When I moved the adjournment I had been saying that on current trends it might be possible to bring our debt-GNP ratio to acceptable proportions in the foreseeable future. Let us recall that the National Development Plan stated and I quote
Though the evolution of debt is influenced by factors other than the level of borrowing, a realistic expectation would be that by the end of 1993 the national debt might be reduced to about 120 per cent of GNP from 133 per cent.
However, such a success story is still relative.Ireland is still very much at the top of the international debtors league. The fact that we are managing to stabilise the debt cannot lull us into a false sense of complacency or permit a relaxation of a very vigilant fiscal policy. Whether we like it or not, the nation is still in hock. Technically, in any man's terms and particularly in layman's terms we are broke and if we were a private enterprise we would be insolvent and the doors of the banking institutions would be slammed permanently and very firmly in our face. The reason we are broke is that a large slice of public funds has gone into paying for the past election promises of successive Governments, particularly for the election promises of a previous Fianna Fáil Government.
While we all remember that budget deficit borrowing started in the mid-seventies, the infamous manifesto of 1977 was the launching pad for the Dutch auction-style economics. It was amusing to hear Deputy Dick Roche preach from the high altar of fiscal rectitude and lecture the Opposition on their responsibilities but he was rightly reminded, I think by Deputy Rabbitte, that he was an adviser to the one and only Minister for Economic Planning and Development, Dr. Martin O'Donoghue the chief architect and man mainly responsible for the infamous 1977 manifesto. Thanks be to God, that was a short-lived trend but unfortunately it has left an indelible imprint on the economic history of this country.
Despite the measures that have been taken, Ireland's foreign debt profile is still not good by comparison with other countries and it has to be acknowledged that when foreign debt is adjusted per head of population Ireland emerges as one of the most indebted nations of the world. When allowance is made for the fact that Irish gross national product is higher than that of most developing countries, Ireland remains among the top ten foreign debtors when compared with other nations in the developed world.
Ireland is cast internationally as being developed in terms of having a good industrial market economy, but the justification of such a classification has never been made entirely clear and it seems anomalous in view of the fact that Ireland's gross national product per person is below that of developing countries such as Trinidad, Tobago, Hong Kong and Singapore. No matter what has been achieved today, in sheer absolute terms, Ireland's foreign debt is not as some people would have us believe a mere drop in the ocean of international liquidity. Indeed, Ireland's debt liability has attracted a fair amount of international attention, and unfavourable attention at that. We are sandwiched in somewhere between Pakistan and Colombia. This makes a fallacy of the traditional argument that Ireland is so small and our borrowing requirement is so limited we could raise what we like on the international capital markets.
While there is no doubt that the country's ability to raise borrowings remains unimpaired, the accumulated debt of the past is still attracting a fair amount of international attention, and in some cases international criticism. One of the biggest problems arises from the fact that despite our cutbacks and various restrictions and the general consciousness we have to maintain a continuous consistent line of economic stringency, we are still running hard to stand still. That is the hard reality facing us in the future.
Everybody knows that at budget time it becomes very much an open season, and indeed a festival for special pleadings.The Government — no matter what Government are in power — are besieged by demands and petitions from all sides from various pressure groups and interest groups representing a wide range of interests in the community, each of whom is meritorious in their own right and each having a particular significance in terms of how people see their own priorities. The purpose behind their representations is an attempt to win a tax concession here, a grant there or a spending increase in some area. While the interests are diverse and many and are often hostile to each other, they have one unifying characteristic and that is such of the demands, if met, will inevitably lead to a deterioration of the Government's financial position. Each interest group are necessarily concerned about the impact of the budget on their group but not on the economy as a whole. It is interesting that on budget night each group see the budget in terms of their own perspective or through their own tinted glasses. Each group assess the exercise in terms of the effects on their members. If the Minister for Finance accedes to their demands it is regarded as a good budget but if the Minister does not accede to their demands it is regarded as a bad budget, the budget of a hardhearted Minister who is impervious to the criticisms of logical arguments being put forward. If the Minister accedes to their requests he is regarded as a man of wisdom, a most far seeing individual who is sensitive to the needs of a group who have an argument which makes a great deal of sense.
