Léim ar aghaidh chuig an bpríomhábhar

Committee on Budgetary Oversight díospóireacht -
Thursday, 14 Jul 2022

Summer Economic Statement 2022: Discussion

Apologies have been received from Deputies Nash and Durkan. I wish to highlight to members that we will have a short private session following the public session.

I welcome the Minister for Finance and the Minister for Public Expenditure and Reform and their officials to the meeting to discuss the summer economic statement.

Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the House as regards references witnesses may make to other persons in their evidence. The evidence by witnesses who are physically present or by those who give evidence from within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege. Witnesses giving evidence remotely from a place outside the parliamentary precincts may not benefit from that level of immunity from legal proceedings as a witness physically present might.

Witnesses are 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 relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Members 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, her or it identifiable. I remind members of the constitutional requirements that members must be physically present within the confines of the place where Parliament has chosen to sit, namely, Leinster House, in order 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 parliamentary precincts will be asked to leave the meeting.

I invite the Ministers to make their opening statements.

I thank the members for the opportunity to attend the committee today to discuss the summer economic statement, which sets out the Government's medium-term budgetary strategy and the parameters for budget 2023. I will begin by briefly outlining the economic and budgetary backdrop against which the budget is being prepared.

Budget 2023 is clearly coming at a challenging time for Ireland. A little over two years ago, a pandemic without precedent upended our economy and society. I know we all want to move on from the pandemic and to leave it in the rearview mirror, but we cannot forget the toll it has taken on lives, livelihoods and our national finances. The Government responded, quickly and decisively, to protect households and businesses and to support our healthcare sector. We employed the full range of the resources we had carefully built up to prevent a deep and disastrous recession. This approach worked. At an enormous cost, we protected our economy from long-term damage and set the stage for a robust and broad-based economic recovery, particularly with regard to employment, when the pandemic had been brought under control. Today, there are more people at work in Ireland than ever before in our history. In the depths of the pandemic, when unemployment was at record levels, few could have thought that possible. It is a testament to the success of our budgetary policy that the link between employer and employee was maintained, and that people were able to return to work in such numbers as the recovery took hold.

However, as we are all well aware, the challenges did not end when the pandemic receded. The invasion of Ukraine, and the necessary sanctions that have been imposed, have triggered a further global economic shock. This is most evident in energy and commodity prices. Along with lingering after-effects from the pandemic, headline inflation in Ireland, like most advanced economies, is now running at highs not seen in many decades. In June, inflation rose to 9.6%, the highest level in nearly four decades. People clearly feel the pain, with prices rising in the supermarket, at the petrol pump and elsewhere. Once again, the Government has acted in response to an external economic shock. While it is beyond the ability of any Government to fully offset the impact of inflation that is driven by global pressures, we have provided €2.4 billion in direct relief to help ease the burden. I note that measures have been particularly focused on assisting the most vulnerable. Analysis of the distributional impact of these measures show that they are progressive, with the gains in disposable income most keenly felt by those in the lower income deciles. For example, the Economic Insights - Spring 2022 document published by the Department of Finance in April 2022 shows that all households are expected to see increases in their weekly equivalised disposable income, with those in the lowest three income deciles gaining the most. Coming on top of the response to Covid, the Government has made available more than €50 billion in fiscal support over the past two and a half years.

This has taken a further toll on our public finances. The strength of the economic recovery, supported by Government action, has enabled us to make significant progress in restoring our national finances to a healthier position than a year ago, but much remains to be done. At over €230 billion, our level of public debt on a per capita basis is among the highest in the developed world. The economic context is now changing rapidly. As a result of the jump in inflation, the extraordinary monetary support that has been made available over the last few years is now being withdrawn. The cost of borrowing is now rising. The era of low-cost borrowing is, clearly coming to an end. There are now clear indications that momentum in the global economy is slowing and this is the case in Ireland too. Furthermore, it is fair to say that the risks to the economy which we recognised in the stability programme update, have now begun to show signs of materialising. A chief further risk is the potential for a withdrawal of natural gas supplies from Russia to mainland Europe. While we do not, at present, view this as the most likely development, it clearly constitutes a very real risk nonetheless. It would result in major economic disruption in export markets with severe second-round effects in Ireland.

In these highly uncertain times, with heightened vulnerabilities, managing the public finances in a careful and responsible way is a matter of urgency. The committee will recall that the Government set out its medium-term budgetary strategy in last year's economic statement. In brief, this strategy was aimed at putting our public finances on a sustainable trajectory by limiting core current expenditure growth to the trend growth of the economy. This, of course, was framed in far more benign inflationary circumstances. In recognition of the changed circumstances, we have temporarily amended the expenditure rule for next year only. To protect public services and incomes, core current expenditure will now increase by 6.5% in 2023. For later years, the 5% rule will remain unchanged. I would point out that the Irish Fiscal Advisory Council has endorsed this aggregate fiscal approach. Accordingly therefore, the budget package for next year will be €6.7 billion, comprised of €5.65 billion in additional public expenditure and a tax package of €1.05 billion. The Minister for Public Expenditure and Reform, Deputy McGrath, will provide the committee with more detail on the expenditure package shortly. On the tax package, I note that this is now double the amount allowed for in the original budgetary strategy set out last year. This is in recognition of the need to adjust the parameters for budget 2023 in view of the altered economic context. A focus of the tax package in the budget will be to ensure workers do not move into higher tax bands purely due to inflation. Inappropriately or poorly designed fiscal policy runs the risk of backfiring. It can lead to an increase in inflationary pressures, with budgetary policy itself becoming part of the very problem that we are trying to address.

This leads on to some concluding comments on corporate tax. Taking into account the positive developments in tax revenue to date, an overall budget package of €6.7 billion is consistent with a very modest budgetary surplus for next year. There will of course be those who say we should spend this surplus. What I find remarkable, is that those who call for higher spending, on housing for example, will at the same time object to those same homes being built.

I want to stress that the headline taxation figures present an overly benign picture. Much of the recovery in our public finances is due to the continuing surge in corporate tax receipts – up 53% in the year. To be clear, we welcome these receipts. They reflect well on Ireland as an attractive location for highly profitable multinational firms. As I have warned many times however, these receipts are potentially extremely volatile and cannot be guaranteed at current levels into the future. More than half of our corporate tax yield is now paid by ten large companies. This means a very significant portion of our tax take is subject to the businesses decisions of a small number of taxpayers. The buoyant corporate tax receipts we have experienced over the past several years could be transient, and they do not form a sound basis for building permanent commitments. We cannot repeat other mistakes when temporary revenues were used to finance permanent spending because we know what happens when those revenues disappear. I have therefore asked my officials to examine how much of the current corporation tax yield may be "excess", above what should be expected from the economic fundamentals, and this will be reported in advance of the budget. Identifying this excess will enable us to avoid basing expenditure on unreliable revenues while ensuring Ireland remains a top-tier destination for foreign direct investment.

I will conclude on that point. The Government has no money of its own. It is public money that is hard-earned by the taxpayers of Ireland. We have a duty to be responsible with that money, to make what at times can be difficult choices, to do what we can but to be honest with people that we cannot do everything. The budgetary strategy set out in the summer economic statement meets these objectives. It helps to strike the appropriate balance between supporting those who need help, such as individuals, families, farmers and business owners, while not adding to inflation.

Good morning. I thank the Chair and members of the committee for the invitation to be here today alongside the Minister, Deputy Donohoe. The summer economic statement is a key milestone in our annual budgetary timetable. It sets out the Government’s fiscal and expenditure strategy for the year ahead and provides an outline of the resources that will be available in the context of budget 2023. The economy has emerged from the pandemic in a strong position. The budgetary measures taken by the Government during the pandemic have made an enormous difference to the economy we see today. Unemployment stands at 4.8% and over 2.5 million people are in employment, more than immediately prior to the pandemic. Businesses too have displayed remarkable resilience as critical business supports such as the employment wage subsidy scheme, EWSS, have been unwound. As the Minister, Deputy Donohoe has highlighted however, the backdrop to next year’s budget is an increasingly challenging one. While the economic recovery from the pandemic has been rapid, as can be seen in the labour market, it has also led to a mismatch between demand and supply dynamics. This is putting upward pressure on prices of goods and services. Exacerbated by the war in Ukraine, increased consumer prices mean many households, particularly those on lower incomes, are experiencing difficulties with the rising cost of living. The Government is acutely conscious of the burden this places on the Irish people. The challenging context has added further complexity to the formulation of our fiscal strategy for 2023. In finalising the fiscal and budgetary parameters for the budget, we have sought to strike a balance between helping to mitigate cost-of-living pressures and ensuring sustainability of the public finances. Overall policy must be responsive. We are aiming to design a budgetary package to protect the most vulnerable in society and those on middle incomes while also ensuring measures do not add to pre-existing inflationary pressures. In recognition of cost-of-living pressures, budget 2022 set out a €1.2 billion package of expenditure measures to support citizens across a range of sectors. Some headline measures included increases in weekly social protection payments as well as the fuel allowance and working family payment; health affordability measures; social and affordable housing funding; and enhanced student and childcare supports. On the taxation side, which the Minister, Deputy Donohoe, has referred to, budget 2022 had a substantial almost €600 million income tax package that increased the standard rate band and income tax credits. In response to the evolving situation during the first half of this year, more than €0.5 billion in additional expenditure measures have been introduced so far this year. This included the €200 electricity credit, further lump-sum fuel allowance payments and the back-to-school package announced just last week. In addition, a number of exceptional taxation interventions were made.

