Summer Economic Statement 2019: Statements

Today, the Government published its summer economic statement which is, as the House knows, a key element of our reformed budgetary process. Before I outline the key points from this statement, it is appropriate to take stock of where we are now in terms of the economy.

Our economy is now very different from that which prevailed a decade ago when Ireland entered the most acute phase of the financial crisis. It is more diversified. Economic activity is more balanced. Living standards have improved. The public finances have finally returned to surplus.

Unemployment now stands at just 4.5% compared to a peak of 16%. Gross domestic product, or national income growth, of 3.9% is projected for this year and 3.3% for next year.

However, the risks to our economy have self-evidently intensified. There is now a greater likelihood of a no-deal Brexit outcome. A risk of overheating in the domestic economy exists as it closes in on full employment and mounting wage changes. There is the possibility of a deterioration in the international trade policy environment. Finally, as I have acknowledged, there are vulnerabilities in the future in regard to corporation tax revenues.

The key principles underpinning the Government’s economic strategy are, first, a steady and sustainable approach to improving living standards in our country; second, a sustainable budgetary policy; and, finally, with reference to budget 2020, an approach that protects domestic living standards to take account of differing Brexit outcomes.

The Government must formulate the appropriate budgetary policy on the basis of what is right for the economy in order to ensure continued, steady improvements in Irish employment and living standards. As such, our budgetary policy must lean against the wind, first, to try to avoid a scenario where our economy might grow too quickly in the future and, second, at this stage to build up our buffers and economic resilience in order that we can stabilise the economy in the event of shocks.

Against this unique backdrop, the task of framing the budget this October, weeks before the UK is due to leave the EU, will be more challenging than usual. Our obligations to the European Union mean that we must submit a draft budgetary plan to the Commission by the middle of October.

The approach of the summer economic statement is therefore one budget, two scenarios. The economic statement sets out two budgetary scenarios. The first involves an orderly Brexit, while the second involves a disorderly Brexit. Both are indicative and unprecedented levels of uncertainty mean that there are many possible economic outcomes.

Either scenario suggests a careful budgetary stance is needed in preparing for budget 2020. This is in line with the policy advice that has been made available from the IMF, the European Commission, the OECD and the Irish Fiscal Advisory Council.

In the event of an orderly Brexit and given that we are at the top of the economic cycle, the appropriate budgetary policy is to stay inside the parameters outlined by my Department in the stability programme update in April. This involves a budgetary scenario and strategy of €2.8 billion for 2020. In an orderly Brexit scenario, this is consistent with a 0.4% headline surplus as a percentage of national income for next year.

With current and capital expenditure commitments amounting to €1.9 billion, including a planned increase of €700 million in our capital investment, and with the additional commitments that we have - the demographics - to meeting our commitments to public servants, and an expenditure reserve of up to €200 million being established to accommodate funding requirements for the national broadband plan and the national children’s hospital, this leaves €700 million to be specifically allocated as part of this budget.

Over the medium term, the strategy envisaged under this scenario would see an improving headline surplus, with expenditure growing below the projected growth in the economy. This is appropriate given the uncertainties arising in the external environment and the current position of the economic cycle.

It goes without saying that a disorderly Brexit will put pressure on the public finances and presents a clear and present challenge to domestic living standards. Under a disorderly Brexit scenario, this could involve a headline deficit in the region of 0.5% to 1.5% of national income for next year, depending on the magnitude of the economic shock.

Under a disorderly Brexit scenario, in addition to the strategy outlined for the orderly scenario, a disorderly response would consist of the following measures. First, by allowing our social welfare and tax systems to provide counter-cyclical support for our citizens, we would ensure that for those who found themselves suddenly without work or with lower incomes we would have the resources in place to provide the supports back to them through our social welfare systems in particular. Second, there would be temporary, highly targeted and meaningful support for the sectors most affected.

In September, the Government will decide which scenario will form the basis for budget 2020. The approach being proposed is the correct one to ensure on the one hand that we do not generate further inflationary pressures within the economy and, on the other, to build up appropriate resources in order that budgetary policy can support the economy in the event of a disorderly Brexit.

By taking these decisions now, it will help with the choices of the future. For example, it would allow continued support for our national development plan and allow us to maintain and improve public services in the future.

Budgetary measures must be financed by revenue streams that are sustainable into the future. I have previously flagged the risk arising from this, and this was one of the drivers behind the decision on the VAT rate for the hospitality and services sector last year.

I have asked my officials to develop proposals to manage windfall corporation tax receipts to ensure the sustainability of the public finances and to ensure that the fiscal rules do not contribute to budgetary imbalances. I will publish a discussion paper on this topic in the coming week. I will also publish and build on a commitment in the summer economic statement to examine a process the Department of Finance will put in place to establish the sustainability of corporation tax receipts into the medium term, conscious of the work that is under way in the OECD, with the objective of completing the work by March.

The rainy day fund is another policy response to mitigate over-reliance on revenue over-shoots, including corporation tax receipts. In addition to the rainy day fund, the best solution to an excessive reliance on any tax head, including corporation tax, is to run budgetary surpluses. This year a surplus of 0.2% of national income is in prospect with a further improvement next year to a surplus of 0.4% of national income.

The economy is in good shape but we face uncertain times. Now is the time to look at the decisions we can make to ready ourselves for what the end of 2019 and 2020 might bring for our economy, country and society for all on our island. We have important choices to make and we will have to frame this budget, even in an uncertain time, with more of an eye to the future. I look forward to working with the Dáil to frame such a budget and see it pass on 8 October.

I welcome the opportunity to make some remarks on the summer economic statement, which was published earlier. My main takeaway from the document is that we now have a better sense, although only an estimate, of the likely impact of a no-deal Brexit were it to materialise at the end of October or in subsequent months. The figures illustrate a stark picture. A projected surplus next year of in excess of €1 billion would become a deficit of between €4.5 billion and €5 billion in one calendar year, which is a dramatic change of fortune. Over the five-year period to 2024 public finances could worsen by close to €30 billion in the event of a disorderly Brexit, compared with an orderly Brexit underpinned by a withdrawal agreement. Those stark figures need to be read in conjunction with previous estimates and reports from the Department of Finance, the ESRI, the joint paper, the Central Bank's analysis and the stability programme update from this year, which showed that economic growth over a two-year period that the Minister indicated this afternoon would be largely front-loaded to year 1, would fall by approximately 3%. That would mean little or no growth whatever next year. It may not be that bad but some say the impact could be worse. If it is worse, we face negative growth.

This is the environment into which we are entering prior to budget 2020. My understanding of comments made by the Minister and the Taoiseach in recent weeks was that there would be two quite radically different alternative budgets under preparation and come September, the Minister would decide which was the more appropriate given the assessment at that time of whether a no-deal or orderly Brexit was likely at the end of October. However, that is not what we are getting today.

The Minister's policy decision is that come what may, the budget day package will be €2.8 billion. We have two very different estimates of what the outcome might be depending on the Brexit scenario that transpires. However, the budget package is €2.8 billion, of which €2.1 billion is set in stone. The flexible element of budget 2020, therefore, is €700 million. If my interpretation of what the Minister is saying is correct, his assessment of where Brexit is likely to settle will influence how he is likely to use that €700 million. He is saying that the automatic stabilisers, which are essentially demand-led, will kick in, and if people lose their jobs, welfare supports will be available and, therefore, welfare spending will increase. Equally, less economic activity than was forecast will mean that tax receipts will come in lower than expected. Those are the automatic stabilisers. However, there seems little headroom for what the Minister calls the temporary targeted funding for the sectors most affected. It appears that all that must come out of the flexible envelope of €700 million. The Minister might elaborate on that later in more detail.

It seems that he decided in June that the budget day package in October will be €2.8 billion, irrespective of what form of Brexit, if any, we face later that month or beyond. I am not sure that it is wise to lock in that budgetary strategy right now. I do not see that it is necessary, as much can change in the coming months. Much of the data on which this is based may change and the economic picture might change. Aside from Brexit, there are many moving parts. The Minister has touched on some, and many other risks are outlined in the summer economic statement such as the economy overheating. We are seeing elements of that working through in the extra cost of delivering capital projects, for instance, and in the construction sector. There is also corporation tax, and a much more uncertain and volatile international trading environment. Sometimes we do not fully appreciate and accept just how open an economy ours is. It would not take much by way of external factors to have a material affect on our economy's performance. That is an important point. I hope the Minister will come back on the amount of resources he will have in play to do anything tangible to support the sectors we all accept will need special supports in the event of a no-deal Brexit.

