I welcome the Minister of State at the Departments of Finance, Deputy D'Arcy, to the House. Group spokespersons have eight minutes, which is not to be exceeded, and all other Senators have five minutes.
Summer Economic Statement 2019: Statements
I welcome the opportunity to speak today on the summer economic statement, SES. The SES constitutes a key part of our improved budgetary process and provides the basis for fiscal policy formulation in advance of budget 2020. It outlines, in broad terms, the parameters that will frame discussions due to take place at this year's national economic dialogue over the next number of days about options and priorities in advance of October’s budget. It builds on the stability programme update, SPU, published in April and it sets out the Government’s medium-term economic and fiscal strategy as well as the constraints facing the economy over the medium term.
On the short-term outlook, the SPU projects growth of 3.9% of GDP this year as well as a budgetary surplus of 0.2%. Our public finances have been firmly placed on a path to sustainable recovery, with this Government prioritising budgetary policies that are focused on economic stability and growth. Recovery is evident across a range of economic indicators, with the labour market in particular now close to full employment. Notwithstanding the progress to date, there remain a number of significant risks to the outlook which I will touch upon shortly. This is why the Government has been continuing to rebuild our fiscal buffers, to ensure we have capacity to deal with any adverse economic shock that could emerge. This fiscal strategy includes targeting budget surpluses, reducing our public debt and establishing the rainy day fund. In addition, the decision to more than double our level of capital investment from €4.2 billion to €8.6 billion from 2016 to 2021, will mean that the necessary conditions are in place to help boost the growth potential of the economy.
While we have made significant progress in terms of ensuring our recovery, we must be cognisant of the risks to the economic outlook. Since publication of the SPU, risks to our economy have intensified. Domestically, we are facing the possibility of overheating as well as the fiscal vulnerability that stems from the volatility of our corporation tax revenue. On the international front, there is an increasing likelihood of a no-deal Brexit as well as the risks associated with possible changes to the international trade policy environment. Against this backdrop of uncertainty, it is crucial that budgetary policy is centred on building fiscal capacity and supporting economic stability.
On the risks associated with Brexit in particular, this year's SES has been prepared on the basis of two budgetary scenarios, with the first scenario assuming an orderly Brexit and the second assuming a disorderly Brexit. In the event of an orderly Brexit, the appropriate budgetary policy will be to stay within the parameters as set out in the SPU. Any expenditure increases or taxation reductions outside of these parameters would risk further inflating the economy. The SPU projects a surplus of 0.4% of GDP next year. Targeting this surplus will mean increased capacity to absorb the impact of Brexit.
The budget 2020 framework involves a budgetary package of €2.8 billion for 2020. Under the orderly Brexit scenario, with current and capital expenditure commitments amounting to €2.1 billion, which include pre-commitments of €1.9 billion and a capital reserve of up to €0.2 billion being established to accommodate funding requirements for the national broadband plan and the national children’s hospital, this leaves €0.7 billion to be specifically allocated as part of budget 2020. Under the disorderly Brexit scenario, this could involve a headline deficit in the region of -0.5% to -1.5% of GDP for next year, a swing of up to €6 billion. Come September, if a disorderly Brexit is the most likely scenario then a no policy change approach will need to be adopted for budget 2020 in order to ensure the State has the necessary resources at its disposal to meet the impact of this exceptional challenge, while preserving the longer-term sustainability of the public finances. This will also ensure that sustainable improvements in living standards can be maintained.
As set out already, the risks to the public finances arising from the high concentration of corporation tax receipts and from increasing public expenditure on the basis of transitory receipts have been well documented. The Minister for Finance has requested his officials to prepare a paper to examine policy options aimed at ensuring that the concentration of corporation tax receipts and the fiscal rules do not lead to budgetary imbalances. The Minister will publish this paper shortly and will give consideration to some of the policy options in advance of drawing up recommendations for Government in the autumn. Running budgetary surpluses and establishing the rainy day fund are examples of policy measures that are being adopted by this Government to mitigate the vulnerabilities in our public finances. Furthermore, the broadening of the tax base over the last decade has ensured revenue streams into the Exchequer have stabilised to allow for the funding of essential public services.
