I move amendment No. 1:
To delete all the words after "That Dáil Éireann" and substitute the following:
"notes the sound and successful economic and budgetary policies of the Government which have resulted in unprecedented growth in living standards and employment, enabling strong improvement in public investment and service provision in tandem with a continued easing of the burden of taxation and national debt and the establishment of the National Pensions Reserve Fund".
I am very glad of this opportunity to set out the Government's record of achievement since we came to office. This record will stand the test of time and the assessment of the electorate. What is just as important as the progress we have made is the fact that the Government's economic and fiscal policies have placed the economy in a strong position to take full advantage of the international economic upswing, which various indicators suggest has already begun.
The key issue is which policies are best for the future. The Government has followed a strategy of building up our economic infrastructure and rewarding work and effort by putting in place a supportive tax regime. It has shared the fruits of economic growth fairly in the community by creating approximately 300,000 jobs – this is the best way to bring about real social inclusion – but also by directing very substantial extra resources to those outside the workforce. It has set about providing for our future through the National Pensions Reserve Fund and through radical changes I introduced in the tax system to foster individual pension provision. We have done this while running a budget surplus.
These are sound, productive and forward looking policies. They seek to set us on a path away from the misguided high tax and high spend policies of the past, which I sincerely hope have had their day. We are the envy of Europe in this regard. We are celebrated in the international press for our achievements. I am asked regularly by international commentators for insights into our experience. The judgment of our peers abroad on how successful we have been is much different to the picture which the motion seeks to portray.
Since coming into office on 26 June 1997, the Government has created an economic climate which has helped our economy to prosper and has put the fruits of our economic success to good use. We have delivered on our promises; achieved a level of employment in the economy never seen previously; reformed the taxation system, especially personal taxation; improved our public services and infrastructure and distributed resources fairly; significantly reduced our national debt burden and run budget surpluses; and, made provision for the future by establishing the National Pensions Reserve Fund.
The sound management of the economy has been one of the cornerstones of the Government's success. We have achieved one of the best economic performances in the world over the past four years. Since 1997 the economy has grown, in GDP terms, by an annual average of almost 10%. Living standards, in per capita consumption terms, have risen by almost one third. Involuntary emigration is virtually unknown and approximately 300,000 new jobs have been created. As a result, unemployment fell from 10.3% in 1997 to an average of 3.9% last year and long-term unemployment has fallen from 5.6% to 1.2%. This record outshines that of our main European partners.
Our economic prospects are good provided we continue to pursue the right policies and secure our competitiveness. The Government's policies offer the best prospect of meeting those criteria. At budget time I indicated that I expected a GDP growth rate for Ireland in 2002 of just under 4%. This is still a reasonable estimate and compares favourably with the European Commission's forecast for this year for the European Union as a whole of about 1.5% GDP growth.
While opinion is still divided as to the pace of the recovery in the international economy, the consensus is that the US economy is recovering. The recently published fourth quarter US GDP data supports that view. The recovery in the US will be a strong boost to both the EU economy generally and to our own. Looking forward, I am in no doubt that the economy is in good shape and is well positioned to take advantage of the improvement in the international climate as the year progresses so that we can return to our trend GDP growth level of approximately 5% from 2003 onwards.
However, this is not to say we can take success as given. We must keep our eye on the ball. As a small, open economy with large-scale dependence on trade and foreign investment, it is imperative for our continued success that the economy remains competitive. That is why social partnership has been so important to our economic success as moderate and predictable wage developments have underpinned our competitiveness. It is crucial that an inflationary mentality does not take hold. Inflation will ease as the year proceeds because the factors causing the upswing now are largely transitional. We cannot take our success for granted and we must all keep working for it.
The Government has used the fruits of economic growth to put the public finances on a more sound footing. We have also reduced the general government debt from 74% of GDP in 1996 to an estimated 34% at the end of this year. That is a huge reduction of 40 percentage points of GDP. In 1996 interest payments came to 46% of income tax receipts while today's figure is 21%. This is a measure of the tax savings from reducing the debt burden. This year we will again have the second lowest general government debt ratio in the EU.
We have run budget surpluses during our period in office. The Government has not sought to borrow to fund its tax and welfare commitments in any of its five budgets. This is a major achievement and will leave the public finances in good stead for the future. We have had unhappy experiences in the past of high borrowing levels and the difficulty which Governments had in bringing this under control, even in good times. All parties looking forward should understand the downsides of borrowing to sustain public expenditure.