While public expenditure responses cannot be deployed at the scale that would be needed to fully compensate for all cost increases, the Government has committed and will continue to provide significant resources to mitigate cost-of-living pressures by assisting those most impacted by energy price inflation and those most vulnerable to price increases. This commitment has framed our preparations for the summer economic statement. Last year, the medium-term expenditure strategy set out the dual objective of delivering sustainable expenditure over the medium-term through setting core expenditure growth rate at sustainable levels and providing ongoing improvements in public services. Our strategy must be responsive to the emerging economic landscape and take account of the exceptional and externally driven nature of the economic shocks we have endured.

It is clear that in order to protect the real value of public services, a short-term adjustment to the strategy is required.

  In framing the summer economic statement, SES, and budget 2023 parameters, we are seeking to balance the need to protect public services without feeding further inflationary pressures. While Government cannot absorb the full impact of the current inflationary shock, we can and will take concrete action to support households, protect public services and invest in our critical public infrastructure.

As set out by the Minister for Finance, Deputy Donohoe, this upward adjustment will result in an increased overall budgetary package of €6.7 billion, of which almost €5.7 billion will be in the form of additional expenditure and just over €1 billion for taxation measures. This package will see core spending increase by 6% this year and 6.5% next year. It reflects the availability of an additional €1.7 billion in resources compared with the level set out in the stability programme update last April.

In terms of expenditure, a total expenditure ceiling of €90.3 billion will be set for next year to accommodate a range of different priorities, through core and non-core expenditure. In 2023, €85.8 billion of core expenditure will be available to provide for both ongoing costs of current service provision and additional public investment. Approximately 3% of the core current expenditure base will be available to meet existing levels of service costs in 2023 compared with the current year. This includes continued investment in the public sector workforce as the delivery mechanism for a wide range of critical services, as set out in Building Momentum; funding for demographic developments, including supporting a growing population and its changing profile; and the full year impact of measures from budget 2022, which are being implemented on a phased basis.

 There will be a €0.8 billion increase in capital expenditure. Overall core capital investment will reach some €11.7 billion in 2023, with an additional €0.2 billion as part of the national recovery and resilience plan. This represents an increase of 7%, which is in line with the National Development Plan 2021-2030. This funding will provide for key investment across sectors, including housing, healthcare, education and transport while investing in our climate goals. There is also likely to be a carryover from any unspent element of the capital budget this year.

A sum of €2.7 billion will be available for new expenditure measures of which approximately €400 million will take effect in the current year. This overall envelope of funding must accommodate priorities across a wide range of policy areas including: the public service pay bill, which is a significant driver of current expenditure and amounts to close to a third of core current spending each year; spending on social protection, which accounts for around another third of core current spending; and Government commitments regarding housing, climate action and healthcare. I would also note that separately a number of one-off measures for implementation in 2022 are being developed by my Department in partnership with colleagues across Government. An announcement on this will be made on budget day.

While the resources that are being made available are significant and will have a considerable impact, prioritisation will be required given the significant level of competing demands on public expenditure. As is always the case, resources are limited and we must prioritise.

In 2023, Government will provide €4.5 billion in non-core expenditure for temporary measures. This follows on from the €7.5 billion in non-core expenditure provided for in the current year. This approach to expenditure management has proved critical in recent years to helping Government respond to the numerous external shocks. The 2023 funding will provide for the continuation of key Covid supports in certain sectors, the provision of supports to help counter the negative impacts of Brexit through the Brexit adjustment reserve fund, and key humanitarian supports for refugees arriving from Ukraine.

As I noted earlier, the 6.5% increase in core expenditure for next years must accommodate a range of priorities . It also means ensuring that spending delivers sustainable improvements in public services and infrastructure. This will require decisions to be made across Government and prioritisation of demands. A range of expenditure reforms have a role to play in supporting this process and ensure spending delivers efficiency, effectiveness and value for money. These reforms include the spending review process; performance budgeting; and the use of Irish Government Economic and Evaluation Service, IGEES, resources across the system to provide important information and critical insights to inform decisions. In that context, my Department will publish the mid-year expenditure report later this month. This is an important document that sets out a clear and detailed view of the baseline expenditure position in advance of the upcoming Estimates process. I hope that it will be of benefit to the committee as well as part of its whole-of-year engagement on budgetary issues.

To conclude, while we are undoubtedly in a very challenging situation we have seen considerable improvements in the State's overall fiscal position. This allowed us and will continue to allow us to respond to these challenges in a fiscally sustainable manner thus protecting public services, improving outcomes and investing in our future. I thank the Cathaoirleach for the opportunity to address the committee and I look forward to answering questions.

Go raibh míle maith agat, a Aire. I will open the discussion up to members following our usual speaking rota and we will start with an Teachta Doherty.

Cuirím fáilte roimh an Aire os comhair an choiste. Economic statements are produced every year and every year we are told by the Minister the way this is going to be and then rabbits are pulled out of the hat on budget day, which we have been promised will not happen. Is the budget strategy that has been outlined in the summer economic statement going to be the one that is delivered on budget day?

Was the budget strategy that was delivered for the last two years the same as the one outlined in the summer economic statements in terms of numbers and expenditure?

We were in an atmosphere, as I am sure the Deputy will know, of grappling with the global effects of a pandemic. That meant that we had to put in place extraordinary measures at different points to help us protect our economic and society. The core spending plans that we announced, particularly in last year's budget, were consistent with the expenditure benchmark that the Government had announced.

That is fine if the Minister is saying that that is what will be delivered on budget day. On the existing levels of service, ELS, costs, the Irish Fiscal Advisory Council has been critical of the amounts that have been identified in the stability programme update, SPU, and again in the summer economic statement. IFAC has said that they are not realistic given the levels of inflation that we are seeing. So there is a €2.2 billion allocation or a crude 3% of core expenditure, which would have probably satisfied in previous years as inflation was quite linear. Given what we are seeing now surely that number needs to be revised upwards?

It is a rule, which we adopted last year, to provide some certainty regarding the provision for ELS, which the Deputy will know comprises a number of elements, pre-existing commitments, demographic pressures, other pressures, known public service pay commitments and so on. Last year, the actual requirement, when the numbers were finally run, ended up being less than that and was closer to 2.5% so amounted to €1.6 billion. The Deputy is correct to say that the current inflationary environment will have an impact. That is why the assessment by my officials, and certainly at this point, is that the 3% we are providing and €2.2 billion will be needed. We do believe that the sum is adequate but we do not believe that we will be able to give some of that funding back for other measures.

So there will be no savings this year.

That is the assessment at this time.

Is it likely that ELS may have to dip into the unallocated €2.7 billion at this stage? I ask even though I know that it is early.

We do not believe so. As we have said, we are seeking to agree a new public service pay deal and I have been clear in reply to parliamentary questions, announcements, etc. that the cost of a new deal and any additional commitments beyond Building Momentum will have to come out of the overall package of around €2.7 billion. So that point is accepted. Obviously one must consider, as the Deputy will do on budget day, what we are going to do about the core budget for 2023, and what we will decide to do in September regarding one-off measures. To answer the Deputy's question directly, it is certainly our assessment at this time that 3% and €2.2 billion is about right but we will validate all of that in the coming weeks as we go into the details.

That is fair enough. I just wanted to get the ministerial assessment and that of the Department as to where we are at this point in time, and that is a wee bit at odds with the stance of IFAC. Obviously we will know better as we get closer to budget day.

I wish to pick up on the point made about a new public pay deal. We know that under the existing ELS the existing pay deals and increments that have been agreed will come out of that package.

The discussions that are under way on a new pay deal will have to come out of the €2.7 billion unallocated resources that the public is now familiar with. The unions have rejected what has been put on the table until now and that is their right. Hypothetically if that package and offer were to be agreed what would be the impact in 2022, if any, and, more important, in 2023? How much of the €2.7 billion would it erode?

There is no agreement at this point so there is no basis for answering the question. We hope to re-engage and there are ongoing contacts with the Workplace Relations Commission. It will advise us of its opinion as to whether there is a basis to re-engage formally. This is certainly our objective. Securing an agreement would help to bring industrial peace and give certainty about approximately one third of our current expenditure pay bill. It is the case that whatever is agreed, and I hope an agreement can be reached, will come out of the overall envelope of approximately €2.7 billion. As I have said in recent weeks, we have identified approximately €400 million for early implementation measures in the current year. This could be a combination of changes in public service pay in the current year and any decision the Government might make to implement immediately changes on the core permanent side of expenditure, such as happened with the fuel allowance last year. The envelope is the envelope and I want to be clear on that. The cost of any public service pay bill and all of the other Government priorities in the budget will have to be met from within that overall amount.