As we enter this period of increasing economic uncertainty, our priority is to pursue sound, budgetary policies. This means continuing to invest in our public services and, as a small and highly globalised economy, ensuring that we maintain balanced books and continue to reduce debt in order to build resilience against Brexit and any further shocks to our economy.
I thank the Minister of State for his opening statement. Much of the heat surrounding the summer economic statement arose in discussions when it was published yesterday. I read some of the contributions made in the Dáil yesterday evening, in particular those of spokespersons and the Minister for Finance and Public Expenditure and Reform, Deputy Donohoe.
Brexit is the most obvious issue that arises. If Brexit goes well, we might be alright but if it does not and there is a no-deal or hard Brexit, the potential swing in the public finances will be from a €1 billion surplus to a €5 billion deficit. As the Minister of State noted, this is a movement of about €6 billion. The Irish Fiscal Advisory Council has noted that between €3 billion and €6 billion of the €10.5 billion of corporation tax receipts is relatively unstable and not guaranteed in any sense. There are, therefore, uncertain and potentially choppy waters ahead. That is not to take away from the positives. We have almost full employment and we ran a surplus last year for the first time. Fianna Fáil is involved in the confidence and supply agreement and has played its part in facilitating the minority Government. We are doing our bit to make sure everything goes as well as it can. The National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 was passed last week with the unanimous support of the House. The rainy day fund is a positive measure which featured in my party's manifesto in 2015. It was also part of the confidence and supply agreement and I am pleased that, as part of its agreement with Fianna Fáil, the Government has secured the rainy day fund. That the fund will have €2 billion in it by the end of this year is a positive.
We also have challenges in how we manage capital projects and expenditure. We are seeing constant overruns in health year on year. Last year, the overrun was approximately €650 million and we also have overruns in the national children's hospital and national broadband plan. Only €200 million of the €2.8 billion available in the fiscal space will go towards addressing those overruns. We are, therefore, kicking some of the problem down the road. We need to find significant resources to fund projects such as the children's hospital and the national broadband plan in the long term. The Minister says there is €2.8 billion of fiscal space, of which he has committed €2.1 billion. Some people have pointed out that the latter figure does not include the Christmas bonus, which would eat up €300 million of the fiscal space. Others argue that the €2.1 billion figure includes the Christmas bonus. I ask the Minister of State to indicate whether the bonus is included in the figure.
We need to remain cognisant that corporation tax receipts account for much of our revenue. I welcome our revenue from corporation tax and would be delighted if it was €20 billion or €30 billion. The way to avoid overdependence on corporation tax receipts is to have an increasing number of companies paying the tax because that would reduce our dependence on particular companies. The Minister has announced a review of corporation tax, which some people would prefer to have done externally. I understand the Minister's rationale for doing it internally and possibly having it independently validated.
The Irish Fiscal Advisory Council has pointed out significant issues with the national finances. It noted the pitfalls of Brexit, the €645 million overrun in the Department of Health last year and that Government spending in 2018 breached the expenditure benchmark laid down in domestic and EU fiscal rules. The Government claims that no project will be impacted by the overruns in the national broadband plan and the children's hospital but projects will clearly be postponed and delayed.
It is very much the case that we do not know what will happen. The summer economic statement outlines the history and points out how well we are doing, relatively speaking. While that is valid, in addition to the €2.8 billion of fiscal space, we may need to borrow up to €6 billion if Brexit goes badly. With every passing day, the likelihood of a no-deal rather than an orderly Brexit increases. The fiscal space is small in the context of having to borrow if Brexit goes wrong.
It is important that we have stability and that is why our party will support a budget, subject to the parameters outlined between Fianna Fáil and Fine Gael in the confidence and supply agreement. That agreement has delivered many measures, including 1,600 new gardaí, an increase in the old age pension and a boost to third level funding. I will not list them all because they are well documented. I wish the Minister of State, the Minister for Finance and Public Expenditure and Reform, Deputy Donohoe, and the Government the best as they deal with Brexit in the uncertain times ahead.