Apart from that, the core priority going into this budget must be to protect the essential, basic front-line services on which people rely as they are under strain. It is fine for the Government to criticise the Private Members' motions that come before the House week in, week out but they do so because of our experience as practicing politicians. We talk to people on an ongoing basis, as does the Government. Services, particularly in parts of our health service such as homecare, on which the House will focus during the week, are particularly strained. Young children are awaiting assessments of need, and have waited two and three years in my part of the country. There is a long and difficult wait for parents who do not have the money to pay for a private assessment but then there is nothing at the end of it. They get a diagnosis but there are no services. Apart from Brexit, the Government will have to focus on what the priorities are for us as a country going into the next year and beyond over the coming months. Apart from the economic backdrop, which must be accounted for, the other core priority must be protecting our citizens and ensuring that those basic services are in place when they need them. They are under serious strain now. It is particularly the case in health and I do not doubt that the Minister is frustrated that health spending has increased by so much yet the return is not there in any improvement in waiting lists, particularly with outpatients, which continue to worsen.

The Minister cannot do everything. He cannot promise a €2.3 billion tax cut and deliver on the full capital programme despite the overruns that are there and, at the same time, protect vital public services. Decisions will have to be made against the benchmark, as far as we are concerned, of what are our values, what are our priorities as a country and who are we seeking to protect. For me, this is the key issue.

I welcome the fact the Minister is initiating a review of the sustainability of corporation tax. I would have preferred if there was an external input into it. I have height of respect for the Department and its officials but they are the same people who are advising the Minister day in and day out. I would have thought a fresh perspective on Ireland's corporation tax receipts would have been the way to go. Perhaps this is something on which the Minister can come back and engage with us on the precise methodology that should be used in conducting this review. I know the review is not just into the sustainability in isolation, given the volatility in corporation tax but is also in the context of the international changes led by the OECD. Those issues are also very important.

The Minister is duty-bound to give a comprehensive response in a very public way to the Irish Fiscal Advisory Council's latest report. The criticism of the Government was stinging. It was quite damning. It is questioning the fundamentals underpinning the budgetary numbers over the coming years, for example, stating the medium-term budgeting forecast on the spending side is not credible. This is the independent watchdog. Those arguments and perspectives need to be assessed and we need an open and honest debate about the demographic pressures we know we are facing. We know we have an ageing population. Every year, we can see the extra demands that arise for elderly care and the pressures on our hospital services. Have we really factored in the known costs that are there? I very much doubt that we have, based on the assessment I have seen so far.

I welcome today's publication. It is a sobering backdrop to the period ahead as we approach the preparation of budget 2020. Once again, it underlines the need for political stability in our country. When we look at the chaos continuing to play out in the UK, if in this country, against all of the unknowns that undoubtedly exist, we provide the stability to ensure that as best we can we guide our country through an incredibly fraught and challenging period then we will have done some good service.

I apologise for being a bit delayed coming to the Chamber. I was at the Committee on Budgetary Oversight where we were hearing from Dr. Stephen Kinsella and Mr. Colm McCarthy on a number of issues, including some discussion on the summer economic statement. I welcome the opportunity le cúpla focal a rá ar an ábhar seo tráthnóna. Tá na díospóireachtaí seo tábhachtach. It is important that we have these debates but it is also important that we have them on a factual basis and on the basis that the information provided is credible and robust. Unfortunately, we do not have this today because in the summer economic statement we have statistics presented in terms of medium-term expenditure that lack credibility. These are not my words and I will go into them in some detail in a moment. The problem is that if we have statistics that lack credibility then we have a document that is fantasy. The expenditure projections are not real and credible and will not be met. We are having a discussion about some of the serious risks that face the Irish economy, whether Brexit, a trade war in the United States, changes to the international tax regime or changes being discussed at European level. All of these challenges and threats, such as overheating in certain sections of the economy, must have sensible, detailed and proper analysis but when the statistics presented in the summer economic statement have already been called out by our own independent fiscal watchdog as lacking credibility and being implausible then we are not having a debate that is rooted in reality; we are having in part a bit of a fantasy debate on what is really there and what is not there. This is the problem.

The Minister announced in the summer economic statement that the unallocated expenditure for next year is in the region of €700 million in either additional spending or tax cutting measures. As I pointed out to the Taoiseach earlier, the commitment he gave at the Ard-Fheis last November will not get very far, given that it would cost €500 million or more to start to implement that tax pledge. The reality is that even as the Minister presents the figure of €700 million again today, he has not taken account of the fact that the Christmas bonus is not factored in. It makes no sense, and this is why I speak about fantasy figures, in this day and age, when we know the Christmas bonus will be paid, that the €300 million needed to pay it is not factored in. Immediately the €700 million becomes €400 million. The Minister has not factored in the fact that all the indications are that we will see another health overrun and overspend. I would rephrase it and state there was an unrealistic allocation for health in the first place with regard to some of the reforms that need to be made to ensure we do not waste money in the health budget. Therefore, this overrun in itself, coupled with the Christmas bonus, takes away the €700 million almost immediately.

This is the problem with the figures that have been presented. One of the differences that exist between these figures and those in the stability programme update published in April is that at least the Minister has accommodated for the fact that some of the runaway projects in capital expenditure, namely, the national broadband plan and the children's hospital, will need an additional €200 million next year. This has been factored in. With regard to the core problem, I will read from the Minister's summer economic statement. Table 3 in paragraph 4.2 shows budgetary projections for 2018 to 2024. It sets out the key fiscal metrics consistent with the stability programme update in 2019. These projections represent the basis of the summer economic statement, therefore, the summer economic statement is based on the fiscal metrics consistent with the stability programme update in 2019. What did our fiscal watchdog say about these fiscal metrics? What did it say about the figures in the stability programme update in 2019? It states in its report:

The expenditure forecasts [in the stability programme update] are not credible: they are based on technical assumptions which do not reflect either likely future policies or the future cost of meeting existing commitments. The technical assumptions used imply an implausible slowdown in expenditure growth, overstating the likely budget balance.

This is not coming from me. It is coming from the Irish Fiscal Advisory Council appointed by the Government, that is independent and provides us with the basis of what we need to work on, and from there we can look at the different ideological positions we have, where we believe investment needs to take place in the economy and where certain sectors need to be supported. When we are doing this on the back of implausible and unreliable statistics that are not credible, then what is the point? There is a real responsibility and an onus on the Minister to stand up when the debate concludes and explain to me, other Members and the Fiscal Advisory Council why he has just dismissed its warnings and comments that the projections are not credible. Why has regurgitated them in this report?

We see very clearly the negative impacts of Brexit. As has been mentioned, the position will be €28.5 billion worse over the next five years in the context of a disorderly Brexit. What is not clear is that the Minister makes the point in the summer economic statement that if a disorderly Brexit is the likely outcome then what he will do is employ the budgetary strategy parameters set out in option A, which is the baseline transition period and no crash-out, with a number of other measures.

Those other measures are automatic in some cases, as has been said, such as social welfare protections for those who will be made unemployed. What really scares me is that there is one line referring to "temporary, targeted funding for the sectors most affected". We have a one-line response, therefore, concerning the effects of a disorderly Brexit scenario which would have a €28.5 billion impact on the economy over a five-year period. That is not good enough. We need more than that. What does that line mean? Surely the Departments, including the Minister's own Department, know what that line means. There is a need to spell out and flesh out what we are going to do in the case of Ireland being faced with a nearly €30 billion hit over a five-year period. That deserves more than a one-line response in this document.

We have argued, as the Minister knows, for a Brexit stabilisation fund. We have argued as well that that fund needs to have an initial injection of €2 billion and that the moneys going into it should come from the resources being put into the rainy day fund. Those contributions to the Brexit stabilisation fund should come from this year's and next year's contributions to the rainy day fund and also from the Ireland Strategic Investment Fund. As the Minister knows, we have been very critical of the design of the rainy day fund. We echo the comments of the Irish Fiscal Advisory Council, IFAC on this matter. The Minister will be aware that IFAC has called out the design of the rainy day fund. The problem with the rainy day fund is that it is counter-cyclical at this point in the cycle, in that it takes money out of the economy, but it will not be in a downturn.

I am reminded of the advertisement for paint which states that it does exactly what it says on the tin. The problem with the rainy day fund is that it does exactly the opposite of what it says on the tin. It cannot be employed when it is raining. It can only be employed for structural reforms, for bailing out banks or for natural disasters. It is very clear under the current rules, however, that it is not there to support, for example, additional social welfare payments. That might be one of the measures we might need. The rainy day fund is also not intended to support the agrifood industry, which would also be seriously affected, and it does not allow for support for small towns or small and medium-sized businesses, SMEs, impacted upon by Brexit.

