforms we would have discussed and agreed last year.

Beds is one issue and the Deputy mentioned critical care capacity. That has to be a learning from Covid, if we are to be honest with ourselves. We did withstand the Covid challenge and the Covid surge, but at a price. No country can take the risk of its public health service being overwhelmed because of capacity issues. The Government is committed to dealing with the capacity issue in acute bed care and critical care capacity over the period ahead. I think we have made very good progress, even in the midst of a global pandemic.

In regard to housing, the specific allocation from the Exchequer to the Department of Housing, Local Government and Heritage will be confirmed on Monday when we publish the new national development plan out to 2030. It is important to acknowledge that housing will be getting very significant increases, which will underpin the delivery of the Housing for All programme. The figure the Deputy mentioned of €4 billion does involve some non-direct Exchequer funding, for example, through the Land Development Agency, but it is public in the broad sense of the word, and it is going towards building homes - social homes, affordable homes and cost rental homes. I think it is fair to put that figure in the total public investment by the State in meeting the challenge of Housing for All. The direct Exchequer element of that public contribution will be set out when we publish the national development plan on Monday. It will represent a very large increase in capital spending for the Department of Housing, Local Government and Heritage over the next number of years.

Deputy Michael Healy-Rae

I thank the Minister sincerely for his excellent presentation. One of the biggest and most topical financial issues for many workers these days is the issue the Minister touched on and which we will call the recognition of the work done by certain workers in certain sectors of society during the pandemic crisis. I would be acutely aware of the fact we do not have a blank cheque for this. It is not a matter where we can do whatever we like or give whatever people want. I have heard people from the left standing up in the Dáil and, to be blunt about it, saying things that sound great to the public and that sound marvellous. At the end of the day, however, I live in the real world of economics where it is like a business. It has to make money, it has to be able to pay its debts and we have to be able to look after sick and vulnerable people, which is absolutely right. We want to recognise work but we have to do so in a prudent way that the State can afford.

I thank the Minister personally for the effort that he and the other Ministers made during the pandemic. I know for a fact there are businesses open today that would not have been able to stay open only for the supports they received during the crisis. Any politician who would not thank the Minister personally for that or recognise that work would not be doing his or her job properly, in my opinion. Yes, I will be the first person to admit that an awful lot of businesses are struggling post pandemic and coming out of it, and I am sorry to say some will not survive. All I am saying is, only for the efforts of the Minister and others, an awful lot more would have fallen by the wayside. We have to try to evolve as an economy and try to get ourselves up and running slowly, safely and surely, and it will take great guidance and prudence to do so.

Dealing with the whole issue, it is like when a person sets out in a well-meaning way to do something good and it sort of backfires in his or her face. That is the feeling I get with the Government and the issue of recognising the work. No matter what the Government does now, it is going to be 100% wrong. The Government is going to be wrong-sided on this because it is not going to do enough for enough people and, therefore, it is going to be wrong, no matter what it does. What I want to see the Government do is this. Obviously, people working in healthcare put themselves and their families at risk, and we all know 100% that has to be recognised. All I would say to the Government is to try to take everything on board, be balanced and reasonable, and not keep people waiting forever. It is so much in the public domain now that people are expecting the Government to make an announcement in the budget with regard to recognising that, and I would like to see that happen so we can move on from it. Whatever it is going to be, it should be done in the fairest way it can be, but in such a way that we will not be waiting until Christmas for it.

Financially, we are at a juncture in our economic cycle and we really have to recognise work. We have to recognise the contribution of employers. We have to look at people who stand up and speak about employers as if they are an awful type of person. We actually have people in the Dáil who, when they mention the word “employers”, it is like people talking about developers or builders. Over recent days, I met a builder, a very sound man, and I said this on the record of the Dáil yesterday. The reason I did this was because I believe an awful lot of politicians today, if they met a developer or a builder, would nearly be ashamed to say it because it is as though, "Oh my God, I should not be meeting with this person." It is the exact opposite. I think every person in the Dáil should be meeting with developers, builders and people who are in a position, in their minds and in their ability, to turn around and provide us with housing.

The reason I met this man is because he is a sound man who is a builder in Kerry for many years. The one thing he was talking to me about, which is something I am very interested in, is the provision of one-bed accommodations. He was talking about our main town in County Kerry and he said he has the ability to build many houses - accommodations, we will call them - and one-beds in particular, because I told him that is what we need. I told him I am continually raising it with the Government. What I would like to see him do is build them at an affordable rate and then the voluntary housing agencies, the local authority and all those types of groups would be able to purchase them at affordable money. That man, and more luck to him, would make a profit and his company would make a profit, and he would then be able move on to the next job.

