The annual Appropriation Bill gives statutory effect to the Departmental Estimates for the supply services, both noncapital and capital, including all supplementary and additional Estimates that were voted and approved by the Dáil since the enactment of the previous Appropriation Act. In line with custom, this year's Bill appropriates to the various services set out in the Schedule, the sum of £6,716 million comprising the Estimates totalling just over £6,691 million as set out in the revised post-Budget Book of Estimates, Supplementary and Additional Estimates of almost £25 million and £200,000 in respect of a Supplementary Estimate for the Office of the Minister for Finance for 1986, which was approved by the Dáil after the enactment of the 1986 Appropriation Act. As usual the Bill also authorises the use of certain Departmental receipts amounting to £661 million as appropriations-in-aid.
The Appropriation Bill also provides the statutory basis for calculation of the "four-fifths" issues which the Minister for Finance is authorised, under the Central Fund (Permanent Provisions) Act, 1965, to make from the Exchequer towards meeting the cost of next year's services during the period before the Dáil has an opportunity to consider and pass the various individual Estimates.
This year the Appropriation Bill is also being used to make a number of technical amendments to existing legislation. The Explanatory Memorandum to the Bill fully explains the basis for these changes. Section 2 of the Bill provides for the amendment of section 14 (3) of the Finance Act, 1948, to allow for the daily calculation of the annual interest rate on Post Office Savings Bank deposits. This is a welcome change which will bring the Post Office Savings Bank into line with financial institutions generally. Given that the Post Office Savings Bank's interest year begins on 1 January, it makes sense to provide for the change at this time.
The second technical provision provided for in section 3 of the Bill, amends sections 2 and 4 of the Central Fund (Permanent Provisions) Act, 1965, and ensures that there will be proper statutory authority for certain accounting procedures in relation to the issue of moneys from the Central Fund for supply services.
The 1965 Act empowers the Minister for Finance to issue moneys out of the Central Fund to meet payments by Departments from their Votes. The amount of these issues are necessarily based on estimates of the outturns for individual Votes. Inevitably, in some cases, issues from the Exchequer in respect of an individual Vote will be less than the actual payments made from that Vote, even though the total payments are less than the amount granted by the Dáil. This situation is usually referred to as an "underissue". Since total expenditure on every Vote must be matched in full by an issue from the Central Fund, the requisite balance is issued in the following year. This has been the practice followed since the foundation of the State and is clearly recorded in the annual Finance accounts. The wording of the 1965 Act, however, authorises the Minister for Finance to issue moneys "in the year" and the Comptroller and Auditor General has brought this particular anomaly to the attention of my Department. In order, therefore, to remove any questions as to the legality of the traditional accounting procedure the references to "in the year" in sections 2 and 4 of the 1965 Act are being deleted. The changes have been backdated to December 1965 when the Central Fund (Permanent Provisions) Act was enacted. This ensures that there is proper statutory authority for the procedures used over the years. These amendments are purely technical in nature and will in no way change the way in which the Supply Services are controlled and accounted for.
Let me turn now to domestic economic developments in 1987. It has clearly been a good year for the economy in many respects. Growth has been much higher than in recent years, and has been led by a very strong recovery in exports, especially exports of high technology goods. The strength of output and exports this year has been widespread. While the high technology sector has again led the way, other areas have also been doing very well. Take the food sector, for example. Output was 10 per cent higher in the first eight months of this year than in the same period of 1986; or the so-called "traditional" manufacturing sector — here there has been steady growth in output for the second successive year.
Agriculture is also likely to show a real improvement in 1987. After two difficult years, we expect to see a strong recovery in farm incomes due to a number of factors. Output prices are likely to be much better than in 1986. The volume of farm inputs has fallen because of better weather. Input prices have also fallen. The recovery in farm incomes this year should be substantial.
Solid progress has been made in other areas too. Inflation is at its lowest level for nearly two decades. With world inflation and commodity prices staying low and the effective exchange rate of the Irish pound stable, inflationary pressures are being held at bay.
There has been further solid progress in the balance of payments this year. Last year the balance of payments deficit was down below 2 per cent of GNP and I expect further significant progress this year. There is a big improvement in the trade surplus over the first 11 months of the year. It has virtually doubled compared with last year to £1.4 billion, at an all-time record. There are also signs that investment in plant and machinery has been strong, which augurs well for the future.
While average registered unemployment in 1987 will be close to 11,000 higher than in 1986, this figure masks the considerable improvement that has been taking place in the trend in unemployment for most of the year. In the 12 months to end-April last the live register rose by 18,400 but in the 12 months to end-November the increase was only 3,800. A further improvement in this trend is expected for the end of the year. There can be no doubt that much of the improvement shown in the live register trend in recent months has been due to the success of the Jobsearch programme which has been of particular benefit to the long term unemployed in their search for work and training.
The action the Government have taken on the public finances this year has had a beneficial impact especially on interest rates, which have already fallen very substantially. Indeed, we are now seeing a further downward movement. Lower interest rates encourage investment, the basis for growth in employment. The drop in interest rates is an important consequence of the action being taken by the Government to correct imbalances in the economy. It is part and parcel of the process of putting the economy right and will help to achieve faster growth over the coming years.