Corporation tax receipts, while very welcome, are very unstable. We keep finding extra money which allows the Minister to avoid borrowing or cutting services to fund overruns. At some point, the curve will go the other way because we will not keep finding additional corporation tax revenue, much as I would like that. Equally, interest rates are at a historical low and the national debt is costing us less to service than it ever did. If interest rates change at any point, the Minister may not be as lucky or fortunate as he has been thus far.
Members of both Houses need to be cognisant of the figures and committed to examining them. I did not like the note on the Government's website that the summer economic statement gives the Dáil an opportunity to examine the figures. No reference was made to the Seanad. The website could have at least referred to the Oireachtas. It is true that the Dáil passes the budget but the Seanad is also discussing the summer economic statement. The finance spokespersons are present and a number of Senators are on the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. There is a role for this House in debating the statement, as we are doing now. Maybe the language of the Department will reflect that in the long term.
Fianna Fáil is facilitating the Fine Gael-led minority Government, subject to the confidence and supply agreement. We have secured various measures within that but I am concerned about corporation tax and capital and revenue overruns. I wish the Minister of State and the Government well in tackling those issues.
I call Senator McDowell. I understand he is sharing time.
I am sharing time with Senator Boyhan. The summer economic statement is, as Senator Horkan said, challenging in some respects and reassuring in others. As the statement notes, the economy is in a remarkably better condition than it was a number of years ago after the financial crash. There are, however, some fundamental underlying problems, such as the indebtedness per head of the Irish population, which is at a high level internationally.
While the Minister of State spoke about the economy being effectively close to full employment, there are ambitious infrastructural plans outlined to the Irish people for the next 20 to 30 years, including some which are needed in the short run rather than the long run. For instance, if one looks at the plans and figures for social and affordable housing, although public housing is a better phrase to describe it, the suggestion is that 20,000 extra construction workers would be required for that and we do not have them as far as I can see. Likewise, people are talking about a massive programme of rehabilitation of our existing housing stock. An extra 20,000 people would be required for that according to some of its proponents. I do not see where those 40,000 people will come from.
We face real constraints. If we are to hit our environmental targets, we have to address issues such as public transport, for example, an increased use of rail, and a reconfiguration of our cities. I put on record again my strong belief that our urban development patterns must radically change and that we must be willing to build higher and more centralised cities. We cannot have people commuting for two or three hours, even if they are commuting in electric cars, in ten or 15 years' time. We still cannot afford to have that waste in our environmental spatial strategies.
Another matter I emphasise is that it behoves all politicians, from all sides of the ideological and party spectrums, to respect the fact that we must contain public spending within reasonable limits.
We cannot let the controls slip from us, especially now, as we approach the end of the confidence and supply agreement, to which Senator Horkan referred, and possibly the end of an electoral cycle. It is vitally important that a spending spree is not promised in the same abandoned way as in the UK, for example, where Boris Johnson is making extravagant promises on taxation, and repatriating £39 billion, to the British electorate. We must have a responsible electoral cycle, and everything has to be constantly subject to reality checks and the constraints on our economy. I fully agree with the Government's position that the possibility of a disorderly Brexit requires a huge conditionality to be attached to our budgetary strategy over the next couple of months. Like everybody else, I hope the UK will have a negotiated, orderly exit from the European Union, if it insists on leaving. We have to be very clear that a disorderly, unilateral, no-deal exit would have profound effects on our budgetary situation, and I commend the Minister and the Government on their determination to make provisional arrangements in their budgetary planning to deal with that scenario, should it emerge. As somebody said many years ago, "A lot done, a lot more to do", and-----
Was that Senator McDowell's Government?
No, that was Fianna Fáil.
It was "A lot done. More to do".
It was Progressive Democrats break time.
The Leader may have forgotten that that was an election in which I lost my seat, so it was not my policy.
I remember it well.
He is on the way back.
The rumble in Ranelagh.
One never knows; the cycle goes round and round. I will hand over to Senator Boyhan.
Is Senator McDowell running again?
I ask Senators not to interrupt.