The Minister has also ignored the IFAC and the Economic and Social Research Institute, ESRI, pointing out an over-reliance on corporation tax receipts. That over-reliance is increasing and becoming more concentrated and volatile. The figures presented as the basis for the Minister's budget, therefore, use resources which are volatile. We need a real vision regarding how we deal with some of the areas of our economy in need of additional investment, such as childcare. Such an investment would support labour participation rates. Those rates are slipping at a time and we need to maintain them at a time when unemployment is low. We also need investment in third-level education so that we have our foundations right. We also need supports for families struggling to meet the crisis in the cost of living.

None of that is spelt out in this document. I am very disappointed that the Minister has used figures that are unreliable and which have been critiqued by the IFAC and the ESRI. I am also disappointed that he has not responded adequately to the major challenge posed by a disorderly Brexit. Hopefully, we will never see the impact of that challenge come to pass and visiting these shores.

The Fine Gael Party has been working overtime to rebuild its rather tattered reputation for fiscal prudence and economic competence. This summer economic statement meets neither of those requirements, unfortunately. In fact, rather like last year's summer economic statement, this statement is seeking to present the best possible aspect of the situation we are in. The situation, however, is outside the competence and control of the Minister at the moment because of Brexit and it poses serious challenges to Ireland.

We do not know whether Ireland is going to get lucky and there will be some form of soft Brexit. It is no more possible to know that than to forecast the leading contender in the race for British Prime Minister and what his love life is like. We cannot make out what is going to happen to Britain and what decisions that country will take on Brexit. This is a budget package that looks forward to a sum of €2.8 billion with €700 million for new measures. We have no commitment from the Minister for Finance as to how much of that he foresees as being available for tax cuts. I do not even know if the Minister actually wants tax cuts. I know the Taoiseach wants tax cuts because he keeps referring to them here as his go-to economic lift in the budget.

There is also no detail in this statement on how much additional funding will be spent if there is a no-deal disorderly Brexit. We have no information, or speculation, regarding likely commitments from the European Union for additional funding to support Ireland in the event of a hard Brexit. It is clear that income tax cuts in this scenario should be ruled out and the €700 million in additional measures should be committed to public services. That would be prudent and appropriate. There are great pressures in the areas of health, homecare, supports for carers, education and childcare. Above all, we have an ongoing crisis with housing and the affordability of rent.

I have the 2019 minimum essential standard of living report from the Vincentian Partnership for Social Justice. It is a key document concerning what families require in rural and urban Ireland. The reports records that a one bedroom flat anywhere in Dublin, even in the cheapest area, costs more than €1,000 a month. It will cost about €1,125. That is the crisis we are living with and this summer economic statement is not even prepared to consider that crisis. The statement is surprisingly light on detail. I described last year's statement as being a novel. The subsequent ending of that novel was not great. As we know, by the time the budget arrived, the Minister had to resort to finding money down the back of the sofa to bail out the health service yet again. That was because the Government is unable to manage the finances of the health service.

The Minister is being more honest this year because he is already telling us that the plan will change substantially in September. We know that will happen based on what occurred last year. The announcement today suggests that no matter what type of Brexit we face, we are going to proceed with the budget plan. We do not know, however, if there will be a Supplementary Estimate or a special budget for exceptional measures if the UK crashes out of the European Union. I think this is a simple question. Nobody here wants the UK to crash out. It is, however, a real possibility that it will and this is a reasonable question to ask the Minister. What happens if that occurs and what will be the parameters of the figures?

The Minister is saying we should wait until after September. Perhaps he should wait until he has stood up on budget day. I cannot see why he should not deal honestly with the Dáil. He should not rule out a special Brexit budget. If there is a decision to spend more money, additional Supplementary Estimates will be needed. What is Fine Gael trying to pretend? We know €500 million was allocated to the rainy day fund this year and another €500 million will be put in for next year. What happens to the rainy day fund in a hard Brexit scenario? A hard Brexit would be a rainy day for Ireland. The way the legislation has been created means that it is not clear in what context the rainy day fund will be available. Would we need the European Union to declare it a rainy day? I am not sure what would happen. Will the rainy day fund be used in a disorderly Brexit? That is a reasonable question and the Minister for Finance should show responsibility and answer it.

I will turn now to the extra cash needed for the national children's hospital and the national broadband plan.

Here is a little clever accounting that accountants do all the time. The Minister has made Orwellian use of something called an "expenditure reserve" to allow for spending that he knows will happen. He is setting aside €200 million a year from now on for a special reserve to meet the holes in the financing of the national children's hospital and the national broadband plan. The Government will sneak this extra €200 million a year in to avoid the constant embarrassment arising from the overruns in both. This will ultimately be capital investment, but that has not been made clear today. We have gone back to the habits of Brian Cowen, the former Minister for Health and Children. He could not distinguish between capital and revenue expenditure for quite a while because of financial embarrassment. The health service of the time did not seem to be able to do it either. We are going back to that.

There is no commitment to a Christmas bonus in the summer economic statement. Some people might say this is quite a technical item. The Christmas bonus is traditionally provided for out of current resources because budgets traditionally fall either at the end of the year or early in the new year. The IFAC took issue with this. It stated that this is an in-year spending increase and, therefore, it should be properly provided for with regard to the relevant time spans. Last year it was provided for in a Supplementary Estimate. Supplementary Estimates amounted to €1.3 billion overall. However, there is no provision for the Christmas bonus in the summer economic statement. It is silent on that issue.

There are two possibilities. I think the Minister is going to pay the Christmas bonus, which I hope and recommend that he does. Alternatively, he will abolish it like Fianna Fáil did ten years ago. We had to reinstate it. Which will it be? That is a profoundly reasonable question to which the Dáil deserves an answer. I assume the answer is that the Minister will find that money out of what will be available in November, when a surge of self-employment tax payments will be received. Why not just share that with us now and be honest about it? It is an incompetently devious attempt to pull the wool over some people's eyes pretty much all the time. The Minister is trying to give the average taxpayer a little pat on the head and say everything is all right, and in any event he has the rainy day fund in his back pocket so if anything goes wrong it will all turn out all right on the night.

It is the intellectual equivalent of the famous soft landing that Fianna Fáil promised as the boom turned to dust. We heard about the soft landing everywhere. In fairness, everybody wished for a soft landing. Several people said differently, predicting there would not be a soft landing and it would be a total disaster for the country if the banks failed in Ireland. Will the Minister level with the Dáil? He writes book reviews a lot. Some of the book reviews he writes in various papers suggest he has an intense and detailed interest in economics, both practical and theoretical. I make a point of reading them and I commend him on them.

Does Deputy Burton read the books or just the book reviews?

It is great that a Minister for Finance has the time to write book reviews but can he please this time write an honest summer economic statement or amend this one?

The €700 million that according to this statement is available for additional expenditure in the coming budget is just not enough. The issue of the likely cost overruns in health has been pointed out. The Minister has questions to answer. The Christmas bonus was raised by Mr. Colm McCarthy at the Committee on Budgetary Oversight. We must also consider the possibility of a hard Brexit and the costs that could impose, the volatility of the corporation tax receipts and possible downturns. Those are all uncertainties.

Whether we have a hard Brexit or any of these difficulties materialise, there are many areas where we need dramatic increases in investment and spending. Affordable housing and council housing are most obvious area. We are not doing enough. The Construction Industry Federation told the committee that the private sector will not meet the output targets the Government hopes it will hit, and the situation in public and affordable housing is just dire. The leakage of wastewater into Dublin Bay is another example of a creaking water infrastructure that needs dramatic increases in investment. If climate change targets are to be met and congestion dealt with, a dramatic increase in investment in public transport is needed to reduce fares, improve the quality of public transport and start new projects. We have a serious problem with childcare. We need to invest to provide affordable childcare on a greatly expanded basis.

In the area of education, we need many more apprentices. That means investment in that area. The financial obstacles facing people going into apprenticeships and higher education must be removed. Particularly given our skills and labour shortages, any possible additional labour force participation needs to be activated. That means investment in areas such as education, apprenticeships, childcare and so on. Then there is the need for climate action and a range of areas where we need significantly increased investment and spending. Moreover, wage demands from health workers and others who have suffered pay restraint and pay cuts for the best part of a decade are legitimate and justified. We need to find money for everything.

