Committee on Budgetary Oversight díospóireacht -
Wednesday, 26 Apr 2023

Stability Programme Update: Ministers for Finance, and Public Expenditure, National Development Plan Delivery and Reform

An Cathaoirleach Gníomhach (Deputy Ged Nash)

I welcome the Minister for Finance, Deputy Michael McGrath, and the Minister for Public Expenditure, National Development Plan Delivery and Reform, Deputy Paschal Donohoe, and their officials to the meeting to discuss the stability programme update, SPU. Before we begin I will explain some limitations to parliamentary privilege and the practices of the Houses as regards references they make to other persons in their evidence. The evidence of witnesses physically present or who give evidence within the parliamentary precincts is protected pursuant to both the Constitution and statute by absolute privilege.

They are again reminded of the long-standing parliamentary practice 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. It is imperative that they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person or entity 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 requirement that they 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 they are not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting.

I invite the Minister for Finance to make his opening statement.

Minister for Finance (Deputy Michael McGrath)

I thank the Chair for the invitation to discuss the SPU. The document was published in draft form on 18 April 2023. In accordance with our legal requirements, the final version will be submitted to the European authorities on Friday, 28 April 2023.

By way of background, the annual update of the stability programme is prepared each spring by my officials in co-operation with the Minister for Public Expenditure, National Development Delivery Plan and Reform, Deputy Paschal Donohoe’s, officials, and sets out my Department’s best assessment of the economic and fiscal situation and outlook. The legal framework requires forecasts for the next three years at a minimum. On this occasion we have prepared economic forecasts that extend to 2030. Following a rigorous process, the macroeconomic forecasts were endorsed by the Irish Fiscal Advisory Council, IFAC, on 6 April. In particular, the council welcomed the longer-term economic forecast horizon.

The stability programme is prepared on an existing policy basis. The analysis and projections are prepared on the basis of the policy position set out in budget 2023, with the addition of policy measures officially announced in the intervening period, for instance, the February package. Government will formulate the broad parameters of its budgetary policy over the summer and this will be published in the summer economic statement. Before that, Government will engage with stakeholders via the national economic dialogue, which takes place on 12 June. The Government has set out a medium-term fiscal framework that permits core public expenditure, net of any discretionary tax changes, to grow by 5%per annum over the period 2021 to 2025. The SPU is prepared on a no policy change basis and therefore the 5% spending rule has been applied in the figures. In response to the war in Ukraine and the subsequent cost-of-living challenges facing households, the Government agreed last year as part of budget 2023 to adjust the annual expenditure growth rate, going slightly beyond 5% growth rate set out under the fiscal framework. Decisions on core and non-core expenditure parameters for budget 2024 will be considered as part of the summer economic statement 2023.

Moving to the substantive issues, let me say a few words about the economic and fiscal context. Despite the energy price shock and multi-decade high rates of inflation, the economy has proven remarkably resilient. This is most evident in the labour market, with employment at a record high, and the rate of unemployment close to historic lows, at 4.3% in March. To put some numbers on the employment position, there are 220,000, or 9%, more people in employment now than there were immediately before the pandemic. Unlike some other economies, Ireland’s participation rate has also improved from pre-pandemic levels. It is fair to say that this is truly remarkable. Resilience is not just a feature of the economy. Demand in our main export markets has held up. However, the situation remains extremely fragile and I share the assessment of my officials that risks to the global economy are tilted to the downside.

Elevated geopolitical tensions and further global financial market fallout from aggressive monetary policy tightening are just some of the forces that could derail the world economy. Against this background, my Department’s forecast is for modified domestic demand, MDD, which is a proxy for the domestic economy, to grow by 2.1% this year and by 2.5% next year. For this year, the forecasts have been revised up relative to the autumn forecasts by just under one percentage point.

The improved outlook for domestic activity is reflected in a robust labour market, with employment numbers just shy of 2.6 million, which is the highest level ever. Employment is expected to continue growing this year in line with domestic economic conditions, while the unemployment rate is expected to remain low at under 4.5% this year. Price pressures are easing somewhat. It now appears as though inflation, absent any further energy price shock, is on a downward trajectory. Headline inflation is forecast to be just under 5% this year and 2.5% per cent next year. However, as we all know, the cost-of-living pressures remain. Non-energy or core inflation is expected to ease more slowly, with elevated energy prices having passed through to many other sectors.

Against this backdrop, it is important that budgetary policy does not add fuel to the inflation fire. I believe the Government has got the balance right. In February, Government implemented a further package of cost-of-living supports worth almost €1.3 billion. This included the extension of reduced taxes levied on fuel and electricity, the extension of the 9% VAT rate on hospitality, lump sum payments to recipients of long-term social welfare, and a widening of the eligibility criteria for the temporary business energy support scheme, TBESS. This built on a wide range of measures put in place since budget 2022 to help to ease the burden of inflation on households and businesses. Taken together, Government has made available €12 billion, or almost 4.5% of GNI*, in direct measures to help to ease the burden of inflation on households and businesses.

This response has struck the correct balance between helping to absorb some of the impact of rising prices without adding to inflationary pressures. It is also crucial that our fiscal response does not jeopardise the sustainability of our public finances over the medium term. That is why I have made clear that the February package of supports will be the last cost-of-living intervention until the budget, and why Government has taken the decision to gradually phase out the reduced rate of tax on fuel.

Medium-term macroeconomic forecasts out to 2030 are also detailed in this year’s SPU. The production of these longer-term forecasts was motivated by reforms to the European Union’s fiscal rules that are currently in the pipeline, as well as previous recommendations of the IFAC. The key takeaway from the analysis is that over the second half of this decade, economic growth is set to slow. This is mainly due to an ageing population, as well as slower productivity growth. My officials have been documenting this for some time.

Turning to fiscal developments, my Department is now forecasting a general Government surplus of €10 billion for this year, the equivalent of 3.5% of national income. This is based on the assumption of tax revenue amounting to almost €89 billion, a growth rate of almost 7%. While this is, of course, very much welcome, the headline surplus this year is heavily dependent on volatile windfall corporate tax receipts; in other words, receipts that cannot be explained by underlying economic conditions. Excluding the impact of these receipts, estimated at almost €12 billion this year, an underlying deficit of €1.8 billion is projected for this year. This is a better metric for assessing the resilience of our public finances.

Government is taking steps to address the risks around windfall corporate taxes. A total of €6 billion has now been transferred to the National Reserve Fund to strengthen our economic and fiscal resilience. Moreover, I will shortly bring advanced proposals on a longer-term focused national reserve fund. A scoping paper that sets out high-level principles will be published very shortly by my Department. Public indebtedness next year is projected at more than €224 billion, or more than 75 per cent of GNI*. It is important to stress that borrowing costs have increased significantly and the direction of travel is clear. As a result, fiscal trade-offs are once again a feature of decision-making.

In conclusion, the past number of years have thrown up many challenges for the Irish people, with the onset of a once-in-a-lifetime pandemic, followed by a once-in-a-generation energy price shock. Despite these challenges, the Irish people have continued to show incredible resilience. Looking ahead, the Government will continue to protect those most adversely impacted by cost-of-living pressures and will continue to invest, in a sustainable way, in vital public services. Government will also manage the public finances in a way which equips the State to address the numerous fiscal challenges coming down the line in the years ahead.

I look forward to a fruitful and constructive exchange of views on the economic and fiscal outlook. Before that however, I will hand over to my colleague.

Minister for Public Expenditure, National Development Plan Delivery and Reform (Deputy Paschal Donohoe)

I thank the Cathaoirleach, and I welcome the opportunity to be here this evening. The Minister, Deputy McGrath, has already acknowledged the importance of the SPU in our annual budgetary cycle. From an expenditure perspective, it allows us to take stock of the significant and continued investment in our day-to-day public services and infrastructure, and outlines, on a no policy change basis, the path for Government expenditure over the medium term.

The range of economic forecasts contained in the SPU demonstrates the strength of our economy and our labour market in particular. It reminds us of the resilience of our economy and society in the face of so many challenges in so many years. The challenges have included Covid-19, Brexit, the war in Ukraine and most recently, the increased cost of living experienced by so many in the past 12 months.

I am acutely aware of the challenges, particularly with regard to the cost of living, as well as the need to build more homes while continuing to improve our public services. Careful management of our economy and public finances has allowed Government to do the following things from an expenditure perspective. First, to provide increased resources for core public services by investing in quality of life in Ireland, and continuing to build and make progress towards a strong, fair and more equal society in the future. Second, to deliver significant and essential infrastructural projects through our national development plan, to support our employment prospects, economic development and regional growth. Third, we have put in place considerable supports to provide assistance to our people and businesses towards the external challenges which we face.

With regard to investment, €80 billion was spent on core public services in 2022. This provided additional supports through day-to-day services in both the health and childcare sectors and in our schools. Through the national development plan, NDP, it supported continued investment in capital infrastructure, that is, the projects that make a real difference to our lives: our hospitals, our homes, roads and schools. For this year, up to €91.1 billion in gross voted expenditure is available across Departments and agencies. This represents an increase of almost €24 billion since before the pandemic in 2019. Within this ceiling, €85.9 billion will be provided by way of core expenditure. This funding will continue our strategy of supporting our core public services and providing growing investment in infrastructure under our NDP.

With regard to the first quarter of this year, almost €20 billion was spent across Departments and agencies. This reflects an increase over the same period in 2022 of €900 million or 4.9%. This performance is in line with our budgetary plans, and we will ensure that spending stays in line with agreed parameters throughout 2023. This level of spending reflects the range of investments set out in budget 2023, including enhanced social protection programmes, more affordable childcare and supporting our public sector workforce to deliver services in our country.