My goodness, is that not what we want? I hear politicians standing up in the Dáil to talk about these types of people profiteering from the housing sector and all of this type of rubbish. That is why we have a housing crisis. It is because we are not encouraging that type of work and we are not encouraging that type of person to carry on with their building companies. We have lost many good builders over the years and they would not go near it now because they hear themselves and their industry being ridiculed continually in the Dáil by people who never did a day's work in their lives themselves. It is about time they were told that. They are very lucky they are in Dáil Éireann because, if they were not in the Dáil, they would not manage to make a living driving a digger, with a shovel or mixing cement, or trying to buy a field or borrow money from the bank, because they would not have the ability.

They would be put out of the bank if they were seen going in because they are not wanted there. We need more of those types of people in Ireland to help resolve our housing crisis. I would love to see a queue of Deputies coming into the House on a Tuesday morning saying they had met a developer in their area, a building contractor or a landowner who wants land to be zoned because he wants to sell it for a profit in order that houses can be built on it.

The State will not be able to do it itself. I am not condemning the Government or its two predecessors. History will tell us that governments are not able to provide all the housing that is needed. The private sector is needed and we need those people who have the ability to borrow money, buy land, get it zoned, build houses and make them available at an affordable price. As I said, there seems to be an awful mentality now as though builders have leprosy and people have to run away from them because they do not want to be seen with them; if people had their picture taken with a developer, they should nearly hang their in shame. That type of nonsense has to stop.

I would love a Government to come out and say it wants to encourage these people to be involved and to say it wants the employers who create one or two jobs for themselves, their family or their neighbours, because they are the backbone of Ireland. It is like the farmers who create work for themselves on their farm, and perhaps when they have jobs to be done, they hire their neighbours. There are Deputies who are lucky they are politicians because they would not want to try to do anything else. It is as though they have a hatred for work. I recall hearing one day that on one of the largest construction projects in Ireland, three people had been infected with Covid, and a politician stood up and said the 5,000 or 6,000 other people should all be sent home indefinitely and given €350 a week to stay at home. He wanted to shut down the job because three people had got the virus. The reason he did was he thought they would be better off at home twiddling their thumbs than working.

We have to bring a strong worth ethic back to Dáil Éireann and not listen to the fellas with their backsides coming out through their trousers who do not know the first thing in the world about work. They could not create a job for themselves or anyone else. We need to get down to brass tacks and start supporting that type of an economy. I call on the Minister, the Minister for Finance and the wider Government to really encourage work-----

Chairman

I am afraid the Deputy is out of time.

Deputy Michael Healy-Rae

Perhaps it is as well that I am.

Chairman

Would the Minister like to respond?

Deputy Michael McGrath

I will, briefly. It will be difficult to respond because that was a comprehensive tour de force by the Deputy, although I thank him for his comments. I acknowledge what he said about the recognition issue. We will seek to deal with that as quickly as possible but I do not envisage it will be a budget day issue. We need proper engagement with trade unions and employer bodies to come up with a considered response to this issue. Otherwise, we run the risk of significant divisions in society on the back of it. I look at the email traffic coming into my consistency office, as I am sure the Deputy too does every day, and many people are expressing a view on this issue. It is fair to say there is not a consensus but rather a wide set of views on the matter. That is not a reason to address it, which we will do, but we need to give it careful consideration.

I worked in the private sector and I think I have a good understanding of how our economy and our society work. When I listen to all the demands in the House every day for additional public spending, I know those demands can only be met, in part, if we generate the revenues in our economy to pay for them. We are dependent on taxation revenues being generated by a strong, enterprise-based economy. That is what gives us the funding to have good public services and a decent society underpinned by those services. I understand that and it is why I have no hesitation in engaging directly with employers, for whom I have great respect. The sacrifices many of them make are extraordinary. They take very significant risks, in many instances putting their personal home on the line, as the Deputy well knows, in order to take on debt to invest in their business and not all the businesses work. Many of them fail and people are left with major legacy issues as a result. I have tried to help people in all sorts of circumstances where they gave it a go. We should encourage people to give it a go. We want an entrepreneurial culture in Ireland and I think we have one. We just need to ensure the State does not get in the way but is there to help people and support them. That is the perspective I bring to being in government.

My Department works closely with the construction industry. We have a construction sector group, for example, which meets regularly and involves officials in my Department and also those representing the industry and the professions. It is about listening to them and coming up with solutions. I have never built a house, so I of course listen to people who have built houses and know what the issues are in getting that work done. We in the Dáil are not going to build any houses; we will build them by providing support to local authorities and approved housing bodies and by providing support to, and enabling infrastructure for, the private sector. There is much talk about building houses but very little talk about putting in place the water, the wastewater infrastructure and the other services needed to build homes. That is an important aspect.