Unlike other people, we are not hypocritical. We do not call for fiscal rectitude on one hand and lots of extra expenditure on the other, nor do we believe that extra investment and expenditure should be financed through additional borrowing. That is a dangerous game. We should not worsen the poor debt position. As the Minister will be aware, our question to him is why he does not look at other potential sources of revenue. The elephant in the room is now being discussed even in the United States, and by some very unlikely people. Some of the richest people in the US are talking about wealth taxes. Why do we not look at those taxing that revenue as a source of wealth? Employers' pay-related social insurance, PRSI, is at one of the lowest rates anywhere in Europe. We could tax financial transactions. Professor Stephen Kinsella was before our committee earlier. He said that the financial flows in and out of this country are astonishing. They are way out of proportion to an economy this size. The State should have a financial transactions tax, which could generate lots of revenue. The myriad tax loopholes that benefit property speculators and big multinationals should be examined. Why does the Government not look at redirecting some of those resources into key areas where investment is needed such as infrastructure, services and strategic industry? We need a more sustainable and diversified economy. The best buffer against uncertainties is not to have an economy that is so vulnerable to a small number of corporations and a couple of sectors. Why not look at those options? We need investment and money for services, but the Government never ever considers taxing wealth and profits, which have increased exponentially.

The global picture for world capitalism is pretty bleak.

It is facing a new economic crisis. While its exact timing is difficult to predict, the indications are not good. The institutions of world capitalism, including the IMF, the European Union and the World Bank, all predict lower growth rates for the first time in close to a decade. Most of it is fuelled by fears of a global trade conflict between the USA and China, in particular, as part of a trend towards deglobalisation that is definitely present. There is also the recently highlighted danger of the bursting of the property bubble here and around the world which has been fuelled by cheap money and the financialisation of property. There is the question of Germany which was the engine of growth in the European Union but which is now close to a technical recession. There is also, of course, the rising prospect of a no-deal, chaotic Brexit which would have a particular impact on Ireland. We face these things in circumstances in which capitalism has exhausted some of its monetary reserves in the already very low interest rates and cheap money available. Martin Wolf says if it is hit by a new economic crisis, an equivalent reduction in interest rates means bringing them down for short-term loans to -2.5%. Capitalism has also exhausted a lot of its political reserves.

In the circumstances, it is correct to have a discussion about preparation. In some senses, the Minister recognises the dangerous situation and talks about preparing for it. He even notes the over-reliance on corporate tax receipts, which is a welcome observation on the reality. However, his prescription fails to recognise the severity of the problem facing us because it is trapped within the neoliberal mindset and the particular development model for Irish neoliberal capitalism from which the Minister is unwilling to break because of the party and class interests he represents. Fundamentally, what he is talking about in terms of preparation for a no-deal Brexit, the budget and so on is minimal change and ordinary people tightening their belts further. That is also the answer from Fianna Fáil, given the indications from Deputy Michael McGrath that in the event that there is a no-deal Brexit, people should not receive an extra €5 in social welfare and that somehow that will avoid the disaster. It is the model of development for capitalism in Ireland that is the problem. It involves reliance on foreign direct investment, a massively outsized financial sector which the Government is intent on blowing up even further in the context of Brexit based on Ireland's position as a corporate tax haven and a model of agriculture which is completely unsustainable economically and environmentally.

What is needed is a radical socialist plan to transform the economy. The key words which appear once but which are otherwise missing from the summer economic statement in which they should appear more often are "climate change". They appear once in a vague reference to global problems. Climate change is not something with which one deals one week as part of a climate action plan, whereas the next week it does not feature in a plan for the economy and the budget. That it is not present shows that the Government is not serious. If there was a left government today, what would have been announced was a green new deal with socialist policies. That is what Ireland needs to respond to the economic and environmental unsustainability of the current economic model. We must end Ireland's status as a tax haven, have massive public investment in renewable energy measures to make Ireland a leader in that field, escape from the current agriculture model by nationalising big agribusiness, provide supports and grants for small farmers to reduce the size of the herd substantially and create environmentally sustainable forms of agriculture, engage in afforestation, invest in free public transport for all, while expanding transport massively, and bring the key sectors of the economy into public ownership. That would allow us to plan the economy in the interests of meeting the people's needs and those of the planet, as opposed to relying on multinationals which can pull out at a moment's notice. These are the same multinationals which in many instances are responsible for the carbon emissions which are destroying our planet. That is the kind of plan we need.

The most striking aspect of the summer economic statement is the profound shadow cast on the country by the 31 October deadline for Brexit. The statement sets out two radically different budget scenarios, namely, scenario A on page 25 and scenario B on page 26, which is unprecedented. The priority in scenario A - an orderly Brexit outcome - remains the avoidance of overheating. The report refers to avoiding adding fuel to the flames. However, one wonders how we can continue to ramp up housing output if this is the primary requirement in that scenario. The level of growth in this scenario is expected to be 3.3%. The report shows the Department targeting a surplus of 0.4% of GDP by 2020. It is notable that a €200 million expenditure reserve is proposed in 2020 to accommodate the funding requirements of the national broadband plan and the national children's hospital. Perhaps the Minister might confirm whether approximately €65 million of that sum is intended for the national broadband plan, notwithstanding the significant question mark over it. Scenario A targets a headline surplus of 0.4% of GDP in 2020, taking into account carry-over costs from 2019, public sector pay increases and provision for capital expenditure and demographic changes. Will the targeted package of €2.8 billion in 2020 be remotely sufficient in the event that there is an orderly Brexit? In recent weeks Deputies, including on the Government benches, have met workers and trade union members and officials across a wide range of sectors, including education, health and childcare. In fact, a lot of the meetings took place only last week, while more are scheduled to take place this week. Clearly, significant additional State resources are badly needed across these sectors of the economy and society. However, the overarching aim of the authors of scenario A is simply to avoid overheating the economy.

The estimates of the severe impact on the economy included on page 26 in scenario B - a disorderly Brexit - may well be far too sanguine, notwithstanding the €6 billion figure quoted for the fall in Exchequer revenues. A crash-out from the European Union by the United Kingdom on 31 October would have a profound impact on the whole economy. The strategy of the summer economic statement report in scenario B is to implement the scenario A budget, with so-called "temporary targeted funding" for the worst affected sectors, while allowing the automatic stabilisers to kick in. Is this remotely sufficient? It is a basic approach, plus a scenario B approach. Is it not crucial to have a whole-of-society approach to provide whatever additional supports are necessary for workers, families and all lower income households? The question that has been posed is whether we will need another far-reaching budget if this comes to pass. I notice that 8 October will be budget day. Given the history of the European Union in respect of last-minute decisions, will the Minister be in a position even then to respond adequately to the circumstances that may well confront us if the leading contender for the Tory leadership becomes Prime Minister?

There is little in the summer economic statement on broadening the tax base, which is disappointing. It is not even contemplated to provide a further buffer against Brexit. As other colleagues mentioned, Professor Stephen Kinsella of the University of Limerick was at the Committee on Budgetary Oversight today where he referred to Ireland as a dual economy. There is the economy of the multinationals which employ 300,000 workers and produce massive but unstable corporation taxes and the real economy which is nearing full employment, with some growth in household income and consumption. One of the helpful aspects of the summer economic statement is box 3 on page 16 which looks at the extensive links between the economy and that of the USA. The €60 billion worth of imports and exports going in one direction or the other only highlights our vulnerability, in particular, during the administration of President Trump which has, unfortunately, 18 months left to run.

Chapter 3 of the report, Then and Now, compares Ireland as it was before the Great Recession with the Ireland of 2019. It has been included to give us some reassurance. Chapter 3.3 refers to initiatives such as the summer economic statement and the spending reviews and the work of the Tax Strategy Group, the Parliamentary Budget Office and the Oireachtas Committee on Budgetary Oversight, of which I am a member. It has to be said the Departments of Finance and Public Expenditure and Reform seem very lethargic in meeting the need to provide even more transparent information and responding to the various critiques of their performance during the years. Many Deputies have mentioned that, for the second year running, the IFAC has reported that increases in current spending are totally unsustainable without additional revenues. This key point has also been made by Deputies Boyd Barrett and Paul Murphy. The Government's medium-term strategy is not credible. As the Minister knows, there is a motion on the clár of the Dáil in my name about last year's IFAC report. This year's report is very similar. It is hard to know why the Minister cannot respond in a very full manner to the challenges that have been put to him by the IFAC. While I accept Deputy Noonan's point that there is no use having a dog if it does not bark, a response is necessary.

