I welcome this opportunity, in the unavoidable absence of my colleague, the Minister for Finance, to address the Seanad on the Appropriation Bill, 1997. The annual Appropriation Bill gives statutory effect to the departmental Estimates for the supply services, non-capital and capital, including all Supplementary Estimates which were approved by the Dáil since the last Appropriation Act.
The Bill before the House appropriates to the various services listed in the Schedule the sum of £12,104 million. This total amount comprises the original Estimates of £11,675 million, as voted by the Dáil last May, and Supplementary Estimates totalling £429 million, most of which were approved by the Dáil in recent weeks. In line with the normal practice, the Bill also approves the use of departmental receipts amounting to £1,155 million as appropriations-in-aid of the services listed in the Schedule.
I wish to say a few words about the Government's general policy on public expenditure and to address some of the criticisms of that policy which have been made since the publication of the 1998 Estimates last month and in the context of the budget on 3 December. The Government's policy on expenditure as stated in An Action Programme for the Millennium is to limit net current spending growth to 4 per cent and capital spending growth to 5 per cent on average up to 1999 and to reduce overall Government spending as a share of national output.
The Government's policy on expenditure is soundly based. As the Minister for Finance made clear in his Budget Statement, the Government is not intent on controlling expenditure as an end in itself. This Government is not engaged in a policy of severe curtailment of public services which would do untold damage to the social consensus and progress which we have achieved in the last decade. This Government is fully committed to maintaining a firm control of the public finances. However, it is also committed to ensuring that all sections of Irish society, particularly the most disadvantaged and marginalised, can participate in and benefit from our extraordinary economic success.
The continued strong performance of the economy is providing the resources to improve in a significant way the position of the more disadvantaged in our society. In his budget, the Minister for Finance committed over £280 million in a full year to a comprehensive package of social inclusion measures. This amount, with the £273 million committed in the 1997 budget, more than meets the commitment in Partnership 2000 to spend £525 million on social inclusion measures over the three year lifetime of that agreement.
The Government has adopted a balanced and equitable approach to public spending. It is providing significant additional resources to improve essential public services for the benefit of the most deprived members of the community. It is doing this while at the same time containing the growth in current expenditure within the limit set out in its programme. The Government recognises the importance of building on the social progress achieved to date by addressing the many inequalities which still exist in Irish society. It recognises also, however, that there must be a prudent limit on the amount of resources we can commit to doing this.
Controlling public expenditure is a crucial element in this Government's budgetary policies. It is one of the key priorities which the Government has identified as part of its overall objective for tighter management of the economy so as to maximise the long-term potential for growth, jobs, social inclusion and improved living standards for all. The commitment on limiting expenditure growth is taken seriously by the Government. Past and bitter experience in Ireland tells us that mismanagement of public expenditure can lead to serious problems in overall budgetary and economic policy. The inevitable consequences of spiralling public spending are higher taxation or increased Exchequer borrowing. This Government is determined that this will not happen. The prudent budgetary policies which have done so much for the success of the economy will be maintained, including continued firm discipline in the control of current public expenditure.
Criticisms have been made of the Government's expenditure policy. This criticism has in general been devoid of rational analysis and has focused principally and narrowly on the technical basis on which the figures for the increase in expenditure have been calculated and presented. The charge has been made that the figures for current expenditure have been manipulated in such a way as to present a false view of the increase in 1998 over 1997. Specifically, the criticism centres on the fact that certain payments were made this year which were not expected to be made until 1998 and future years and that this was done to ensure that the increase in 1998 spending is within the limit set in the Government's programme. The implication is that, if these payments had not been made, expenditure in 1998 would be significantly over that limit.
The Minister for Finance has already answered this criticism on many occasions in interviews in the different media and particularly in a comprehensive statement to the Dáil on the 1998 Estimates on 26 November. In that statement he gave a clear and full account of the position. That is a matter of public record and I do not propose to cover the ground in detail again today. However, I take the opportunity to make a couple of important points on the matter to clear up any possible misunderstandings that may still exist.
Nobody should be in any doubt about the Government's commitment to controlling expenditure, which is serious and solid. The expenditure Estimates for 1998, as adjusted for the additional spending measures announced in the budget, do not imply a weakening in the Government's resolve to keep a tight rein on public spending. Net current expenditure, as defined for the purposes of the Government's programme, is estimated to increase by 3.7 per cent in 1998 over the likely 1997 outturn. The emerging trend in expenditure will be closely monitored during 1998 and necessary action will be taken to ensure that the outturn for the year will still be below the Government's target of 4 per cent.