The Deputy raised a fundamental question about getting more people with direct private sector experience into politics. There are some but more are needed, as is more mobility into and out of politics. We need people to come into politics with life experience and a full career behind them of getting things done in the private sector and who are willing to offer themselves in the interests of public service. I want to see more of that rather than less, and that is a challenge for all of us. Perhaps it is about the way we do politics and the challenges involved in being in public life now that some people simply would not tolerate.

Deputy Seán Canney

I thank the Minister for his time. As a politician who worked in construction for more than 30 years, I have a good idea of how to build a house and how to work in construction. To return to the point about investment in housing, many young people nowadays cannot afford to buy or build a house because the standards and conditions under which people now have to build them have gone beyond affordability. We are investing large sums in housing, whether in the form of housing delivered socially or through the affordable housing schemes, and I recognise the idea is to try to have housing for all. There are some fundamentals, however, that are not correct, and when we are spending all this money, little details get lost. One such detail I come across all the time relates to county development plans or local area plans. We zone lands for residential purposes without knowing whether it will ever become available in the lifetime of the plan because we do it as a desktop exercise. We zone land-locked land for residential use. We zone lands that can never be sold, for a plethora of reasons beyond anybody's control. We do not compulsory purchase order, CPO, lands we zone, and I do not think we should. More due diligence needs to be carried out in forward planning to ensure that whatever areas we zone are available. Otherwise, we are just creating a scarce resource, that is, land ready for development.

This issue has not been tackled. I have spoken to the Planning Regulator and the Minister for Housing, Local Government and Heritage about it. It needs to be cracked on with. If we are zoning land and saying houses should be built in a certain area, the first question should be whether they can be built there.

There is another issue around housing. The national development plan is going to be published on Monday. It is going to involve large figures, billions of euro of taxpayers' money and money we have borrowed, to try to provide housing and all the other infrastructure we require and want. The big risk is that public works contracts are cumbersome to deliver. We can spend seven, eight or nine years without getting a digger on site or getting a builder in. The planning processes and approvals can take that length of time. Money will be announced in the budget but I believe we should be cherry-picking projects that are shovel-ready. That should be an immediate target for every local authority and public sector body, including the Office of Public Works. Those bodies should pick out projects that are ready to go because what is happening is that we make announcements and do not see anything happening on the ground for five, six or seven years. We have seen that is the case with flood relief schemes and all of those types of things.

Youth employment is a big issue. How do we get the youth back into work? How do we make work pay? That is another area of expenditure where we must create a difference between not working and working through the benefits that accrue to working.

Deputy Michael Healy-Rae was talking about building contractors. We have an amount of public sector works to which builders have signed up in the past five, six, seven or eight months. The contracts were based and priced on a particular set of circumstances that have now completely changed. People have entered into contracts and have found, before they go far into the project, that it is going to cost a hell of a lot more. The contracts at the moment are fixed price, with no price variation for increases in the cost of labour or materials. If we expect builders and contractors, as distinct from developers, to remain in business, we must tackle this issue head on. The Office of Public Procurement must deal with this issue as a matter of urgency. Many projects are at risk of closing down because people cannot afford to build them because of the increases and inflation that is there. We need to deal with that urgently and I would like to hear the Minister's comments in that respect.

Moving to infrastructure, the Minister mentioned the servicing of sites, water and wastewater. Irish Water is totally underfunded. It has been constantly fire-fighting since it was brought into being. It is dealing with risk and trying to solve the risk of pollution and whatever else. There are many towns and villages across the country that do not have wastewater treatment. Houses cannot be built in those places even though they may be growth centres for the main cities. That infrastructure is just not there and there does not seem to be any plan for when the provision of that infrastructure might happen. I know there is talk about funding becoming available under such a scheme. If Irish Water is to do its job properly, it needs to be funded properly in order to carry out all the remedial works that are required, as well as other works that need to be progressed if we are to build houses. I ask the Minister for his comments on what I have said and, if I have a minute or two at the end, I will come in again.

Deputy Michael McGrath

I thank the Deputy for his comments and questions. His experience of working in construction comes through in the nature of his questions and the contributions he makes in the Oireachtas, and I acknowledge that. Of course, when local authorities zone land for residential development, the whole purpose is for those sites to actually be developed. There is little point in zoning new lands for development if there is little prospect of them actually coming to the market and being built upon. I accept the Deputy's point on the need for proper due diligence because zoning additional land for the sake of it serves no purpose. It may, in fact, serve to deny the possibility of zoning another site with some prospect of being delivered to the market. There are constraints within the national planning framework. The Planning Regulator will take account of the amount of zoned land in each area so there is little point in having land zoned that is not going to be brought to the market for construction or developed. Councils have the power to dezone land. That is one of the functions that remains with the elected members and it is one that I know some councils implement. It is an important tool for them. As the Deputy knows, there is provision within the Housing for All strategy for the taxation of zoned land that is not being used. That is an issue on which the Minister for Finance and the Minister for Housing, Local Government and Heritage are currently working.