Chapter 5 of the report, Public Expenditure Strategy, mentions a number of expenditure reforms, including the 2017 and 2018 spending reviews. We hope these reforms are happening in the overall budgeting process. A spending review is promised for this year. Clearly, the existing supervisory mechanisms for expenditure failed very badly in the case of the national children's hospital project. The Minister, the Minister for Health and their predecessors were seriously negligent in agreeing to the two-stage tendering process and failing to alert the Oireachtas last summer when the cost of the project careered out of control. The Secretary General of the Department of Public Expenditure and Reform and his staff have to be commended on their opposition to the inflated costs associated with the technological problems being encountered with the national broadband plan.

Chapter 5 focuses on expenditure overruns in the Department of Health. It refers to "the creation of a new oversight group chaired by the Department of Public Expenditure and reform, to monitor spending" and mentions that "monthly spending reports [will] be submitted to the Cabinet Committees". We are aware of the work that has already been done by the new director general of the HSE in recent months. He obviously sees a need to control spending. The Committee on Budgetary Oversight examines each year's Votes and Supplementary Estimates for the Department of Health. The total failure of successive Governments to fund the HSE in a remotely adequate manner since 2011 has been identified as a key issue by contributors such as Fr. Seán Healy of Social Justice Ireland. There is a lack of co-ordination between the HSE's annual operational plans and the headings in the Vote of the Department of Health. In the past eight and a half years Fine Gael, aided and abetted by Fianna Fáil since 2016, has failed fundamentally to reform and fund this sector adequately. We have heard shocking statistics for hospital waiting lists, early intervention assessments and the provision of many key health therapies for citizens. Unfortunately, Fine Gael is not prepared to create the necessary revenues to develop a national health system that is fit for purpose. The reliance on expenditure ceilings in the health, social protection and education budgets from 2019 to 2021 also seems to be problematic. The budgets seem to be based on changes driven by demographic factors only. They do not seem to address the need for significant improvements in the actual services being offered.

The Minister has told us today that he intends to come forward with proposals to ensure the sustainability of corporation tax receipts. Is he thinking about the kind of prudence fund that has been recommended by the IFAC? We have the rainy day fund. I presume we have other buffers. The Minister reminds us in the foreword to the summer economic statement that despite all of these structures, the national debt remains high, with a ratio this year of more than 100% of GNI*. As the foreword makes clear, "on a per capita basis, this amounts to €42,500 for every person in the State". The Minister, his predecessor and the late Brian Lenihan foisted most of this debt on the people. I am one of many Deputies who are greatly concerned to ensure that in the coming months, at a critical juncture for the country, ordinary citizens will not have to bear the brunt of any remediation or measures aimed at protecting the country's economy.

I would like to share time with Deputy Danny Healy-Rae.

Is that agreed? Agreed.

I am happy to speak to the important summer economic statement, the compilation of which must have been a difficult process for the Minister for Finance, Deputy Donohoe, and his Government colleagues. If the Minister has been listening, he will be aware that his reputation for fiscal prudence has taken a hammering in the past 18 months. We have all read the recent reports in national newspapers suggesting he has not been his cheery self recently. It seems that he is beginning to feel the pressure of out-of-control spending. He can shrug if he likes, but that is what realpolitik is like. He is not in control of his job. He should pony up and accept that he is unable to do it. Perhaps he should ask all of us to give him a dig-out.

The first fiasco was the out-of-control spending associated with the national children's hospital, while the second was the €3 billion cost of the national broadband plan. One could not buy such incompetence. If one went into a national school and picked out some junior infants, they would do a better job than the one the Minister is doing in charge of these important infrastructural projects. It is open season for people to plunder. To be honest, it is robbery without violence. The Minister allowed people to enter into these contracts. His whole approach seemed to involve not listening to officials in his Department. To be honest, it beggars belief. As I have said previously, he would not run a sweet shop. It would be a very bad one. He might survive for a week in a second-hand clothes shop because he would get all the stock in for nothing and the staff would be volunteers.

We read this morning that the national broadband plan will require €774 million in capital expenditure between 2019 and 2022. This is an additional €455 million over and above the existing provision in the national development plan. A further €1.58 billion will be required between 2023 and 2027, bringing the total cost to €2.3 billion. One would think we were talking about snuff at a wake, but this is real money. According to the latest data from the Department of Communications, Climate Action and Environment, a further €645 million will be required between 2028 and 2043, which will bring the overall total to €2.977 billion. All of this is compounded by the dire warnings issued by the IFAC which has informed us that the Government's management of the economy is creating risks and dangers that need to be addressed as a matter of urgency. The IFAC has made it clear that spending in the Department of Health alone is threatening the sustainability of the entire economy.

Earlier today Deputy Healy and I raised in the Topical Issues debate the cut in funding for vital respite care summer camp facilities at St. Rita's in Clonmel, which is run by the Brothers of Charity. The Brothers of Charity, the operating staff and management at St. Rita's and, above all, the families and service users have been affected by this downright blackguarding. The successful respite care service that they finally brought over the line in 2018 helped 20 families by giving them a modicum of respite. The question of this year's funding came down to the wire in the Chamber earlier this evening. The families who endured this uncertainty and trauma had to stream into my office and those of other politicians before the HSE and the Government finally and grovellingly admitted that it would continue to provide respite care this year. It beggars belief that the Government would treat people with disabilities in such a manner. It dishes out money on contracts and spends it recklessly in other areas, but in this case we are talking about a mere €25,000. It is not an insignificant amount of money, but if there was to be an audit of this expenditure, it would be unbelievable.

On a more technical note, I was interested to read the excellent briefing document supplied by the great team in the Parliamentary Budget Office on tracing Brexit-related Exchequer expenditure in budget 2019.

I salute the team in that office. This note considers the Exchequer impact of Brexit contingency measures, including expenditure on Brexit readiness programmes, customs charges and additional staffing requirements that were unlikely to have occurred in the absence of Brexit. We know that. We have heard the announcements of staff being put in place. I find it alarming to read that in general, it is difficult to determine the overall Exchequer impact of Brexit-related measures with apparent discrepancies across different Government publications on the likely cost of relevant programmes and indeed their allocation in the Revised Estimates Volume. That is a striking statement and one that must be given more attention than it has received to date.

The briefing note goes on to state that it is unclear if expenditure arising from Brexit contingency measures is being met by reallocating money from existing programmes or increases in voted expenditure as a direct response to Brexit. It is very hard to decipher what it is. Perhaps the Minister will enlighten us on that point because in many respects, that is a very serious charge to make. I hope the Minister does respond to it. While the authors of the note do not say it outright, there is a definite sense that transparency is not very clear. In fact, the figures may have been presented in such a way as to make us think that extra funds are being allocated when they have just been taken from existing programmes.

These are important questions that need to be answered before we can provide any kind of meaningful analysis or assessment of the summer economic statement. The Minister, or at least the Minister for Health, found out last September about the runaway train that is the national children's hospital. Of course, we know it is the wrong site. We knew that all the time. It has never been the right site for the sick children who need it. They cannot even access by helicopter, not to mention by road. We then see the lovely wording and terminology used by the Minister. He uses the term "re-profiling". Nothing will be axed or cut. It will all be re-profiled. The Minister must think we all came down in the last shower. There were thunderstorms in parts of the country today but, thankfully, they did not happen everywhere and we did not all come down in that shower. We are the representatives of taxpayers and we want to hold the Minister to account. Flowery language will not allow that to happen.

On health, I do not know how much money the Minister proposes to put into the HSE this year but it is not performing the way anyone wishes it would. I do not know if money is the answer because so many things have gone wrong. Respite care was mentioned. Telling elderly people that they must wait until the middle of November for home help is ridiculous and nonsensical. Carers are waiting a long time to get a payment. Some people for whom they are caring have actually died before the carers got paid for caring for them.

On agriculture, farmers are wondering what is going on with this €100 million or is it €50 million? Must they reduce stock to qualify for this funding or is it intended for farmers who are genuinely suffering and have lost money? I must remind the Minister and the Minister of State, Deputy D'Arcy, that in 2013, the then Minister for Agriculture, Food and the Marine, Deputy Coveney, told farmers to increase production. The current Minister for Agriculture, Food and the Marine, Deputy Creed, and Commissioner Phil Hogan are telling farmers that they must reduce production. I have to remind the Government that in the meantime, farmers have spent millions - money they had and money they did not have but borrowed. They are now being told that they must reduce production when they might have no way of paying back that money and that they should plant some of their land. For the Government to dictate to farmers in this way rather than working with them is very unfair. It is ridiculous to think that after a short space of years, the Government is now telling farmers that they must reduce production and not grow any more.

