Dáil Éireann díospóireacht -
Tuesday, 18 Nov 2003

Vol. 574 No. 4

Estimates for Public Services (Abridged) 2004: Motion.

Minister for Finance (Mr. McCreevy)

I move:

That Dáil Éireann commends the 2004 Estimates for Public Services (Abridged) published by the Minister for Finance on 13th November, 2003.

The Abridged Estimates Volume is the first instalment of the 2004 budget. On budget day I will set out the complete picture of the Government's economic and fiscal strategy for 2004.

Before setting out the strategic focus and the aggregate content of the Estimates, I will deal with the economic context within which they were framed. Ireland has faced a much more challenging economic and business environment over the last 18 months. The economic growth projections which underpinned my last budget assumed that the generally anticipated global recovery would begin from the second half of 2003. Clearly, this did not happen at the pace we expected. As a result, in August the official economic projections for GDP growth in 2003 were revised downwards from 3.5% to 1.5%.

In assessing our economic prospects and framing our spending policies we must, therefore, deal with the world as it is, not as we would wish it to be. In this regard, there are a number of key facts that are relevant to us all and that must inform our thinking. First, Ireland is part of a monetary union where monetary policy is focused on ensuring a low inflation environment, with the ECB aiming to maintain the rate of inflation at close to 2% over the medium term; second, international competition is exerting downward pressure on goods prices and is likely to continue to do so for some time to come; third, we are one of the most open economies in the world; fourth, international competition for jobs and investment is becoming much more intense all the time.

Ireland's position as a small and open economy means that economic developments here are, to a large degree, determined by our ability to supply goods and services to the global economy. To ensure we can continue to compete successfully, we must strive to get our cost levels in line with the European Union as quickly as we can. The decisions made by the Government in framing the 2004 Estimates were taken in this context. They are designed to ensure we create the conditions necessary for the economy to be strongly positioned to benefit from the expected international upturn; maintain and create employment; and increase the share of wealth in the country.

We did not adopt this strategy simply for the purpose of economy in spending or compliance with financial rules. The plain facts are that by creating a low inflation environment, keeping public spending increases in line with resources, keeping debt levels low and planning a coherent investment strategy we will reap strong rewards, not just in the longer term but also in a matter of a couple of years. A key element in this is ensuring a balance between the resources which the Government has at its disposal and what it spends. The exceptional economic growth in the years 1997 to 2000 enabled annual gross spending to be increased very substantially to a high point of 21% in 2001. As economic growth has moderated, we have in the interests of sound management followed a course of bringing spending increases more into line with increases in revenue.

The expectations created by the experience of exceptional high growth are no longer realistic. Lower economic growth means lower revenue growth. Lower revenue acts as a constraint on what the Government can spend. As such, we must limit public spending growth to revenue growth. If we fail to do this, we risk either an early return to higher levels of taxation or excessive levels of borrowing. The Government has kept a tight rein on spending over the last 18 months to ensure this would not happen. As a result, this year we have reduced the gap between revenue and public spending growth. We need to ensure we consolidate this situation. This message of consolidation is the key message I wish to impart to the House today. We must not endanger all we have achieved since 1997 by imprudent management of the economy and the public finances. All sides of the House must recognise that spending growth must be kept at a sustainable level over the medium term. This means future annual public spending increases will have to be very close to this year's level.

Based on the latest estimates as supplied by Departments the summary tables of the Estimates include 2003 forecast outturn figures. The outturn on gross spending is estimated to be higher than provided in the Revised Estimates by some €340 million. However, the additional gross spending is offset by additional receipts from the health levy, moneys recouped from the United Kingdom for health services and higher PRSI income into the social insurance fund, giving a net excess of some €115 million. Accordingly, I now expect gross spending in 2003 will increase by 7.6% over 2002 compared to annual increases of 14.4% and 20.7% in the previous two years. I acknowledge the financial discipline and control shown by my ministerial colleagues and their Departments, particularly this year, in bringing about this outcome.

The measures in relation to financial management and control which I announced in last year's Estimates debate also played a key role in this regard. Particularly important was the monthly reporting to Government on expenditure trends and the requirements placed on Departments in relation to risk assessment and contingency planning to cater for unforeseen pressures.

The strategy underpinning the global and sectoral allocation of resources is twofold: first, as I have indicated, to ensure the global allocation was appropriate to the total level of resources and the promotion of stable economic conditions and sound public finances, and, second, to give priority to the areas of social welfare, health, education, and infrastructure, while meeting our pay obligations under Sustaining Progress.

Health, education and social welfare spending will account for 67% of total Voted spending next year. The gross allocation for the Department of Health and Children will amount to over €10 billion in 2004. Over the period 1997 to 2004 gross expenditure on health will have increased by €6.4 billion or 178%. Cumulative spending on health from 1997 to 2004 is €53,000 million while the share of total national public expenditure on health has increased from 19.2% in 1997 to 24.9% in 2004. There are now about 96,000 staff providing health services compared with 66,000 in 1997. Between 1997 and 2003, an additional 6,000 nurses have been recruited, which amounts to 22% of the total increase. A further 8,500 people, amounting to over 30% of the increase, have been recruited to the medical, dental and health and social care professional grades. This investment has, therefore, seen real improvements in the delivery of frontline health services over this period. However, we must strive ever harder to optimise value for money for the huge level of resources invested each year.

The gross allocation for the Department of Education and Science will be €6.5 billion in 2004. The cumulative increase in gross expenditure on education over the period 1997 to 2004 will amount to €3.3 billion, a doubling of expenditure over the period. The 2004 Estimate provides for nearly 79,000 employees, which effectively means that the pupil-teacher ratio at both primary and second levels has improved significantly in recent years. At primary level the ratio has fallen from 22.2:1 in the 1996-97 school year to 18:1 in the 2002-03 school year, while at second level the ratio has fallen from 16:1 to 13.6:1 in the same period.

The lower pupil-teacher ratio means that there are now approximately 2,500 resource teachers and 1,530 learning support teachers in the primary system to enable children with special educational needs receive a proper level of educational services. There are also over 5,500 special needs assistants employed in first and second level schools to ensure that children with special educational needs in mainstream classes receive the necessary educational supports. These figures show that the increased investment in education has been translated into a higher level of frontline educational services.