I absolutely acknowledge the pressures that are there at the moment for first-time buyers and others who are looking to buy their own homes. I remember, as a young lad growing up, we lived in a local authority house and there was a great scheme at that time in the 1980s whereby if a family was in a position to relinquish the house back to the local authority, there was a £5,000 grant. My parents bought a small, old cottage in a rural area near to where we were living and moved there. It was a fantastic home. That is a great example of the type of innovation and the type of scheme that we need to support people as they seek to own their own homes or secure rental accommodation from a local authority or an approved housing body.

The Deputy also mentioned the planning system. As he knows, there is a major body of work under way in the Office of the Attorney General, for which the Cabinet gave formal approval on Tuesday, which involves essentially rewriting the whole planning code. That will, I believe, significantly reduce the legal risks that are currently resulting in many successful judicial reviews of essential infrastructure projects. People have a right to object and to go to court and seek judicial review. However, we should have confidence that where a project has come through a comprehensive planning system, it will be upheld and that the planning system is robust and sufficient rigour has been applied to the application. I believe we will secure progress on that issue through the work that is under way in the Office of the Attorney General.

The Deputy raised issues around procurement and I am very much alive to them. They are presenting during live tenders at the moment and we have certainly seen instances where the sponsoring body, the public body, has had to go to the second, third or fourth lowest bidder in order to successfully place a contract. That is because of the inflation in costs that has arisen since the tender was submitted by the contractor. That issue and the issue of the public works contracts and the price variation provisions there, whereby there can be no variation, as the Deputy knows, for the first 30 months, are presenting a challenge. I have met with officials in the Office of Government Procurement and we have gone through the issue in detail. Those officials are currently examining the matter and I have asked them to come back to me with some options as a matter of urgency. I expect them to come back to me shortly with some proposals on those issues.

I do, at the same time, acknowledge that we have a role in protecting the interests of taxpayers. We must ensure that public money is well spent. That will always be a top priority in my Department, as one would expect. We must acknowledge that particular issues are presenting at tendering stage. There are also issues relating to the performance of contracts. Those issues are being examined by the Office of Government Procurement and the chief procurement officer. I expect that I will be going to Cabinet on that matter in the coming weeks.

I agree with the point the Deputy made about employment and that work should pay. It should always be the case that work provides a better financial outcome for somebody than not working.

We are working through any specific issues in our social welfare code that create a disincentive to work. We want to support people to work, even if it is part time, so that they do not end up worse off or lose secondary benefits, which tends to be a key issue in that regard.

I acknowledge the point the Deputy made about Irish Water. I have made progress in my time as Minister to date in significantly increasing Irish Water’s capital funding. I believe its budget this year is of the order of €1.4 billion. I provided additional funding in July last year and for quarter 4 of last year, which we announced on budget day. The Minister for Housing, Local Government and Heritage, Deputy Darragh O’Brien, is determined, as part of the overall settlement we have agreed in the context of the national development plan, to ensure Irish Water is properly funded and has a secure and steady level of public investment in the coming years to allow it to plan the projects to which the Deputy referred. These are not projects that can start within a month of the Government providing the funding. Irish Water needs to know well in advance that funding will be provided for particular schemes, so that it can go through all of the different stages and get them to the point of construction.

Deputy Kieran O'Donnell

I want to go back and forth with the Minister if that is okay with the Chair. The Minister spoke about recognition for the national Covid-19 contribution. Will the Minister elaborate on that? Can we assume the matter will not be decided on budget day but after the budget? When does the Minister expect talks to commence and conclude, so that we get an outcome from this process?

I would like to make a comment on Covid overall. What we have come through is akin to a war, except that it was a virus. Basically, Ireland has been on a war footing for the past two years. It affected everyone in all areas of society. Any recognition measure must be fair. If it is seen by the public as favouring one sector over another, it will not work. I ask the Minister to clarify the position. Whatever talks take place must be inclusive of all sectors of society. This affected everyone, from front-line workers and people who were moved into nursing homes when the pandemic broke out to gardaí and others in a range of areas. There should be a national recognition of Covid-19. When will talks commence? It will not be on budget day. Will it be before the end of the year?

Deputy Michael McGrath

I thank the Deputy for raising this issue, as did a number of his colleagues. As I said earlier, it is a complex and sensitive issue. The Government acknowledges that there is a need to provide appropriate recognition for the incredible efforts by so many people across our society and economy over the past 18 months. We will strive to be as fair as we can. I also acknowledge that people look at the question of fairness through their own lens and perspective and we do not always get a consensus on what is fair. It is the intention that this matter will be dealt with after the budget, so not on budget day, as I said.