The threat of carbon tax is another issue. I would tell the Minister and Minister of State and even Fianna Fáil that all they are doing at the moment is trying to be greener than the Green Party. They will have to be practical and bring forward practical solutions. The Government is imposing deadlines on working-class and poor people and suggesting they must get out of their cars when they cannot manage without them in rural Ireland. There is no place to plug in and charge an electric car. It is like putting the cart before the horse because that is what the Government is doing. It is hurting the people and the people are scared. There will be a general election. The Government must realise this and it will get its answer on the doorstep when it goes to the people.

We are on a remarkable economic knife edge. I cannot remember a precedent where the path between overheating the economy or, unfortunately, what looks more likely, a very sharp downturn on the back of what the UK Government does or does not do has presented such a remarkable black and white scenario. If we are expecting the latter, we must prepare for it. If we must adjust in September, so be it. Regarding the two responses set out by the Minister, I heard a similar approach enunciated by John McCarthy, chief economist, at the ESRI Budget Perspectives conference involving the use of the automatic stabilisers or temporary targeted support. This is the critical thing for us to focus on. Regarding those automatic stabilisers, it is written in the economic statement today that they are increased social welfare payments because of more unemployed people and they stimulate the economy because we will be taking less tax in because of what I presume are lower wages from a downturn. It does not sound as if they are particularly effective stabilisers. They are like two stabilisers on a small bicycle when we are on a much bigger bicycle. I think we need to do far more than that.

I have not heard the details but my concern which I have heard in certain sectors where I have engaged in this debate is that the temporary targeted support might just be another cheque to the meat or dairy industry in a way that does not bring about some of the fundamental long-term changes we need. We should be preparing for a green new deal - a stimulus plan. We need to do it anyway but in the event of a crash-out no-deal Brexit, we could use that economic tool - Roosevelt used it and it worked - to do more than those economic automatic stabilisers would deliver. It is difficult because the timelines are so tight. What could we do in a very short timeframe that might help to stimulate the economy? I will set out some very simple examples but we should use the coming months to think them through. I would love to see a massive payment going to Irish farmers to start protecting hedgerows. That would not require a significant capital investment. The resources and knowledge are already available. However, it would have a significant benefit in terms of our climate and biodiversity story and would a be direct payment to farmers with regard to the kilometres of hedgerows that would be restored. It would have long-term benefits for the country.

I think we should target rural Ireland because it is likely to be most affected in a downturn and it is easier for us to get building workers working in rural Ireland than in Dublin. Even in a Brexit downturn, we are likely to have shortages of building workers in Dublin for the immediate future. We should be looking at that rural regeneration and development fund and expand it into retrofitting buildings, particularly those in the centre of towns and villages.

It would start to deliver on the national planning framework which states we have to bring life back into the core. However, it has to be in the context of a green new deal. Earlier the Taoiseach defended the existing national development plan by claiming no one else was willing to state where cuts would be made. We would make cuts. There are 51 national road and motorway projects in planning and under construction. There is not one single public transport project in either phase. We cannot keep doing this.

At the Velo-City 2019 international cycling conference in Dublin international delegates were in a state of shock when they saw how poor cycling infrastructure was here. They could not believe what Dublin was like. Can we not tell the local authorities that we will have a major expansion of pedestrian and cycling facilities? The Minister would be able to ramp it up in a way he might not be able to do with large public transport projects. We must start by making cities, towns and villages safe places in which to walk. That would not require significant planning permissions or the use of large machinery. All it would require is the input of direct labour and the local authorities starting to do it as part of a green new deal. It would be practical, quick and help to stimulate the economy in a way higher unemployment benefit payments would not.

I have just come from the communications committee where we heard from Eir. There are real questions about the national broadband plan project. Contrary to what the Taoiseach said today, Eir claimed it could complete the same project, on time and with only a slightly different level of service provided, for €2 billion less. That sum of €2 billion is as much as we have in the rainy day fund. It would be useful if we were heading into a downturn. Our basic approach should be not to cut capital expenditure but to use the money well. There is an increasing number of questions coming from the communications committee and the national broadband plan needs to change.

I welcome the opportunity to speak to the summer economic statement. We were presented with black and white options for several scenarios. The one with the United Kingdom crashing out of the European Union is pretty dire, not just for next year’s but for subsequent years’ budgets. The loss of 50,000 jobs in such a scenario is conceivable. Social welfare payments and tax revenues would not just be impacted on, as it would affect the domestic economy, as well as creating a negative economic mood. There would be a cohort of people for whom it would be quite difficult to create alternative employment. Obviously, the agrifood and small and medium-sized enterprise sectors would be the most exposed. It is about using our imagination in advance to determine the best way to mitigate the worst excesses of such an event.

From today’s statement, up to €200 million will not be available. In the context of Brexit, it may seem to be a small amount of money. However, it is a sizeable amount because the Government has failed to do its job by keeping costs under control. In allowing such eye-watering cost overruns, with the flawed tendering process for the national children’s hospital and the national broadband plan – I agree that the latter needs to be revisited – the Government has essentially stripped €200 million from next year’s budget and subsequent budgets. It will also affect opportunities and underlines how the national development plan needs to be revisited. At this point, it is a work of fiction when such significant readjustments need to be made.

We must also take account of the declaration of a climate emergency. That must involve the reconfiguration of some of the projects included in the national development plan.

The debt-to-GDP ratio, when GNI* is used, means that we are in serious territory, particularly if we add €5 billion a year in borrowings for several years. There are several other dynamics, including going back to the national development plan and removing other projects because we would not have the ability to borrow.

I must question the figures included in the summer economic statement. At the Committee of Public Accounts several weeks ago we heard about a liability not included in the HSE’s accounts for 2019 but one which had been pushed forward. That liability should be shown now. Deputy Pearse Doherty referred to the Christmas social welfare bonus not being included. One wonders exactly how much space there is for vital public services. We must get serious about the cost of delivering housing. It is not happening for the common good when the cost of building land adds to the cost of housing. These issues are critically important when examining the national development plan. They are also important when future-proofing in a scenario where there will be less money available but when we will still have to provide better infrastructure, whether it be public transport, housing or facilities to provide better healthcare services, as well as dealing with threadbare services. It is not just a question of looking at the black and white on paper. There must be a dynamic piece of work to use our collective imaginations to protect ourselves to the greatest degree we can.

In accordance with the order of the House, each party or group has five minutes for a question and answer session. We will begin with Deputy Michael McGrath. If Deputies want to receive answers, they should put concise questions.

I will keep it interactive.

Will the Minister address my point about the different approaches open to him if there is a hard or a benign Brexit and he has €700 million to play with? If that is the case, will he inform the House if options are being explored and fleshed out as to what potentially can be done with it and of the extra support that might be available from the European Union beyond what has already been committed?

The way in which we will handle that issue is by looking at a matter the Deputy raised. I agree with his point that in the event that there is a disorderly Brexit, we would have to mobilise resources to help the country to respond to the consequences and protect key front-line services. The choices the Government could make about the sum of €700 million and the deficit would be driven by the principles of what we could do to protect living standards in a vulnerable time in the economy and society, as well as engaging with stakeholders on the responses needed to deal with this great shock. Up until this point, the engagement we have had with the European Union has been on the flexibility we may need in providing state aid. That has been a key and important area in the engagement.

The point at which I am getting is that when one boils it down, the maximum amount of money that will potentially be available to address the supports needed for certain sectors in a no-deal Brexit scenario is €700 million.

That is assuming there are no other demands the Minister must meet. No one can assume that there will be no increase in health expenditure, for example. Is the Minister saying that, in terms of the budget, €700 million is the limit of the scope available to provide what he calls temporary targeted funding for the sectors most affected? Is that all there is? He says that the budget day package will be €2.8 billion in either scenario. It seems the only flexibility he has is what he will do with that €700 million. He will not even have all of that €700 million.

When looking at what temporary, targeted supports will be needed, I will look at other measures that could be taken to fund them which may include, most notably, a level of borrowing. This is an issue with which we will deal when we move into the budgetary process itself. We have to get the mixture right. We have to ensure the resources are in place to support public services. I then need to engage with key stakeholders regarding what further may be needed to support the economy at a time of great change. At this point in time it is very difficult to say what that might be. It is very early to be forming a view on what the impact of Brexit could be and, therefore, on the plans that will be needed.