I welcome the Minister of State, Deputy D'Arcy, and thank him for coming to the House to discuss the summer economic statement. As Senator McDowell said, and the Minister of State acknowledged, all budgetary policy must be framed against the background of the rising possibility of a disorderly Brexit in the autumn. That was clearly echoed in both the Minister of State's speech and his report, and I commend him on the way in which the report has been laid out by his Department.
I wish to draw the Minister of State's attention to a short paragraph on page 36 of this report, which must be welcomed. It refers to the issue of budget transparency, and claims that access to timely, objective, and accurate information is a precondition for citizens to understand how public resources are being managed, participate in informed debate, and hold the Government properly to account. That is right, and I welcome that. I also acknowledge the reform of budgetary policy and framework. We must achieve openness, transparency, and, ultimately, public accountability in our public resources and finances. That is a good thing which we should welcome.
Finally, I note a commitment here which I wish to acknowledge. At the time of the budget, we will dedicate a citizens' guide to the budget which will be published to explain the key decisions in clear and non-technical language, which is a positive move. This guide will be an objective, self-contained document that focuses on the objectives and content of the budget, presented in a concise and accessible format. It is intended to foster greater understanding of public finances, public finance policy and choices, and ensure members of the public fully understand the budgetary decisions that will impact on their lives. That is important and I wanted to single it out because sometimes, with all the economic and financial jargon of the budget, the punters on the street do not quite understand what is going on. That is a clever move. I welcome it and ask the Minister of State to pass that message on to the Minister and the Department. It is important that, on the day of the budget, we have a concise, simple infographic and some key messages about funds, because this is the public's money. That initiative is welcome. I again thank the Minister of State for his report and for coming to the House today.
I welcome the Minister of State to the House. He is no stranger here, and he is doing a great deal of work. As an aside, now that Senator McDowell has heralded his standing in the next general election, whenever that is, he might give us a preview of his slogan for when he goes up that pole and hammers the nail. That might be interesting.
He should not use nails, or he might electrocute himself.
I hardly think so.
I welcome the summer economic statement. Taking an overall view, I approve of the approach taken with this particular summer economic statement in that it deals with Brexit, which is hanging over us. There is no point in saying otherwise. Brexit is a certainty, and there is now a strong possibility of a hard Brexit. We have to be prudent, and we have to be true to our policies as a Government as well. The economy is now back on a reasonably sound footing, we have a budget surplus for the first time in ten years, we have virtually full employment, with over 2.3 million people working, and our unemployment rate is below what would normally be termed full employment. However, our debt levels are still high, and we have to be cautious about that, in both the public and private sectors. Our debt levels are coming down, and while we have certainly seen a reduction in both public and private debt levels, particularly this year, it is something we must be conscious of.
Public investment in infrastructure projects stopped from 2007 onwards, and one would have to question whether that was the correct approach, in hindsight. It is important that we continue to invest public infrastructure. Design and planning of the M20 motorway is under way, and a 60-bed block is being built in University Hospital Limerick, which is hugely important. Flood relief projects are happening up and down the country. Senator McDowell referred to public transport, and I would be hugely supportive of both our rail network and other networks. That feeds into the whole issue of climate change and our carbon footprint, which is something we have to look at. We also have to be conscious that our indigenous exports sector is hugely dependent on the UK, so if there is a hard Brexit, there will definitely be implications for us in Ireland, and we have to prepare for it in that way. Equally, a soft Brexit would make it much easier.
This summer economic statement effectively presents a picture of a balanced budget, full employment, a doubling of capital investment, and having a proper programme back on board, but it also presents the risks, which relate to Brexit and the level of increase we have seen in corporation tax. There is a body of work within the Department and we have to look at that in terms of long-term structure. We are also looking at the climate plan, with carbon taxes rising up to 2030, and insurance as well. I am conscious of striking a balance, and I have a fundamental view on that. I do not believe someone on €680 a week should be paying a marginal tax rate of 50%.