I understand. We know it is likely that a pay deal will be struck. Will the Minister give us an indication of how much of the pie will be taken up by the pay deal? Is it not the case that the rejected pay deal on offer had a total value of €1.1 billion? Was this not the overall package on offer? The 2023 figure was less than that because some of the increments were later in the year. Do the officials have the figure of how much the 2.5% increase would have amounted to? It would allow the committee to say that if a pay deal is in excess of this it would cost more than the figure that was on offer.

I will not get into the detail of where the negotiations finished off-----

I am not asking the Minister to do so.

-----or where they might end up.

I am not asking the Minister to do that.

The figures he mentioned would be across a number of years and would not all be in the current year. Next year, as the Deputy acknowledged, there will be a spillover effect into 2024 when the full effect of any changes-----

Is the 2023 figure €700 million?

I will not confirm the split between the different years-----

-----in a negotiation that did not conclude. The unions have spoken publicly about figures. I have responded to this in broad terms but not in specific terms on the overall cost. The Deputy can work out the maths. In broad terms a 1% increase in public service pay is approximately €250 million. If we add in the knock-on costs for pension entitlements it is an additional €20 million to €30 million. Of course this is based on a full year impact of 1%. As always, when it comes to negotiating a pay deal there is a certain phasing in. Various increases kick in at various times of the year. It all depends on the formula and where it lands in the end. The Deputy can work out what is the fiscal impact of a deal.

Working on this basis it would be fair enough to look at the pay deal on offer even though it has been rejected. The 2023 impact would have been approximately €700 million, with another €400 million in 2024 as other increments and the full year effects kicked in.

I will not go into detail but there would have been an impact in 2022, 2023 and 2024. The cost would have been spread. There was no agreement so we have to pick up negotiations and try to achieve an agreement, which will be difficult.

If I table a parliamentary question asking the Minister for these figures if a pay deal kicked in for the public sector as proposed on certain dates would he answer the question?

I always answer questions-----

You are not answering them today.

-----to the best of my ability. I will not get into it-----

Okay, I will move on.

-----because the negotiations did not conclude-----

I know they did not conclude.

-----including on the question of the actual-----

We are trying to get an indication of the impact of what was on offer and, I presume, is still on offer from the Department and the impact it would have on the budget for 2023. This is all we are trying to do.

I understand that.

We are not trying to sneakily find out-----

I will always answer parliamentary questions as openly as I possibly can. The truth is that negotiations did not get to the point where specific dates for various increases were being discussed or agreed. Of course this has a direct impact on the spread of the overall cost in three calendar years. I do not want to mislead the Deputy or the committee. If he tables a question we will answer it as best we can.

I appreciate that.

Will the Minister clarify that capital expenditure will be increased by €800 million in line with the national development plan capital ceilings? Is this the figure we will see in the budget for 2023? Is there leeway to further increase capital? It is obviously not identified in the summer economic statement. The Minister could take some of the €2.7 billion from expenditure and put it into capital. Is the Minister sticking with what is in the national development plan?

Our intention is to leave the capital ceilings unchanged as per the national development plan.

Will the Minister clarify what is the capital allocation for the Department of Housing, Heritage and Local Government for 2022 and 2023 respectively?

These figures are on page 44 of the national development plan. The core direct Exchequer capital for the Department of Housing, Heritage and Local Government is €3.4 billion for 2022 and €3.516 billion for 2023. It is in table 4.2 on page 44. The intention is that we will maintain the ceilings-----

The ceilings will be maintained with no increase beyond what is set out in the national development plan.

That is our current position.

We know there is construction inflation and that it is running at a significant level. Is it 8% or 9%? According to Housing For All, which is underpinned by these capital allocations in the national development plan, the target for 2023 is 9,100 social homes, with 5,500 affordable homes and cost rental homes next year. How does the Minister expect to deliver this same number of homes with the same amount of money given that everybody recognises the cost of delivering them has increased and the Minister has just confirmed he will not increase the allocation next year?

When we look at the run rate at present we see underspends in some Departments, including housing, because of delays in getting certain projects off the ground and getting various schemes started. It is my expectation, and certainly the view of the Minister with responsibility for housing, that there are adequate resources. We may well see a carryover from the housing budget into next year as we did from 2021 to 2022. That was because of Covid and the shutdown of the industry for a number of months in 2020 and 2021. There is a knock-on effect, which has significantly enhanced the budget in the current year. It may be able to spend it all. It is behind profile at present. It is heavily back-ended because of the way the payment mechanisms work with local authorities throughout the country. I expect there may well be a carryover into next year. Certainly we do not hear concerns from the Department of Housing, Heritage and Local Government about its ability from a funding perspective to deliver on the commitments in Housing For All in terms of outputs and the number of units.

Has the Department of Public Expenditure and Reform run the numbers based on inflation? The target in the national development plan is 9,100 social, affordable and cost rental homes from next year. The Department has provided an allocation of €3.516 billion. This was when inflation was quite level at less than 2%. Now inflation is running at almost 10%. Has the Department estimated what the additional allocation would need to be and whether it is carryover or Exchequer allocation? The Minister mentioned the Department may be able to spend it all. What if it does spend it all? Where will the money come from then?

Our role is to set the overall ceiling in the national development plan. This has been done for the Department of Housing, Heritage and Local Government as it has for other Departments. There is ongoing dialogue with the Vote section in the Department that manages the relationship with the Department of Housing, Heritage and Local Government. These issues are discussed on an ongoing basis at the Cabinet committee on housing. It is a matter for the Department to manage the overall capital allocation. It is a generous settlement overall. There was a large increase in 2022 and there will be a further increase next year. There is likely to be a carryover.

We are certainly not being informed by the Department that the funding available under the NDP impairs its ability to deliver-----

Does the Minister have a figure for the likely carryover at this stage?

No. It is too early in the year.

Does the Minister have any estimation? Are we talking about €50 million or hundreds of millions of euro?

It is too early to say but, in the year to date, gross capital expenditure in the Department is €153 million below profile. That is almost 22% below profile, reflecting the fewer than anticipated claims received due to various issues that impact on delivery and getting schemes off the ground. We are only halfway through the year and the Department may well catch up. That remains to be seen. There is a situation where the profiles are back-ended significantly towards later in the year. It may well be the case that there will be a carryover into next year. My expectation is that there will be a carryover, but we will remain in close contact with the Department of Housing, Local Government and Heritage, which expects that it will have sufficient funding from the central Exchequer to deliver the NDP.

It has been signalled that a package of one-off measures will be introduced on budget day beyond the parameters outlined in the summer economic statement. Will any part of that package alter the projected general Government balance, or will it all come out of the underspend in terms of the Ukrainian refugees?

That remains to be determined. It will obviously depend on the overall scale of the package. It could impact on what the general Government balance will be. The Government and the Minister, Deputy Michael McGrath, and I will form a view on that during September.

How much of the contingency fund in 2022 is likely to remain unspent, given the trajectory of costs in terms of Ukrainians coming to our shores and the likely Covid expenditure by the end of the year?

It is difficult to estimate it. We started with an unallocated contingency of just under €4 billion. There has been a significant drawdown and allocation of that in recent months. We had a difficult start to the year with Covid and the Omicron variant and now there is a resurgence of Covid. Much depends on the direction that will take in the months ahead in terms of healthcare and the implementation of further rounds of vaccination and so on. There will be definitely be significant additional demand in health for Covid-related spend in the current year.

We also incurred a lot of additional expenditure earlier in the year with social protection because of the extension of different measures there, and we had to fund a range of cost-of-living measures, of which at least €500 million would have been on the direct expenditure side.

On the cost of looking after the Ukrainian refugees, we are in ongoing contact, as one would expect, with the line Departments that carry these costs, especially the Department of Children, Equality, Disability, Integration and Youth and the Department of Social Protection. We have an estimate, which is a range, that the costs could be between €900 million and €1.2 billion this year. We expect the Department of Children, Equality, Disability, Integration will give an updated forecast shortly to us and the Government on the anticipated accommodation costs that will need to be met across this year. Of course, it depends on the continuing flow of people. We all recognise the acute pressures it places on the accommodation system at this time. We also had a Supplementary Estimate on the acquisition by the Minister, Deputy Eamon Ryan, and his Department of temporary electricity generation capacity, which must be funded.

At this point, our assessment is that in excess of €500 million of that €3.9 billion may well be unallocated or uncommitted. That could change as the year goes on, particularly in the context of Covid.

I appreciate that. I have a number of other questions. I have raised for many years that there is no legal impediment to the earlier publication of the White Paper that comes out at midnight on the Friday before the budget. The argument has always been that it is crucial to feed the September fiscal monitor into the White Paper. That September fiscal monitor will not be available this year given that the budget will be brought forward by 14 days. Therefore, will the Department commit to publishing the White Paper early, in September at the latest?

I cannot give that commitment at the moment.

Because the figures for September will not be available to me until later that month. We will examine-----

Will they be available after the first week?

Hold on. I will answer the Deputy's question. We will examine whether it is possible, but I cannot give that commitment at the moment.

The figures for September will be available to the Minister in the same way that the figures for October are available to him in the first week of that month. There is no reason the White Paper cannot be published on 9 September, in the same way that a White Paper is usually published around 9 October.