The gross provision for social welfare expenditure is €10.6 billion on a pre-budget basis. On this basis, spending in 2004 on social welfare will have increased by almost €5 billion since 1997. Over the same period, the unemployment rate has fallen from 10.3% to 4.4%. This represents a very significant improvement in real terms in the level of social welfare provision. For example, in 1997 the old age contributory pension was €99 per week. It is now, before any increases in budget 2004, over €157 per week. This is an increase of 59%, or 27% in real terms, on the 1997 level. The corresponding increase in the old age non-contributory pension is even greater, at 68%, or 34% in real terms. Child benefit rates have also increased substantially. In 1997 the rate for the first and second child was €38 per month. In 2003 it is €125.60, representing an increase of 231%, or 165% in real terms.

The gross allocation for Exchequer capital expenditure will be €5.5 billion in 2004. When account is taken of public private partnership investment in public projects and the contribution of CIE resources to public transport investment, total capital spending on this basis will be about €5.9 billion or an increase of over €350 million, or 6%, on the figure pertaining to 2003.

Since 1997 the Exchequer has invested over €33 billion in capital expenditure. Its provision is now close to 5% of GNP, as compared with 3.4% in 1997. This is twice the EU average.

Turning to individual sectors, the 2004 provision for capital investment in the transport area will be €1.6 billion, an increase of €1.3 billion or 413% over 1997. Within this total, road investment has increased by €963 million or nearly 320% since 1997, and public transport investment has increased by €322 million, which is 46 times the 1997 level.

The 2004 Exchequer provision for capital investment in housing will be over €1 billion, an increase of €766 million or 275% over that of 1997. This provision will be supplemented by over €650 million of non-voted capital investment by the local authorities.

Health capital investment in 2004 will be €509 million, an increase of €342 million, or 205%, over 1997. Capital investment in education will be €491 million, an increase of €327 million, or 199%, since 1997.

This unprecedented level of investment is funding the implementation of the infrastructural programme of the national development plan. Despite the delays and cost inflation that have affected the NDP infrastructure programme, the reality is that by the end of 2006 the plan will have brought about a very significant improvement in our economic and social infrastructure.

The Estimates continue to give priority to national development plan investment, especially in the key area of infrastructure. This accords with the view articulated by the ESRI in its mid-term review of the national development plan. More generally, while the Government has differed from the ESRI's financial recommendations in some areas, the national development plan Estimates provisions are broadly in line with the ESRI's recommendations.

I accept that the evaluation does contain criticisms on cost overruns and deficient management of infrastructure projects and programmes. It also points to the need to properly evaluate projects. We must strive to ensure the best value for money in the planning and evaluation of infrastructure projects.

My Department is currently revising the capital appraisal guidelines for public sector capital projects and revised guidelines will be issued to Departments and public agencies. The existing guidelines remain in place and relate to the evaluation, planning and execution of capital projects.

I must stress that the onus for proper appraisal and management of capital projects rests with Departments and the implementing agencies. My Department will, however, strive both in the context of the revised guidelines and otherwise to impress on Departments and implementing agencies the need for best practice in regard to evaluation and execution of capital projects.

I am also in favour in principle of a multiannual system of financial envelopes for capital investment. This is recommended by the ESRI and would facilitate more efficient project and programme management by providing greater certainty as to availability of resources over a number of years. I will have more to say on these issues in my Budget Statement.

The provision for Exchequer-funded public service pay and pensions is €14.2 billion, an increase of €1.1 billion, or 8%, on the figure for 2003. The increase comprises the following: the general round increases under Sustaining Progress –€540 million; the 2004 increases arising from benchmarking –€305 million; and other pay provision, including the part-time directive –€265 million. This rate of increase in the pay bill is lower than the rate of increase in any of the past four years.

The largest increase is accounted for by the increases due to the general rounds under Sustaining Progress, which are 3% from 1 January 2004, 2% from 1 July 2004 and 2% from 1 December 2004. In 2003 a six-month pay pause for the public service was secured, which meant that all the increases due under Sustaining Progress are to be paid in 2004. The pay pause in 2003 saved the Exchequer about €180 million this year.

The additional €305 million for benchmarking in 2004 includes about €50 million for the parallel process. This provision and the provision for the general rounds are being made on the basis that there will be verified progress on the conditions outlined in the agreement. The performance verification groups and the relevant Secretaries General have yet to finalise their work. It may be that in some cases the increases will not be paid if some grades or organisations or sectors are in breach of the conditions. However, it is prudent to make provision for the payment given its size.

I am determined that, over the period to which Sustaining Progress refers, the quality of public services will improve. There has been a period of stable industrial relations and I expect this to continue. In addition, there will be benefits to taxpayers through the achievement of the modernisation objectives over the life of the agreement. The longer term benefit of the benchmarking system will be that it will force public service pay determination away from the old, illogical relativities based system towards a better system more closely tied to that which operates in the private sector.

A total of €265 million of the additional pay cost is due to other factors, such as the payment of the increase due to the application of the part-time work legislation in education, an increased provision for the EU Presidency, increments, an extra pay day in 2004 for some staff and an increase in the numbers of pensioners.

Between 1997 and 2002 staff numbers in the public service increased by 59,000, or 27%. I have already alluded to the improved services in health and education that these additional staff have achieved. Nonetheless, in the light of the vastly changed economic and budgetary position, I announced in last year's budget that public service numbers would be capped and would decrease by a modest 5,000 over a three year period.

The Government subsequently agreed the timing and details of the reductions. In agreeing proposals in this area, the Government has endeavoured to provide that frontline service staff would not be targeted for reduction. The cap has now taken effect and a reduction of 2,000 is expected next year. The full effect of the reduction in numbers will materialise in 2005 and 2006.

To summarise, the key features underpinning these Estimates are as follows: we need to consolidate in order that we can be well positioned to reap the rewards of the expected upturn in future economic growth; we must match public spending growth to revenue growth; future increases in public expenditure will have to be kept close to this year's level; the 2004 Estimates provide for an extra €1.9 billion, bringing total planned expenditure to more than €40 billion; and we continue to provide substantial resources for health, education, social welfare and infrastructure.

