Vol. 434 No. 4
27 Mr. Sargent asked the Minister for Finance his views on whether national indicators other than GDP and GNP are needed to reflect social and environmental welfare in view of the fact that GDP increased in real terms by 2.5 per cent in 1991 and 2.75 per cent in 1992 and unemployment, crime and environmental degradation has continued to increase.
GNP and GDP are compiled in Ireland by the Central Statistics Office using the standard international methodology. They are internationally accepted measures of national economic activity. They are important indicators of overall economic performance. The Exchequer borrowing requirement and the national debt are expressed as ratios of GNP and GDP and hence both are important indicators for short and medium term macroeconomic policy management. The Maastricht criteria for budgetary and debt convergency are expressed as percentages of GDP. GNP is used for determining our EC budget contribution and GDP per capita is used in determining eligibility for EC Structural and Cohesion Funds. In so far as the functions of the Minister for Finance are concerned, they are therefore important indicators of national economic activity.
While it would be desirable to also have measures of national welfare incorporating wider social and environmental concerns, there is as yet no agreed international methodology for including such concerns in a national accounts framework.
I would like to inform the Deputy that GDP growth in real terms for 1991 and 1992 was 1.9 per cent and 4.6 per cent respectively according to the 1992 national accounts.
Does the Minister agree that the key issues in the economy are ecological sustainability and human well-being of which employment and the other factors to which he referred are a part? Will he accept that at present there is no single or collection of indicators for these since economic growth measures activity and is an extremely crude form of measurement? Will he agree that under the present system an increase in the number of road accidents could mean increased economic growth? There may not be an agreed indicator internationally to reflect social and environmental welfare but other countries have taken the brave step of looking at social and environmental indicators. In his next budget the Minister should take account of indicators such as literacy, homelessness and carbon dioxide emissions so the social and environmental audits can be produced as well as a cash audit?
At ECOFIN meetings during the past year the points raised by the Deputy were debated. I supported the idea of a carbon tax. Environmental economists, and some international environmentalists, are concerned that the manner in which GNP is compiled does not reflect environmental considerations. If crime and other areas are considered it would be difficult to compile a set of national accounts. There is a theory that if we use what they are calling in Europe, satellite accounts, rather than compiling these figures in GDP and GNP, people will be able to see, for example, the cost of a polluted river, how it would damage the tourist industry, and, consequently GNP. I would not have any difficulty with such theory but if we took it as a model for crime, welfare and other matters, we would never have the national accounts. It is difficult enough to prepare them at the moment. There is considerable debate in Europe about using the proposed model for environmental matters. Our traditional position has been to use the UN Convention which is the European model of GNP-GDP. This can only be changed collectively, otherwise it would not be possible to base our criteria on the Maastricht guidelines and on what international markets seek. I do not see a great difficulty in trying to move in the direction suggested.
I do not suggest that GDP and GNP do not have a place, I am just asking the Minister to take into account that the relevance of GDP and GNP to our overall well-being is becoming thinner as unemployment soars and the problems associated with it increase. Will the Minister take into account countries such as Sweden and America where they have looked at other factors and where they have environmental and social audits in line with GDP and GNP to give a broader picture of the Government's performance? Will the Minister also take the brave step of following some of the more progressive countries rather than waiting for the whole world to come together which seems an impossibility?
A system of satellite accounts are being looked at now. If the Deputy's suggestion conforms with the way we do our accounts at present I will look at it. The Belgian Presidency is setting the pace for the rest of us in these areas. In the varíous ECOFIN meetings, including one last weekend, I have been supporting that line.