I do not believe so. Equally, we have to look after people who are less well off, including social welfare and carer's recipients. This is the balance to be struck by Government. We also have to put money aside. Senator Horkan mentioned the rainy day fund, which we debated recently in the Seanad. There was almost unanimous support here, explicit or implicit, for the overall objective of the rainy day fund. There will be €2 billion in a rainy day fund by the end of this year, which is a significant amount of money. We are moving into the territory of counter-cyclical budgets. If the economy is showing signs of overheating, we must put money aside for a rainy day.
If there is a hard Brexit, the Government will have to support people exporting to the UK, including in terms of jobs and a multitude of other areas. A hard Brexit will bring various problems. A disorderly Brexit would involve a headline deficit of between 0.5% and 2.5% and a swing of up to €6 billion, which could have significant implications for us. However, all that is outside of our control. The British Parliament will decide on the type of Brexit it wants, which is conditional on a number of factors, including who will be the new leader of the Tory Party and Prime Minister. However, it is important to remain positive. The majority of MPs are not in favour of a no-deal Brexit. We have to hope that this will bring realism and common sense to the Brexit issue. Ireland and the UK are inextricably linked.
I welcome the summer economic statement. I agree with Senator McDowell that we must maintain control over spending. Equally, we must ensure we give breaks to hard pressed families across a range of areas. It is a balancing act. The outcome of the Brexit process in the UK, our nearest neighbour, will have huge implications for us. It is a terrible shame that the UK is leaving Europe. The UK was an ally for Ireland in various discussions and negotiations in Europe. I do not believe there will be a rethink. Rather, I think there will be a Brexit. The only question is what form it will take. This summer economic statement deals with the realities of what is unfolding in the UK in front of our eyes. We must be prepared. This document goes a significant towards that end.
I thank the Minister of State, Deputy D'Arcy, for presenting the summer economic statement. Senator Kieran O'Donnell will not be surprised to hear that I take a slightly different view from him.
I was waiting for somebody to say we were going to have a soft landing. I recall the many times previously that we were told not to worry, that we would have soft landing.
I note the Senator's tone has dropped an octave.
Senator Conway-Walsh has the floor.
I thank the Acting Chairman. I note I am the only woman in the Chamber.
No, Senator Maria Byrne is in the Chair.
With the exception of Senator Maria Byrne in the Chair, I am the only woman in the Chamber.
And the clerk.
I mean in this circle. With so much to answer for over the two weeks, we could all be forgiven for assuming that would see something new and novel in yesterday's summer economic statement. This publication is a bit like Senator Kieran O'Donnell's speech in that it is another exercise in fantasy. The statement announces a budget package that lays out €7 million in additional spending over and above that which is already precommitted.
It is €700 million.
All this is based on spending and the revenue projections that two leading economic institutions in as many weeks have branded as not credible. This Government's long-standing policy of over-reliance on tax receipts will continue and with it so too will the uncertainty around the funding of our public services. I am delighted the hospital in Limerick is getting a new extension. Meanwhile, hospital beds in Mayo are being closed and home help hours are being cut and refused.
There are no changes to revenue projection. There is no indication that this Government's woeful record on tax will be improved. The Fine Gael fantasy tax cut is even mapped out, stripping €3 billion from the public purse. On top of this, a further €200 million is being used to mop up the fiscal mess and serious waste caused by this Government in regard to the broadband plan. Before I came to the Seanad I attended a meeting of the Joint Committee on Communications, Climate Action and Environment, where the broadband plan was being discussed with the ESB. Yesterday, the committee discussed it with Eir. What a debacle. What a job the Government has made of that plan.
As the spending projections remain completely unrealistic so too does the draft budget package. The sum of €700 million will be gobbled up instantly by the Christmas bonus and the latest overrun on health. Is the Government telling the people that there will be Brexit preparation measures this year or will it be pleading again for some corporation tax receipts to be found down the back of the sofa? In regard to the last crash, it was impossible to project tax receipts because, again, of our over-dependence on corporation tax. It is worrying to see this happening again. As there is no difference between Fianna Fáil or Fine Gael, we can expect more of the same.