The Government has used the benefits of economic growth to deliver on its promise of tax reform. A key part of our programme was our commitment to reduce personal taxation and to encourage people to take up work. In our five budgets, almost €4.8 billion in tax reductions has been delivered. The standard rate of tax has been cut from 26% to 20%. The higher rate has been reduced from 48% to 42%. The initial entry point to taxation has been more than doubled. These changes delivered substantial increases in real disposable income for all taxpayers. Furthermore, the introduction of tax credits has made the income tax system more equitable. To be fair, Members opposite have acknowledged these positive achievements and do not have a fundamental issue with them.
Following the last budget more than 690,000 income earners or 37% of those on Revenue's records are outside the tax net. The corresponding figures when we took office were 380,000 or 26%. I would remind the House that, of the €4.8 billion in tax reductions in the Government's five budgets 43% has gone on increasing the basic tax allowances, or credits as they are now, including the PAYE allowance; a further 22% went in taking more than 370,000 taxpayers off the top rate of tax; over 16% went to reduce the standard rate of tax paid by all taxpayers; and just 11% went to cut the top rate of income tax. All taxpayers have benefited substantially from the major tax reforms and tax reductions the Government has carried out. The Government has been a Government for all taxpayers.
In setting out the Government's record on taxation, I would like to remind the House of some of the key measures introduced in the budget. We took more low income earners out of the tax net altogether and a substantial number of those on middle incomes were moved from the top rate of tax to the standard rate. In addition, we took another large step towards achieving the aim of moving the income tax entry point to the level of the minimum wage. Both of these measures made further progress towards meeting the policy objectives of the Government and the social part ners in this area over time, as agreed in the Programme for Prosperity and Fairness.
The last budget brought the entry point to the tax net for a single person to over €209 per week and took 68,000 low income earners out of the tax net altogether. When we came into office the corresponding entry point was £77 or almost €98 per week. The single standard rate band was also increased by €2,605 to €28,000 with relevant changes to the married bands. This took 57,000 taxpayers from the higher rate of income tax in 2002.
The Government has also shown its commitment to the elderly in the area of income tax. When we came into office, the income tax exemption limits for those aged 65 and over were as low as £4,600 per annum single and £9,200 married. They have been more than doubled, removing a substantial number of elderly taxpayers from the tax net.
As part of its tax rate reduction policies, and following an agreement reached with the EU Commission, the Government will have reduced the standard rate of corporation tax from 36% in 1997 to 12.5% from 1 January 2003. Business has responded to this reduction by creating hundreds of thousands of new jobs. Our corporation tax rate will help to ensure that Ireland will continue to remain an attractive location for foreign direct investment which has played a key role in Ireland's economic success over the past ten years. The Government has also helped businesses and shareholders in companies by reducing the rate of capital gains tax from 40% to 20%, resulting in a more than five-fold increase in the yield from this tax between 1997 and 2001.
Our tax policies have sought to promote investment, reward effort, encourage risk-taking and secure equity in the distribution of resources as best one can. Our move to a tax credit system offers greater scope for marrying more coherently the incentive and equity aspects of our tax code for the benefit of all income earners. It will allow us to target tax reliefs better than we do now.
The Government has delivered on its promise to improve our infrastructure. We have committed significant resources, especially to roads, public transport and housing. Capital spending has increased from just €2 billion in 1997 to just over €5.7 billion in 2002. Even with such a high level of investment in our infrastructure, more is needed in order to meet the growing needs of the economy and the Government is committed to this.
The national development plan is key to meeting our infrastructure needs. Contrary to what some maintain, there has been an excellent roll-out of the NDP infrastructure programme over the first two years of the plan. The evidence of this is visible throughout the country as infrastructure projects of unprecedented scale, especially in the transport and environment areas, are either currently under construction or at various stages of planning.
Particular attention has been focused in recent times on progress in the NDP roads programme. Over the first three years of the plan the Exchequer has provided gross funding of some €2.5 billion for the roads programme, which is €260 million above that committed in the published operational programme. This has facilitated an excellent roll-out of the roads programme in the key first two years of the plan. The evidence is there for all to see. Progress is evident on the Dublin port tunnel, the M50 and the M1 to Dundalk and beyond, to name but a few key projects. We are committed – as will be clear from what is an historically huge level of investment in the roads programme – to ensuring that there will be no undue delay in projects that are essential for national and regional development. We are moving into the third year of a seven year investment programme with the objective of ensuring that by the end of 2006 there will be a transformation of our road network.
In public transport, the Luas is proceeding apace. In addition, while not part of the national development plan, the Government has recently invited expressions of interest for the development of a metro system on a PPP basis. Additional rolling stock on the DART, the first since it opened, is now in operation providing significantly improved transport services in the Dublin area. Under the NDP, Iarnród Éireann is seeing the first major Exchequer public investment in railway infrastructure for decades. In public transport we have also seen improvements in Dublin Bus and Bus Éireann.