Capital spending of €1.2 billion at the end of March was an increase of 34% in comparison to the same time a year ago. This shows the significant progress in the roll-out of the NDP. Last month, I announced a package of actions aimed at enhancing project delivery for the plan. These reforms underline my Department’s renewed focus on securing the delivery of better outcomes, through capital spending, for the people of our country. This plan is the largest, greenest and most ambitious infrastructural plan to date. My Department aims to be at the centre of supporting national development plan, NDP delivery, and making the ambitions contained within the plan a reality. Out to 2030, we are investing €165 billion in new and upgraded infrastructure to meet the needs of our growing population. In 2023, more than €12 billion is available from the Exchequer for investment in public capital projects.

It is important to recognise that the country has seen a step change in capital investment in a short period. I recall being in this room in 2017, when total Exchequer capital investment stood at €4.6 billion. It is now at approximately €12 billion. It will deliver the infrastructure that we need for the digital transition of our economy, and will aim to provide solution in supporting the implementation of Housing for All and the climate action plan. This investment, over so many years, will transform employment opportunities, economic development and regional growth to support our growing population through the provision of new homes, schools, roads and hospitals.

An Cathaoirleach Gníomhach (Deputy Ged Nash)

I might interrupt the Minister, as it may be in his own interest as well. A division has been called in the Dáil. I suggest that we suspend for a few moments to allow all of us to attend the vote, and return as soon as it concludes. Is that agreed to? Agreed.

Sitting suspended at 6 p.m. and resumed at 6.26 p.m.

Deputy Paschal Donohoe

The aftermath of the pandemic, the impact of the war in Ukraine, supply chain challenges and rising price pressures have all had such an impact on our public services, our households, our people and our businesses. We very much recognise these challenges and the Government has responded. Non-core spending allowed the Government to put in place measures towards mitigating these challenges. These include supports for our public services, in particular our health service, in dealing with the impact of Covid-19 throughout 2022; supports for our households, people and businesses to assist them in dealing with increased prices; and humanitarian supports to welcome and provide for those arriving to our shores from Ukraine. We have balanced the need to provide supports while, at the same time, ensuring budgetary policy remains sustainable. This is reflected in our quarter 1 spending. More than €400 million was spent on a range of supports, including accommodation, for people arriving from Ukraine.

The Government recognises the continued cost-of-living pressures faced by households. In February, we announced a further package of measures to be rolled out over the next few months. The package included €500 million of temporary and targeted expenditure measures, primarily related to social protection and education. Most of our most vulnerable will receive additional welfare payments this week to build on the supports provided in 2022. Where supports for these temporary challenges are still required, financial support continues to be provided though non-core expenditure and, in 2023, the overall expenditure ceiling for the year provides €5.2 billion in such non-core spending. However, it is important to note that non-core expenditure has decreased every year since 2020, as we removed the exceptional Covid supports when they were no longer needed. This has facilitated the return of our public finances to a surplus position and will continue to do so throughout 2023 and beyond.

In the medium term, we will look to deliver sustainable public finances. The Minister for Finance has described the surplus for this year and acknowledged the role of corporation tax receipts in delivering that surplus and, mindful of that, we have expenditure projections in the SPU that are based on a sustainable level of spending. These are also included in the model of the SPU on a technical, no policy change basis. The voted expenditure ceilings reflect the 5% growth rate anchor for core spending set out under the medium-term economic strategy. This strategy is based on aligning voted expenditure with the growth rate of our economy as measured by GNI* and aims to ensure a level of public spending that is sustainable, allowing us to provide consistent investment in delivering public services and infrastructure.

In setting expenditure parameters, however, the Government is aware that our fiscal strategy also needs to adapt to the evolving nature of our economy and society. This flexibility was reflected in our decision to increase the growth rate of public expenditure above 5% for budget 2023 to take account of higher than anticipated inflation and resulting cost-of-living pressures. The summer economic statement provides the key anchor for budgetary policy each year.

Over the coming months I will further consider our budgetary position, in collaboration with the Minister for Finance, in advance of the 2023 summer economic statement, which will then set out the expenditure parameters for budget 2024, taking into account the latest data available.

The careful management of our public finances, while responding to significant external challenges, has supported our economy in remaining resilient. We have to plan for the future and invest in digitalisation, decarbonisation and the future quality of life of those we serve. In the coming months I, with the Minister, Deputy McGrath, will consider how best to use budget 2024 to achieve those priorities.

An Cathaoirleach Gníomhach (Deputy Ged Nash)

Thank you, Ministers, for your respective overviews of the stability programme update. I now pass over to Deputy Doherty to begin with the questions.

Deputy Pearse Doherty

Tá fáilte roimh an dá Aire chuig an gcoiste. To pick up on that point about the spending rule the Government has adopted, this year core expenditure will increase by 7.4% compared with 2022. The Minister, Deputy Donohoe, says that is to do with cost-of-living pressures, but those pressures are outside of the core expenditure in the main. Is that not the case? That €5.2 billion package was non-core expenditure.

Deputy Paschal Donohoe

That is correct.

Deputy Pearse Doherty

What, then, is the Government's rationale for increasing core expenditure by 7.4%, which is about 50% higher than the rule it had?

Deputy Paschal Donohoe

That was done because, in conjunction with the Minister for Finance, we made the decision to move off the 5% expenditure rule for 2023 in recognition of the exceptional pressures we were facing and because the financing of the social welfare package, in particular, comes out of core expenditure rather than non-core expenditure. That led to the change in the level of planned expenditure for the year.

Deputy Pearse Doherty

Is it the Government's intention to stick to its 5% rule for next year in terms of core expenditure? Obviously, this rule does not include taxes, so there could be a package of €2 billion in terms of taxes and it would not include non-core expenditure, which last year was over €5 billion. In core expenditure terms, is the Government wedded to the 5%, even with inflation running at a significant level, about 5%?

Deputy Michael McGrath

I will take that question. That is a decision we will make in the context of the summer economic statement. We will give consideration over the coming months to the issues the Deputy has raised. As he will know, the 5% spending rule was predicated on an assumption of inflation at 2% and then a trend real growth rate of 3%. That is where the 5%, as the Deputy will know, has come from. We are not at 2% inflation. We will average, we believe, less than 5% this year and less than 2.5% next year. I would like to see another couple of months of data to make an assessment closer to the summer economic statement as to what is the appropriate budgetary stance. That said, the spending rule was a very important innovation. I think it has been widely supported by the Irish Fiscal Advisory Council and others as providing an anchor in respect of expenditure growth. Clearly, however, it was not appropriate last year in the context of inflation averaging 8%, having an assumption of 2% inflation. Of course, inflation also has an impact on many of the elements of core expenditure, the extra costs associated in providing public services and so on. That was why we decided on a departure for budget 2023. We have not made a decision yet, but for next year-----

Deputy Pearse Doherty

But there may be a departure again, and that will be outlined in the summer economic statement. Is that what the Minister is saying?

Deputy Michael McGrath

That is the position. We will make the position clear in the summer economic statement, but I would like to see another couple of months of data. While we are forecasting inflation to average 2.5% next year, it will not start the year at 2.5%. In the table in the SPU that set out the quarter-by-quarter pathway of our inflation forecast, 2.5% is the average.

Deputy Pearse Doherty

That is fair enough.

Deputy Michael McGrath

We will make an assessment in the coming months but we are not reaching a definitive conclusion now.

Deputy Pearse Doherty

As for the Government's view of non-core expenditure for next year, it is €700 million compared with €5.2 billion this year. Obviously, this year's expenditure was largely the support package for households in response to the cost-of-living pressures, but can the Ministers give us a breakdown of the €700 million in non-core expenditure? Is that the humanitarian supports in respect of Ukraine? Is it the Brexit adjustment fund? Has that number now gone down to that level?

Deputy Paschal Donohoe

I will get that information for the Deputy in one moment and I will be able to give him the breakdown of the €700 million. Of course, the 7.4% to which he referred earlier is our planned expenditure growth for 2023 versus the outturn for-----

Deputy Pearse Doherty

Yes. I am aware of that.

Deputy Paschal Donohoe

It is just worth emphasising that the planned core expenditure growth for the year is 5.9% so, looking at the figures we announced on budget day, it was planned growth of 5.9%. It is important to say that because it puts into context the scope of change versus the expenditure rule we had before the decision was made.

Deputy Pearse Doherty

Okay. It is a 7.4% increase compared with last year. That was the point. I do not think the Minister disputes that, but-----

Deputy Paschal Donohoe

To answer the Deputy's question about the €700 million, it is €500 million in Covid, mainly health, supports and €200 million for the national recovery and resilience plan, NRRP. There is no provision in it, obviously, for Ukraine, and the reason for that is that those non-core reserves were set before the outbreak of the war.

Deputy Pearse Doherty

When we look at the SPU table here, which details €5.2 billion last year, was any Ukraine money included in the €5.2 billion?

Deputy Paschal Donohoe

Yes, there was, and I will give the Deputy the breakdown.

Deputy Pearse Doherty

Why are we not including any Ukraine money in 2024?

Deputy Paschal Donohoe

Because this is done on a no-policy-change basis. The Minister for Finance has not yet made the decision on the overall expenditure ceiling, and we have some work to do before we get to that point. The Government, only prior to the SPU, had determined a non-core figure for 2023, and the non-core figure for 2023 of that €5.2 billion includes €1.6 billion for Ukraine and €1.5 billion for Covid.