The 2004 Estimates will enable us to sustain a healthy economy and public finance position in order that we can capitalise on an improved international economic climate. They build on the significantly expanded expenditure base of recent years and, in so doing, provide for considerable investment in the areas of health, education and social welfare. The Estimates also provide for a continued high level of investment in infrastructure to help us become more competitive over the medium term. They are the correct prescription for the economic and investment requirements of the country at this time. I commend the motion to the House.

Mr. R. Bruton

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"–notes that the 2004 Estimates for Public Services (Abridged) published by the Minister for Finance on 13th November, 2003 will provide that:

–60% of the increase in current expenditure will be absorbed by increases in the Exchequer pay and pensions bill;

–the payment of a further round of benchmarking will be made without a commensurate reform programme to ensure value for money is delivered;

–in many Departments expenditure on non-pay subheads will decline in real terms, resulting in a reduction in the level of services provided;

–inadequate provision has been made to fund the capital infrastructural requirements, especially in the transport and health areas, which are needed to build a strong economy;

–further stealth taxes will be imposed on a range of State provided services, especially those under the remit of the local authorities;

–the cutbacks in the social welfare area represent a further attack on families and on lone parents;

–the Government's promise to recruit an additional 2,000 gardaí will not be met; and

–condemns the Government's stop/start approach to the management of the public finances which has totally failed to deliver quality services to the public despite incurring record levels of expenditure in recent years."

In 1997, after almost two decades of scrimping and saving to mend the problems in the public finances, this Government was handed a unique opportunity. Not only had the public finances been placed on a sound footing, but the economy was growing at 10% and employment was increasing at the rate of 1,000 jobs per week. Here was an opportunity for the Government to step up to the mark and carve out a new Ireland using the wealth we had created wisely to bring benefits to all of our people. That opportunity was spurned and, instead, the hard lessons learned during the difficult years, particularly the 1980s, were quickly forgotten. The worst excesses of rapidly developing economies were repeated due to a lack of Government wisdom. Huge sums of money were poured into unreformed systems which did not deliver value for money. Poor choices were made, as we have seen in the ESRI report, poor value was obtained and, as we have seen in the Punchestown case, proper procedures were ignored.

The Government had no vision for a new Ireland and squandered the opportunity. The problem was inept leadership from a Government which worked a washed out model and was unequal to the challenges the country faced as we moved into a new millennium. The Estimates volume for this year bears the indelible marks of the legacy of soft option policy, for which people are now picking up the pieces.

One will search in vain in the Estimates for radical reform or anything which would deliver better value for money. No programmes have been restructured, no bureaucracy has been dismantled and no new systems of evaluation or cost management have been introduced. No renegotiation of the benchmarking agreement has taken place in order that genuine value for money could be obtained and no organisation has been asked to compete for its budget or demonstrate what it is achieving. Instead, we have more of the same, with the Estimates presented in the same manner as every year. Despite indications given by the Minister many years ago, the House did not have a new debate.

The Minister has presented the same recipe as last year, namely, more stealth taxes and cuts in infrastructural spending and a squeeze on services which will hit the most vulnerable sections of our community. The only difference is that many items of this nature are more cleverly concealed than they were a year ago. It is clear, for example, that the Minister has concealed the true extent of expenditure growth. Until today, no reference was made to the €430 million overrun in current expenditure, nor was reference made, even today, to the double payment under the benchmarking agreement last year. The two years of benchmarking payments paid last year again conceal the extent of the increase which must be found to meet this year's payment. When one adds these two items, one finds that the underlying growth in current expenditure –€2.5 billion or 8% – is much higher than the equivalent figure in last year's Estimates.

The Minister has given the House an indication, based on reasonable assumptions about growth, of the capacity of the economy to raise taxation next year. His estimate of €1.9 billion means he is already committed in his Estimates to spending €600 million more than is likely to be generated in additional tax revenue, which will, I presume, be yielded through unchanged taxation rates. If one adds to this figure a minimal social welfare package, one arrives at a figure of €1.2 billion in excess of what the tax base will generate next year. It appears that the Messiah of low taxation has switched to the other side. There is no doubt, however, that he will save his blushes by doing the type of things with which we are now familiar, namely, increasing indirect and stealth taxes, raiding special funds and bringing forward payment dates. Such measures will do nothing more than conceal the reality that the additional taxes required will have to be paid, if not today, in the future. This is the approach that underlies the Estimates.

The fundamental problem with the Estimates is that the money available to the Minister is not being spent properly. The high water mark of this Government's refusal to address reform in any realistic way was the benchmarking agreement. I do not propose to revisit the benchmarking agreement in detail, as we have already debated it in the House. It was, however, supposed to cast aside the idea that one would be paid extra simply for co-operating with modernisation and change. Instead, we were told it would be based on objective evidence and real delivery of value of money would emerge in exchange for 75% of the additional payment. The key to unlocking this extra value for money was that the Government would enter negotiations with a hard reform agenda and negotiate serious reform in the delivery of public services. What happened? It did nothing about negotiating the reform agenda and one heard not a squeak from trade unions being pushed to go beyond their established position in the crucial negotiations which followed publication of the benchmarking report. The opportunity to reform was lost and with it the possibility of bringing before the House a different type of Estimate. This will go down as one of the greatest failings of a Minister for Finance who has expressed pride in holding office.

The consequence of this failure is now obvious. We must come up with €515 million in additional funding to pay for benchmarking increases due on 1 January, which will bring the benchmarking bill in 2004 to €805 million when one includes the double payment awarded this year. In addition, the Government is committed to a further €800 million for pay rounds in 2004. Not surprisingly, public pay increases have pre-empted all other resources.

If one strips the Estimates bare, one finds that the amount of discretionary money which could trickle down to ordinary people to deliver improved services, is close to nil. While the amount allocated for non-pay items is €720 million on paper, when one looks more closely one finds that €620 million, more than 85% of the total figure, is already contractually committed under increases in various social welfare schemes, demand-led health schemes, third level grant commitments and commitments under the Commission to Inquire into Child Abuse and the Residential Institutions Redress Board. These are hard commitments which must be paid and will not be available to those who deliver public services. In short, non-pay budgets will be delivered a sharp blow. While the bureaucracies and permanent staff remain intact, the materials they need to deliver a quality service will not be available.