I understand the Deputy's argument. I cannot give that commitment at the moment.

I encourage the Minister to give that commitment. I have two final questions. Does the Minister accept that there is a legal impediment on the Government to publish expenditure ceilings for three years?

A legal impediment?

Sorry. Is there a legal requirement on the Government to publish expenditure ceilings for three years?

The Minister did not do that in 2020.

We were in the middle of a pandemic.

The Minister did not do that in 2021.

We had a pandemic still raging.

Come on. Let us be clear. There is a legal requirement on the Minister to publish expenditure ceilings and it was not done in 2020 nor 2021 in the mid-year report.

We did publish them across the period but when we published them, we said that their level of accuracy was significantly lower than we normally accept. When we published them and fulfilled our legal requirement - as opposed to legal impediment - we said that their level of accuracy was in some way short of what it normally would be. In fact, as part of the medium-term budgetary strategy, which the Minister, Deputy Michael McGrath, and I published last year, it had to include the expenditure ceiling. It was done but when they were published, we acknowledged that their accuracy would be very different from normal years.

They are usually published in the mid-year expenditure report. Is that correct?

I will take that as it is a related question. There were brought to Government, laid before the House and published in each of the past two years. There is a legal requirement but it is not a legal requirement that it is done on budget day. It was done at the end of the year in each the past two years. As the Minister, Deputy Donohoe said, we were faced with exceptional circumstances and it was difficult to forecast with any degree of accuracy. We did fulfil the legal commitment.

They are usually published in the mid-year expenditure report. There were not. I take the Minister's point now and I took it at the time in 2020, but will they be published this year in the mid-year expenditure report?

This is the last sitting day of the Dáil, after which the House will go into recess for more than eight weeks and the budget will not be published for a number of weeks after that. The inflation rate will be published today. I predict it will be close to 10%, the highest in 40 years. Does the Minister have any regrets about not introducing an emergency budget instead of leaving many thousands of families high and dry over the summer months, when the Dáil will be in recess?

I believe the budgetary strategy that the Government has outlined is the appropriate strategy. Of course, I am absolutely aware of the costs and difficulties many people are facing throughout the summer period. However, the Deputy is aware of all the measures we brought in as the year has progressed and the additional measures brought in by the Ministers, Deputy Humphreys and Foley, to help with the cost of going back to school. That is a large amount of help, but we know that many people need more and we will do our best to provide more when we come back and do our budget in September.

I thank the Ministers for their contributions. One of the issues that I am particularly exercised about is eligibility for social housing and social housing support. We have been repeatedly given commitments on publishing the outcome of a review that has been running for at least five years, which it was reported was concluded in December 2021. It still has not been published or announced despite repeated promises that it would be before the summer recess. There is absolutely no justification for the fact that the review has gone on for that long.

There is certainly no justification for the fact that the Minister has sat on it from December. The ESRI quantified the number of people in need of housing support who were cut off their entitlement to social housing or social housing support in the form of HAP, RAS or whatever. That was pretty stark. We knew it anecdotally from the people coming in week after week saying they were on the housing list for ten years, that they cannot afford market rent and now they are off the list. The ESRI said in its recent report that the number of people eligible for social housing support has dropped from 46% about a decade ago to 33%. This is a massive stealth cut in housing support, affecting tens of thousands of working people who previously would have received some support to deal with extortionate rents or who might have gotten a social house at some point, who now do not get it and go over a cliff once their income goes over €35,000 net or perhaps a bit more depending on the family size. They are now left completely in the wilderness and have to pay rents that are completely unaffordable.

My question for the Minister, Deputy Michael McGrath, is whether he has discussed this with the Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien, because I suspect that the reason this review has not been published is that the Government is terrified of the costs that could ensue if the income eligibility threshold is increased by whatever amount. If it was restored in real terms to the level it was at ten years ago, which to my mind is the absolute minimum that should be done, given that the number of people in need of the support has grown exponentially with high rents, I imagine the bill for that would be pretty high. I cannot conceive of the idea that the Minister has not discussed this and that it is not at the back of the delay in publishing the outcome of the review. Has the Minister discussed it? Is he aware of the cost? Is that the reason we have not seen the outcome of the review? What is going to happen to it? If that is not the case, when will we hear about what is going to happen with the income threshold, which is a very pressing matter now for huge numbers of people? I would like to hear the answer to that question first.

I have been part of the discussions at the Cabinet committee on housing on that issue, as well as all other housing related issues. I cannot give the Deputy a specific date as I do not know when the Minister intends to bring forward a proposal on that, but a proposal has not been made to the Department of Public Expenditure and Reform.

In response to Deputy Boyd Barrett's question about whether the fiscal implications are the reason there has not been an outcome to date, I do not believe that is the reason. Of course, we always have to assess the expenditure implications of any decision, but that has not been the main issue in the discussions to which I have been a party in the committee. We are awaiting the outcome of that review and it is a matter for the Minister, Deputy Darragh O'Brien, to bring that forward. In the meantime, as the Deputy is aware, we are expending very substantial Exchequer resources through the HAP, RAS, rent supplement and social leasing. All of those supports are being provided. I cannot give Deputy Boyd Barrett a specific date as I do not have it, but I am satisfied that his inference, that the Department of Public Expenditure and Reform has been blocking bringing forward the outcome of the review, is not the case.

I am very glad to hear that. Has the Minister quantified the cost, because it would have budgetary implications? I believe the thresholds should be raised substantially. That group of people whose income is in excess of €35,000 or perhaps up to €40,000 is still eligible depending on family size, but they are pushed over a cliff. Some of those people are in homeless accommodation as we speak and are now not even entitled to that. They are being threatened with eviction from homeless accommodation because they have gone over a threshold, having been on a housing list for ten years. To be honest, you could not make this stuff up in terms of what is going on. This is life and death stuff for some of them due to the situation they are in. On that level of income, they have no chance of paying the rents in Dublin and they have no chance of purchasing. The Government says the affordable housing schemes are coming and all the rest of it, but we are quite a few years away from them having any impact - even if they work - and there are question marks in that regard for that cohort. I refer to people earning above €35,000, and even up to €50,000 or €60,000. This is urgent.

In his discussions, has the Minister even quantified what it might cost? For example, if we push the threshold up to €40,000, it will cost this much. If we push it up to €45,000, it will cost this much. If we push it up to €50,000, it will cost this much. If the Minister has not quantified it - I take his word that the Department of Public Expenditure and Reform is not blocking this - and if that is what he tells me, I believe it, but is it even part of the Minister's budgetary considerations? If it is not, that tells me we are not going to have the thresholds moved before the budget, which is a very serious breach of promise, because we were told by the Minister for Housing, Local Government and Heritage - and I have been told by the Taoiseach on a number of occasions - that the outcome of that review was going to be made public before the summer recess. That promise has already been broken. The Minister, Deputy Michael McGrath, is saying it is not him blocking it, but he is not quite sure when all this is happening. He has just told me he does not have figures on that. If we do not know how it is going to impact on the budget then that tells me we are not going to hear about this any time soon.

What I am saying is that I have not seen the outcome of the review. I have not seen a report from the Department of Housing, Local Government and Heritage on the issue, so I have not seen a quantification of what the cost would be of increasing the eligibility threshold by different amounts.

I have acknowledged that in making any decision on policy, there is a need to consider what the implications are from an expenditure point of view, but that has not been the reason the outcome of the review has not been brought forward. I assume the work is not completed. The Minister for Housing, Local Government and Heritage is best placed to give the Deputy a direct answer to that. We should also acknowledge that an equally important issue is the lack of accommodation opportunities. Even people who currently meet the existing qualification criteria for HAP and rental support cannot get the properties in some instances. Extending the bands is not going to resolve that issue. We have to increase supply and make sure there are more rental accommodation opportunities available for people. I will ask the Minister for Housing, Local Government and Heritage to come back to Deputy Boyd Barrett directly because I do not have a date as to when the outcome of the review will be brought forward. We are ready to engage on it in my Department.

That tells me it is not in the Minister's budget considerations currently. Is that fair to say? It does not figure in how we are going to spend that €2.7 billion, quite a bit of which will go on whatever public sector pay deal is reached. I will get to that in a moment.

What we are setting out here today is a framework. This is not made up of individual decisions across various Departments. That process is only now getting under way. That is the Estimates process. This is the framework. What we are saying is that the total of all of the collective decisions that we will make in the coming weeks has to be consistent with this framework. Today is about the framework. It is not about the priorities in housing or the relative priorities of housing, health, and welfare. That is what we will be discussing in the weeks ahead.

I suggest to the Minister that it would be very sensible from a budgetary point of view to start to work out how much it would cost if the threshold went up to €40,000 and, likewise, how much it would cost if the threshold went up to €45,000, €50,000, and so on and so forth. To be honest, I cannot believe that we are not at least beginning to estimate that cost. If the Minister is not doing it, I strongly suggest that he does because he should know it if there is going to be any move or announcement on those thresholds.

I repeat, that announcement has been promised.