Deputy Pearse Doherty

It is because the Government has not made a decision to continue to maintain Ukrainians' residency here that it has not just included the €1.6 billion.

Deputy Paschal Donohoe

We have made a decision to support the residency of those who come to our country fleeing a war. Having visited a number of centres in which these poor people are arriving in our country at the moment, I can assure the Deputy of our commitment to continue to do our best by them. The principle of the stability programme update, however, is that it is done on a no-policy-change basis, and we have yet to consider what the non-core figure for 2024 will be, given that we are obviously in 2023. Obviously, a key date or point in all this will be reaching a better view regarding the movement of people into our country for-----

Deputy Pearse Doherty

Will the summer-----

Deputy Paschal Donohoe

I am just trying to finish answering the Deputy's question.

Deputy Pearse Doherty

I know but I have-----

Deputy Paschal Donohoe

I was just concluding. We want to be clear and have a better understanding of the number of people who will be moving into our country next year. I think a few more months of data, as the Minister, Deputy McGrath, said just a moment ago, will help us in doing that.

Deputy Pearse Doherty

That is fine, but the Government has not provided anything for any of those tens of thousands who are already here for next year. That was the question I had.

May I ask the Minister, Deputy McGrath, a question-----

Deputy Paschal Donohoe

Just in case there is-----

Deputy Pearse Doherty

With respect, Chair, I am trying to put a question.

Deputy Paschal Donohoe

-----any inference in the Deputy's question that we were not going to do this-----

Deputy Pearse Doherty

I am not suggesting that. I am saying it is not provided.

Deputy Paschal Donohoe

-----I will remind the Deputy of what he already knows, which is that this is done on a no-policy-change basis.

Deputy Pearse Doherty

Chair, with respect, may I ask the question? Will the summer economic statement at that point have the non-core expenditure figure updated to include Ukraine?

Deputy Michael McGrath

Yes, because that will set out what we regard as reasonable budgetary parameters. This document does not set out the budget or even parameters for the budget. It is strictly on a no-policy-change basis, so we are not introducing new estimates on a policy basis of different numbers on the expenditure side, for example. We are updating the economic forecasts; we are not providing input into any changes on the policy side.

Deputy Pearse Doherty

I understand that.

Deputy Michael McGrath

The summer economic statement, however, will set out our estimate at that point in the summer of the budgetary stance.

Deputy Pearse Doherty

How much of the €4.3 billion increase in core expenditure next year compared with this year is comprised of demographics and existing levels of services, ELS?

Deputy Paschal Donohoe

I will get those figures for the Deputy now and come back to him on them.

Deputy Pearse Doherty

I appreciate that.

Regarding the corporation tax, can the Minister, Deputy McGrath, give us a timeline in respect of his proposal for a long-term savings vehicle? Regarding the numbers before us relating to expenditure for next year, €1 billion was announced yesterday and also €500 million was announced in terms of the tenant in situ scheme. Have they been factored into these numbers?

Deputy Michael McGrath

Regarding corporation tax, in the next couple of weeks I will publish a scoping paper that will set out our thinking on a long-term savings vehicle. It will be related to those windfall receipts that have been identified. The paper published by the Revenue today highlights not just the extraordinary growth in the receipts but the increasing concentration that I am sure the Deputy will have seen, with the top ten now accounting for 57% of corporate tax receipts, up from 53%. Corporate tax is now the second largest tax head and represents 27.5% of net tax receipts. It is a significant increase. There are growing receipts but, at the same time, there is increasing concentration. The intention is to bring forward a scoping paper in the next couple of weeks. There will have to be, ultimately, legislation to underpin a new fund-----

Deputy Pearse Doherty

Can I ask the Minister's thinking on-----

An Cathaoirleach Gníomhach (Deputy Ged Nash)

Sorry, the Deputy's time is well up now at this stage. I am sure he wants a response from the Minister, Deputy Donohoe, on his question on demographic pressures and how that has informed the stability programme update. I will then have to move on to the next contributor.

Deputy Paschal Donohoe

Out of the €4.3 billion of expenditure growth that is anticipated in 2024, approximately €2.5 billion of that is based on ELS.

Deputy John Lahart

The Ministers and their officials are very welcome. I wish to commend both Ministers. Given how we have emerged in very recent times from an economy that was almost completely shut in terms of people’s ability to go to work, but not in terms of economic activity, I would like to re-emphasise one of the starting figures. Growth in employment of 9% is a figure that is easy to glide over. Some 220,000 additional people at work is a very positive figure to report.

At this time of the year, the Ministers will know from previous budgetary oversight meetings that we would be looking at the themes that might be beginning to emerge in budget planning and budget preparation. Do they have any little insights that they can give us on what the drivers of budget 2024 are likely to be?

Deputy Michael McGrath

I concur with the Deputy’s point on the labour market. It is a remarkable performance across the economy. It is across a whole range of different sectors, which is heartening to see. Ireland is an attractive country for inward investment. We continue to perform exceptionally strongly. The foreign direct investment, FDI, base is gaining strength all the while and we are seeing more and more indigenous firms grow and become successful from an Irish base. It is certainly the case that, across a whole range of sectors, we are seeing quite a tight labour market and shortages of staff.

On the budget, it is early days. This is an important step on the road to the preparation of the budget. We will have the national economic dialogue again on 12 June, so that will be a further significant milestone, and then the summer economic statement, which will follow extensive engagement between the Minister, Deputy Donohoe, the party leaders, the Government generally and me. We value the input of this committee. We respect this process and that is why we gave the draft SPU early, as we had agreed at Government level. It was made available and it was published. The Parliamentary Budget Office had an opportunity to assess it and today issued a publication in that regard as well. Later this week, we will issue it to the European Commission, as we are required to do.

The economic backdrop will shape and determine the budget make-up; for example, where we will be come the autumn in the context of inflation, what the situation will be with the war in Ukraine, where we are on energy prices, where we are in terms of monetary policy and the impact that has, the cost-of-living pressures generally for households and businesses and the up-to-date data at that point in time. Protecting competitiveness will be a key factor for Ireland. That is where we have done particularly well. There will once again be a strong public capital programme that the Minister, Deputy Donohoe, can cover. There will certainly be a taxation package and a welfare package in the budget. We have given commitments in the programme for Government that we will be in the position to honour in respect of both of those areas. There will be continued improvements in public services in terms of efficiency and getting good value for money. There will be increasing capacity in areas such as healthcare and, of course, delivering on housing, which is a top priority for the Government in the context of the forthcoming budget, as it will be for the remainder of the life of this Government. That will be a top priority and that is why there were announcements such as the package that was made yesterday.

Deputy John Lahart

Have we a date for the budget?

Deputy Michael McGrath

It will take place on the second Tuesday in October.

Deputy John Lahart

In his statement, the Minister admits that excluding the impact of the receipts that cannot be explained by underlying economic conditions, which he estimates are at about €12 billion, we would have an underlying deficit of €1.8 billion projected for this year and accepts that this is "a better metric for assessing the resilience of our public finances". Would the Minister agree that it would be better, when we are publishing the public finances and the state of them on a regular basis – monthly, quarterly or whatever – to factor in what he said there? When we publish the receipts, it creates an enormous expectation in the public that this is money that is available for spending. However, this sounds like a realistic note that says when we factor that out, we are in deficit to the tune of close to €2 billion and this is a better metric for measuring it. That way, on the one hand, we raise expectations and, on the other, we are talking about a realistic assessment of the economy. In addition, the Minister talked about the indebtedness. We are at €224 billion. There is still a substantial debt to pay.

Deputy Michael McGrath

The receipts we are collecting constitute real money. We welcome that there is buoyancy in relation to corporation tax receipts but, at the same time, we cannot ignore the underlying trend. The growth has been truly extraordinary. In 2011, we collected about €4 billion. Last year it was €22.6 billion. This year we believe it will exceed €24 billion. When the officials in my Department prepare a paper de-risking the public finances in association with the Revenue Commissioners, they provide an estimate of what they believe to be windfall in nature. I have to take that on board. It would be a serious risk to the stability of the public finances if we were to use those potentially temporary receipts to make permanent expenditure commitments, so we will not be doing that. In both the fiscal monitor and the SPU, we publish the underlying general Government balance, excluding the windfall corporate tax receipts. Those data are published and are there for all to see. We are not saying that these receipts are going to fall away overnight. However, there is certainly a risk, given the windfall nature of these receipts. The Deputy will see we have made projections out to 2026 in the context of the fiscal horizon – I think it is on page 33 – and we are showing what we believe will be continued growth in corporation tax receipts over that period of time, although he will see it is largely flat between 2024 and 2025. That is when we believe that the impact of the OECD base erosion and profit shifting, BEPS, project will kick in. It all underlines the importance of being careful and cautious with these receipts. We do not believe they will last forever. We will have to put receipts away to meet costs that we know are coming our way. That is why setting up this long-term reserve fund is an important body of work that this Government and this Oireachtas need to complete.

Deputy John Lahart

Is that separate from the National Reserve Fund, into which there is €6 billion now?

Deputy Michael McGrath

The exact relationship between the existing fund and the new fund is one we will consider. One option would be to assimilate the existing reserve fund into the new fund but that detail is under consideration and will be the subject of discussion. However, it is a separate fund and it has a longer term focus and will be invested. The existing fund is administered by the National Treasury Management Agency, NTMA, and is invested typically in short-term Government bonds. It earns a very modest return but in real terms it loses value over time so there is need for a longer term fund that earns a return for the State to meet the cost that will come down the line. The exact investment criteria and drawdown criteria, the triggers for accessing the fund, are matters that will be the subject of discussion and the Oireachtas will have a key input into that because it will require primary legislation.