The axe has fallen on discretionary spending. When one examines the provisions, one finds the Estimates are peppered with cuts which will undermine the quality of services to ordinary families in real terms. Child care and primary and secondary school capitation grants have been cut. The Exchequer contribution to the local government fund has been cut for the second year in a row, while community employment has been cut and the treatment purchase fund has been cut in real terms. FÁS training and integration budgets and social welfare employment support have been cut and, despite Government boasts that housing is its priority, investment in water and sewerage has also been cut along with urban regeneration funding. The Environmental Protection Agency's funding has been cut, as has health capital spending. This is despite the Government's claim that the Hanly report will be implemented in 12 months in two selected regions. This is a direct consequence of the way the Government put together these Estimates. It has been forced to exact these cuts from various Ministers to square the books because it failed to carry out the type of reform that was needed over an extended period, particularly last year with regard to benchmarking.

Aside from the visible cuts in the Estimates, there are many more concealed from view. They will be implemented but their implementation will be shoved down the line. It will not be Ministers who announce them or who will have to contend with the impact. The people dealing with local services will feel the squeeze. They will have to tell people depending on public services that the services are not available. The list is already familiar. Hospital beds will be closed next year, as they have been this year. This is madness. These beds have been put in place by the taxpayer at enormous expense. There are huge needs in the health area. Why are we not using those beds more efficiently, turning them over more quickly and getting greater patient throughput? Instead, the Minister for Health and Children and his colleagues come up with the idea that we must close these beds and deny service to people who need it. That is the consequence of this mindless, accountancy approach to public spending.

We will see the same in the schools. Teaching materials will not be bought, broken equipment will not be replaced and the quality of education will deteriorate again. Travel will be cut and social workers and outreach workers will not be able to travel to the most vulnerable to provide the services they need. Budgets for contracting in nursing homes will be cut. More of those available will be blocked while there will be more blocked beds in our acute hospitals. The consequences of this will be felt in the accident and emergency departments which will experience even more persistent chaos than they have experienced this year. They will also be felt by the families who are caring for relatives 24 hours a day, seven days a week. They will be denied respite care, as they already have been this year. We will see more of this approach.

It is not clear from the Estimates but there will be no money to make inroads into the backlog of unmet needs for people with disabilities. It is one of the blots on the records of successive Governments that they have not been able to get to grips with those needs. Once again, they will be left behind in the scramble for money. It is always the weakest who are left to suffer the pain and to pick up the pieces. It will be schools in deprived areas which will suffer most. Public patients, not private patients, will be left to wait endlessly on trolleys or to suffer in silence, imprisoned in their homes. Carers will be worn out and young families will be left cooped up in bedsits or shared accommodation. The opportunity to break out of social welfare dependence will be closed to many.

It is often said that a state should be judged by how it treats the weakest people in its community. There is no evidence that concern for the weakest people in our community had any bearing on the way these Estimates were compiled. The Estimates tell people on the minimum wage that they must pay all their medical expenses, not only for themselves but also for their spouse and children. The 60,000 people who depend on social welfare rent supplement must survive on €112 for a single person or €195 for a couple. The low paid worker cannot ever get any help with the cost of his or her rent.

The contrasting experiences of those who are well placed and those who are vulnerable and who visit the clinics of Fianna Fáil Ministers tell a story. Well placed members of the equine industry and of the private hospital sector have called to the Minister's clinics and have been greeted with open arms. There has been a rapid scramble to deliver them extra money or generous tax concessions. Contrast that with the experience of those who appear to have called to the clinics held by the Minister for Social and Family Affairs. The result was, as she said on the radio this week, that she got ideas for how she could exact €58 million from the meagre incomes of those on social welfare.

The other hidden aspect of the Estimates is the way the screw will be tightened through stealth taxes. The Government has admitted to some of them. People on long-term medication will pay more. The amount they pay has increased by 46% since the general election. The cost of attending a hospital has increased by 40%. Those who depend on rent supplement have to pay 70% more since the general election while people trying to send their children to college must pay 90% more since the election. These are only the tip of the iceberg, the increases the Government has acknowledged.

The new policy, however, will shunt down the line the extra taxes and stealth taxes that will have to be paid. They will arise from the freezing of the local loans fund and the ridiculous three-card trick whereby the Minister tried to pretend that increases in motor taxes were not stealth taxes. The freezing of the local loans fund has three consequences – increased motor tax for motorists, increased bin charges for householders and increased commercial rates for businesses. These will follow as sure as night follows day. Furthermore, later this year there will be a quadrupling of the development charge paid by the buyers of new houses. Fianna Fáil, instead of nurturing the seeds of the future, has the new philosophy of making those who are forming new families or who are undertaking new business initiatives shoulder the burden for neglected infrastructure. It is an extraordinary philosophy and flies in the face of much of Fianna Fáil's rhetoric. However, that is the reality.

The parents of school-going children will experience more demands for voluntary contributions. The big State monopolies will also look for more. The ESB has already secured a 6% increase. The VHI will also look for more, following the 15% increase in bed charges. We will probably see the other big companies vying with each other for the accolade of securing the highest charge. Thus far, the highest charge granted since the general election is approximately 40%.

The business sector, which would have looked to these Estimates for evidence that the Government had got the message that our competitiveness is crucial and is being eroded, will be bitterly disappointed with what it has learned. Over the last 12 months the prices our exporters have been receiving for their products have fallen by 8%. Government increases in charges that affect business have increased by between 10% and 15% across the board, as was shown by surveys during the week. The hope of business was that the Government would finally realise that most of the elements that are eroding our competitiveness are originating with the Government. However, that message has not got through. Instead, a stop-go approach, which wastes money, is being introduced in infrastructural spending. The evaluation process that had been so careful when the European Union was funding such projects has rusted over, as the ESRI has pointed out.

The Estimates offer the business community more cuts in infrastructural investment, new stealth taxes, extra spending without securing value for money and more sclerosis in decision making on insurance, deregulation and competition. It always seems as if the Government is waiting for just one more report before it will get to grips with the anti-competitive practices that affect so many professional services and the delivery of banking and financial services.

The Estimates are a disappointment. They show all the evidence that they were put together with the slide rule approach of getting the numbers right and forgetting about the need to deliver quality services, to secure good value and to reform systems. These elements, which should have been a feature in the Estimates, have been overlooked. We will see the consequences of that in the poorer performance of the economy and poorer delivery of public services while those at the bottom of the heap will bear the brunt of it.