In relation to capital expenditure, the post budget figure for the increase in Exchequer funded capital in 1998 is 19.2 per cent. This is significantly above the limit of 5 per cent growth in such spending on average up to 1999 as set out in the Government's programme.
The provision of £100 million in 1998 for the education technology investment fund, which has been announced by the Taoiseach, the Tánaiste and the Minister for Education and Science, is one of the main reasons for this large increase. The announcement of this fund has been seen as an innovative and far sighted measure to tackle one of the biggest potential risks on the economic horizon, namely, the emergence of serious short-ages in skills among our young workforce. It would be difficult to find anyone who has questioned the soundness of this decision. It represents a major investment in our education system and in the future economic and social fabric of society. Apart from this significant investment in our educational system, there are justifiable increases in other capital spending programmes, all of which will strengthen the social and economic infrastructure which is essential to underpin Ireland's continued development.
Payments which the Government has been criticised for making in 1997 as a means of manipulating the spending figures are all totally legitimate and are in respect of liabilities which are fully matured and properly due for payment. As the Minister for Finance has already explained, it is wise to use the resources which this year's strong Exchequer position affords to meet these costs now rather than later. The spending commitments involved will have to be met at some stage and it is entirely reasonable to make provision now so as to reduce the burden facing the Exchequer in later years.
Those who have criticised the Government's expenditure policy on the basis of the somewhat facile charge of massaging the figures are not seeing the big picture. They have failed to appreciate that the Government's spending plans for 1998 as set out in the Estimates and the budget, by keeping growth in current spending within the 4 per cent limit, demonstrate clearly the Government's determination to ensure that expenditure policy, as a key element of economic and budgetary management, contributes effectively to the maintenance of a strong national consensus and underpins significant investment in support of this country's future economic and social development.
As the Appropriation Bill is the Government's last item of financial business for the year, it provides a good opportunity to review our general economic performance. Such a review is important also since it provides the context within which budgetary and expenditure policy must be seen.
This is a particularly auspicious time for the economy. We are currently enjoying the benefits of a period of sustained economic growth. Ireland's GDP has grown by about 40 per cent over the past five years, outperforming all of our European Union partners. One of the most important and pleasing aspects of this growth is the extent to which it is being reflected in the reduction in the numbers on the live register of almost 50,000 since August 1996. Furthermore, the number at work has risen by 220,000 since 1993. I acknowledge the contribution of the previous Government to this very good news.
The prospects for further growth are also very bright. We expect investment to continue growing at a high rate, perhaps by an annual average of 12 per cent, over the period 1997 to 1999. This is very important in the context of providing increased capacity and will help facilitate the continuation of non-inflationary economic growth in the medium term at a time in the economic cycle when bottlenecks would otherwise be expected to arise.
We are clearly very much alert to the dangers of inflation in this period of exceptional growth. Increased capacity has been provided through a significant public capital programme. This will help to limit price pressures as a result of constraints in the supply of goods and services. We have to realise also that now in particular is a time for resisting the temptation to seek either wage increases above those provided for in Partnership 2000, or enhancements to our public services beyond those included in the Estimates and budget for 1998. It is clear that there is no head-room for excessive pay claims. In addition, imprudent increases in non-pay public expenditure would undoubtedly undermine our position when we need to ensure that the economy can develop further the necessary economic infrastructure in the years ahead when international transfers may not be on the same scale as in the recent past.
The targets for the relevant economic aggregates are being met in the context of satisfying the Maastricht criteria for economic and monetary union qualification. The corresponding targets for the period to the year 2000 are set at levels which will enable us to enter and participate in EMU from January 1999. We can move into the single currency, confident in the knowledge that the economy is in its most secure condition since the foundation of the State. Inflation is at record low levels and is expected to remain moderate at approximately 2 per cent over the next three years. Adherence to Partnership 2000 will help to ensure that this remains the case. Ireland's competitiveness can therefore be maintained, thus ensuring continued strong export growth on our foreign markets which are themselves forecast to remain favourable over the medium term. The balance of payments is also expected to remain healthy and will likely be in surplus over the period.
The general Government balance has moved into surplus this year and is forecast to remain so for the foreseeable future. The Government debt to GDP ratio, which has fallen from approximately 96 per cent in 1993 to approximately 67 per cent in 1997, is expected to fall further by approximately 5 percentage points per year over the next three years. The Government's fiscal position is therefore fundamentally very sound, and leaves us well positioned for successful participation in EMU.
We can look forward to experiencing the benefits of EMU in advance of the January 1999 start-up date. As the participating European economies continue to converge, we can anticipate a fall in our interest rates which will be a welcome stimulus to business investment and will help to keep inflation low.