Deputy John Lahart

I have two final questions. One is for the Minister for Finance, Deputy Michael McGrath, and I am not forgetting the Minister for Public Expenditure, National Development Plan Delivery and Reform, Deputy Donohoe. The Minister will publish a scoping paper and I get that. Would there be a fixed proportion of the windfall on an annual basis or would it be decided on an annual basis depending on what the revenues would be? My question to the Minister with responsibility for public expenditure, Deputy Donohoe, is what challenges does he see in his portfolio as we approach the budget. Where will his priorities be for budget 2024?

An Cathaoirleach Gníomhach (Deputy Ged Nash)

I am conscious a vote was called in the Dáil around three minutes ago.

Deputy Michael McGrath

I will be very brief. The scoping paper we will publish will set out different scenarios for options and we will have to determine how much is transferred into the fund over time. That will be dealt with at a high level in the scoping paper that is about to be published.

Deputy Paschal Donohoe

Managing spending demands in the context of a surplus, and putting in place public spending plans for next year that can help the vulnerable and at the same time avoid contributing to our economy overheating-----

An Cathaoirleach Gníomhach (Deputy Ged Nash)

I will adjourn the meeting until after the Dáil vote.

Sitting suspended at 6.52 p.m. and resumed at 7.17 p.m.

An Cathaoirleach Gníomhach (Deputy Ged Nash)

We will go back into public session. There is no Fine Gael member available for the next slot so I will move on to Deputy Boyd Barrett.

Deputy Richard Boyd Barrett

I thank the Ministers and their teams for their contributions. The big thing people are thinking about at the moment is the surpluses the Government has announced and what might be done with them. The Minister said it would not be prudent, given the underlying deficit when we take out the windfall profits, to rely on revenues that may be vulnerable to significant changes in the future. That is not an unreasonable position but is it not the case that if the Government were to spend the surplus in a way that would not require ongoing current expenditure, and that might actually save ongoing current expenditure in the medium to long term, it would then be very prudent to ramp up our investment in a number of key strategic areas? Doing so would put us in a better position and reduce our vulnerability in the future, rather than putting the surplus in a piggy bank of one sort or another.

I would be interested to know a little bit about the piggy bank and what that is going to do with the money. Money is always invested somewhere. If we do not decide where it is invested, who will and what will it be invested in? It seems to be that it would be better for us to make the decisions and to invest it in ways that strengthen the resilience of our economy in the medium to long term and deal with some of the big problems and demands that we have. I want to tease that out a bit with the Minister. To give a few examples, we need a massive retrofit programme in this country.

We need to increase the grants we give to people. At the moment, people on lower and even modest incomes are far less likely to invest in retrofitting their homes because they cannot bridge the gap between the grants available and the cost of retrofitting. The better-off can afford it, take the grants and retrofit their homes. The gap is too big for people on low and modest incomes. Would it not be a sensible investment to increase grants massively for people on low and middle incomes to retrofit their homes, as there would be big savings down the line? For example, we could give big grants to people for solar panels, which will reduce their energy use, have a climate spin-off and reduce energy imports and usage generally. Currently, the pace of retrofit is very slow and it is generally the better-off who can afford it.

Another example is capital investment in public transport. There is a huge deficit in rural Ireland in public transport and we know we probably need to electrify the entire bus fleet. These types of capital investment will pay dividends down the road in climate and avoiding possible fines if we do not meet climate targets. These measures could massively improve our medium to long-term situation. Forestry is another example. Big investment is needed in the sector, which would pay off in the long term, again avoiding possible fines if we do not meet biodiversity or climate targets. We must invest in a new forestry model and use that money to increase dramatically our very poor afforestation levels. That would be good expenditure now that would not make us vulnerable because we can spend it now and if we do not have it in the future, it is not as much of a problem.

The big one is housing. All roads lead back to the housing crisis. Staff cannot be retained in many key areas. People are leaving the health service and the trades - I do not need to tell the Minister - because we do not have the housing. It is causing huge hardship for all those impacted. Is it not fair to say that for every extra publicly-owned house, we would save money in the medium to long term? It would save the current expenditure on the rental accommodation scheme, RAS, housing assistance payment, HAP, and leasing costs, which are pretty big, at approximately €1 billion a year. Although we need those schemes now, we could eliminate that current expenditure, which is set to increase, by increasing public housing stock through up-front purchases and allocating money in advance for ramped-up social and affordable housing targets. In any event, even according to the Minister's figures, the targets are inadequate to meet housing demand over the next period. Can we not ramp up the building targets and water infrastructure services needed on a lot of public land which is not being serviced at the moment? In my area, there is a lot of publicly-owned land that is not even planned to be serviced before the end of Housing for All. That would be capital investment, spending the surplus, but would pay dividends in the medium to long term and would not make us vulnerable; in fact, it would increase our resilience and deal with acute crises in housing. I would like to hear the Minister's response to that.

Deputy Bernard Durkan took the Chair.

Deputy Michael McGrath

Much has been written about forecasts in the last week or so. Large surpluses of €65 billion are forecast for between this year and the following three years. They are only forecasts; it is not money we have now but represents the central scenario and the current best estimate by officials in the Department of what is likely to happen. Additional demands may arise. We discussed non-core expenditure earlier, for example, making provision for people from Ukraine who came to Ireland. Whatever way one looks at it, if these figures materialise, they are very large sums of money. Who would have thought just a few years ago that Ireland would be in this position? It is a very good news story and a credit to the careful management of finances in recent years, the strength of the economy, the foreign direct investment, FDI, sector, the Irish people, private enterprise and so on.

We need to be very careful in the decisions we make. Major costs are coming down the line, which are unavoidable. Every independent report has pointed to the demographic and age-related costs we know are coming. We estimate that by the end of this decade, on a standstill basis, it will cost €7 billion to €8 billion more than it did at the beginning of the decade to provide services because of age-related pressures. Those are real costs that need to be met. The national debt is also very large. The figures are available in Table 1 - at the end of last year, it was €225 billion. The cost of servicing it is manageable now but as those bonds mature, they will inevitably be re-financed at higher rates unless we pay them down with cash reserves. I do not want a situation in which we use more and more of the taxes we collect from people - their hard-earned money - to pay interest on the national debt. I think it would be a waste of money. That also has to be taken into account.

The Deputy made some valid points about the public capital programme. There have been underspends in the last few years, which the Minister, Deputy Donohoe, will speak about. Covid is one factor behind that but it is not the only one. There are also capacity constraints, which is why we are reforming the planning system and trying to make the overall system more efficient. The Minster introduced changes to the approval process in respect of major capital projects, which I hope will also help. We must ensure that we get value for money at all times, which is always a key consideration. There are constraints in that regard, which we must acknowledge. The Deputy provided several examples such as retrofitting, public transport, forestry, housing and putting in place services to facilitate housing, all of which are noble things we are already aspiring to and have large budgets to do. In the coming weeks, I will discuss with the Minister his work to manage the capital budget. I did that job of managing expenditure for two and a half years; it is really difficult. Colleagues always have lots of ambitions and projects they want to advance. We will discuss the management of the capital budget and what is an appropriate level over the next few years.

In the main, we must put these resources away for costs we know are coming our way. They are definite costs that will hit Ireland and will either be paid for through resources we put away or paid for down the line by people paying taxes at that time. We decided as a Government to keep the pension age as it is, which will come at a major cost. This will not fully offset that cost; other changes are still be needed to meet those age-related costs such as the cost of healthcare, homecare, pension provision and so on. The Deputy made several points about capital expenditure, which the Minister, Deputy Donohoe, and I will discuss over the next few weeks in the context of the summer economic statement, when we will lay out our budgetary strategy for the next 12 months.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

I call Deputy Nash. Is Deputy Boyd Barrett not finished? Sorry about that.

Deputy Richard Boyd Barrett

Do I have a bit more time or not?

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

The clock on the wall says zero.

Deputy Richard Boyd Barrett

If I am out of time, I am out of time.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

That is the way it is.

Deputy Richard Boyd Barrett

I am just asking if I am or am not out of time.

Deputy Paschal Donohoe

I would like to make a few points about what Deputy Boyd Barrett said. I agree with every word the Minister, Deputy McGrath, just said. Capital expenditure is also recurring. I have noticed a new concept of non-recurring capital expenditure come in over last the week. I have rarely come across examples in which you can decrease capital expenditure easily. It is important to keep in mind that it is not just current when we are having a discussion regarding dated, recurring spending.

The second point I make to the Deputy is that we had to cut capital expenditure when receipts that turned out not to be reliable fell the last time, in the global financial crisis . In many ways, it was that decrease in capital expenditure over a prolonged period, which was done in an effort to avoid even harder choices in current expenditure, that set the background for the challenges we have now, especially with regard to housing for a growing population. I understand the Deputy's analysis is based on a differentiation between capital and current expenditure. As the Minister for Finance said a moment ago, I can see the value in investing in our future. I agree with the Deputy on those aims. I simply want to stress that capital expenditure also needs to be paid for from day-to-day receipts. As I said, we have learned from the last time what happens when we get that equation wrong. In my years of working with the Minister, Deputy Michael McGrath, and of doing his role in the last Government, I know it is hard to cut capital expenditure.

Deputy Richard Boyd Barrett

I was just saying-----

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

To be fair to other speakers, I will bring you in again.