Ms Burton

The Labour Party has tabled the following amendment to the motion:

To delete all words after "Dáil Éireann" and substitute the following:

"–condemns the 2004 Book of Estimates for its lack of social and economic vision, and its harsh treatment of the most vulnerable in our society, in particular:

–the imposition of a series of taxes by stealth on the Irish people, which have no regard for ability to pay on the part of those on whom they are imposed;

–the harsh series of cuts in social welfare provision which will impact on the least well off;

–the failure of the Government to live up to its electoral promises in a range of areas, particularly in its failure to provide for additional medical cards and the hardship which this will impose, especially on children; and

–the failure of the Government to make adequate provision for capital investment which will inevitably result in lower economic growth and fewer jobs in the future."

It is certainly a milestone when the public budget passes the €40 billion mark. It prompts the remark that rarely in a country's history has so much money been spent with so threadbare a list of achievements to show for it. The Minister for Finance, Deputy McCreevy, enters the pre-budget season with a significant cloud of doubt over his judgment, shown up by the Punchestown affair. He might be forgiven if his judgment had been vindicated by the subsequent history of the centre. It has not been, and is most unlikely to be in coming years. No amount of bluster by him can hide the fact that he played fast and loose with public funds and, in so doing, compromised his office and judgment. It is a dark blot on his record, which is beginning to show an unconscionable number of such blots.

The Book of Estimates is littered with them. It is unfair, short-sighted and economically foolish. This is the third round of spending cuts since the last election. It is a betrayal of Fianna Fáil's election promises and a further assault on the least well-off in our society. It provides for further unfair taxation by stealth of the people. It is also a recipe for economic stagnation and failure. This is a Book of Estimates for the "nags and jags" brigade. No expense will be spared by the Minister for pet projects. No cut is too harsh for those who rely on social welfare and no breach of faith with the electorate is too brazen to contemplate.

Economic policy is not driven by economic logic but by party political considerations and an unvarnished ideology of the right. In the last Dáil spending was first curtailed. Then the Government went on a pre-election spending splurge, as the Minister has acknowledged. In this Dáil it is doing precisely the same. The Estimates are not about economic prudence but about building an electoral war chest. Fianna Fáil will try to buy the next election with the electorate's own money, just as it did at the last election. We will then hear sanctimonious speeches about how Fianna Fáil took difficult decisions in difficult times. Money will once again be no object but serious damage will be done to the economy in both the short and long-term.

Two issues stand out in the Estimates and both demonstrate dramatic switches of policy by the Government which need to be highlighted. The first concerns social policy. The Minister for Social and Family Affairs, Deputy Coughlan, who is usually upbeat and optimistic, appeared unusually forlorn at her press briefing last Thursday, and no wonder. I heard her hapless admission on "Morning Ireland" that she was under orders to find more than €55 million in savings from the social affairs budget. These cuts in social welfare bring to an end a political consensus which has lasted for more than ten years. The Taoiseach was involved in a policy decision by the then new Fianna Fáil-Labour Party coalition that social welfare reform's primary aim was to encourage people back to work, training or education to create a path for opportunities.

The then Government set an agenda which was endorsed and amplified by the rainbow Government and which all of its successors implemented. In this agenda welfare reform was to avoid right-wing punitive measures on claimants in favour of positive encouragement back to work, training and education. These reforms allowed lone parents to earn between €146 and €293 while retaining some or all of their lone parent's allowance. The back-to-work scheme allowed individuals to hold on to a portion of their social welfare payments for up to three years after commencing work. A series of schemes promoted back-toeducation, training and work experience measures, which included help with child care and the retention for a period of vital benefits such as medical cards.

Last Thursday's announcement by the Minister for Social and Family Affairs indicated a sea change in policy, a return to a harsher, often right-wing approach to welfare which will cause immense hardship to the poorest in society at a time of historic riches. The harshest measures will be the changes to supplementary rent allowance. This will mean that persons will not be able to get help with their rent for six months. It will affect lone parents, particularly younger lone parents, who after the birth of their child may live for three or four years with their parents but by their mid-twenties may want a place of their own. Such parents have almost no chance of getting local authority accommodation and usually resort to renting, with the help of a rent supplement, while waiting for anything from five to eight or nine years on the housing list.

The Government decided four years ago to transfer responsibility for the rent supplement scheme to local authorities but has chosen not to implement the policy. Rent supplement claimants are to be the victims of this failure. It is proposed that those claiming rent supplement will be referred to the local authority for an assessment of housing need. This is a seemingly sensible measure but there is no possibility of local authorities meeting the need they have assessed, given the numbers on housing waiting lists and the paltry amount of social housing under construction. According to the Minister, ways of improving the services provided for those with long-term housing needs are under discussion with the local authorities. Why were these discussions not completed before making these changes? The Minister obviously lost out in the battle to a much more robust Minister for the Environment, Heritage and Local Government, Deputy Cullen. From now on anyone claiming rent supplement will either have to be already homeless or in rented accommodation for at least six months. This is a classic catch 22 – if one can afford to pay rent for six months, why would one need a rent supplement? My colleague, Deputy Penrose, will deal with the other cutbacks in social welfare.

The second policy U-turn outlined in the Book of Estimates concerns the capital investment programme. For all of the Minister's honeyed words about multi-annual budgets, the true situation is that there is a shortfall of resources under each heading contained in the spending plans. The Minister once had a target Exchequer capital spend of 5% of GDP. His 2004 Estimates fall €150 million below this figure. In 2003 the under-spend on the capital side so far is €763 million. In an overall spend of €40 billion for 2004, there is no disguising the blunt fact that the share devoted to investment has been seriously reduced. This is a dramatic switch in policy and observers are unanimous in recognising the plain truth contained in the figures that the relative importance of capital investment in the Minister's overall spending plans has declined. He cannot pretend there is lesser demand for investment. The opposite is obviously the case from even a cursory analysis of our infrastructural gaps and the rising costs of congestion. The inevitable result will be a further loss of competitiveness and fewer jobs.