In response, I would say that is an issue for the Estimates process. That process is now getting under way. Every Minister and Department will set out their priorities and I will go through all of them. To be fair to the Minister for Housing, Local Government and Heritage, in the last two budgets he has significantly increased the number of HAP places, and he has secured a lot of additional funding on both the current and the capital expenditure sides. I know it is a priority area for him. It will be discussed in the coming weeks as part of the Estimates process. I will discuss the issue with him.

I have one last question on housing. Despite the debates we may have about whether Housing for All is fit for purpose and can actually deliver, does the Minister accept that since Housing for All was published, the situation has deteriorated and that he may need to reconsider the envelope, as it were, of planned expenditure on housing to meet the crisis that we are now facing? I am not just referring to the fact that there are refugees coming into the country. According to every sort of measure, the situation has got worse. House prices have reached astronomical proportions. At the epicentre of the housing crisis, the rent situation is going from bad to worse on a weekly basis. On top of that, there is inflation, which is in effect an income cut for the very same people who have to pay those rents or consider taking out a mortgage with less income for higher cost accommodation. Is any consideration being given to the idea that that envelope of spending and investment in the area of housing is just going to have to increase?

To be honest, I think the priority is delivery. In the past two years, the construction industry was shut down for several months each year because of Covid. That had an impact on delivery. We ended up delivering about 20,000 units each year in 2020 and 2021. We know that we need far more than that. It is estimated that we need to deliver at least 33,000 units each year. I think the forecast for this year is around 24,600 units. Hopefully, that will be achieved and even exceeded. The funding is in place. It is really about delivery. Looking at Housing for All and the targets it sets across cost rental, local authority affordable housing, the First Home affordable purchase and shared equity scheme and the work that the Land Development Agency, LDA, is doing in Project Tosaigh, if we can achieve those targets, we will make a real difference. The funding is there to back that up. From where I am sitting, I do not currently see funding as the constraint. There were underspends in each of the past two years. The Department of Housing, Local Government and Heritage has underspent so far this year on capital. It remains to be seen how the second half of the year pans out. The funding is certainly there to deliver the units. That is the priority. We are seeing progress, as the Deputy well knows, in terms of commencements and new planning permissions being granted. The pipeline appears to be strong. However, I acknowledge that there are headwinds in the sector too. Construction inflation is running at a very high rate. The cost of certain materials went up by 40% and 60% in the last year, which is having a direct impact on delivery. There are also labour shortages in the sector. There are headwinds and challenges in delivering the targets. However, on the social housing side, the direct build forecast for the current year is over 8,000, as against a target of 9,000 direct build units. Despite the challenges, a lot of progress has been made in delivering social housing. We are seeing that all over the country. The performance does vary from local authority to local authority. Approved housing bodies, AHBs, are playing an increasingly important role, but the funding is there. We need all the partners involved to deliver and to build the homes that we need.

I have probably said enough on the issue. To my mind, it is the most pressing issue and the one that the Government has indicated is its top priority. If the housing delivery plan for my local authority - which has been signed off by the Department - is anything to go by, after applying a little bit of pressure in trying to extract the figures I know that the local authority's plan for the duration of Housing for All will mean that there will be more people on the housing list at the end of the five-year period than there are now, given the additional numbers that the local authority estimates will join it. Currently, there is a 20-year waiting list. If that is as far we are going to go, we will still be in trouble on this issue in five years' time. Added to that, the Minister has rightly identified the issue of rising costs in the construction sector, which has already scuppered one co-operative project in my area that was due to start. The co-op developer said it could not deliver the project at the cost previously estimated.

Does the local authority plan to which the Deputy referred include the LDA pipeline and the AHBs?

Yes, absolutely. It includes the LDA pipeline. In fact, the first LDA delivery is due to take place in Dún Laoghaire. It is rather telling that four years after the LDA came into existence, it has not delivered one house on that site. That is due to be the first LDA-delivered site and it is not going to be delivered until 2024. It is pretty shocking stuff. I can tell the Minister that there is nobody blocking the development. We are actively campaigning to get the sods on the ground turned, but nothing is happening.

Is the project fully approved and good to go?

It is hard to understand. I am probably out of time, am I?

The Deputy has three minutes. It would not be like him to have time left.

Well, yes. Very quickly, I will ask the Minister for Finance some questions. I do not want to leave him out.

The Deputy rarely does that.

Is the Minister considering any additional revenue-raising measures in the current budget? As he is aware, in People Before Profit we are very prudential in our budgeting so that when we argue for substantially increasing expenditure beyond what the Minister is proposing, as we do, we always propose revenue-raising measures such as wealth taxes, increases in employer PRSI rates and increases in corporate tax and financial transaction taxes. The Government always pooh-poohs our figures as to what we could raise through the introduction of such measures. Recently, Oxfam estimated that a 2% wealth tax on those with over €4 million in assets would raise €4 billion. I am sure the Minister will say that is just not true. I personally think it is. Even if a quarter of that estimated amount could be raised by a wealth tax on the wealthiest people in this country, it would be a lot of money. Given the huge challenges and demands we face, is any consideration being given to the introduction of some additional revenue-raising measures in the form of taxes on those who have not done too badly or have done very well over the last period, including the very wealthy and some areas of big business? For example, we could introduce a windfall tax on the energy companies or the big investment funds in housing and property that have done very well over the last period. Is any consideration being given to the idea that such companies and funds should be asked to cough up a bit of extra tax from the gains that they have made while other people have been suffering, to help fund the big challenges we have and to shield others who are being hammered by the cost-of-living crisis?

I am out of time, so I will throw in one last question. On the issue of public sector pay, our view is that pay, pensions and income should at least keep pace with inflation. Otherwise, we are reducing the spending power of people, which means human suffering for them, and it also potentially has a negative knock-on effect for the rest of the economy. People have less purchasing power, which then hits the economy. We think it is an economic, social and moral imperative to ensure that public sector pay, pensions and income at least keep pace with the rate of inflation so that people are not losing real income or purchasing power. What does the Minister say to that?

I will deal with the question on revenue-raising measures first. Every budget that we introduce brings in additional measures that raise revenue.

I would expect budget 2023 would be no different. There are always measures that allow the Government to raise additional revenue to fund changes in expenditure or taxation elsewhere.

We have to get the balance right. I have always recognised that the Deputy's figures have a coherence to them. He came out and said how much more he wants to spend and put in place measures that, in an abstract way, would allow him to fund that additional expenditure. Where he and I have differed for many years is that he sees the world as being static and assumes that if we increase taxes on workers and companies investing in our country that there will be no consequence. I strongly believe there will be a consequence. Putting in place measures that increase the level of taxation that large employers pay would, over time, lead to those large employers employing fewer people in Ireland.

I refer to windfall charges and taxes. We should bear in mind that some of the companies involved are owned by the State. Any change in how much money we want to recoup from those companies at a point in the future can be achieved by revision and dividend policy. I guarantee the Deputy that even if the State makes such a change, that will have an impact. It will, for example, impact on the investment plans that we need many semi-State companies to deliver in order for Ireland to have a higher share of energy through the renewable sources that we have the ability to generate in our jurisdiction.

We only have to consider the reaction in the UK to its proposal to bring forward a large windfall tax, even with investment reduction. Many larger companies are now saying that could affect their investment plans. We need to bear in mind that we have seven auctions for our offshore wind energy. Does the Deputy think those auctions will be unaffected if, while they are under way, we decided we would arbitrarily increase the taxes companies would pay for supplying our country with energy? That is the difference.

As always, we will consider other measures to determine whether they will raise revenue. While I will respect the budget secrecy process, and will not say anything today that would be inappropriate given that the budget is so far away, it is fair to say that many of the measures the Deputy wants me to introduce will not be announced on budget day.

I do not think we can look at pay in isolation. I have always made the point that in agreeing a pay deal with the public sector there will also be a need to take account of what the Government has done to date on other cost of living measures and what it plans to do in the budget. All of the advice we have received from reputable bodies, domestically and internationally, has been not to chase inflation. Pay alone should not chase inflation. If we did that, we would drive it higher and it would become more embedded with second and third round effects. We need to manage it carefully.

We will need a deal that is fair for public sector workers and acknowledges that their living standards have been impacted and there will need to be pay improvement beyond the existing terms of building momentum. However, a balance has to be struck between that and ensuring that the deal is affordable overall and we do not end up chasing inflation and driving it higher, which would cause all sorts of problems for the economy.

I thank the Ministers for their presentations. I had an opportunity to listen to part of the contributions and read them.

I would like to ask the Ministers about two areas. The first relates to people who do not qualify for social welfare because they are just over the threshold, such as working people in receipt of ordinary incomes. I understand the Ministers recognise that cohort as being the middle four deciles. They are under increasing pressure every day in terms of household finances. What kind of measures, or range of measures, have the Ministers considered to support this group of people? They are under increasing pressure. Reference has been made to childcare.

I refer in particular to social welfare. Has consideration been given to the qualifying thresholds for those in employment, such as the working family payment, lone parent allowance, income disregards for means tested pensions and so on to determine whether those areas can support people who are in employment?