Deputy Ged Nash

My first point does not relate to the growth in tax revenue that is anticipated for the next few years, but to something that struck me when I was reading the SPU last week. It was confirmed by the Parliamentary Budget Office, PBO, yesterday in its presentation to members of the committee. The SPU, PBO and others forecast that certain tax heads would be revised downwards this year. I would be interested in understanding the dynamic of that. For example, it is estimated that stamp duty will decline by €555 million and excise duty by €480 million. I understand why the gain and receipts from excise duty would be less given the measures introduced by the Government in policy changes on excise duty on fuel and so on. However, I would be interested in why the forecast on stamp duty has changed so significantly.

Deputy Michael McGrath

I thank Deputy Nash. The answer is that there was a significant one-off transaction in stamp duty in 2022. That has affected the baseline position. As the Deputy stated, the changes in excise are a function of the policy choices and transactions we have made to those taxes.

Deputy Ged Nash

What was the one-off transaction?

Deputy Michael McGrath

We do not get into individual transactions.

Deputy Ged Nash

It is significant.

Deputy Michael McGrath

I also do not have the detail of individual transactions, nor should I have.

Deputy Ged Nash

It was one transaction. I understand.

Deputy Michael McGrath

It was a small number of one-off transactions that combined to have a material impact.

Deputy Ged Nash

It is significant.

The national recovery and resilience plan, NRRP, was mentioned earlier. I recall that a few short months ago, significant sums of money had not been drawn down. Will the Minister establish for the committee how much has now been drawn from that fund from the European authorities?

Deputy Paschal Donohoe

If the Deputy bears with me for one moment, I will give him the figures he is looking for. We are in the process of progressing the first payment request for it which is to the value of €395 million out of a total sum of €915 million. To the best of my knowledge - I will be corrected if I am wrong as the meeting goes on - funding has not actually been received but the Commission is processing the request for payment.

Deputy Ged Nash

With respect to the concept of the national reserve fund, the committee has agreed to carry out a schedule of work analysing the optimum model that might be adopted. We are doing so in the spirit of trying to be helpful and co-operative with the Ministers in designing that innovation. It will be an important initiative for the reasons the Minister, Deputy Donohoe, pointed out, to provide us with the opportunity to make investments on a counter-cyclical basis if and when the economy experiences a downturn. We are still living with the consequences of some of the difficult decisions we had to make a number of years ago due to the economic and fiscal position of the country. Do the Ministers have any particular model in mind for the design of that innovation? For example, we are all familiar with the initiative taken in Norway a few years ago as regards what it did with what might be described as windfall revenues from its oil industry. Is that a model the Ministers are looking at?

Deputy Michael McGrath

The scoping paper we will publish shortly will look at a number of international models. I acknowledge what the Deputy said about being constructive and I value the work of the committee. This is important work for the committee to undertake as it is a significant decision and will have a major impact. We have yet to decide on the detail of the investment strategy. It very much depends on the risk appetite. A diversified portfolio of assets will be needed. We will look back at what happened with investments and how investments were managed under the old National Pensions Reserve Fund. We will look at a number of international models. The Deputy cited Norway. Canada, Australia and other jurisdictions have done different things and our circumstances are different. Broad political agreement that this is the right thing to do would be a good starting point. The argument needs to be made. I think it stands up to scrutiny because of the challenges we know we will face. The demographic train is coming at us in the years ahead. The costs are real. We must provide for them. As I said last week, we are in something of a sweet spot at the moment as regards the public finances. It may not last indefinitely and we must make the best use of it. I value the input of the committee over the weeks and months ahead.

Deputy Ged Nash

I think the case can be made for a fund of that nature. The principle of that fund can garner a degree of political consensus given the position we are in and the opportunities this fund will present to do things we always wanted to do and never had the opportunity to do. It will provide us with the opportunity to future proof our economy and society. Much of the reason we are in a position to do that is the generation of substantial receipts from corporation tax. It is not only corporation tax receipts, but they are a significant portion of the significant revenues that are being generated at the moment.

I assume the forecasts in the SPU are based on us fully embracing pillars 1 and 2 of the OECD process. Am I correct in saying that pillar 2, which is for want of a better description the 15% corporation tax rate, will go live on 1 January 2024? I have a question about corporation tax forecasts. For number of years now, we have been hearing from the Department of Finance that around this time or perhaps next year, we will be €2 billion worse off as regards corporation tax receipts because of the impact of pillars 1 and 2. That has changed significantly. With due respect - there are a lot of variables - that forecast has proven quite roundly to be incorrect.

Can we have confidence in the forecast and the extrapolation from the Department of Finance about where we are going in terms of corporation tax, given all the variables that are at play? Is this just the Minister's best guess? If it is his best guess, would we be advised to take independent advice even outside of the Irish Fiscal Advisory Council's forecasts about where corporation tax receipts are going?

Deputy Michael McGrath

On the investment strategy of a fund that we would set up, I do not believe it would make sense to invest it all in one economy, that would be taking on too much risk. It would need to be diversified. We will have ample opportunity to discuss the detail of that. On corporation tax, we have factored in that €2 billion hit in 2025. It remains the current estimate of the Department of Finance of the combined impact of pillar 1 and pillar 2. That estimate was calculated back in 2020 and a lot has changed since. It has not been possible to update that estimate at this point because many of the design features remain outstanding, particularly in respect of pillar 1. The hit could be significantly greater than that figure but we cannot stand over an estimate until further significant design work is done in respect of pillar 1. Ireland is very much involved in those discussions. The Minister, Deputy Donohoe, did an enormous amount of work in his previous role as Minister for Finance over recent years in securing what I believe was a very good deal for Ireland. We are seeing the benefits of that now and I believe we will into the future.

Pillar 2 will be enacted in the Finance Bill in the autumn. It will come into effect on 1 January 2024. It is going to add enormously to the body of work that we have in the consideration of the Finance Bill, at least an additional 100 pages of legal text for the transposition of pillar 2, the EU minimum tax directive. That is where we are at on that.

Deputy Michael Healy-Rae

I warmly welcome the Ministers and their officials and thank them for their contributions so far. I will try to be as brief and concise as I can. I was listening attentively and I am very sorry as this is my fault. I am failing to grasp something with regard to the no policy change - I am speaking about the portion of money that is going to be put aside to deal with the whole Ukrainian issue. Has that money been decided, put aside, or what is the situation with it? I really apologise, it is my fault if I did not pick it up right but I would like the Minister to clarify that if he can allow me that indulgence.

Like everybody else I am delighted and find it remarkable that we are going to live to see the improved financial situation that we have. Of course, with that comes enormous responsibility on the Ministers, their colleagues, on all of us and on the officials to try to do the right thing with regard to the future and with excess receipts that we might have. It reminds me of a very famous individual who was asked one time what should people do when they find themselves in a situation like this. I heard the Minister, Deputy Michael McGrath speaking about the national debt. I really have to wonder if we would be serving the people well. Every one of us wants to spend the money. We want to see the money being spent on housing, infrastructure, health and all of those things. However, we have to also be prudent. We were all brought up to save for a rainy day and to think of a rainy day. If you have a good day today, you have to remember you might have a bad day tomorrow, or a bad week or month, and you might have nothing coming in, especially when you are self-employed and you really have to try to balance for the future. If a person comes into money and if they are only budgeting in their own house, the first thing they should do is look at the expensive things like credit card debt. Would they really be serving themselves better, rather than trying to save the money they have or do something with it, to actually cut down on the expenditure that they have? I heard the Minister say that the national debt was manageable but I wonder should we be looking at trying to reduce it. Is it serving the public, the people we are there to work for and represent, that we would try to combine that with the core spending that we have to do to keep the wheels of commerce and the business of running Ireland up to date?

When it comes to the whole housing issue, I was accused the other day of not declaring an interest so I want to declare an interest in that, the same as in farming or anything else. I would have to say that I am very fearful for the future of the private rented market when I hear debates going on in the Dáil like earlier today. Suggestions were being made that would actually hunt whatever is left in the private market out of it. When we are talking about building houses for the future, public housing, which we want to see more and more of, at this meeting and every meeting I go to and every public forum, I will ask in the honour of decency if the politicians in Dáil Éireann who are objecting to housing projects will stop that. If they do not stop, if the people who are decision-makers in Dáil Éireann are making serial objectors of themselves, it will be very hard for us to house people. I have to get that point across.

When it comes to securing the future finances of the country we have to look at what happened today. Young people marched for 15 hours to come to Government Buildings to hand in a letter with eight points. I am referring to Macra na Feirme. They are the young taxpayers we want to have involved in farming, who we want to serve. One of the main things they are looking at is a retirement package for farmers. Anyone who was in elected office 20 years ago will remember that we had two schemes then in farming. One was to help older farmers to retire and it was financially beneficial for them to do so. Then there was a good package for younger farmers to come into farming. At both ends, getting out and getting in, it was financially attractive. Right now it is not. We do not have anything meaningful enough to encourage the older farmers to retire. I am not talking about people who are really old but those from their mid-50s onwards who might be thinking about passing over to the younger generation. The younger we can get people into farming, the better possibility we have of them staying at it. Those young people who came up today are representative of young people up and down the length and breadth of the country. I would really like to see us doing more to encourage them to stay in farming.