I am sure the Minister has read the World Economic Forum review that downgrades Ireland's rating for growth competitiveness by no less than seven places in the past year from 23rd to 30th. This assault on the capital programme is short-sighted in the extreme. It undermines the future capacity of the economy to reach the goal of steady, even growth rates. It destroys confidence by resuming on the wretched path of stop and go, boom and bust. International investors looking at Ireland will now get two negative signals from the Minister. They see a country that has prospered but whose Government has chosen to abandon plans to use that wealth to lay down conditions for future prosperity. They will see a national pension reserve fund get another billion euro or more but still no re-investment of these funds at home. Another year has passed and still the Minister is unable to offer the trustees of the pension fund a route to have some of this money invested here in roads and communications networks that can secure a return and a cashflow as good as anything Philip Morris or any other international share can offer.

Everyone will pay the price of this Book of Estimates. Once again, the Minister has chosen taxation by stealth. He has added further to the long list of charges and fees which he has increased since the last election. Our old friends Duncan and Mary have been hit once more. Doubtless, the Minister will remember Duncan and Mary. They featured in last year's budget as the typical couple with two children who would benefit from modest tax changes. I hope in this year's budget, the Minister will find the time to catalogue the other changes he has made to their family budget and which many commentators have estimated will come in at approximately €800.

The cost of in-patient accommodation in hospital is up 25% in 18 months. The cost of an accident and emergency visit is up 42% in 18 months. The drugs payment threshold is up 46% in 18 months. VHI bills are up 27% since the election. So-called college registration fees are up 89% since the election. Motor taxation is up 17% since the election. The list goes on. Gas bills, ESB bills, TV licences, VAT, telephone bills, stamp duties on ATM and credit cards have all been increased. If one does not like it and wants to leave the country, one will be charged more for a passport to get out.

These indirect taxes and charges are regressive. They take no account of a person's income in how much is required to be paid. Some are targeted at the worst off. As pointed out in The Irish Times on Monday, Flixotide, a preventive medicine for childhood asthma costs €46.70. The drugs refund scheme will not cover this cost. Once again, the poor, and particularly the children of the poor, who are affected by asthma, must, literally, suffer.

The Book of Estimates contains no substantial additional resources to fight crime. Where crime is concerned, the Government has no money, no strategy and no clue. It promised 2,000 extra gardaí. When that idea was dropped, it had no plan B and continues to have no plan B.

There is a need for reform of Garda structures and management. Equally, the fight against crime requires more resources. As a Deputy who represents Dublin West, I know only too well the impact crime has on communities. It is not the rich and the well-to-do who suffer most from crime. It is the middle and lower income families who suffer, who are intimidated and sit up at night worrying when their teenage children go out, who suffer the costs of damaged property and damaged lives, who deal with the consequences of a Government which talks tough on crime, but only that, because for this Government talk is cheap.

On health, the headline is that the health budget will pass the €10 billion threshold. This is deceptive as a large slice is to be clawed back from health consumers by extra charges and the third rise in the drug refund payment limit in the 18 months since the election. Nothing becomes the Minister for Finance so much as the cavalier way he behaved during Report Stage of the Finance Bill this year when he suddenly introduced a clause to offer yet another McCreevy tax shelter, this time for investors in a private hospital.

Some Sundays ago it was reported that a prominent Dublin tax consultant was assembling a consortium of so-called high net worth individuals to invest in a private hospital in Galway. Some €14 million worth of tax breaks was to be the sweetener, thanks to the McCreevy scheme. The result will be less taxes for the Minister to collect, more tax breaks for wealthy people, more access to private health care for those who could pay and, accordingly, less resources for those who use the public hospitals. As always on the McCreevy-Martin watch it is a lose lose situation for the public health service.

What are we to get from this year's health budget? Precious little to judge from the Minister's background statement. He cannot promise a single additional medical card nor can he set out any timetable to meet his promise of 200,000 additional medical cards. The percentage of the population covered by medical cards continues to fall inexorably and is now below 30% dragging more and more families into additional personal costs to cover visits to the doctor and associated prescription costs.

In my constituency, James Connolly Memorial Hospital has a fantastic new wing fully built, furnished and equipped for more than six months at a cost of approximately €104 million. I believe other hospitals are in the same position. Funding restrictions make it impossible for these new facilities to be commissioned fully. This is economic madness pure and simple. The Irish Times medical correspondent summarised the grim reality of Irish health care under the Martin-McCreevy stewardship as follows: “The prospect of paying more for the privilege of waiting longer continues to be the reality of Ireland's health service.”

The decisions on education are mystifying. Primary schools appear to get an extra funding boost to their building programme but it will only enable a partial catch-up after years of repeated indifference to the substandard condition of many schools and the urgent unfilled gaps in primary school provision in many development areas.

What is it about the Government that makes grandiose spatial plans of hubs, gateways and strategic development zones but will not guarantee the provision of new schools in the locations they choose. These plans are all dead letters if they do not offer the most basic of amenities any community must have, a comfortable well-equipped place for the children to go to school.

I heard the Taoiseach speak eloquently here on Wednesday last in defence of development levies by citing the mistakes of the past where people were sent to live in areas where no facilities were provided. His Government is responsible for the most basic facility of all – a primary school. Last year the primary schools were held back, this it is the turn of the secondary schools, universities and institutes of technology. Parents are made to pay more for registration fees but their student children will enter colleges whose funding is so restricted that inevitably they must reduce services to students. This will mean less tutorials, fewer practicals, less funds devoted to reducing the chronic drop out rate, and less investment in new learning methods. Therefore, students pay more to get less.

Both the Minister for Education and Science, Deputy Noel Dempsey, and the Tánaiste were obliged to do a policy U-turn by restoring the science research budgets they had previously dumped. I am glad they were persuaded, however belatedly, of the error of judgment they had made. Knowledge industries are the key to future industrial growth. Foreign investors do not come here solely because of low company taxes. Access to a well educated source of modern skills is the main ingredient such companies will seek in the future.

Before leaving the education topic I note that €120 million has been set aside for payment to victims of abuse in residential institutions. It is a very large sum and a heading we are likely to see at this magnitude for many years to come. The transfer of liability to the State education budget must mean services for the current generation of school goers will suffer. This sum would go a long way to get a head start initiative back on the road to offer pre-school opportunities and to fund a meals in school service, particularly a hot breakfast, for children in disadvantaged areas. In meeting that deal the Government should not have taken the money out of the education fund. Again in these Estimates we see the poorest and most marginalised people in our society being made to suffer the brunt of the McCreevy cutbacks.