I am happy to take those questions. I thank the Deputy. In the measures we have introduced in recent months, we have tried to strike a balance between ensuring that most of the measures are targeted and generally involve using the social welfare system, such as the fuel allowance scheme, back-to-school clothing and footwear allowance and so on. We have also had measures with a broader application that benefit people who are above the social welfare qualifying threshold. The electricity credit is an obvious example, as well as the abolition last week of school transport fees, a reduction in public transport fares for younger people and the population generally and changes to the drug payment threshold scheme.

In framing a set of one-off measures, we will have to strike a balance. Our principle is that many of the measures will need to be targeted because this is, in the main, but not exclusively, an energy price crisis. We are seeing broader inflation in food and across a range of other materials and goods that people purchase. We recognise that people who are earning above the upper limits are also struggling and feeling the pressure. There will need to be measures that go beyond the eligibility cohort, as defined by the social protection code.

The other issue raised by the Deputy comes down to the interaction between the social welfare system and work. We often hear examples of people who can only take on so many hours because they will lose certain benefits or feel it is not worth their while to work. The principle that we as a Government subscribe to is that it should always pay to work. If people have the opportunity to take on more hours, that should also pay. We are examining the interaction between the welfare system and work, in particular, to determine whether there are any issues we can address which would allow people to participate to a greater extent in the labour market, be that taking up employment or doing more work if they are currently in employment. We are considering options in that regard in the context of the budget.

I want to add to what the Minister, Deputy McGrath said regarding the recognition of those who do not qualify for social welfare payments, but are in work and clearly face new difficulties because of the higher price of energy and food. That is why there is complete agreement in government regarding the role of indexation in our personal code.

The Minister, Deputy McGrath, and I recognise that people who receive a wage increase from their employer to help with the cost of living receive it because of how hard they have worked and the ability of employers to pay an increase in recognition of their efforts. We believe, therefore, it is appropriate that we try to avoid someone paying a higher level of tax on a wage increase he or she has earned. This is why, since day one, we have focused the programme for Government on the role of indexation in our tax code at a time at which wages are growing to try to deal with the consequences of inflation.

If wages grow at a sustainable rate, which is why the work the Minister, Deputy McGrath, is leading on public sector wage negotiations is so important, we want to do our best to help workers keep their fair share of the wages they earn. That will form an important part of the package we announced on budget day. It is why the Government agreed to a change in the resources available for the taxation element of the budget.

I thank the Minister. I refer to making changes to the social welfare thresholds.

Has the Department of Social Protection come forward with targets or estimates on what it would need to be able to support others? Has that group given any indication of what kind of figures might be involved?

We are working through the process at the moment. We are at the early stages of the Estimates process. It is helpful for me as Minister for Public Expenditure and Reform to have the framework in place. That puts a certain shape on the discussions that are taking place now and through September. The Government will have to identify core priorities and we know what they are in the context of this budget. It is about the cost of living. It is about helping people manage through this difficult and challenging inflationary spiral. We have acknowledged that it is not just impacting on people on social welfare, though it is most acutely impacting them because they have fixed incomes and, by definition, are on quite low levels of income. People who are above those thresholds are feeling the pressure too. Many of them have significant day-to-day costs, including childcare, transport to and from work, mortgages, rents and so on. These measures need to have a broader application.

As to the core budget for next year and changes to the social welfare system, we are at the early stages of working through all the different options in that regard. We have clearly acknowledged that there will be a need for a social welfare package and, as the Minister for Finance has said, a taxation package as well. It will all be focused on trying to help people at what is a tough time. We recognise that as a Government. We have done a lot to date. It is perhaps not as much as others would like but we have made significant interventions. As the public finances are in a reasonably healthy position, we have resources for the autumn that we think will make a real difference. The work being done between now and then is about getting that balance right between one-off measures in the core budget for next year, measures that target those most in need and measures that have a broader application. There is a lot of work going into that and it is well under way at this point.

Economic figures like GDP and unemployment figures are not the only measures of who we are or where we want to take society. For the first time, the summer economic statement referred to the well-being framework and a swathe of other aspects that measure quality of life and what is important to us, such as education, physical and mental health, biodiversity and a range of different aspects. While the framework is not fully in place, having it as part of the summer economic statement was a huge benchmark. That says to people that there are other yardsticks for prioritising funding. How do the Ministers see the framework influencing this budget and others beyond that?

I acknowledge the huge work the Minister for Public Expenditure and Reform and his Department have done on this. He will elaborate on the framework in a moment. I welcome the Deputy's recognition in this regard. It also formed part of the national economic dialogue, where we tried to broaden the evaluation of how we are doing beyond the very traditional economic measures of GDP and inflation, although that matters from a standard of living point of view, and the level of employment within our economy. This is vitally important to how we make progress in our society. I anticipate that when we do budget 2023, we will try to give a perspective of how that budget stacks up against those kinds of indicators. As I said, the Minister for Public Expenditure and Reform and his officials have done a lot of work on what that will look like, as has the Department of Finance.

To add to what the Minister said there, we all acknowledged during the last two years of Covid that issues that do not always get a high level of attention or traction in political debate are important to people in their day-to-day lives. We all got a renewed sense of appreciation for the environment, local amenities, walkways, greenways, biodiversity and all the issues the Deputy touched on. The adoption of the well-being framework now is particularly timely. It includes 11 overall dimensions from which the well-being dashboard of 35 indicators flows. Those are wide-ranging, as the Deputy has acknowledged. We have examined the experience of other countries, including New Zealand, which is seen as a world leader in this regard. We have also looked at the work of the OECD and my Department has established a well-being public policy unit. It is a work in progress and we are going to continue to develop it. There are future phases for the development of the well-being framework. Well-being issues very often come down to the fundamental things people need in their lives, which is a roof over their head, accommodation, access to healthcare when they need it and a basic level of income to give them a decent quality of life. Particularly at a time of high inflation, that is where our focus lies.

While we have a well-being framework, it is not something we look at as separate to the budget. We do not consider all the other issues and then look at the well-being framework and see how that influences us. It has to be a thread running through all our considerations in the budgetary process. We have to think about what things contribute to well-being that really matter to people in their day-to-day lives. In the Deputy's question and in our responses we have acknowledged what we believe those things are, namely, the basic supports and services people rely on. It is a very welcome departure in Irish politics and in our budgetary process to include well-being and equality budgeting. In recent years, we have increasingly published more and more material on equality budgeting and we will continue with that in the context of the budget, as well as later in the year as part of the Revised Estimates when more and more Departments and budget-holders will bring forward metrics and evidence on how they are accounting for equality budgeting. It is a very welcome change. It takes the focus away from the hard numbers in isolation. It is about what they mean for people in their day-to-day lives. That is what really matters. We are elected public representatives and we know from talking to people every day in our constituencies what the issues that really matter to them are. We have to make sure those are our priorities in the budget.

The most important point mentioned by the Minister is that it is not a separate measure. It is a thread running through the whole process.

I welcome the Ministers and thank them for their work. There are a few items I wanted to get their thoughts on. I listened to their earlier contributions. Are there any circumstances where they would be required to change the parameters before the budget because of what might happen with external factors or other factors? They have said there will be no changes. I refer to the Brexit adjustment reserve fund. Many of the factors impacting us are external, such as the impact of Ukraine on oil prices and so forth. Are there any further supports coming from Europe? Is this something being looked at at a European level? I ask the Ministers to comment on our level of national debt. We are now into a period where the ECB's involvement in the bond market is dissipating. What impact is that having for us in terms of interest rates, our national debt and refinancing the national debt? Where do we stand on that?

I have two further questions specifically for the Minister for Finance. I note he is doing a review of corporation tax. When does he expect that to be ready? It is a feature that comes up a lot in the media.

Our corporation tax revenues are buoyant but in many cases they are coming from a small group of companies giving an exponentially high level of corporation tax. That is to be welcomed, but how will that frame the policy on taxes and spending?

I have a specific question on the Living City initiative which I will hold to the end because it is a stand-alone question.

I will kick off because the Deputy opened with questions that are relevant to me.

I do not foresee any changes in our budget day parameters between now and budget 2023 being announced. At €6.7 billion, it will be the largest budget in core spending that any Government has introduced in Ireland for quite some time. However, as the Minister, Deputy Michael McGrath, has said on a number of occasions, it will be accompanied by once-off measures within 2022. That means the overall budget day package will have additional measures for 2022 on top of a very significant increase in our budget day package for 2023.

I have already acknowledged the growth in our national debt. Deputy O'Donnell is well aware of it so I will not repeat what I have said on that. If I look at the measure that matters very much to us, which is what that stock of debt looks like as a share of the value in income of the goods and services in our country, an important picture is developing. First, when and if the Government holds inside the budget day parameters that we have indicated for this year and the years to come, it means our stock of public debt will begin to fall after the very sudden increase during the era of Covid-19. According to the summer economic statement, we currently stand at a stock of debt for 2022 of €233.8 billion. As we stay inside our budget day parameters it will begin to fall as an amount of debt, which is a significant change from where we have been over the last two years, moving by 2025 to €227 billion. While that fall in the quantity of debt in itself is helpful but in real terms is not huge, it means, importantly, that our debt as a share of national income when measured as GNI begins to fall. That is the key thing for us given how high our debt is in the first place. Notably, it means that our share of debt falls from 96.5% at present to below 90% next year and to below 80% by 2025.