On the issue of corporation tax, the Minister has announced a review of its sustainability. One of the stand-out points made in the Irish Fiscal Advisory Council, IFAC, report was that somewhere between €3 billion and €6 billion of the €10.4 billion received last year could be considered excess or outside of the normal economic cycle. In other words, it may not be sustainable. If we had the perfect storm scenario in which the corporation tax receipts proved not to be sustainable at the same time that a no-deal Brexit occurred, we really would be in extremely serious difficulties. Will the Minister address IFAC's point? Does he accept its point that up to €6 billion of corporation tax may not be received again?

The Deputy made a proposal in this area, although I saw the merit in doing it. He suggested a process be put in place to form a view on sustainability. The IFAC outlined a very broad range of scenarios. It suggested that €3 billion to €6 billion of the approximately €10 billion we collect may be at risk. That is very broad guidance from which it then advises me to work. I will be very brief; I know Deputy Pearse Doherty is next. I want the Department of Finance to lead the work. It is not appropriate to outsource key projects that could affect important economic decisions. I will then look at how that work and those recommendations can be externally validated to ensure we receive a different perspective on the analysis. The Deputy is right. When a group of people is working on any key issue over a prolonged period, week after week and month after month, it is appropriate to sense-check the conclusions reached.

Will the Minister comment on the Government's use of the stability programme update, SPU, projections in the summer economic statement, despite the criticism from the Irish Fiscal Advisory Council which states that these projections are not credible and are implausible?

It is precisely because of the analysis of our current expenditure projections offered by the Irish Fiscal Advisory Council that we have increased them for the summer economic statement. The average rate of projected economic growth in the SPU was 2.5%. In the forecast for the medium-term projection, which underpins the two different scenarios, I have increased the rate of expenditure growth to 3.25%, an increase of one third. I have done so in recognition of the views being offered on this issue and based on my own experience of managing current expenditure and the different pressures associated with it. I have a different view from the Deputy and from some of the analysis offered in that I still believe that if we begin to predetermine projected current expenditure growth into the future it will, in itself, create a base off which Government decisions will then be made. That would be the wrong course to take.

The projection for 2020 was €2.6 billion. Will the Minister confirm what the projection for expenditure for 2020 is now? With regard to the figures he has presented, the Minister has talked about medium-term projections, which suggests they are further out, but they are nowhere near the expenditure levels we have seen in the past two years. This expenditure is nearly double what is being projected at this point in time.

The change to which I referred is in respect of the year 2021 onwards; it does not take account of 2020 because the rate of expenditure growth for that year will depend on the decisions made on budget day. I am not in a position to indicate what those decisions will be right now because we have made no budgetary decisions. Predicting a gross rate of expenditure growth of 3.25% when the economy is growing at a rate of approximately 3%, which is our medium-term growth forecast, is credible and a significant change from where we were. I have heard the Deputy's views on the matter; I have heard what the IFAC has had to state and I have a fair bit of experience of managing this issue. That is why I decided a recalibration was merited.

The Christmas bonus has not been factored in. Is the Minister going to continue to ignore the criticism received year after year from the Irish Fiscal Advisory Council, the Committee on Budgetary Oversight and others? That bonus is to be paid in December. As Colm McCarthy says, there are things that are unpredictable but Christmas comes every year. Is the Minister suggesting the bonus is not going to be paid? Why is it not included in the data he has produced today?

A custom and practice has built up with regard to the payment of the Christmas bonus. Another Deputy appeared to allege that because the Christmas bonus is not referenced in the summer economic statement, it is not going to be paid. The Christmas bonus payment has been included in most budgets, including all recent budgets. At this stage I do not have any plans to change that provision. The payment is in our base and I will make a decision on how to handle it on budget day.

The reality is that the €700 million decreases to €400 million if the Minister commits to pay the Christmas bonus again in 2020. The other issue that is very clear is that an overrun is projected in health. All the indicators, which mirror those we have seen in previous years, show that there will be another significant overrun in health. Has the Minister factored that in? Building on the questions asked previously, in the context of a no-deal scenario the €4 billion - or €5 billion under the current projections - will, of course, have to be borrowed to make up the deficit. The idea that the only money that would be available to support industries that will need huge support in the event of that kind of shock to the Irish economy is the €700 million, which is €400 million after the Christmas bonus and perhaps nothing after the health overrun, is not plausible.

To deal with the first point, I disagree with the Deputy's analysis that the Christmas bonus would be subtracted from the €700 million, leaving €400 million. The payment of the Christmas bonus is in our base. Traditionally when we determine the allocation of new resources, which are outlined in the summer economic statement, we are referring to expenditure on top of the base.

That is not true.

With regard to how we would fund new activity to support the economy in the event that there is a disorderly Brexit, as I have already indicated to Deputy Michael McGrath, were we to be in that situation I would recommend to the Government that we look at how to fund such support, which might include making decisions on borrowing or in respect of the rainy day fund.

To clarify, if the Christmas bonus is in the base, that means that it is accounted for. It is not in the base. The Minister needs to correct the record. That is one of the criticisms made by the IFAC, the ESRI, and the Committee on Budgetary Oversight. Does the Minister want to correct the record?

I thank the Deputy for reminding me of that. The Christmas bonus was paid last year. It is in our expenditure base.

I have two questions.

The ESRI recommended that in the event of there not being a no-deal Brexit, the Minister should go harder on carbon tax increases and property tax increases in the budget. I ask him to comment on that.

I note the comments of Deputy Michael McGrath, reported in The Irish Times, that Fianna Fáil would not push for the traditional €5 increase in social welfare payments across the board, paltry as they are, in the event of a no-deal Brexit. I ask the Minister to give his views on that subject.

Both of those are budget day decisions. I will not comment on what Deputy Michael McGrath or other political parties might be saying about this. The budgetary process will begin in September. Members of the House are commenting on what we have said today. I will be approaching budget 2020 in good faith and in a professional way with Deputy Michael McGrath and Deputy Cowen. It is not the purpose of the summer economic statement to indicate what budget day decisions will be. Decisions on carbon taxation or any other matter will wait until we are putting together that budget. However, choices open to the House and to me regarding how we protect our economy in the event of a disorderly Brexit taking place will be really important. A disorderly Brexit would mean there will be other things we cannot do. It would mean that the act of making choices and deciding where we place resources will be more important than ever.

That leads on to the point I was making and the question for the Minister to answer. Given the possibility of a disorderly Brexit, uncertainties in other areas, the demands and requirements for public spending on a whole range of areas - I will not list them - is €700 million really enough? If, as I would suggest, it would be far preferable to have much more - I do not think anybody could dispute it would be preferable to do that - does the Minister not think it is time to look at raising extra sources of revenue from areas that Fine Gael has been unwilling to look at previously? I cited the example of Professor Stephen Kinsella. He said that when he first thought about financial transactions tax, for which we have been advocating for a long time, he did not like the idea of it. He has now come around. He has now said, given the staggering scale of financial flows into and out of this country, that this is a form of behaviour we need to tax both to constrain it and as a potential source of revenue. That is just one example.

I also mentioned employer's PRSI and closing some of the big corporation tax loopholes, particularly those benefiting the big multinationals.

Labour skills shortages are developing as we near full employment. I would argue that there is considerable underemployment in sectors of the economy which could help deal with that problem. However, in order to deal with it we need to do something to remove financial obstacles to getting into education, further education, postgraduate education and so on. We need to do something about the cost of childcare. We need to take measures which will cost money but actually increase labour market participation to address this very serious problem for the economy. Does the Minister accept that we need investment in those areas?

I always admire that, unlike some other Deputies, Deputy Boyd Barrett will put forward costed ways in which funding can be raised. He and I strongly differ about their consequences. The financial transactions tax, FTT, is the classic example of one. The FTT is likely to be implemented in some European Union member states in coming years. I believe that will happen. From the point of view of having an open economy such as our own, which has a very strong financial services sector within it, I believe the consequences of us bringing in an FTT at the moment would be very negative for jobs and financial services in our country. Whatever potential revenue we may gain from introducing an FTT, which I believe would be short-lived, would be very quickly eroded by the consequences of employment loss in a very important part of the modern Irish economy.

I agree with the Deputy on labour market participation issues. Many of the people who live here are not participating in the labour market for all kinds of different reasons. We need to refocus on how we can encourage them to work if that is what they want to do.

Scenario B covers just a couple of lines in the report before us. Is detailed work being done on that? We have two major proposals about the automatic stabilisers and helps for areas of the economy that will be profoundly affected. In effect, is an alternative disaster budget strategy being prepared? Is there detailed work on that?