The problem is that everybody sees the budget in terms of their set of needs. Very often we see things through our own blinkered perspective and if the Minister does not accede to our demands, then invariably we accuse him, rightly or wrongly, of leading our group and the country as a whole to their eventual perdition.If the Government placate the various interest groups by spending money which they do not have or by foregoing revenue they would otherwise have raised, they will be accorded due praise by each group but if, on the other hand, they frustrate the demands of such groups and set about correcting the financial position then condemnation, fire and brimstone will be the order of the day. The essential function of Government is to defend the interests of the community as a whole and to frustrate, if necessary, the demands of sectional groups. The Government have to look at the community's future as a whole when fashioning their policies.
As I said earlier, the country is not poor, it is just broke. This distinction between being poor on the one hand and being broke on the other was, I think, first formulated by the economist, Colm McCarthy. It is an important distinction in that it points to the genesis of the economy's difficulties. A household can be quite rich in terms of the income it commands, but if it overspends by aspiring to living standards it cannot finance or afford, then it will soon become broke. Therefore, it is possible for a household to be relatively rich and broke simultaneously.
This essentially is what has happened to the Irish economy over the past 15 years or so. We are relatively rich as a country but we have become broke attempting to keep up with our neighbours, the Jones's in Britian. The amount of income created by producing goods and services was insufficient to cover our expenditure and to make up the difference the country had to borrow on a massive scale. High interest rates on the accummulated borrowing added still further to the country's bills. As a result of the continuing attempts to artificially keep our living standards to an unsustainable high level, our national debt now stands at £25 billion. We are broke because we overspent in the past and the interest payments on those debts are now so large that, even when the Government are trying to economise on current spending to finance the profligacy of the past, they are strangled by the burden of past borrowing. In the past the drive to overspend was powered by demands from the interest and pressure groups which were alluded to in the debate two weeks ago and again today.
The figures which emerged yesterday are disquieting on the one hand and encouraging on the other. While Government borrowing, despite the sluggish first three months of the year in terms of revenue, is being brought within controllable levels, one has only to look at the whole situation, to see that we are borrowing way beyond our means. For the first half of the year Government borrowing was £507 million, somewhat ahead of market expectations but below last year's level. The Minister for Finance has said this is satisfactory, that budget targets are being met and that the pickup in terms of revenue from taxation, etc. will become more visible and obvious as we move into the third and final quarters of the year. However, one has to temper this expectation with the realisation that the tax concessions which were given in the budget will begin to impinge more from this time onwards.
The Government's finances are in a reasonable shape at present but I wonder whether they will manage to maintain the degree of progress which has been achieved in the relatively recent past as the effects of 1992 begin to impinge and the demands and erosion of tax harmonisation begin to take place. We seem to be fair set for meeting short-term targets but at the same time we are running relatively hard just to keep steady.
Nevertheless, one must have anxieties, our economic achievements have been the result of the good advice which has been handed out by the officials in the Department of Finance and thankfully taken on board by the Minister for Finance.One wonders if it is absolutely necessary, given the relatively recent recovery in economic terms of the public finances, for the Minister to still push ahead, irrespective of the reservations which have been expressed by Members from all sides of the House about setting up a debt control agency. Is there a need for such an elite corps? Does the Minister not acknowledge that the economic achievements have been largely brought about as a result of the solid advice given by his Department? One can understand the reluctance on the part of the officials in the Department of Finance to see their power eroded by a new elite corps — who will undoubtedly do the same work they have been doing and are doing today — who will get salaries above the norm and who will apply for the posts within the Department which have been held by the officials who have been giving good advice to the Minister over the years.
We on this side of the House do not see a need for such a elite corps. If there was a deterioration or slippage in economic performance there might be a need for such a grouping, but in the light of recent experience where things have been improving, thanks to the good advice meted out by the officials of the Department, we cannot concur with the Minister's dogged insistence to put in place a new super-structure to manage the national debt.
Ba mhaith liom fáilte a chur roimh aidhm an Bhille seo, which is further to restrict the national debt, but we, on this side of the House, do not believe we need a new elite grouping to do so.