There will be a reduction in the actual amount of national debt coupled with a reduction in the percentage.

The percentage reduction is faster. All other things being equal, on our current forecasts we are still expecting our national income to grow. That is particularly important. At the start of the year the interest we were paying on our national debt for new borrowing was approximately zero and today it is 1.7%. I will note, before others make the point to me, that the 1.7% is a reduction on where we have been in the last few weeks, when it was well above 2%, but there is a hell of a difference between zero and 1.7%. Our expectation is that we will continue to see change in the sovereign bond markets as the ECB changes monetary policy in response to what is happening to inflation.

Finally, the Deputy asked a specific question about corporation tax. We will have that work complete before the budget. There are many different forecasts regarding how much our national debt and how much our corporate tax receipts could be affected by changes in the business cycle or OECD corporate tax reform. It is not always helpful for me to base our preparation on what could be the biggest figure. What we have to do is try to have a figure that we believe is a reasonable assessment regarding what the vulnerability could be, as opposed to the largest figure out there. That is work I asked the Department to do and we will have that work done by the budget because, in turn, it could influence other choices we make.

With regard to EU funding, we are working on the basis of commitments that have been made already in different funding streams. The principal one I have responsibility for is the national recovery and resilience plan, which is close to €1 billion. In that context, a range of investment projects is being implemented across Government. We are making provision, as can be seen in the summer economic statement, for a further €200 million of that to be spent across next year.

Under the Brexit adjustment reserve we will receive a total of €1.165 billion in current prices. We have already received the first tranche of that. It has to be spent by the end of next year. The reference period goes back to the beginning of 2020 so eligible spending must occur between 2020 and 2023, inclusive. We have made certain allocations so far to a number of Departments. We have given approval to a range of schemes in agriculture and fisheries brought forward by the Minister for Agriculture, Food and the Marine, Deputy McConalogue. We have a major infrastructure project at Rosslare Europort that is currently under procurement and there are a number of other proposals from Departments that are currently being considered.

This funding comes in the form of pre-financing. We submit the formal claim in 2024, after the reference period, but we get the money upfront. Clearly, we have to ensure that it is spent in a way that fully conforms with EU spending rules and there is a strict requirement that it must be linked to the adverse effects of Brexit. Ensuring that the spend is eligible is a critical test and it is one on which we must be sure. It is not as simple as coming up with new spending ideas or things it would be nice to do. The link with the adverse effects of Brexit has to be explicit, clear and demonstrable, but we are making good progress on it.

I have a small addendum to that. The public works contract is being bedded down at present. It is a big factor in terms of public contracts, and I have discussed this previously. Is the Minister satisfied that it will work? Will it be subject to review? Can he give a general overview on that and the current position from his perspective?

I should acknowledge the work that the Deputy and the committee on transport have done on this issue over the last number of months. I thank the Deputy in particular, as Chairman, for that because I believe it helped to articulate the challenges that have been growing in recent months for the delivery of different public works contracts.

We have been assessing this for a while. We made an initial change in January and we made a further change in recent weeks in terms of the inflation co-operation framework, which has been broadly welcomed. There is a period of familiarisation required now in order that contracting authorities and contractors can understand the full detail of it. The Office of Government Procurement has done a great deal of work to provide guidance and supporting documentation and to assist all the partners in the delivery of the NDP to have a clear understanding of how this burden-sharing process is going to work. A small number of agreements have been entered into to date, and more are expected imminently. The initial feedback has been encouraging. That is the update I have received from my Department and from colleagues across Government. The fact that we included energy as well as construction materials and that it is backdated to the beginning of this year was very helpful. We are seeing a greater level of interest now in new tenders, which is positive, and we are successfully placing contracts. However, it is a very uncertain time for major contractors.

There are letters of acceptance.

We will certainly keep it under review, but the early indications are that it has been broadly welcomed and the implementation of it has begun.

It will be kept under review. I thank the Minister.

My next question is for the Minister, Deputy Donohoe. I refer back to the end of last year. The Living City initiative is available in Limerick city, which is a Georgian city. Unlike probably any other city in Ireland, the footprint in the city is primarily Georgian. The Living City initiative was introduced a number of years ago. There has been some success, but not what one would expect.

In terms of the latest figures from the Department, about 37 properties have availed of the scheme. I asked last year for a review of the scheme and the Minister kindly took it on board. I understand that the Tax Strategy Group is looking at it and will bring forward a report to the Minister. Really bringing the city up - and the city is doing very well with great employment and a lot of positivity - is very difficult when it comes to the footprint of the city, which is Georgian. I ask that when the Minister comes to his budget deliberations, he would consider the review and look at certain areas such as owner-occupier residential properties, particularly around making the initiative consistent with the other schemes for commercial property and landlords in terms of the period for which they can claim and being able to carry forward the relief. It is scheduled to conclude at the end of this year. If the Minister is looking at it, I ask that we would get some bit of headwind that the Minister might extend it for a number of years rather than just one year. I wanted to raise the matter with the Minister in advance of his budget deliberations. It is something in which I am particularly interested. Could the Minister give me his thoughts on the initiative? For those of us in Limerick city, it could be a phenomenal catalyst if it is looked at and amended and if we can encourage more people to participate in it. I want to see families coming to live in the city and people being able to move to the city. The city is very vibrant but the cost of doing up Georgian buildings is far more expensive that the cost of doing up a standard house. The announcement of Croí Cónaithe, what is the Irish pronunciation-----

Croí Cónaithe.

The announcement of this scheme is fantastic. I was looking through it. It should make an enormous difference but it does not apply to cities and city suburbs. Limerick city is Georgian. We have a scheme but with only 37 properties participating since 2013, I ask that the Minister give it serious consideration. He initiated a review last year, which I very much welcome. Could he give me his thoughts and deliberations in advance of the budget?

We will give the points raised by the Deputy about the operation of the Living City initiative very serious consideration. A proper review of the scheme has been done and I will be getting a copy of the report very shortly. The Deputy raised some very reasonable points regarding how what is a very targeted scheme could work better and they will be given proper consideration in the time ahead. The Deputy raised these points in the context of last year's Finance Act. At that point, I said we would give it a thorough run-through in the Tax Strategy Group process, which is nearly complete. The points raised by the Deputy will be considered carefully.

The Minister would be very familiar with Limerick city.

Yes. I echo what the Deputy said. Phenomenal work is under way there. Limerick 2040 is one of the key bodies-----

But it will be feeding into Project Ireland 2040.

Indeed. In conjunction with the council, Limerick 2030 has done brilliant work moving lots of large initiatives forward. I am really looking forward to going back soon with the Deputy and seeing all the progress that has been made. I know well the parts of the city referred to by the Deputy and the work that could really complement the broader regeneration that is under way. It will be given proper consideration and the work that I committed to the Deputy would be done is nearly finished.

I was also upstairs listening to the full contribution. I just discovered that data out today tells us that prices have risen by 9.1% up to June 2022. That is the highest in 38 years, which is quite shocking. What inflation rate and ECB interest were assumed when the summer economic statement was formulated? What contingency plans have been made if the situation worsens? Are there plans to contribute to a rainy day fund or pension reserve fund?

We had assumed a base case scenario of inflation within our economic forecast of approximately 6% on average for the year. When the Minister for Public Expenditure and Reform and I published the stability programme update in April and the summer economic statement a couple of weeks ago, we acknowledged there was a risk to that 6% and said there could be changes that would move it to between 8% and 9%. Even though it is still too early to say where this rate is going to land overall for the year, we are clearly moving into the higher inflation scenario as opposed to the 6% one. We will produce our next inflation forecast on budget day.

So the Minister will not have anything before budget day.

We will be implementing lots of initiatives between now and budget day, for example, the measures announced by the Ministers for Education and Social Protection on back to school and the changes to the SUSI grant across the summer. All of the measures the Government has announced during the year will be implemented across the summer.

The Government has not made any decision yet about what role could be played by the rainy day fund for 2023. I have acknowledged for many years that there is a risk. We were making progress in reducing that risk and got hit by a pandemic. We need to begin that work again but the Government has not considered any recommendation from me about whether we would use such a fund.

The ESRI appeared before this committee last week. One of the things that stood out was its reference to the lack of statistical information and the need to invest in the CSO. Does the Minister agree with this statement and does he propose to address it? Is there any concern around this?

Nothing has been flagged with me regarding significant difficulties with the operation of the CSO and the data it produces in a very timely way. The indicators it is now involved in producing for the Government appear to have grown in both quantity and quality in recent years. I am sure it will raise funding needs, as every State body does, to which the Minister for Public Expenditure and Reform will listen in the Estimates process.

I thank the Deputy for raising that point. I met the CSO in recent weeks. I visited its head office in Cork, met the leadership team there and had a really good discussion. I thanked it for all of the work it is doing. The turnaround time it achieved for the census and the headline population figures was remarkable. It did not raise any specific issues that warranted intervention but I will have a look at what the ESRI has said. If there are any resource implications, we will consider them in the context of the Estimates. I commend the CSO on the outstanding work it does. It has significant value in policy making and the work we do in government. I am sure the Deputy as a Member of the Oireachtas-----

I agree with the Minister about the outstanding work done by the CSO but what I am saying is that some of the stuff we get back seems to be about a year behind and I have concerns about that. I am very aware that we have had Covid but I would still like us to get things more quickly.