Put simply, there are no changes to tax projections, no changes to the fictional spending projections and no measures outlined on how to broaden the tax base. These plans are now workable. Meanwhile, the upcoming budget and, perhaps, much of the political energy of this State will be dominated by events across the water. Indeed, they will ultimately be decided by the whims of whatever Tory candidate inherits that party's leadership. The Government may not have known that weeks after the publication of the October budget we will be staring into a potential no-deal scenario but it knew Brexit was coming and that it could only spell trouble for the Irish economy, in particular for exporters in the agrifood sector in the Border and rural communities. Those producing for the North-South and Irish-British supply chains are particularly vulnerable. A no-deal Brexit is a very real possibility and, therefore, so too is a deep and significant downturn in the Irish economy. The only sensible response to this potential crisis is support and investment in this budget in a way that will increase our economic capacity. The summer economic statement fails to outline the path we will take as a State to provide that support or the tax measures that will be amended to fund it.
Sinn Féin has proposed a varied range of fiscal and tax measures to support the areas and industries that will be most affected by Brexit. Foremost among those was the creation of a €2 billion Brexit support fund to be used as and when it is needed, funded in part by money this Government intends to squirrel away to bail out the banks again. Beyond those on the coalface of the Brexit threat, our economy is crying out for investment. The Government presides over one of the lowest labour participations in the EU. We need more people at work and more people in proper, secure employment. This can be achieved by lowering the cost and burden of child care on families. For people who may find themselves pushed out of work by the Brexit downturn we need investment in active labour market schemes to provide support and retraining, if necessary. In that regard, we do not need schemes like JobPath on which €185 million that has been wasted. We need capital investment that will unlock the opportunities presented by the low carbon transitions. All this requires targeted investment that will secure longer-term growth and mitigate the worst impacts of the downturn. Investment requires fair and sustainable taxation. This is impossible if the Government remains committed to its farcical tax break election pledges. Despite all its warnings of prudence in the summer economic statement the Government has again mapped out how €3 billion taken from the tax base over five years in an election giveaway will only affect the top 20% of earners, including for 2020. This means €3 billion less in revenue as we stare into a downturn. As recently as the last couple of weeks, two major economic institutions have issued warnings about the Government's management of the State finances.
If we have not yet seen any detail, the question is when we will. If there is none, will we ever see it? Is the Government simply using the public finances for election posturing?
Can the Minister of State confirm that he believes a priority for the Government is to strip €3 billion to give to the top 20%? The Government has two options. Either it doubles down once again and pledges to tear strips off the tax base as Brexit and a downturn loom or it performs a U-turn and tells us what we all know. As with Fine Gael's equally ridiculous promise to abolish the universal social charge, USC, this is another risky and soon to be broken promise. While the Government is using the public finances as a Fine Gael election tool, people wake up to the news that housing in half of the counties in the State is unaffordable. Before we get to Brexit, a downturn and another lecture about fiscal prudence, the Government should note that day-to-day life is already unaffordable for vast sections of the public. With tougher days on the horizon, there is one question families across the State need the Government to answer. Is this recovery and resurgent economy what people have been told to wait for? We have historically high rents, extortionate childcare costs and public services that are simply unfit for purpose.
Despite constant warnings from Sinn Féin and others, the Government has continued to waste our public finances on handouts for the wealthy. The bailed out banks still enjoy a ludicrous tax holiday. The Government has allowed vultures and property funds feeding off the housing crisis to avoid hundreds of millions of tax. Hundreds of millions in back taxes from multinational companies continue to accrue. I pointed out earlier this morning that the carer's allowance is taxed. We do not tax the vulture funds but we tax carer's allowance. I had a great deal more to say but I will conclude on that note.
I hope Senator Conway-Walsh will wait for my response.
I need to apologise to the Minister of State because I cannot wait for it.
She is going to run out. Senator Conway-Walsh comes in and says what she says, kicks boots around the place and then walks out.
No. An important discussion on the 540,000 households that do not have broadband is taking place at the Joint Committee on Communications, Climate Action and Environment.
This debate is also important but maybe Senator Conway-Walsh did not notice.
If I need to leave, it will be for that reason. Of course, if the Government had the broadband situation under control, I would not have to go to that committee meeting.