The Minister for Finance, Deputy Paschal Donohoe, and I met the Irish Congress of Trade Unions yesterday to discuss ICTU's pre-budget submission. I took the opportunity to raise the issue with ICTU and it is fair to say that it broadly agrees with the approach that there needs to be collaboration and consultation. I mentioned that we have the Labour Employer Economic Forum, which is a good forum in which the Government meets representatives of the employer bodies and trade unions. That is a good forum for us to meet and discuss this issue further. The LEEF will meet in October and the intention is to deal with this matter in the coming weeks. We do not want it to drag on for months and months.

We also have the issue of a Labour Court recommendation in respect of a specific set of claims lodged by the Irish Nurses and Midwives Organisation and other healthcare workers. I am sure the leaders of the relevant unions will demonstrate good faith and allow some time for us to work through the issue in its broader sense.

The Deputy touched on one point that highlights the complexity of all of this. This is the issue of nursing homes where, unfortunately and tragically, many people passed away with Covid-19. The vast majority of our nursing homes are private facilities and the people working in them are not public sector employees. We have to ask what are the tools at the Government's disposal to provide appropriate recognition for people in that category. They were on the front line and at the coalface of dealing with the worst of Covid-19. That highlights the complexity and difficulty with this issue but we will deal with it. We will not shirk from it. There is a need for us to provide special recognition in as fair a manner as we can. The best chance of achieving that outcome is by adopting a collaborative approach with wider society, including trade union representatives and the employer bodies.

Deputy Kieran O'Donnell

Will the Minister give an indication of when he expects an outcome to that process? Will it be the end of October, the end of November or before the end of the year? The public are interested in finding that out.

Deputy Michael McGrath

It needs to be in the coming weeks and certainly before the end of the year. The discussions with the social partners will get under way shortly. We have a budget to complete in the next 12 days or so. We also have the launch of the national development plan. The focus of the Minister for Finance and I over the next 12 days or so will, understandably, be on the budget. That involves an intense set of meetings across Departments and with other stakeholders. That work is ongoing. I want to be able to give this matter proper reflection and consideration and hear the views of others. The intention, therefore, is to address it in the coming weeks. To answer the Deputy’s question as directly as I can, I believe we need to have this matter dealt with before the end of the year.

Deputy Kieran O'Donnell

The summer economic statement referred to a figure of €4.7 billion. When we distil the statement, it provides headroom of €1.5 billion, made up of €1 billion in current expenditure and €500 million in taxes.

Tax receipts for the month of August, post the summer economic statement in July, showed a 25% increase or €866 million in extra taxes. My question to the Minister zones in on the €1 billion in spending. When it comes to budget day, will this figure provide the Minister with extra headroom? Will the €1 billion be used to provide social welfare increases? Will such increases keep pace with the rate of inflation, which was running at 2.8% up to the end of August? Will they cover pensions and other areas of social welfare? These questions are in the context of the additional tax revenue of €866 million in August, which was not provided for in the summer economic statement.

Deputy Michael McGrath

I thank the Deputy who understands these figures very well. To answer his question directly, we will not be using the stronger than expected tax receipts to boost the budget day package. We do not believe that would be an appropriate or prudent thing to do. We will, therefore, stick to the framework we set out in the summer economic statement. As the Deputy noted, that involves an increase in core expenditure of €4.2 billion, of which €1.1 billion will go towards the increase in the public capital investment programme next year. A further €2.1 billion will go towards meeting the existing level of service commitments, demographics, public service pay costs and so on. That leaves around €1 billion for new budget day measures on the expenditure side. That would be coupled with €500 million, which will be available to the Minister for Finance for a tax package.

That is the structure of the budget. We obviously welcome stronger than expected tax receipts. If that leads to a lower than predicted deficit outturn, as set out in the summer economic statement, that is a good thing. However, we certainly should not use this revenue to enhance what is already a strong budget package.

In overall terms, current expenditure growth for next year, as per the summer economic statement, stands at 4.6%, with overall expenditure growth for next year set to be around 5.5% because we are increasing capital spending by close to 12%.

Over the next five years, overall core expenditure growth will average around 5%. We believe that is an appropriate level at which to set expenditure growth and it would be imprudent and unwise to use stronger than expected corporate tax receipts, for example, to boost that expenditure growth further. We will not be doing that.

On the specific measures, they are the subject of live discussion. The Minister for Social Protection, Deputy Humphreys, and I, in particular, are working closely together on the social welfare Vote to ensure we respond in the best way we can to the increase in fuel costs and electricity prices that people are having to live with. In the last two budgets, there were no increases in core weekly social welfare rates but there were packages that were targeted and impactful, in relation to the living alone allowance, the carer's support grant, improvements in the working family payment, qualified child dependent allowances and so on. We did a lot in those budgets to help people who needed it the most. All of that will be taken into account and we look forward to finalising that in the coming days.