Sebastian Barnes appeared before the Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach yesterday. He said that the full costings on actions to meet climate targets and Sláintecare had not been provided by the Government. What provision has been made in the summer economic statement for both of these?

We are working to the overall Government strategy regarding Sláintecare and climate action. Legislation is now in place, the Climate Change Advisory Council is up and running, we have the overall carbon budgets and the sectoral emissions ceilings will be agreed shortly. The allocation of responsibility for those will be agreed by Government. On the capital side, we have multi-annual ceilings so every Department knows exactly what it has out to 2025. Some Departments have certainty beyond that because of the long-term nature of delivering major capital infrastructure projects, including in the Department of Transport, which will play a key role in that climate transition we all acknowledge we must implement over the period ahead.

On Sláintecare, the Government's commitment to funding healthcare cannot really be called into question. We have seen significant increases in healthcare funding in recent years, aside from Covid-19, even on the core side. The overall budget is approximately €22 million. That has enabled us to fund a major increase in capacity. We have provided funding for the addition of well over 11,000 beds and between 800 to 900 of those are now in place. That is a significant increase on a base of approximately 11,000. Thousands of additional healthcare staff are being recruited which is to be welcomed and there is more recruitment planned. Sanction has been given for further recruitment and ambition. It is going to require a medium-term to long-term commitment to implement Sláintecare in its fullest respect. As you know, the Minister of Health, Deputy Donnelly, is keen to negotiate a new contract with hospital consultants. The principles of that were agreed by Government quite some time ago. We want to see a focus on public work because we want to see the level of waiting time and the number of people on waiting lists in the country reduced dramatically. That is the Government ambition. In terms of the costings and the budgets, we have set out on a multiannual basis what our commitment is on the capital side and we have provided through our actions to date on the current side, very strong resources-----

Yet we are still concerned about waiting lists and the length of time people are on them. We have nurses who have still not received bonus payments. Much and all as we praise the health situation, unfortunately I am not as impressed as the Minister, Deputy McGrath is.

An Teachta Lahart has just come in so if Deputy Ryan wants to ask another question-----

Do I have seven minutes left?

Yes, but we did not expect Teachta Lahart to come in.

I will be as brief as possible. I am glad the Minister, Deputy McGrath, mentioned transport as well because we saw in Spain this week that they have cut their public transport by half. Train journeys of less than 300 km are now free of charge. Would the Minister consider this at any point here? I know he may say it is up to each Department but for those that are really struggling currently, it might be something to think about down the road. I will finish on this last point. We have seen in Poland what is called an anti-inflation shied where VAT has been cut to 0% on food, gas and fertilisers, to 5% on electricity and heat, and to 8% on fuel. I wonder why we have not done something similar here. I am very aware of the package he is going to tell us about and while we are extremely grateful for any package, we certainly feel it is not enough. I listened to Deputy Doherty earlier and he spoke about the two months of recess and asked what was going to happen to these people struggling. We are aware of schools opening up. I wonder is there anything extra that could be added?

I thank Deputy Ryan. I make the point that just last week an additional €67 million was announced which included the extension of hot meals to children attending DEIS schools. This was a really important initiative that the Minister for Social Protection, Deputy Humphreys, brought forward. This also included the abolition of school transport fares and the improvement in the back-to-school clothing and footwear allowance. We recognise there are extra costs at this time of year and we took the view that because this is when these costs are being incurred, we would have to address these outside of the normal budgetary calendar. Those moves have been broadly welcomed.

On transport fares, we should not understate the importance of the 50% reduction on fares for young people and the 20% reduction across the population generally on public transport services. The continuation of that or any further measures and all of those issues have to be considered as part of the Estimates process. There will be a lot of different priorities competing for resources and we will have to work our way through that as best we can.

Progress is being made on the payment of the pandemic recognition payment. We would all have liked it to have happened more quickly. For those who are directly employed by the HSE, I think the vast majority have now received the payment. For those who are not directly employed such as staff in hospices, private nursing homes and members of the Defence Forces, there is further work to be done. The Department of Health is working its way through that currently.

Regarding waiting lists, we have an initiative to the value of approximately €250 million because waiting lists have grown unfortunately. The pandemic had a real impact. It is a Government priority now to address that. People are waiting too long and we are going to do all we can to make a lot of progress in that area.

A Theachta Lahart, as per the speaking rota, the final speakers get five minutes. I am aware the Ministers need to go in five minutes.

I thank the Chair. I will time myself. I appreciate the Ministers' willingness always to come before the Committee on Budgetary Oversight. The Ministers have mentioned the significant measures the Government has taken to address the cost of living and that there will be more. One that stands out to me and that I have highlighted is the medical expenses threshold measure which has been cut in the space of 18 months. As the Minsters know, the threshold was €124 before people could get free medication on a monthly basis and this is now down to €80. That is a saving of close to €500 a year. It is quite significant then. I refer to some of the other measures as well not least the back-to-school allowance which is a very proactive response.

I want to take into account everything that has been said about the pressures that people are under. I went to buy a pair of shoes recently in Rathfarnham Shopping Centre. I got good value you will all be pleased to know. However, the staff there said that all the talk of the challenges facing the country is having a negative impact on people's willingness to spend. People have become quite anxious about it. There is the message of the fact of full employment and the fact that two weeks ago 200,000 people left this country to take holidays - a very positive sign of an economy doing well. It is an economy that clearly has its challenges and we need people to keep spending money to bring more taxes in and to be able to make the significant impacts we have been making on the cost of living for people. I put the question to both Ministers. Is the fact that very little is being made of the really positive things happening in the economy and that so much negative talk is going on creating an environment where people are anxious to spend, something they are conscious of?

The Minister, Deputy McGrath and I are constantly at pains to acknowledge the challenges and difficulties many are facing at the moment but in the same breath to make the point regarding the things that are still going well in our economy. We both made reference in our opening statements to where we are with income, with employment and to the growth that has taken place in our economy and the very positive change that has happened since the pandemic has lessened. We are aware of the need for that balance because it is important the people of our country are reminded that despite the new challenges we are facing so soon after we have dealt with the cost of a pandemic, we have an economy that has a very high level of employment, is still growing in a very robust way, and has public finances that have recovered. That should give us confidence in our ability to manage the challenges that lie ahead. Deputy McGrath and I have said again and again that we cannot meet every need placed upon us in the Dáil and elsewhere but we are both confident we can do enough to help and that we will continue to do that. As one final concluding comment on that, Deputy Ryan made the point earlier regarding what is happening with public transport in Spain and what is happening in Poland with VAT. If we go down the path of picking the single biggest measure each country has done and say in the round that Ireland has to match them all, that is the path to the creation of new risks and problems for ourselves. We have to compare what we are doing in the round, to what other countries are doing in the round. There are plenty of economies that have not cut excise, or VAT, or that have not done the one-off payments that Minister McGrath has brought forward. What Ireland has done in terms of scale and targeted and broad measures, compares well to what many other countries in Europe have done and we should continue to look at it in the round when comparing overall what we are doing versus elsewhere.

I will add a quick word to that and I thank Deputy Lahart for coming in.

It is inevitable in many respects that the challenges and the negatives tend to get a lot of traction, whether it is Covid, Brexit or the terrible war in Ukraine and the inflationary spiral that is causing. However, there are many positives. Ireland is an outlier in European terms in so many respects on the positive side. There is the level of growth we continue to enjoy, the job creation, the dramatic improvement in the public finances and the continuing strong investment pipeline announcements by both FDI clients and Enterprise Ireland clients, which are really strong and positive. We must strike a balance between acknowledging the headwinds - and there is a great degree of uncertainty at the moment about the international economy in particular - but also recognising sentiment is important and the Deputy is spot on there. It is a key driver of economic performance because while there are undoubtedly many people struggling at the moment there are many others who have resources and we want them to make decisions to invest, spend and play an active part in our economy. Our giving a fair presentation of all the issues, including the challenges and also the positives and strengths, can play an important point in giving that sense of confidence, because we are confident. It is not false hope. It is important to give people hope based on realism about the outlook for the Irish economy. We will get through this period and Ireland will continue to be a strong performer. It is just important we make the right decisions to help us on that journey. I thank the Deputy for making the point as it is a really important one.

I thank the Ministers.

I thank the Deputy and the Ministers. We are coming to the end, so I would like to ask two things. They are not big questions. On the different tax expenditures or reliefs that expire at the end of the year, will the Ministers provide a note to the committee itemising those that sunset this year, the portion of their costs included in the base for next year, the cost of expending them into next year and whether a portion of the €2.7 billion will need to be used for mica redress? Is that okay?

I can certainly provide that to the committee.

I thank the Minister. Gabhaim buíochas leis na hAirí as an gcomhrá inniu. That concludes our public session. We will now go into private session to discuss some housekeeping matters.

The select committee went into private session at 11.33 a.m. and adjourned at 11.51 p.m. until 5.30 p.m. on Wednesday, 7 September 2022.