In his first budget recently, the Minister for Finance took the opportunity to build on the foundations for our current economic success which have been laid by his predecessors, particularly through the successful transformation of the public finances, with the support of the social partners and the community at large. We can see today the fruits of this co-operation in practically all the main economic indicators, most notably in the numbers of people at work.
The approach adopted in the budget, which will, I believe, prove to be a successful formula, was driven principally by a need for the continued maintenance of healthy public finances; the introduction of work-friendly policies in both taxation and the social welfare code; the development of a social inclusion package with particular emphasis on the elderly, the numbers of whom will double in the first half of the next century; and the provision of further investment, especially against a background of changes in European structural funds and the emerging capacity constraints, both of labour and capital, in anticipation of continued high growth levels.
Meeting these requirements will address the objectives of our Action Programme for the Millennium and will deliver on the promised resources in Partnership 2000 for tax and social inclusion. It also will ensure that we create the right conditions for continuing our strong economic growth performance, thus maintaining progress in reducing the numbers on the live register.
The tax measures introduced in the budget, coupled with the initiatives under the family income supplement and the back to work allowance scheme, are designed to reward effort and to improve incentives to work. These will increase take home pay and make it more attractive to work, thereby minimising pay cost pressures and helping to keep inflation under control.
The overall limits on increases in current spending of less than 4 per cent, along with the prudent tax initiatives, will maintain the general Government balance in surplus. Government debt will continue to be reduced. Inflation will be maintained at the moderate level of 2 per cent. In general, the budget is enterprise oriented and will ensure that our new found and well earned wealth is maintained through strong non-inflationary growth well into the future. This balanced approach is the initial step in the implementation of a five year programme which will see us comfortably positioned for entry into Economic and Monetary Union in 1999 and for successful participation beyond in the new millennium.
I now want to outline briefly some of the details of the Appropriation Bill before the House today.
Section 1 of the Bill gives statutory effect to the Departmental Estimates for the supply services, non-capital and capital, including all Supplementary Estimates which were approved by the Dáil since the last Appropriation Act.
On 15 May 1997 the Dáil approved the original 1997 Estimates for Departmental expenditure, which totalled £11,675 million. Since then the Dáil has approved a number of Supplementary Estimates for various Departments which, in total, come to £429 million. This extra amount brings the total grant for supply services expenditure in 1997 to £12,104 million. Section 1(1) of the Bill appropriates this total amount of £12,104 million to the various supply services or Departments as listed in the Schedule to the Bill.
In addition, section 1(2) of the Bill provides for the application of a total amount of £1,155 million in Departmental receipts as appropriations-in-aid of the grants for the supply services listed in the Schedule.
I will outline briefly the main factors which have given rise to additional expenditure and the requirement for Supplementary Estimates this year. lt is important to bear in mind that the actual outturn for expenditure is likely to be lower than that implied by the Supplementary Estimates as additional savings begin to emerge towards the year end.
The total net current expenditure approved by the Dáil in May this year was £10,222 million. This included £72 million in respect of Hepatitis C compensation payments, which was not included in the revised Book of Estimates published earlier. The latest best estimate is that net current expenditure in 1997 will be some £10,400 million, £178 million higher than the original Estimates approved by the Dáil.
This year the Government has had to meet a number of significant costs on some important economic and social programmes.
I want to turn now to section 2 of the Bill. The bringing forward of the date of the 1998 budget to December this year raises certain difficulties for the first time as regards adherence to Article 17.1.2º of the Constitution. Article 17.1.2º requires that the Financial Resolutions of each financial year must be enacted into law by the end of that financial year, that is, by 31 December 1997 in the case of the Financial Resolutions passed on budget night, 3 December. However, Article 17.1.2º also allows for the 31 December deadline to be deferred if an Act to that effect is passed before the end of 1997.
This section makes provision for this deferment option to be invoked. The alternative to this approach would have been to rush through the Dáil and Seanad in the two week period between the budget and the Christmas recess detailed tax legislation which could at times be complex. The approach being provided for in this section of the Appropriation Bill will maintain the normal statutory deadlines for passing budget measures into law, that is, 84 days for the completion of the Second Stage and four months for enactment of the Finance Bill.
Ireland's economic achievements are largely due to prudent budgetary policy and to the consensus between the Government and the other social partners. The broad national consensus on economic and social policy has underpinned our competitiveness. In turn, sound fiscal policies have allowed the Government to reduce taxation and to increase spending on key social programmes.
It is essential that budgetary policy remains on track, that the consensus remains strong and that a significant investment is made to support Ireland's future development. The Government's expenditure policy will maintain that sound approach.
I commend the Bill to the House.
I wish you, a Chathaoirligh, and all your colleagues a very happy Christmas.