On the corporate tax receipts, I heard a Deputy making a comment the other day about data centres, suggesting that we should not have any more of them. Fair dues to the interviewer, who asked the Deputy about the tech jobs. The answer was, "What about them?" I want to say about the tech jobs that, like the Ministers, I appreciate the foreign investment that we have here. I appreciate the tech jobs and the massive financial benefit they are to our country. I welcome them and would welcome more of them. When I hear that sort of irresponsibility coming from certain sectors of Dáil Éireann it makes me worry as to what is going on inside in some people's heads when they have such a hatred of people who come here to create wealth, jobs and employment and to make a profit for those companies. I said it the other day and I will say it again. There is nothing wrong with anybody, any entity or group of people wanting to make a profit. There is nothing wrong with it. If they pay their taxes, it is a perfectly healthy and sensible thing for any person, group or company to aspire to do, to wash their face, make a profit, grow and continue to create employment. I say this just in case any people involved in tech jobs think they are not welcome because of a statement by one Deputy the other day.

I suppose we will always have one person making such a statement, or, in our case in the Dáil, a few. Many of them are serial objectors.

I thank the Ministers for the work they are doing and I do so in a very personal way. We might often have our disagreements about political goings-on but everybody knows the Ministers are always trying to serve the best interest of the people. Now, more than ever, when our economy is turning what we will call a good corner, we need to have people working with them, their officials and Departments, not against them. They will want people to make sensible suggestions. We hope they will take those suggestions on board, be they on infrastructure or other matters. If through capital investment we can improve our roads, bridges and accessibility, help rural areas and spend more money on those areas, we will help to keep people there. That is the type of work we want. We want to see an Ireland improving all the time, with no one left behind. We want to create a genuine environment of work in which work is rewarded. It is a sensitive matter because – there are certain sectors that would not like to hear this – if we are taxing certain people out of business because they are being charged at a rate of 56% to provide services, we really have to start thinking about how sensible it is. I am, of course, referring to the mass exodus at present from the private rental market. There are 80,000 fewer private residential tenancies compared to ten years ago. A very simple sum indicates 350,000 people who would have been housed through private rental tenancies are not today. That is a very startling figure. It is no wonder that the housing crisis is where it is, with the continuous berating, belittlement and harassment of people involved in the sector. I certainly do not agree with going after Airbnb properties. It will prove to be folly in the future. Anybody in the Government who believes 12,000 people can be made to change from renting in the short term to renting in the long term needs to reflect on it. Eighty percent of people surveyed recently said they will not be forced to do so.

Deputy Michael McGrath

I thank the Deputy. There was a lot there and we will not be able to cover all of it, but maybe I will touch on the national debt, corporation tax and the rental market and the Minister for Public Expenditure, National Development Plan Delivery and Reform, Deputy Donohoe, might touch on the Ukraine issue and the making of provision in that regard. The Deputy spoke quite a bit about housing and farming.

The Deputy made a good point on the national debt. We are spending approximately €3.5 billion servicing it. It is interest that we are paying at the moment. While the average interest rate across the portfolio is 1.5%, much of the funding to which it relates was borrowed at a time of historic low interest rates. We know what has happened in recent times. When the debts mature and fall due, the Government will either pay them down or refinance them. If we refinance, it will be at a higher rate, meaning the interest bill will rise, so reducing the national debt is genuinely attractive. There might not be many votes in it but it is the right thing to do. It future-proofs the public finances for the years ahead and helps generations to come in that as little as possible of their tax will go towards servicing the national debt built up in our time.

The Deputy made some good points on corporation tax. For his information, according to data the Revenue Commissioners published today, we collected €22.6 billion last year in corporate tax. Just over €10 billion of that came from manufacturing, with about half of that €10 billion coming from the pharmaceutical and chemicals sectors and about €3.8 billion from ICT manufacturing, at the hardware end. Four billion euro of the €22.6 billion came from the information and communications sector, which, broadly speaking, is the tech sector and includes software development. This points to a very significant contribution to the overall corporate tax take in Ireland last year, and that has to be acknowledged. There is a wealth of information in the data published today by the Revenue Commissioners, and it is well worth considering.

I will comment briefly on the rental market. The Deputy has put on the record his own interest in the area. That is no secret and he declares it in his returns every year. We want landlords to stay in the market. We are aware that too many are leaving. They have an important role to play in the provision of accommodation. I have given a commitment that the budget will have measures to help retain existing investment in the sector and also attract new investment. I will not go into any detail on that, as the Deputy will expect. I am not going to act sooner than the budget because the matter involves careful design work and I need to get it right and then ensure there are no unintended consequences. We have seen too many landlords leave the market. The commitment I have made is one I am happy to make because it is important to signal to landlords that we want them to stay and others interested in investing in the sector to provide accommodation for tenants to look on doing so favourably. I will do the best I can within the constraints that always exist, to try to make it more attractive to stay in the sector or enter it in the first instance.

Deputy Michael Healy-Rae

I thank the Minister.

Deputy Paschal Donohoe

I thank the Deputy for all his questions. I will make just three points in response. The way in which the stability programme update is framed is such that it makes no new policy decisions. If policy decisions were made in the document in front of the Deputy, it would, particularly from my point of view, result in mass negotiation with other Departments that want to secure a claim to funding before the budget. This is why the budget represents the only point in the year in which decisions are made on allocations for the following year.

To go back to the Deputy’s point on the reserves, non-core expenditure is all about identifying what we are spending money on that we hope we will not be spending on permanently. Core expenditure, however, involves money we expect to continue to spend in the future, and that is why we have a non-core allocation for this year. However, we have not changed the non-core allocation for next year because that entails a decision we will make in the budget. The figure stands at €700 million for 2024 because the Government has not yet made a decision on how much more money will be needed to meet the various commitments the Deputy is aware of.

The Deputy made a wide contribution. He is one of the few Deputies I have heard since the Minister for Finance published the surplus figures last week who has acknowledged the difficulties we have owing to a high debt. I will not develop any further what the Minister for Finance, Deputy Michael McGrath, has said, apart from saying that if people look back in a decade on this period of surpluses and this generation of politicians, focusing on the Government before the Opposition since the former must ultimately make the decisions, and see we made no attempt to reduce our national debt, their verdict on us will be pretty demanding and severe. In essence, we will have passed on to them a debt that will have reduced their ability to make choices.

I am as aware as anyone in this room of the challenges we all have, day by day, but I want to go back again to the point made by the Minister for Finance with regard to a high level of debt and what that means. Finally, I will make an observation on the whole corporate tax base and I will do so briefly because it will then be dealt with by the Minister for Finance.

Corporate tax receipts and their level are driven by our engagement with global capitalism. I cannot help but be struck by the fact that some of those who are most eager to spend the additional corporate tax receipts that are coming in are most committed to overthrowing global capitalism. There is a severe inconsistency in this. I say this with due regard to my good colleague, Deputy Boyd Barrett. The Deputy will be aware that I do not agree too much with his views on economic policy but he knows that I have the height of respect for him. I am really struck by the irony, however, that he and his sisters and brothers in the socialist movement want to overthrow the form of capitalism that in turn is contributing to the corporate tax receipts we have and which he wants to spend.

Deputy Michael Healy-Rae

I thank the Ministers. I appreciate their contributions very much.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

I thank the Minister and the Deputy. I call Deputy Seán Canney.

Deputy Seán Canney

It is an enlightening discussion. It could go on all night. I thank both Ministers for being here.

Deputy Paschal Donohoe

We would have to consider the level of enlightenment then.

Deputy Seán Canney

I thank the Minister for his forthright comments. The biggest issue I see with all of this goes back to what Deputy Healy-Rae said about being at home in your own house with your own finances and how you deal with them, and if a person wins a few pound in the local club lotto, what he or she does with that. We have a situation here where we can end up, if look back from the future, as credible people who looked after the country, or we could be looked at as the people who squandered.

With regard to keeping the balance right and to keep the political balance right so that we are actually making the right decisions for now and for the future, and having listened to what has been said here today, the thing that would be of most interest to me is the National Reserve Fund and what model it might take. It is about where we put the money if we are going to mind it, the mechanisms by which it is withdrawn, and what the triggers are that would allow us to take out the money again.

I agree wholeheartedly that we need to write down some of our debt as we go along. It is important that we do not end up saying, "That this is for somebody else to deal with". The narrative around the excess we have, which is an increase in the tax take from the pharmaceutical and tech industries and so on, which is a windfall tax, is creating a sense that we are awash with money that we can do what we like with. Coming back to the issue of housing, which is an area I am comfortable talking about, one of the biggest challenges is not the money at the moment, it is actually the capacity to build out the houses.

In that regard the Minister, Deputy Donohoe, has responsibility for the NDP. I had a discussion earlier with one of the guys from Macra na Feirme, who was president of that organisation back in 1978 and 1979. He was saying how circumstances have changed. One of the issues he commented on, which I have also always commented on, is that we have managed to create a huge paper trail industry, which is actually the speed at which we can get things done. We are spending a lot of money on doing a lot of things that perhaps we do not need to do. They seem to be the right processes and we do not ever say that we will take a process out of the way. We kind of defer it and say we need to look after the way we spend the money when actually we are spending an awfully long time trying to get projects from inception to construction. That timeline is costing money with no return. I would like the Ministers' comments on this. If we do anything from a budgetary point of view, we could take our public procurement, and all that goes with that, and turn that on its head. I do not believe that at this stage the procurement we are using is delivering value for money. We are not taking into account the cost and the huge amount spent on consultants and whatever else to try to meet the paperwork that is required. That money would be better spent in a practical way in getting things done still have value for money. With housing, we could speed up that process a lot more if we took a lot of the gateway approvals out of the process and let the local authorities do their business, albeit with a check and balance on it but not to the extent that we have now. It is delaying up to five years getting a project running from the time we buy or procure the land and service the land until we actually get a contractor on it. Hidden costs have been built into the system that need to be taken out of it.