I welcome the Minister of State to the House. I was struck by a couple of points made by earlier speakers. Senator Victor Boyhan referred to providing the public with a citizens' guide to the budget using simple language. I would like to see an annex to that guide containing a guide for people with disabilities and their families to show where they will be after this budget, whether up, down or treading water.
Senator Kieran O'Donnell talked about having an eye for and taking into account people on social welfare and those on the margins. I welcome that. It is another issue as to whether the statement and what will follow it actually manage to do that.
Senator Rose Conway-Walsh noted she was the only woman in the Chamber. I believe she meant she was the only female contributor. That got me thinking about Senator McDowell's point that we must have control over spending. Of course we must but how many women, who are more often affected than men, will have control over spending after the budget? They have to consider rent, mortgage, food, children's clothes and so on. What will be left after that? For many people, there may not be anything left to make spending choices about? These are some of the issues.
I attended the national economic dialogue this morning on behalf of the Disability Federation of Ireland. I read the Minister of State's statement and listened to what he said this afternoon. I look at this through the prism of the commitment of the Government to implement the UN Convention on the Rights of Persons with Disabilities. That means getting on with, and progressive improvement in, the participation and living standards of people with disabilities. I do not feel the love, if I may put it like that, from the forward to the summer economic statement. It may be implied but it is not overtly stated. I will offer some examples. Living standards have recovered and measures of well-being have improved generally, but not for people with disabilities. I am acutely aware that the scars of the crisis will remain for some time. Many people, to continue the analogy, are still bleeding. They have not got over the crisis to the extent that the wound has become a scar. Access to services in health and some other areas is becoming more difficult.
Mention was made of continuing to invest in our infrastructure. Is that our social infrastructure or is it capital and economic infrastructure? The statement does not indicate that this includes the social fabric and infrastructure. Reference is made to sustainably improving living standards, but for whom? Does that include people with disabilities?
The Minister of State said that, put simply, the Government faces a difficult balancing act in steering the economy and the public finances through a potentially turbulent time. There is no mention of the social infrastructure that was hammered during the recession. The Minister of State went on to emphasise that the Government would still be in a position to fund the roll-out of the national development plan and maintain and improve existing levels of public services. Public services, especially in the health sector for people with disabilities, are hanging on by a shoestring.
Less than one month ago, the new director general of the HSE stated in a memorandum to his staff that the first thing was to hold the line on the budget for this year. He suggested that, come what may, the HSE would not go over-budget. The HSE goes over-budget every year. The reason given for that statement was to regain the confidence and trust of the HSE's funders, namely, the Department of Health and, more particularly, the Department of Public Expenditure and Reform. How can disabled people understand that statement other than to interpret it as them being left outside while one public body regains the trust and confidence of another public body? That is rather chilling. I will not go into the details but I know there are major pressures in funding disability and health services this year. We had an exposé of these in the Joint Committee on Health last week. The disability services budget did not start off as a balanced budget. There was a deficit of €16 million and there is more than €30 million of a deficit hanging around in organisations that are funded and audited. There are other pressures. Nothing is allowed for demographic pressures this year. There are real issues. We are not now holding still. How are we to ensure that people with disabilities, their families and others are catered for? We can think of many other groups who will finish up on the margins or pushed back.
One positive and important development in the Oireachtas this year has been the commencement by the Oireachtas disability group of a series of meetings with Secretaries General to discuss a range of issues across different Departments.
I studied economics for several years and I have a degree in the subject. I know that we are a small open economy. Even if we did not have Brexit, it would be difficult but now we have all of that too. I know people have to pay their way and that we have to earn our living on the high seas. I also know that we have to keep the fabric of social services intact and in development. I know in particular that early last year the Government and the Dáil made a commitment, for which I am thankful, to implement the UN Convention on the Rights of Persons with Disabilities. That means the wheels have to keep rolling, maybe not at a magnificent pace but we cannot have them stop either. I am asking for clarity that this will be the case.
Ar dtús báire, cuirim fáilte roimh an Aire Stáit.