Mr. Boyle

I wish to share time with Deputies Ó Caoláin, Harkin and Higgins. I speak to the Green Party amendment to the Government motion. The Green Party condemns the Book of Estimates, 2004, as lacking in a social, economic and sustainable vision in the manner in which it already deals with marginalised groups in our society. If this Book of Estimates is informed by any vision, it is a narrow selfish vision. It is born out of a Government that knows where its votes come from, in the case of the Progressive Democrats, and where its money comes from in the case of Fianna Fáil. The Green Party further condemns the failure to properly resource necessary infrastructural development and to prioritise infrastructural needs effectively.

In this Book of Estimates the Government is proposing to spend €10 million less than it proposed to spend last year in capital spending, and it seeks to tweak that figure by artificial means. The national development plan cannot and will not be met in its present form and the Government continues to misrepresent how infrastructure is being provided. The Minister has quoted a figure for how public transport has increased at 15 times the rate of capital expenditure on roads, yet we spend three times as much on road expenditure as we spend on public transport, and this Book of Estimates further cuts the amount of capital expenditure available to public transport projects. Rather than have direct Exchequer funding for CIE to help it fund such capital expenditure, it is moving that burden in a very suspect way into an additional debt for the CIE group of companies. That is how this Government operates.

The Green Party condemns the misleading attempt to acquire additional funding through surreptitious means that disproportionately transfer the burden of financing public service onto those with least means. There are additional charges of €90 million, flat rate charges, direct charges and charges that are not linked to the ability to pay. Maybe if the Government had courage enough it would say that the people who are not within the tax net and earn even less than the minimum wage, will be paying these taxes and levies, in the same way as those who are among the 400 top earners, many of whom pay no tax, will be paying these same levies.

We further condemn the cutting adrift of local government funding that will undermine the provision of services at local level. Apart from increasing motor taxation this Government is not providing one cent extra for local government. It is imposing the full burden of providing additional local services and the cost of benchmarking on local authorities by way of increased service charges which will no longer be linked to any attempt to be a refuse or environmental charge, and increased commercial rates. We condemn the merciless attack on those dependent on social services through the removal of key funding projects. We will hear in the course of this debate over the next day and a half how many of these petty and vindictive cuts will affect the most marginalised in our society. I have heard Government backbenchers defend the cut in the back-to-education allowance. This money will be aimed at secondary education. On that logic future cuts in this area will focus on the money spent in primary education. I suspect that by the time of the next election the back-to-education allowance will apply only to pre-school education because that is the logic on which this Government operates.

We condemn the insulting manner in which environmental protection programmes have been cut, with a 32% cut in funding for the Environmental Protection Agency indicating the Government's true priorities in this area. This is just a selection of the cuts in the most contentious Book of Estimates that this Government has produced.

The Minister for Finance is fond of using 1997 as a benchmark, his year zero, the Government's Pol Pot. Everyone knows the resources that were available between 1997 and 2002. Will he use 2002 and the date of election as a benchmark?

Éamon Ó Cuív

Yes.

Mr. Boyle

Will he use last year as a benchmark?

Éamon Ó Cuív

Yes.

Mr. Boyle

If he compares figures year to year he will see how badly this Government in the 29th Dáil is performing. This is a Book of Estimates that will help inform a budget for those who occupy what the Minister describes as the new plateau of wealth, those who are pulling up the ladder of universal access to social security, health and educational opportunity all in the name of fiscal discipline.

During the boom years the economy was on autopilot. Ministers were preoccupied with little more than spending their largesse in enhancing their electoral prospects, and in indulging their whims. There are clear indications that the problems in the economy will be turned into opportunities for some type of ideological experimentation. We will see more privatisation, more stealth taxes, licensed profiteering, local levies and poorer core public services along with continued generous tax breaks. The burden of fiscal discipline will be carried by those who have been disenfranchised, denied their full rights to citizenship and excluded economically by a Government which has given up on them and feels it does not need their support to govern.

Caoimhghín Ó Caoláin

There is clearly deep anger throughout the country at the series of cuts and stealth taxes arising from the Book of Estimates published last Thursday. In a two-pronged attack on the citizens of this State the Government is charging more for less services and is cutting back on vital provisions for some of the most vulnerable people in our society. This is typified by the mean and dangerous restrictions on rent supplement which will penalise the poorly housed and those on the economic margins. The restriction of qualification for those who have been in private rented accommodation for six months is an absolute disgrace. It will increase homelessness and further inhibit people in dangerous domestic situations from moving out and finding their own accommodation. What a pitiful reality for those newborns and young children who will grow up in such circumstances. It is a reality far removed from the national pledge to treat all the children of the nation equally.

Before the general election, Fianna Fáil promised to extend the medical card to 200,000 people. Since the general election the people who were promised that they would benefit by this extension have been hit by increased charges for health services. The new rise in fees for visiting accident and emergency units follows a rise of 26% last year. It comes at a time when people are on trolleys in accident and emergency units and when the Government is proposing to close such units in local hospitals under the aegis of the Hanly report, where it has not already done so. It comes also at a time when the primary care units promised by this Government have not been delivered. Such units would help reduce the numbers of people going to accident and emergency units. These health charges are a further blow to those whose income is just above the limit for medical card qualification. They will now face higher costs for medicines after another significant increase last year. The drugs payment scheme threshold has risen from €70 to €78, following a €5 increase last year. This will cause further hardship. The allocation in the Estimates for health does not provide for the reforms to which the Government claims it is committed. It will simply keep the system limping from crisis to crisis.

I have already received representations about the cuts in back-to-education allowance where the qualifying period is rising from six to 15 months. A constituent has pointed out that he will now have to claim unemployment benefit for an additional nine months. This cut is illogical and can serve only to dissuade people from returning to education.

In his Estimates statement last week the Minister for Finance, Deputy McCreevy, spoke of "a tighter approach and greater prioritisation of spending". Where was this approach when he was bankrolling his pet project in Punchestown in his constituency? This, like nothing else, symbolises the overall economic mismanagement by the Government. Who is paying the price? The answer is, of course, the ordinary taxpayer.