In the area of housing, my colleague the Minister for State at the Department of Environment and Local Government recently announced the fifth record year for housing output. Over 52,600 new homes were completed last year. We are building houses at a rate of more than 13 per 1,000 population, which is by far the highest rate of house building in Europe. In terms of social housing, over 5,000 local authority houses were completed or acquired last year, the highest level of output for over 15 years. Output under the voluntary housing programmes in 2001 was some 1,200 units, the highest level ever achieved by the sector.
Reflecting this performance in implementing the NDP, it is estimated that during the three years from 2000 to 2002, over €10.1 billion will have been invested in economic and social infrastructure under the plan. This is in excess of the commitment in the published operational programmes. More significantly, by the end of 2002, the Exchequer will have provided over €750 million more than originally promised.
The Government is also delivering on its promise to improve public services. We have focused in particular on health, education and social inclusion. We promised to develop a quality health service. Between 1997 and 2002 we have increased the gross allocation to the Department of Health and Children by over €4.5 billion or 125%. In numbers terms, we now have more than 4,000 additional doctors, nurses and other health-care professionals. Hospital waiting lists have been reduced by one fifth during the Government's term of office. Target specialities have seen a particularly sharp drop in waiting lists since December 2000. The waiting list for cardiac surgery is down by 49% and the ENT waiting list is down by 22%.
Behind this waiting list reduction lies a huge increase in the throughput and workload of our hospitals. The number of medical procedures performed has almost doubled over the past five years from 422,000 per annum to 825,000 per annum. While certain problems continue to exist, nevertheless the increased expenditure on health services over the period has delivered a significant advance in the level of service provision.
By targeting investment in health services strategically, the Government is committed to funding further significant improvements. As part of the health strategy, 700 new beds will come on stream in the current year at a cost of €65 million. A treatment purchase fund to reduce waiting lists is also being put in place, with a budget of €30 million to purchase capacity for public patients either in private hospitals or in hospitals abroad. By the end of 2002, the aim is that no adult will wait longer than 12 months and no child will wait longer than six months for any hospital treatment and that by 2005 no patient will wait longer than three months.
The Government has also made targeted investments in services for people with disabilities for which the 2002 budget set aside an additional €55 million. This includes provision for an additional 500 rehabilitative training places. There has also been a significant increase in the level of funding for services for the elderly. An additional €49 million was provided for this in the 2002 budget. Also, a further €10 million has been provided in 2002 to develop additional services to address youth homelessness, with particular emphasis on services for children in need of special care and protection.
I have repeatedly highlighted the fact that we also need to ensure that the very significant funding which is now being committed to the health services is accompanied by the highest standards of efficiency and effectiveness and the Government is committed to this.
The Government also promised major investment in the area of education. We have delivered on that promise. Since coming into office, capital funding for building and refurbishing our schools has almost quadrupled. In 1997, only 30 primary school projects were under way. In contrast, there are currently 84 primary school projects either in construction or at the tender phase, with construction about to commence. In 1997, only 12 major projects were sanctioned at second level, compared with a record 125 such projects in 2001. Class sizes in primary and secondary schools are at their lowest level for many years. This year alone, an additional €3 million is being provided to appoint an extra 350 teachers at first level and 200 teachers at second level from the commencement of the next school year. There are now 20,000 more third level places, enabling far more children to prepare themselves for their future in a modern economy. An additional €10 million was also provided in the last budget for a range of measures in the education sector to assist pupils with disabilities and to provide improved services in the special needs education area.
However, providing resources alone is not the complete answer to improving public services. I am committed to ensuring that value for money is achieved across the major spending programmes. My Department is driving a number of reforms to improve the overall management of public expenditure and it will continue to seek the full co-operation of Departments in delivering both effectiveness and efficiency in the provision of services.
My philosophy in relation to public spending is clear. When there is money available I am willing to invest it in our public services. However, I am not prepared to stand over an approach which would set our public finances on an unsustainable path. We cannot spend what we do not have. Significant pressures for additional spending over the next few years already exist. We must all work to ensure that the response to these pressures is based on the long-term interests of our economy. We need to achieve an appropriate match between spending and resources going forward.
The Government is committed to social inclusion. In the PPF, the Government undertook to progressively introduce social inclusion measures with a total cost in the year 2003 of €1.9 billion. In the event, the combined cost of social inclusion measures introduced in the last two budgets alone, even before any account is taken of improvements provided for during the annual Estimates process, was over €3 billion in a full year.