Deputy Aindrias Moynihan

I thank the Minister for the overview. I will discuss three areas, namely, essential workers, capital projects and just transition and carbon tax.

The Minister has answered many of the questions on essential workers so I will be brief. It is hugely important to acknowledge the massive effort essential workers put in during the pandemic. It was so big that anything the Government does will only be a token but it is important the acknowledgement is there. Easy options such as the public holiday will not suit everybody, such as supermarket staff who were on the tills without personal protective equipment, PPE, dealing with the public. They will have to stock fresh food and keep shops running over the bank holiday. I am glad the Government is taking an inclusive approach and consulting widely on it. Bringing that to a timely conclusion with appropriate acknowledgement is important.

Spending on key capital projects, whether homes, schools, roads or public transport, is a massive deal. It employs people locally and gives regions a chance to catch up. On capital works like the N22 between Ballincollig and Macroom, trying to make that safer, or the N20 between Cork and Limerick, what is the outlook for such schemes in the short term? It is essential such capital projects advance.

The carbon tax and just transition are big issues for many people. There is increased cost and we are likely to see it again in the budget. The Government is aiming to change people's behaviour with increased costs, but that is easier to do in some sectors than others. Somebody who farms and has to buy diesel has more difficulty transitioning than somebody who is in and out to work and has a public transport option available.

I understand the Government will ring-fence moneys for the just transition and doing works like insulating homes and so on. Currently that is moving really slowly. Look at the way the Sustainable Energy Authority of Ireland, SEAI, is delivering for homes around the country and the level of work it is doing on those homes with the insulation. I am getting an increasing number of calls that people are disappointed with the length of time they are waiting and feel that the level of the works falls short of expectations. What will ensure that, as carbon tax is increased and there is a bigger fund, it will deliver faster and more suitable works for people? What oversight will be there on the likes of SEAI? With the insulation of homes, SEAI pumps cavities but many bungalows built in the 1970s have a concrete strip across the top of the wall which will provide a cold bridge. SEAI would want to pump the cavity and leave a cold bridge outside. It is not delivering what people need and they are having to wait for the service. As more money goes in, expectations will be higher. What checks and balances will be there on SEAI to deliver on the just transition?

Deputy Michael McGrath

I thank the Deputy for his questions and his comments on the recognition issue, which a number of his colleagues also raised. The Deputy raised an important point on the need for remembrance and the fact we tragically lost so many people to Covid-19. It is appropriate that we recognise and remember all those we lost, including those we lost in the last 18 months not due to Covid, who were denied the send-off they otherwise would have got. It has been a difficult 18 months for the whole country. It would be such a shame, having had so much solidarity across society in the last 18 months, if we were to end up with a divisive approach to this issue. I am determined to avoid that and the best way to do that is to consult wider stakeholders, including trade union leaders, employer bodies and civic society. We will do that as a Government and bring forward a proposal because recognition is warranted, justified and will take place. The manner in which the Deputy and other colleagues presented it is the correct way to do it. It is not an easy issue and it is not about a reward or anything like that really. You cannot reward people for the type of work they did and the sacrifices they made but some recognition by the Government is warranted.

I am looking forward to the publication of the national development plan on Monday. I thank the team in my Department, led by Ronnie Downes, the assistant secretary, and the national investment office, who did outstanding work over many months on the review of the plan. It is an exciting, ambitious plan and the Deputy touched on the kernel of it. It is now about the delivery and implementation of this plan. If we implement this plan and the funding is there to do so, it will be transformative in so many parts of the country. We have put balanced regional development at the heart of the new plan.

The Deputy touched on some specific issues, including road projects. While I will not get into individual road projects that may or may not feature in the national development plan, suffice to say there will be road projects in the plan. I acknowledge the great progress being made on the ground with the N22 project, the Macroom-Ballyvourney bypass, which the Deputy, Deputy Michael Healy-Rae and many others have a keen interest in. I am monitoring the progress of that and it is great to see it going so well. The major Dunkettle interchange project is also under way in Cork and progressing well. There will be road projects in the national development plan but the plan needs to be consistent with our climate action obligations. The Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, will bring forward a climate action plan to the Government shortly.

As the Deputy is aware, that involves carbon budgets that need to be implemented if we are to meet our targets of a 51% reduction in greenhouse gas emissions by 2030 and carbon net neutrality by 2050. That is a difficult challenge but it is one to which we must rise, so there will be an emphasis in the new national development plan on public transport, active travel and all forms of sustainable transport. It will, of course, involve investment in road infrastructure, but I wish to set the overall context for the Deputy and colleagues.

As regards the immediate issues raised by increases in the carbon tax, we acknowledge that those increases, which must happen and have already been legislated for by the Oireachtas, pose a challenge for many people across society and for parts of the economy. We will seek to respond to that in our budget presentation. We are conscious of the need to insulate people insofar as we can from the impacts of carbon tax, but also rising electricity and fuel prices. The Minister, Deputy Humphreys, and I will be bringing forward proposals on budget day in that regard.