Economic performance has been disappointing under some headings. Personal consumption has been rather weak and now looks unlikely to show growth this year. Building investment has also been poor. Notwithstanding the improving trend to which I have already referred, unemployment is far too high. Despite the progress of 1987, we cannot afford to be complacent.
The world economy is still in an unsettled state. Events like the worldwide stock market crash in October illustrates the growing interdependence of the major economies. I might add that, whenever possible at international meetings, Ireland has always urged that the major world economies should take the necessary action to reduce the trading and other imbalances which are at the heart of the present instability in the global economy. The response of Governments to the stock market crash has been sensible and has averted some of its potential adverse after-effects. This points to the need for us to get our own house in order; we cannot rely on international economic developments to resolve our problems.
One of the most significant developments in 1987 has been the Programme for National Recovery and its associated pay agreement. The programme represents the culmination of the Government's effort to secure a consensus-based approach to the resolution of the formidable difficulties facing this country. Having received the endorsement of the principal economic and social interests, and, if opinion polls can be believed, of the public generally, the programme can be said to enjoy the broad support of the Irish people. This augurs well for our capacity to successfully overcome the obstacles to sustained economic and social progress, because the programme clearly indicates the Government's intention to face up squarely to the financial realities of our situation.
The programme has its roots in the common analysis of the most influential groups in Irish society expressed in the NESC report A Strategy for Development, 1986-90, published just over a year ago. This report set down the requirements to be met to avert an economic crisis, and to establish solid foundations for increasing output and employment over the longer term. One of the conditions defined was the adoption of a consistent and coherent macroeconomic strategy, embodying in particular fiscal policies which would stabilise the national debt in relation to GNP. Another was the pursuit of an effective development strategy, focused on the internationally trading sectors of the economy. Both of these elements are in the programme.
The aims of the programme are, however, broader than this. In it the Government, in co-operation with the social partners, have also set themselves the task of addressing other issues of major concern to Irish people over the past decade or so. For example, the Government are committed to reform of the taxation system so that each group within Irish society pays, and is seen to pay, its fair share of the burden. Similarly, we are committed to securing greater social equity in terms of social benefits and of access to health care and education. As foreshadowed in the programme, the Minister for Labour has already published a discussion document on possible measures in the areas of employment equality, payment of wages and unfair dismissals.
The public service pay agreement, which was negotiated in the context of the programme provides for yearly increases in pay averaging approximately 2.5 per cent over the three year period to 1990. The terms of the agreement represent a satisfactory compromise between what the Government can afford to pay and the expectations of the trade unions and their members. An important feature of the agreement is that the basic pay increases are weighted in favour of the lower paid which should enable them to secure a genuine improvement in their relative wage income over the period of the programme.
A major achievement of the pay agreement is the undertaking by the trade unions not to engage in industrial action in pursuit of claims in excess of the pay terms. This will contribute greatly to industrial peace in the public sector and so enable the Government to concentrate on the difficulties they are facing in relation to the public finances and the economy.
I must emphasise that the Programme of National Recovery is an integrated strategy and the attainment of its ultimate goals depends crucially on the coherent application of the policies which it contains. As an illustration, the beneficial downstream effects on the climate for investment stemming from the resolution of our public finance difficulties will be reinforced by the boost to competitiveness implicit in the pay provisions of the programme and the active sectoral development approach envisaged. This strategic combination of measures is designed to maximise the employment opportunities which are so badly needed. The mutual consistency of the planned policy initiatives and the support of the social partners in their implementation greatly enhances the chances of the programme's ultimate success.
Turning now to the 1987 budget, I am pleased to say that the budget for this year is still on course and there is now a good prospect that the overall Exchequer borrowing target will be achieved. The latest expenditure data suggest that there will be savings on non-capital supply services and Central Fund services. These, however, are likely to be offset by a shortfall on tax revenue, particularly in the area of indirect taxes. These taxes, in particular, are showing signs of weakness reflecting, among other things, the sluggishness in consumer spending to which I have already referred. The overall effect is that the gap between spending and revenue is likely to be very close to that predicted in my March budget.
Savings are also likely on the capital side of the budget. Exchequer-financed expenditure on non-programme outlays, which mainly relate to capital restructuring of semi-State bodies, and on the public capital programme are likely to be below budget. Even allowing for a small shortfall in Exchequer capital resources the Exchequer borrowing requirement for capital purposes is likely to outturn somewhat below its planned level.
The Government, then, have reason to be pleased with the prospective 1987 budgetary outturn, Not only did we introduce a budget designed to secure a significant reduction in Exchequer borrowing but, more important, we are about to deliver on this undertaking. This augurs well for the future control and management of the public finances and also provides a sound financial basis for the preparation of the 1988 budget.
In the future, when we look back at the economic history of this period, 1987 may well be seen as a key year — a watershed when we began to break away from the sluggish growth and sluggish policies which have plagued us for most of this decade. This year the Government took strong and decisive action to put the economy back on the road to recovery.
Sensible policies which squarely face the real issues and which do not shy away from the difficult choices which have to be made, have been, and will remain, the hallmark of this Government. We have taken the lead in putting in place an economic strategy which gets to the root of our problems. We have already seen some beneficial effects of these policies this year and I am convinced that, by continuing along this path, we will see considerably greater benefits in the years ahead. I commend the Appropriation Bill to the Seanad.