Will our net contribution to the European Union in 2020 be higher? Will that be one of the costs we will have to bear as one of the 27 member states? Echoing what a colleague said on green issues, one of the positive sides of carbon taxes is that they may well provide the Minister with more resources to enable a broadening of the tax base to be broadened, although I would obviously argue for the payment of a dividend and the protection of the most vulnerable in society.

Regarding controlling the health budget, we get reports that the recruitment embargo, which was supposed to end at the start of this month, has not ended. Does the Department of Public Expenditure and Reform have an input into that decision? Is the Minister able to direct the new director general of the HSE to continue an embargo beyond that time? Is that the kind of cost control the Minister will have?

It is very hard to square the overheating of the economy with what we have to do in Rebuilding Ireland, our infrastructural development and so on? How does that add up?

Regarding what the Deputy has described as an embargo, we are involved in decisions on health service recruitment and retention. That is part of my job as Minister for Public Expenditure and Reform. To reiterate what the Minister for Health, Deputy Harris, has said, we are saying that Departments need to stay within the budget available for the number of people they are to recruit. That is the case with the Department of Education and Skills and any other Department that has a large number of people working for it. That is the sum total of what the Minister and I are looking to do together.

The Deputy asked about the planning under way to deal with the different consequences of a disorderly Brexit. We were planning for some of that in the run-up to 29 March. Clearly we have had an opportunity to continue with that work. The Deputy referred to disaster planning. I do not want to understate for a moment the serious difficulty we will face if a disorderly Brexit occurs. However, in such a scenario we will still have over 2 million at work in the economy. We will still have a diverse economy providing work for a large number of citizens. Employment is at an all-time high but parts of the country and the economy will face real and significant challenges. That is why I say when we make a decision on that in September it will have very important policy consequences.

On the overheating of the economy, the Deputy is right that it is a balancing act. On the one hand, we need to ensure we make progress in building more homes but, on the other hand, we need to avoid that causing prices to rise in the economy. At the moment, inflation is low and credit growth is exceptionally low. I believe we are getting that balance right but we need to monitor what happens with prices and wages in the construction sector.

Could and should our response to a disorderly Brexit have a green dimension? There is certainly a case for looking at that. If I look at it very broadly and only from an economic point of view, which is not the way I tend to look at the issue, we would of course want to try to move parts of our economy into areas that will be genuinely sustainable in the long run.

There is certainly a case for looking at it if I look at it very broadly, and from only an economic point of view, but that is not the way I tend to look at the issue. We want to try to move parts of our economy to those that will be genuinely sustainable for the long run. It is obvious that in doing that, we have to play our part and respond to the change in climate, which will be part of what sustainable industry looks like in the future.

I mentioned in my contribution the stabilisers. The summer economic statement sets out the potential disimprovement to the general Government balance of €6 billion. Is that after stabilisers have been applied or does the Minister have a figure for what the benefit would be with stabilisers correcting such movements? How much does it give us?

That would be after the stabilisers have occurred.

I want to address another point made by the Deputy and touched on by Deputy Pearse Doherty. The point of the summer economic statement is not to make budget day decisions or indicate their detail; it is only to provide resources available and overall statements on what we are likely to do from a policy point of view.

That figure is after the stabilisers have been used. As to whether we have modelled the second and third order effects of using the stabilisers, that is very difficult. We are dealing with an event against which the forecasting and economic models of any department of finance would have limitations, given how unique Brexit would be, were it to occur.

The Minister talked about supporting the economy in the event of a crash-out, no-deal Brexit and cited temporary targeted funding for the sectors most affected. The Minister must, at this stage, have knowledge of what those sectors might be. How would that funding apply and what mechanisms would be used in such circumstances?

As to which sectors of the economy and what parts of our country would be important when making these decisions, food exporting and small and medium-sized companies in some sectors will be particularly affected by Brexit. Have we decided the form of support that would be available to them? At this point, that decision has not been made but we are looking at options as to how we would respond.

I want go back to my earlier contribution and the better ways of directly supporting communities that would be badly hit, such as the farming community, in the likely event of a Brexit downturn. Does the Minister think that, rather than giving cash straight to companies, the Government should look at schemes that directly support farmers? In doing so, that would steer us in the right direction, because it would be not just a stopgap, cash bung to prop things up but a creative, inventive approach. I would argue that farmers in rural Ireland are those most likely to be adversely affected. Will the Minister take that into account in the coming months as he plans for this?

I take the Deputy's point. This is a live issue that we will return to in the debate that is under way on the reform of the Common Agricultural Policy. The Deputy will know that that is income support made available in return for certain forms of activity. It is more likely to be in that space that the debate he raises will play out. As to whether it would be part of a Brexit response, I am not sure that it would. However, I am happy to debate that with the Deputy and other Members.

We could face a large degree of market disruption, which could happen immediately, and so we need to be careful that we do not try to do too many different things at once. In the event of that kind of shock, my priority would be to look at how we can stabilise incomes and support the parts of our economy that might lose their market access or see it significantly reduced. Given those circumstances, having multiple objectives at the same time might be difficult. However, I agree with the Deputy's broad point on change.

On a final point, part of the process is to protect the sectors that might be damaged by Brexit. However, it is also about looking for stimulus that can be turned on very quickly, given the nature of this potential downturn. The examples I mentioned of immediate capital projects, such as targeted local authority or council spending on footpaths and retrofits, might on their own be tiny, but collectively they have the advantage of being able to be done quickly and achieve other objectives. They would have a much stronger stimulus effect that some of the other stabilisers and measures being looked at.

That is why I said in the summer economic statement that the response from the Government has to be a mixture of two things. The first is how we support people at a time of difficulty, and the other is how we put in place plans and activities to help the economy rebalance. Both have to be done at the same time. We are planning a further increase in public capital investment next year of €700 million. It is my hope that we will establish a pipeline of public transport projects that have planning permission.

I begin by thanking Deputies for their contributions to the discussion on the summer economic statement. The statement published by the Government sets out our commitment to the fundamental principle of steady and sustainable improvements in living standards, underpinned by steady and sustainable revenue streams. It details the economic context and broad budgetary strategy that will underpin the forthcoming budget, which will be presented to the Dáil on 8 October.

The Irish economy has been in a phase of continued recovery, and this remarkable recovery should be recognised. A decade after the financial crisis we have placed the public finances on a sustainable trajectory and restored our fiscal credibility and international competitiveness. Today, there are more people in work in Ireland than ever before. Capital spending has been substantially increased, laying the foundation for future improvements in our living standards, and the growth in our economy is broad-based and robust.

This progress must not be taken for granted. It has been achieved, and will be maintained, through a prudent budgetary strategy. While we are entering a time of considerable uncertainty, because of the progress we have made we are approaching the challenges on the horizon from a position of strength.

At home, it is essential that we remain vigilant against the possibility of overheating as the economy closes in on full employment. Internationally, the global trading environment has deteriorated and the unprecedented situation of Brexit presents considerable risks for Ireland, particularly as the prospect of a disorderly outcome becomes increasingly likely. Whatever the eventual form that the United Kingdom's exit from the European Union takes, the two budgetary scenarios set out in the economic statement enable the Government to prepare for either eventuality. In an orderly Brexit, we will stick to the parameters set out in the stability programme update, crafting a balanced and moderate budgetary package that continues the Government's commitment to prudent financial management. In a disorderly Brexit, the Irish economy will be severely impacted, with output and employment adversely affected, particularly in the short term. As such, the Government will adopt a holding position, allowing the automatic stabilisers to provide countercyclical support and to increase spending on, among other things, welfare payments, and provide targeted support for the sectors most affected.

This year’s budget will take place under unique circumstances. As such, it is imperative that budgetary policy is geared towards enhancing the resilience of our economy. This is why the Government is targeting a modest surplus, prioritising debt reduction and establishing a rainy day fund. While we have come a long way in the last number of years, it is only by maintaining the responsible and sustainable budgetary approach that has delivered these hard-won gains that we can chart a course through these turbulent times.

Before we move on, I wish to be associated with the earlier comments of leaders when sympathy was paid to my fellow Donegal man, Manus Kelly, who died on Sunday in such a tragic and untimely way. He was three times the winner of the Donegal International Rally. Like all Members, I wish to extend my deepest sympathy to his wife, Bernie; his five children; his father, Donal; his mother Jackie; his eight siblings; and the extended family. I knew Manus for years and he was a consummate professional in all that he turned his hand to, whether it was rallying, community involvement, business or politics. He had an enormous personality that radiated wherever he went.

I wish his co-driver, Mr. Donal Barrett, a speedy recovery. Ar lámh dheas Dé a anam uasal dílis.