The Deputy touched on the important issue of the implementation of the retrofitting programme, whether through the warmer homes scheme or the better home energy grants. The current waiting times for those who apply to the warmer homes scheme are too long. We need to do much better. In the budget last year we provided a significant increase in funding for the Sustainable Energy Authority of Ireland, SEAI, and the implementation of schemes such as the warmer homes scheme. I should be fair and acknowledge that Covid-19 had an impact on the ability of contractors to go into homes and get this work done. In addition, there is a shortage of contractors in this space. That is why we are investing more funding in upskilling, training and providing opportunities for people who want to move into the sector. A significant amount of public money will go into this space in the next ten years and we need to make sure we have the capacity to deliver it.

This has been a difficult year. The Department will have a significant underspend on capital, not just because of the impact of Covid on the ability to retrofit homes, but also due to its impact on the national broadband plan. That is an issue on which I and the Minister, Deputy Ryan, are working. We will do everything we can to accelerate the roll-out of the broadband plan. It suffered a setback during Covid-19. The funding is secure for its implementation and I am open to all and any options to accelerate the roll-out of the plan. Covid has certainly underlined the need for connectivity in all parts of Ireland and, with more people now working from home or community hubs and so on, the need for high-speed broadband is imperative for the economy and society.

Chairman

I will try to let members in for a second round. We do not have much time left. While members consider whether they wish to come in for two or three minutes for a second round of questions, I have a few questions, not so much about what is in budget 2022, but more the formation of it. One of the more progressive measures in the budget last year related to areas such as mental health, where a differentiation was made between funding for continuation of services and funding for the development of new services. Obviously, implementing Sharing the Vision is very important in that area. Across the health sphere in particular and in the context of implementing plans such as Sláintecare, it is incredibly useful that a differentiation is being made between keeping up core basic services as they are and the development of new services. Will we see more of that in budget 2022? Is it something the Department wishes to move towards more?

Deputy Michael McGrath

I thank the Chairman for her question. The answer is "Yes". In bringing forward a budget, it is important that we do not just set out the steady state and the overall amounts of money but, rather, actually lay out where the increases are going and what the new initiatives and measures in various areas are that will benefit from that funding, as well as, crucially, how that translates to services that people access and how it translates to where it really matters. As the Chairman acknowledged, the budget last year in the area of mental health was more than €1 billion, with more than €30 million for specific new measures identified by the Minister of State, Deputy Butler, and her team. I am in discussions with the Minister of State on that issue and also with the Minister of State, Deputy Rabbitte, regarding the disability sector. We had a good budget last year for that sector and the Minister of State, Deputy Rabbitte, has made great progress in reducing the waiting lists for assessments of need, for example. I know she is anxious to translate that progress into the provision of therapy services, an issue on which the Chairman has spoken on many occasions. "Yes" is the answer to her question. I want to be able to set out specifically what the country is getting for the extra money that is being provided in various areas.

Chairman

I thank the Minister. That is really useful to know because it makes a significant difference to people working in those services and to non-governmental organisations, NGOs, to be able to see exactly where money will be going. In a similar vein, many people and NGOs often raise with me the usefulness of multi-annual funding in the context of the surety it provides in respect of from where funding is coming, but large-scale projects such as Sláintecare or the development of an ICT system in the health service, for example, require commitments over several years. We have a particularly annualised system of budgeting but, as we move forward with considerable large-scale projects - and we can see the system definitely needs things like ICT upgrades and the implementation of Sláintecare - is that something on which the Minister's Department is working? I know there was resistance in the past to multi-annual funding.

Deputy Michael McGrath

In the context of capital funding, from next Monday when the national development plan will be announced, every Department will have multi-annual funding out to 2025. They will know exactly what they will have each year and that gives them every opportunity to plan the delivery of projects, including in ICT. There is a wide definition of what qualifies as capital expenditure. It includes investment in ICT, for example. That is a key issue.

In addition, as the Chairman is aware, there is flexibility to carry forward underspends in the capital space. For each Vote, a maximum of 10% of the current year capital budget can be carried forward into the following year. More than €700 million was carried forward into 2021 as a result of underspends last year and it is inevitable that there will be underspends this year that will be carried forward to next year. That funding will not be lost back to the central Exchequer.

It is more complex in the context of current funding. When people raise the issue of multi-annual funding commitments, what they really want is a commitment to multi-annual increases in funding. We set out the overall framework in the summer economic statement. Built into that is an increase in core current expenditure of close to 4.75%. As such, there can be a legitimate expectation that there will be increases in expenditure generally, but it has to fall to the Government, budget to budget, to set its priorities and monitor progress on the implementation of the programme for Government. A degree of flexibility is needed because some Departments and projects may be ahead of schedule, while others may get stuck in the system. One needs an ability to make budget day decisions. I am not completely averse to multi-annual and there are certain specific areas where it would be helpful. Several Ministers have raised that directly with me and we are examining it.