Coming from rural Ireland, I would love to say to the Ministers that I want them to build the western rail corridor starting tomorrow and Deputy Rose Conway-Walsh will agree with me. I want them to do many more things in the west. For balanced development in this country, we need to look at the report that came from the EU Commission that says the north and west of Ireland, which are regionally similar areas, are actually very low down in the pecking order in the context of growth and competitive index. A task force with teeth should be set up to rebalance economic development in the State, and to make sure we are positively discriminating towards these areas that are lower down the pecking order. I agree that a lot of things are being done, but there is a lot more to be done. We should take that EU Commission report and embrace it, and try to extract more money from EU Structural Funds, where we can now go for 60% rather than 40% because we are a lagging region. We should take advantage of that. It is no criticism of any Government that we should try to capitalise on the way we have been described and designated right now. It is an opportunity. Perhaps I could have the Ministers' comments on all of that.

Deputy Paschal Donohoe

I thank the Deputy for his points. I will just deal with the expenditure matters he covered and the Minister for Finance will address some of the broader economic issues he touched on.

From a spending point of view, the Government agreed to a number of proposals I brought to Cabinet a few weeks ago trying to make progress on some of the matters he referred to. In particular, we have changed the threshold at which the valuation and the cost-benefit analysis work takes place. We have increased the threshold on that so we are focusing more of our work on projects that have a higher value. It was originally set at €100 million but with inflation, the number of projects that have crossed that €100 million threshold has increased. We have now moved the threshold to €200 million. For projects that are below €200 million we have allowed Departments to make more of the decisions themselves on those projects, as opposed to the very high level of evaluation that goes on for the larger projects. We have done this because at a time of high inflation, as the Deputy said, for every month that goes by, the cost of a project is going up while our expenditure ceilings are, by and large, fixed.

The second change that has happened is to try to give Departments themselves more of the responsibility in this regard. They now need to come to us to confirm that the public spending code has been adhered to and confirmed. We have put more of the responsibility with Accounting Officers in Departments to do this, and we have also decreased the number of decision points on some projects from five to three.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

Perhaps the Minister will conclude as we will have to suspend and come back.

Deputy Paschal Donohoe

I will leave it at that. I will take the Deputy's point points on board. We have made a number of changes in procurement and in particular to the public spending code to try to deal with the matters he raised.

I can conclude my comments at that.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

I thank the Minister. I am sorry for the interruption. We will have to come back to it and hear more from everybody then.

Sitting suspended at 8.10 p.m. and resumed at 8.37 p.m.

Deputy Michael McGrath

I will add to what the Minister for Finance said. He spoke about the overall position we are in with regard to receipts and surpluses. The truth is that other countries all over the world would look at the position we are in with envy. It underlines the importance of us making the right decisions for our people now and in the future. Wherever the Minister, other Government colleagues and I travel abroad, IDA Ireland and Enterprise Ireland always have a series of meetings lined up for us to meet target clients and to help Irish companies to build new connections and open new market opportunities. That is the kind of work that we will continue to do because we know it makes a real difference to our country and our economic performance.

I acknowledge the Deputy's points about the north-west region. We are deeply committed as a Government to achieving a better balance in overall regional development. We recognise its importance. We have seen population growth in every part of Ireland and all parts of the regions in the past number of years. That looks set to continue. Our investment in the national broadband plan is opening significant opportunities and providing connectivity and remote working hubs in towns and villages all over Ireland. We have major investment in urban centres through the urban regeneration and development fund, we have the rural regeneration and development fund, town and village renewal scheme and many more capital investment projects through the NDP that the Minister, Deputy Donohoe, is implementing. Those agencies, IDA Ireland and Enterprise Ireland, have specific plans and strategies to assist the north-west region to meet its economic potential. I acknowledge the points the Deputy made. I reassure him of the Government's full support to achieve the objective that he has set out. We will continue to work with him in that regard.

Deputy Rose Conway-Walsh

I thank the Ministers for their presentation.

There is consensus about how things need to be managed, going forward, and the responsibilities that brings. I want to check one figure in respect of the core year-on-year increase. If there is €4.3 billion, of which €2.5 billion is already spent in terms of demographics, that leaves only €1.8 billion for core spending.

Deputy Paschal Donohoe

I thank the Deputy. As the definition of "core spending" is the day-to-day spending that we expect to continue into the future, existing level of spending, ELS, is part of core spending. It is the part of our spending we can be most certain will recur into the future. That ELS figure is part of the definition of "core spending".

Deputy Rose Conway-Walsh

That amount is already set aside so are we looking at €1.8 billion in discretionary core spending?

Deputy Paschal Donohoe

That is the case. As we prepare for the summer economic statement, we must be aware that there may be spillover consequences of decisions the Government made last year. Decisions the Government has made this year will spill over into next year. That may further reduce that so-called discretionary figure. The key point the Deputy is making is that a large share of that funding is already spoken for in ELS and that is correct.

Deputy Rose Conway-Walsh

That was what I was thinking about in terms of people's expectations of the budget. I am glad we had a discussion of the National Reserve Fund and I look forward to the scoping paper in that regard. There is an awful lot to be learned from the Norwegian model in terms of how it has evolved. Norway has set out the mistakes it made along the way and we can learn from those international experiences.

Further and higher education was my former portfolio. There is a reserve fund of €1 billion, which will be €1.5 billion by the end of 2023. One of our major challenges relates to our labour force and how we meet the needs in that regard. We could not get to how that money could be spent. The fund was not meant as a rainy day fund. It was paid into by employers and was meant to support upskilling and education. What are the technical problems that do not allow that money to be spent? How come we have so much need, in one sense, in further and higher education, and a gap of €307 million?

Deputy Paschal Donohoe

I thank the Deputy. I will make a brief point in response to what she said about ELS. Such funding will still deliver decisions on budget day that are part of the budget day package. To give a concrete example, there are hiring decisions that need to happen in our public service due to demographics, including, for example, the number of teachers. That will lead to the announcement by the Minister for Education, Deputy Foley, of the hiring of more teachers.

The Deputy asked about the National Training Fund. I am aware of the surplus and the debate that is under way in that regard. The core reason that surplus does not yield new or additional spending is that regardless of how the expenditure is funded, it is still defined as normal government expenditure and is, therefore, subject to the Government's spending rules. It is also, of course, subject to the overall budget rules for the European Union. The key constraint is our own decision that it is part of the 5%. That is the key reason. Even though funding for training does come out of the National Training Fund, because it leads to expenditure, it is normal government expenditure and is, therefore, accounted for in the 5% rule.

Deputy Rose Conway-Walsh

The surplus in the National Training Fund will, therefore, just keep on building. We are asking employers to continue to contribute to that fund. It is difficult then to understand why it cannot be used as intended.

Deputy Paschal Donohoe

I entirely take the Deputy's point. It is unlikely that the fund will keep on building. The reason I think that is the experience we have had with the Social Insurance Fund, SIF. Once we give a commitment that we are going to spend in a particular area, we honour our commitments even if the SIF goes into deficit. We honour those commitments by moving money into the SIF from general taxation. There will come a point where the National Training Fund moves into a deficit because of what we are spending. There could, for example, be decreases in the tax we collect in respect of the share of PRSI that goes into the National Training Fund. I could definitely see that happening but it will probably be a medium-term development. In the short term, I take the Deputy's point. I recall when the rate of PRSI was increased by 0.1% per year to invest more in higher and further education. We are spending more in higher and further education and we have a surplus. I will continue with the efforts started by the Minister, Deputy Michael McGrath, to see is there a way of reconciling that. I will be frank and truthful with the Deputy when I say I do not think there is an easy answer.

Deputy Rose Conway-Walsh

We will come back to that. I will follow on from what Deputy Canney said about investment and the fact that the western region is in transition. Ireland was allocated €396 million of EU funding for European Regional Development Fund, ERDF, programmes that the Minister mentioned. When national co-financing is included, it allows the spending of €850 million. The north-west region is classified as disadvantaged. I am trying to get my head around this. The west is a region in transition and other regions are not as disadvantaged. Why was a higher proportion of the allocation not made to the regions if one of the overall objectives is to address the regional inequality? The obvious benefit of the lower classification is that the EU provides a larger share of the funding. It would provide 60% of all projects in the west. However, it seems that less than half of the Exchequer funding has been allocated to the two regions. Are there limitations there in what can be done?

Deputy Paschal Donohoe

I will have to come back to the Deputy on that point. I accept it is an important matter. However, I will have to dig into it further and come back to her with the material relating to it. I am, of course, very happy to take her question and get back to her on it. That is separate to the SPU, which is why I cannot give her an answer this evening. However, I accept it is an important matter. I will write to her with an answer in the coming days.

Deputy Rose Conway-Walsh

I appreciate that. I am looking at the overall objectives of what we are trying to achieve. It is about how much we put into a reserve fund and how much we decide to invest in projects that are going to act as catalysts. When we look at an overall reserve fund, we must consider how we are going to accommodate what we hope to get from developments in renewable energy that we did not get, for example, from the Corrib gas project or the development of oil and gas. There is a real opportunity for us to build in a reserve fund using those resources. I am trying to get a handle on how we can do that in a better way to address the regional disparities.

There is a debt per capita of €49,500. Is that mainly the result of the banking crisis? How much was the debt before the pandemic?