The Estimates and budget of last year, with this year's Estimates, have again spawned a whole series of stealth taxes, taxes which take no account of ability to pay and, therefore, hit the lowest paid citizen hardest. The Government has increased health charges, local authority charges, value added tax, fees for State examinations and many other charges. These stealth taxes have effectively wiped out the previous PAYE tax reductions for the lower paid, and the value of the minimum wage.

The Minister should look at what is happening at the other end of the scale. We are only now seeing the full extent of how the wealthiest in our society have successfully shirked paying their fair share of tax. Earlier this year it was disclosed that 254 Bank of Ireland customers with offshore accounts had settled unpaid tax bills with the Revenue Commissioners. The tax recovered amounted to €100 million. One individual paid €7.3 million in back taxes. A recent study by KPMG found that over €4 billion had been lodged in the Isle of Man bank accounts of six Irish subsidiaries between 1998 and 1999. Of the top 400 earners in the State surveyed in 2002 by the Revenue Commissioners, 117 had an effective tax rate of less than 30% in a system where over 500,000 PAYE workers are paying income tax at the top 42% rate. Some 18% of the top earners were paying less than 15% in tax. As the Minister well knows, a significant number were paying no tax at all.

Instead of restructuring our tax system to create greater equity and ensure greater revenue from the wealthy, the Government punishes the ordinary citizen with stealth taxes and social welfare cuts. Instead of providing both the reforms and the resources necessary to deliver better health, education and social welfare services and infrastructure, it mismanages on a massive scale and squanders the resources of the people.

On behalf of Sinn Féin, I reject the Estimates. We will be campaigning against these cuts and stealth taxes, and for their reversal in the upcoming budget.

Ms Harkin

What is that message beamed at us from our television screens every night? It is: know the price or pay the price. If only it were that simple, because the public now knows that it is paying the price of electing a Government which taxes us by stealth while constantly telling us that we have one of the lowest tax rates in the European Union, yet it claws back with stealth taxes in each successive budget and Book of Estimates.

Stealth taxes are well named. They are like the thief who comes in the night, uninvited, unwelcomed and, most of all, unwanted. What did the Minister for Finance, Deputy McCreevy, say before the last general election? He said there would be no cutbacks, planned or otherwise. He was planning, not only cutbacks but also clawbacks. The Book of Estimates is the book of evidence that indicts him for taxing by stealth and attempting to create the illusion that we have a low tax regime when indirect taxation is rocketing.

In the short time I have available I can mention only one or two of the most insidious clawbacks in the Estimates. One of the worse aspects is that while everyone is hit, those on low incomes are at the receiving end of knockout punches. Junior certificate fees have increased by 14% since last year. Third level registration fees have increased by 90% since 2002. Primary and secondary school capitation grants were cut. The threshold for the drugs refund scheme has increased by 20% since 2002, a scandalous attempt to squeeze money from those who suffer from long-term illnesses. Hospital accident and emergency charges have increased by 30% since 2002 but if the Hanly report is implemented as planned, those who live in Ennis and Nenagh will be so pleased to have an accident and emergency department that they will gladly pay any price.

I could hardly believe the new rules on eligibility for rent supplement which mean that a person must live in rented accommodation for six months before claiming. This is absolutely crazy. We have approximately 800 people on the Sligo Borough Council housing list and 700 on the Sligo County Council housing list. Where can the people concerned live, if not in rented accommodation? How can a person pay a deposit on a home, pay rent for six months and then claim a need for rent supplement? This will lead to an unprecedented increase in the incidence of homelessness all over the country and is the most cruel and heartless announcement in the Estimates.

While it might seem that an increase in credit card stamp duty is not in the same league as the last issue I mentioned, it will nonetheless have a negative impact in my constituency on the business of MBNA in Carrick-on-Shannon which employs over 900 people. If a person changes his or her type of credit card with the same provider, or changes provider, he or she will pay stamp duty twice, though using only one credit card at any one time. This is a direct threat to the business of MBNA but more importantly will stop consumers shopping around for better value and make a mockery of the slogan "know the price or pay the price". The Estimates will ensure we pay the price and that we will keep paying it.

Mr. J. Higgins

The Estimates speak volumes about the priorities of the Government. This is a Government which rules for the rich, the speculator, the millionaire tax exile, the millionaire stud farmer and big business generally. For ordinary working people and those suffering from poverty, it does everything wrong on the double. It double-crossed the people in lying its way back to power, and double-taxes working people over and over again while giving €600 million in tax breaks to big business every year from now on. It is a Government of disgusting double standards by which ordinary working people, compliant taxpayers, are dumped into prison for taking a stand for taxation justice, while the Minister for Justice, Equality and Law Reform does not lift a finger to bring before a court, let alone put behind the walls of a jail, the Ansbacher men, corrupt councillors and defrauding bankers who have stolen hundreds of millions from the State.

The cuts in social welfare speak of a Government whose arrogance now sees its members light years removed from the economic difficulties of ordinary people. For six and a half years the Government allowed the speculator and the landlord to profiteer most monstrously, pushing up the price of homes and rents to crushing levels. Because of its failure to build homes for low income families, they were thrown at the mercy of the landlords into whose maws the State was shovelling rent supplements. When it comes to take the situation in hand, who does it hit? It does not hit the rack-renting landlords but their victims. It is absolutely incredible that poor people are supposed to find €6,000 before they can arrive at a point where they can organise accommodation for themselves.

The rotten system over which the Government presides is stunningly transparent in the outrage announced yesterday whereby a gang of speculator and bribe givers organised in a company called Jackson Way was awarded €13 million of public funds by virtue of a vote by Fianna Fáil and Fine Gael councillors to rezone land on which the company had speculated, yet we are supposed to respect the institution of the State, the rules of which are rigged to make this possible. That is the problem. We have a State which is rigged, over which the Government presides and which it continues to allow to be rigged, to benefit the minority of the very wealthy, the privileged, the big banker and the speculator, while ordinary people who want to take the situation in hand are shown no such tolerance by the institutions of the State, rather they are persecuted and thrown in prison for standing up for justice. The local and European elections cannot come soon enough to give the ordinary people of the State an opportunity to pass judgment on the Government of Fianna Fáil and the Progressive Democrats. I have no doubt that they will pass judgment and pass it harshly.

Debate adjourned.