Chairman

Excellent work has been done by various Departments in respect of well-being budgeting. Will budget 2022 be a well-being budget?

Deputy Michael McGrath

It will. As the Chairman acknowledged, excellent work is being done across government, including by the Department of An Taoiseach, in respect of well-being budgeting and an overall well-being framework. My Department has made significant progress in respect of non-financial measures generally, whether it be equality budgeting, well-being budgeting or green budgeting. As part of budget 2022, we intend to continue to make progress in that space.

We will be providing relevant metrics and indices to show further progress on well-being.

Deputy Mairéad Farrell

I have three questions that require short answers, as I know other members may wish to contribute. With regard to the summer economic statement, the Minister for Finance appeared before the committee last week and said that he had committed to the budget package remaining the same regardless of tax buoyancy. Can the Minister give the same commitment to the committee that, unless there are additional tax measures that will raise revenue, the budget package will remain the same? Can he confirm that?

Deputy Michael McGrath

Yes, there is no intention to increase the budget package on foot of stronger than expected tax receipts. At this point, we are planning to bring forward a budget that is consistent with the summer economic statement and I do not envisage that changing.

Deputy Mairéad Farrell

Last year there were some changes and I believe it is important for the role of the Committee on Budgetary Oversight that it is made aware of changes. That is good to know. I have two further questions relating to the secretarial assistants' pay claim. Has an offer been made? If it has, when is it to be paid? I am asking just about the pay claim, not pensions.

Deputy Michael McGrath

I will make a quick point on the previous question. Last year, we did not have a summer economic statement or a fiscal framework. We were in truly extraordinary circumstances, so this year I hope the information we have been able to provide to the committee is more meaningful and helpful. We have a degree of more certainty.

With regard to secretarial assistants, is the Deputy referring to secretarial assistants in the Oireachtas?

Deputy Mairéad Farrell

I am referring to the school secretaries.

Deputy Michael McGrath

I thought the Deputy said secretarial assistants.

Deputy Mairéad Farrell

I apologise. I probably did.

Deputy Michael McGrath

That is fine, because there is a live issue there as well.

Deputy Mairéad Farrell

There is, and it is an important one too. The Minister might comment on that as well.

Deputy Michael McGrath

On that issue, there has been engagement between my Department and the Houses of the Oireachtas Commission. The way in which the Houses of the Oireachtas Commission is funded is different from all the other Votes. It is given a three-year budget and that is done by means of an Act of the Oireachtas every three years, so later this year the Oireachtas will have to pass an Act providing for the budget for the commission for the next three years. There are some discussions under way regarding secretarial assistants and pay issues. I cannot go into any more detail than that.

Regarding the school secretaries, I welcome the progress we have made on the pay scale. The trade union called off the industrial action for a short number of weeks to allow the detail of that to be fleshed out. We all have great regard for the work done by school secretaries. This is an issue I was very keen to make progress on when I came into office and if we can implement this, it will be very significant progress. The school secretaries and, indeed, the caretakers will continue to have other issues on which they will seek progress, and we will continue engagement on those. However, getting a pay scale that has public sector equivalence was a key request from them and that has now been achieved. I look forward to seeing that being implemented.

Deputy Mairéad Farrell

For clarity, is that the offer that has been made in respect of the pay scale?

With regard to the Minister's other comment, I found this committee meeting quite helpful. The Minister was quite open and helpful, perhaps even in comparison with last year, so I thank him for that.

Deputy Michael McGrath

Yes, there is agreement in principle, which is probably the best way to describe it. The Department of Education is the primary Department on the employer side. Of course, the Department is not the direct employer of school secretaries so there is the issue that the secretaries are employed directly by schools. Many of them have to sign on during the summer and there is a wide variation in the level of pay, for example, the pay to those who are with education and training boards, ETBs, relative to those not with ETBs. The key issue I believe we have made progress on is a common pay scale that has public sector equivalence to certain clerical officer grades. That was their key request and it has been agreed in principle. There will always be points of detail that have to be ironed out and that is what they are working on now.

Chairman

I do not see any other hands raised so it just remains for me to thank the Minister for his time today. It has been a really useful session for everybody. I also thank Mr. Downes and Mr. Kinnane for their attendance today and for their assistance to the committee. We wish you all well in the next month or two with the budget and all the other issues we discussed today.

The committee's next meeting will be in private session on Thursday, 7 October, at 12.30 p.m.

The select committee adjourned at 11.25 p.m. until 12.20 p.m. on Thursday, 7 October 2021.