Let us reflect for a moment on some of the key achievements in the social welfare area over the past few years. The lowest rate of social welfare payment now stands at €118.80 per week for a single person, an increase of 43% since 1997. The old age contributory pension is now €147.30 per week for a single person. This is an increase of 49% since 1997 and well in excess of the £100 per week target which we originally set in an Action Programme for the Millennium. The rate for a couple aged 66 years or over has risen even faster and now stands at €261.10 per week, an increase of 54% over our five years in office. From April of this year, the monthly rate of child benefit will be €117.60 for each of the first and second children and €147.30 for each of the third and subsequent children. This is a virtual trebling of the payment rates and means that the PPF commitments in this area have already been exceeded. There have also been many other improvements in the social welfare area, such as relaxation of means tests, accelerated increases in qualified adult allowances, extension of the free schemes and earlier implementation of social welfare increases, all of which combine to enhance the position of the elderly, carers, disabled and other vulnerable groups.
The success of these measures in improving the living standards of the most vulnerable people is confirmed by the research data. The latest figures from the Economic and Social Research Institute show that the level of consistent poverty, as targeted by the national anti-poverty strategy continues to fall. It stood at 6% of the population in 2000, down from 15% in 1994. Particularly welcome is the very substantial fall in levels of consistent poverty among children, down from 23.5% of children in 1994 to just 8% in 2000.
However, this Government recognises that challenges remain. We are determined to build further on the progress already achieved. To that end, following a very comprehensive review of the existing national anti-poverty strategy involving all of the social partners, the Taoiseach and Minister for Social, Community and Family Affairs recently launched Building an Inclusive Society, an ambitious plan which seeks to continue the development of a more inclusive society. Among the central goals of that plan are an objective of reducing, and ideally eliminating, poverty in Ireland; a specific target of eliminating long-term unemployment and a new benchmark for the lowest social welfare payments of €150 per week by 2007, in 2002 terms. These policy priorities, combined with a continuation of the sound economic and fiscal policies of recent years, provide the framework which will ensure everyone has both the opportunity and skills to participate in economic and social progress.
The Government has not just used the fruits of our economic success to provide for today's needs. It has also begun to provide for our future needs. I established the National Pensions Reserve Fund because, in common with other industrialised countries, Ireland is set to experience a significant ageing of its population over the coming decades and this will give rise to a serious financial burden on the State. It will put a severe strain on the capacity of all Governments to fund social welfare and public service pension liabilities on a "pay as you go" basis. Today there is a ratio of five persons of working age for every person aged 65 or over. By mid-century, it is projected there will only be two persons of working age for every person aged 65 years or over. If we do nothing to anticipate that development now, the consequence will be either that taxes will have to rise dramatically when that time arrives or the value of pensions in real terms will have to be reduced.
The purpose of the National Pensions Reserve Fund is, therefore, to move from sole reliance on pay as you go and introduce part-prefunding of our future liabilities. It is a long-term project from which we should not be deflected in the early years. Pension liabilities are as real as any other and the fact that they will not arise until some point in the future does not mean they need not be addressed now. It is for this reason I provided for a statutory minimum contribution to the fund of 1% of GNP each year with the option to make additional contributions by resolution of the Dáil when circumstances allow. This is a level which will make a significant contribution to future pension costs and is a sustainable commitment.
In addition to the statutory contribution, the Government has already set aside the net proceeds of the sale of the former Telecom Éireann and 1% of GNP in 1999 and 2000 to kick-start the fund. At the end of last year, the total value of moneys standing to the credit of the fund was €7.7 billion. Under the tax code, I have made significant and radical changes in the incentives for individuals to provide for their own pensions. These changes make it more attractive to provide a pension for oneself, more feasible to retain control of one's pension portfolio and make pension products more portable. These changes will more than prove their worth when it comes to dealing with pension issues in the future.
The establishment of the National Pensions Reserve Fund will help to smooth the Exchequer burden arising from our additional pension commitments and introduces a new strategic long-term element into budgetary planning. This is our nest-egg for the future. In my view, we should not deploy it to meet short-term priorities. The ageing burden is an inevitable cost. It is not something we can avoid or dispel, or over which we have any real measure of discretion. That is why we must save to provide for it and why we must start saving now.
At the outset I reminded the House that the Government has fostered a climate in which it has been possible to deliver on our promises. In many cases, we have actually exceeded our commitments. There is no doubt we have improved the standard of living and the level of public services. We have also ensured the economy can continue to deliver good levels of growth so that we can make further progress into the future. I have no doubt that all parties wish to make this economy stronger, more productive and more capable of meeting our economic and social priorities. The Government's record shows that we have policies that work now and will work for the future.