Deputy Michael McGrath

The Government response during the pandemic added approximately €30 billion to the national debt. We also had national debt prior to the global financial crisis and the economic crisis that happened in Ireland in the years following that. Those crises undoubtedly added to the national debt. The rescue of the banking system also added to the debt. We can certainly provide a detailed breakdown of it. In the main, the national debt we have as a country comprises the accumulation of budget deficits over many years, including the years the Deputy referenced.

Certainly, during Covid, it added approximately €30 billion to the national debt.

Deputy Rose Conway-Walsh

I take the Minister's earlier point about refinancing our debt as bonds. That is in the context of their value. In terms of GDP or the expenditure ratio, do matter look any better?

Deputy Michael McGrath

The debt is falling relative to the size of the economy. That is generally how the debts of countries are measured. We are making progress in that regard. Table 1 on page 5 shows the debt in nominal terms - gross and net figures - and the debt ratio relative to GNI*. As the Deputy can see, in the current year we can expect the closing position of the debt to be 79% of GNI*, and falling to 65% by 2026. That is going in the right direction but, of course, the nominal level of debt does matter when it comes to refinancing at higher interest rates, which will cost the country more cash in servicing that debt. The debt falling relative to the economy puts us in a safer position gradually over time but it is still a large stock of debt.

Deputy Rose Conway-Walsh

I thank the Minister. I will finish up because I know Deputy Ryan has been waiting for ages to contribute.

Deputy Patricia Ryan

I thank the Cathaoirleach Gníomhach, the Ministers and their teams. I want to touch on the Pre-Stability Programme Update Report 2023 recommendations, in particular recommendation 2, which contains the phrase “reiterates that lower income and rural households are among the most impacted by the current inflationary pressures and that longer term measures may be required to support these households.” As the committee may know, Kildare South, which I represent, is a very rural constituency. Has the Government conducted any impact assessment to identify the areas where low-income and rural households require the most support in order to resist the inflationary pressures? What additional schemes has the Government considered for low-income and rural households since the publishing of the recommendations to which I refer?

Deputy Paschal Donohoe

I thank the Deputy for her questions. The Government has put in place an analysis of the impact of the different measures we have brought in and what they mean for disposable income. We have not been able to do that on a geographical basis. Instead, we have done it on income level. Very broadly, those who have the least have benefited the most because they need the most support.

Just to give the Deputy some figures in respect of this, for the bottom decile, that is the lowest 10% of income earners within our country, the measures we have brought in since the start of 2022 have been equal to approximately 15% of the income of those who are earning the lowest income within our country. For the second decile, that is the next 10%, it is 14%. For the third decile, it is 10%. As I have said, those who are on the lowest income have experienced the largest increase in their income due to these measures. When it comes to energy, in many cases the measures that have been brought in by the Government, particularly the energy credit for those who are on low incomes, mean that most of the income loss those citizens would have experienced due to prices going up has been offset.

Deputy Patricia Ryan

I have concerns. particularly as I am dealing with old age pensioners who tell me that they cannot afford to pay their ESB bills. I appreciate the Minister’s answer, however.

Recommendation 12 of the Pre-Stability Programme Update Report 2023 states: "that the Government clarify the position of expenditure from the National Reserve Fund, and any other such funds, as part of the fiscal rules.” The Minister mentioned a scoping paper. I was hoping that he might be able to expand on what he said in that regard. I really want to know what the is meant by focused national reserve fund and how is that different from the National Reserve Fund? Deputy Nash also touched on the National Reserve Fund. What sort of rules are we expecting with regard to expenditure from the National Reserve Fund? We often hear this fund referred to as the rainy day fund but with regard to the cost-of-living and housing crises we currently have; is this now not the rainy day fund scenario? Perhaps the Minister might elaborate on that.

Deputy Michael McGrath

I thank the Deputy for her question. That is a point that is often made. The Government and I consistently acknowledge that many people are under real pressure. The Minister, Deputy Donohoe, and I meet people all of the time when we are out and about doing constituency work. They share the same experiences with us as Deputy Ryan’s constituents do with her. Most people recognise that the Government has done a great deal. People can certainly hold the view that we have not done enough, but since the beginning of the past year we have brought forward €12 billion in measures to help households with the cost of living and to support businesses. This comes on the back of everything we did during Covid, which exceeded €30 billion in value. The fact that we were in a position to respond in the way we have to the consequences of war in Europe is testament to the underlying strength of the public finances. We are still, thankfully, in a position to run surpluses and to consider the kind of issues the Deputy touched upon, such as putting money away for future needs we know will arise.

There are a number of differences between the existing reserve fund, which serves a very useful purpose, and the longer term fund that the Government intends to put in place. The first difference is that the fund we will set up will have a longer term focus. The National Reserve Fund is time-limited in law and the amount that can be put into it is capped, although that can be changed by a resolution of the Dáil.

The new fund will be invested, and the investment strategy and the assets that will be part of that strategy will be the subject of consideration. We will discuss all of that over the weeks and months ahead. This is not so much a rainy day fund as much as a fund to meet the costs we know will arise. We know for sure that we have an ageing population. The demographics are changing and the cost of healthcare, pensions and home care will increase significantly. There is no dispute about any of that. We have the opportunity to put funding away to meet some of those costs. It will not meet all of them, however, and we are still going to have to make responsible decisions in the way we manage the public finances every year. The fund will be a help, and it could be a significant one. That is the essential difference between the funds.

The question on how we will be allowed to draw down and spend that money in the context of the EU fiscal rules is very good. This is a live issue. As the Deputy knows, the European Commission published new proposals today as part of the economic governance review. My officials and I will spend the next while examining the details of those proposals. One of the issues we have been very keen on is that there would be provision for what is called the control account in order that governments of countries such as Ireland that are running surpluses and are in position to put money away, will be allowed to spend that money in a manner consistent with the rules when they need to do so. We are very much alive to that issue. We will ensure that the rules reflect the position of countries like Ireland at this time.

Deputy Patricia Ryan

What does the Minister envisage spending that money on?

Deputy Michael McGrath

The fund is set up primarily to meet age-related costs but not exclusively so. There will be other demands on the State which we know will arise in the future. We know of climate action measures and that the digitalisation agenda will cost money. If one thinks about the cost of the digitalisation of our health service, for example, there will be very real costs involved in that. but principally it is focused on the known demographic-related costs. That is the main reason the fund will be accessed in due course. All of that will be the subject now of careful discussion and analysis we will undertake, including here in the Oireachtas, in the months ahead.

Deputy Patricia Ryan

I thank both Ministers and the Cathaoirleach Gníomhach.

An Cathaoirleach Gníomhach (Deputy Bernard J. Durkan)

I thank the Deputy. Do we have any further speakers? The voting block will arise, I am told, at approximately 9.10 p.m. Do the members wish to finish or do they wish to return later? Are we gluttons for punishment, flagellation or anything like that? No?

I will make a couple of comments. In the past, I have spoken many times about the fact that I strongly support the line taken by the Ministers.

I remember the financial crash quite well. Everyone was asking if we could bail ourselves out. There was an idea that we were Irish and that we had friends all over the world who would rush to our aid. Not so. I remember some very prominent people who said that the cause of the problem in Ireland was the fact that our corporation tax was so low. They did not mention that several other European countries had the same problem in a different guise, but they had the benefits of it and those benefits were greater than those we enjoyed. They did not tell the whole story. We should learn from the past. There is the question of the rainy day fund and the fact that it is raining every day. As the Minister said, you could spend what you had every day. When the crunch comes, if we do not have the wherewithal to call upon what we got during the relatively good times, we will be deeply at fault and we will experience successive crashes. Cyber strikes will also be a threat into the future. We do not know when they come or to what extent they will effect us.

Prudent management of the economy is crucial. It is fine for us to all come together and say that we will spend the money because we have it, but that is not such a good idea. We can point to all the hardships, and it is true that there are hardships, but while interest rates have gone up considerably, I remember a time when people were charged 20% in respect of their mortgages. That is not so long ago. It is the same with industry and people who were poor and could ill-afford the strike when it came.

We got advice afterwards from all quarters. I apologise to any economists inside the room or outside it. From all over the globe, they came forward. They scoffed at the attempts that were being made for the country to recover. They did not care. Nobody cared at that stage. They stated that we would need a second bailout, and maybe even a third, and asked who would listen to us. What was happening here was described as leprechaun economics and all of that. They knew all these things. Some of these guys are still around. They are still making statements that have as much weight as they did the first time when we were on the ropes. The moral of the story, as the Ministers well know, is that we have very few friends when we are in danger. There were a couple of spectacular situations and eventually the European Union did come on board and help out. When the Italian Commissioner at the time was asked how long this would go on, he said it would do so for as long as it took. That calmed down all the markets overnight. Nothing else would do at that particular time.

I am sorry for butting in at this point. I thank the Ministers and their staff. We will be glad to take closing statements at this point if the Ministers feel like it.

Deputy Michael McGrath

We can keep those quite brief. I want to acknowledge the Cathaoirleach Gníomhach's point. The Minister, Deputy Donohoe, and I came into the Oireachtas in 2007. We have both been here for 16 years. We were here for the end of the economic boom and we were here for the really dark times. Of course, that has had an influence on our outlook and the outlook of the Government because we are so determined to use the strong position we are in now and to make sure that when issues arise in the future, and, in particular, knowing that we are going to face major costs down the line, to not prepare for that now at a time when we have resources that we have been told are windfall in nature would be negligent. Neither the Minister, Deputy Donohoe, nor I will be part of anything that would result in that.

Deputy Paschal Donohoe

I cannot add to that.

The select committee adjourned at 9.04 p.m. sine die.