Senator Dolan's analogy of the high seas is one that we should keep in mind. In welcoming this debate on the summer economic statement, it is now hackneyed, but so true, that Brexit forms the backdrop to this debate but also provides the uncertainty. That means, and I welcome Senator Dolan's remarks, there must be a measured approach. We must be honest in how we approach the budget, whether there is an orderly or a disorderly Brexit, in October. That honesty means that we as politicians cannot be all things to all people. If one were to add up the promises of the Fianna Fáil Party in 2018, which amount to €3.8 billion, and the amounts the Sinn Féin Party has promised, the reality is we would be back to the days of a decade ago where we had 15% unemployment, we could not get money and we were in an economic bailout. I was in a party of Government that made decisions to rescue, with the people, our country. We took decisions that were in the interests of the people about whom Senator Dolan speaks. They are the people we are trying to work for and with. I perish the thought of returning to those days because I can assure Members that many of us have the emotional and mental scars of that time, of being a backbench member of that party in government.
I challenge Members to come in here and have a debate about the integrity of budgetary proposals, and to be honest. We can adopt the tax, spend and promise everything approach, but where would it get us? We know where it got us. Now we have a budget surplus. Unemployment is at 4.5%, down from the 15%. Following the decade we have come from, there must be a genuine adherence to the fiscal rules and to the remarks of the fiscal advisory council, the ESRI and others. I would make the point that the commentary in some cases is lazy and populist. Now is not the time to turn our country back into a casino and play with the money, which is the taxpayers' money and money we have to borrow. Our economy is not a casino. The house always win, but in our case the house is not Government; it is beyond our shores.
Now is the time for sound budgetary operations where we invest, as Senator Dolan rightly said, in public services and where we can benefit those who are most in need, whether it is the carer, the person with a disability or those who need respite care. In this context, disability must be an important part of the budget we frame in October. We have €2.8 billion of a budgetary proposal and €0.7 billion to spend. It is about balancing the budget. It is about being honest and ensuring right is done for the people and the economy.
However, what happens if there is a no-deal Brexit? We cannot merely walk away from that right now. It is neither rhetoric nor an academic exercise for a PhD dissertation. It is a real fact of life. That is why we have two budgetary stories today with us.
Members mentioned the challenges. We face challenges such as housing, climate action, transport and improving our carbon footprint. We are spending €2.4 billion on housing. We are spending more than €16.8 billion on health and yet today we have people on strike who deserve to be given recompense and recognised for the work they do. How can we balance the budget and be all things to all people? The answer is that one cannot. The answer to that question is that we must be prudent while at the same time recognising that an ghnáth duine - the ordinary person - is important.
I welcome the Minister of State and the summer economic statement. When the previous Government came into office in 2011, the country was literally on its knees and the Republic was in peril. Not too many people understand that now. In the past seven or eight years, Government has managed our finances. As stated earlier, unemployment, after peaking at 16% in 2012, is now below 4.5% and our enterprise-based economy is creating more than 1,500 jobs a week.
This Government often gets accused of a false claim that most of the jobs are being created in Dublin and the cities. This could not be further from the truth. Some 150,000 jobs have been created outside Dublin since the start of 2016, surpassing the Government's regional target of 135,000. Nearly seven out of every ten jobs, or 68%, are created outside of Dublin. Unfortunately, there is the threat of Brexit.
It is encouraging to note that the Border region is not getting left behind. For example, the number of people in employment increased by 5,800 in the Border region in the past 12 months. This is an annual change of 3%. The unemployment rate for the Border has also dropped to 3.8%, lower than the State average, and the live register numbers have fallen in all five Border counties - Donegal, Monaghan, Cavan, Sligo and Leitrim - in the past 12 months.
I am delighted that in my own region the growing economy has allowed me, as a public representative, to secure vital investment since my party took office in 2011. This investment has helped to deliver a range of flagship projects, including the €60 million Ballaghaderreen bypass; the €20 million investment programme at Roscommon County Hospital; the launch of the emergency aeromedical service, which has saved hundreds of lives; the multi-million euro investment in Lough Key forest; a primary care centre in Boyle; a community nursing unit for Ballinamore; and a new community school in Ballinamore. I also worked to secure funding for the N4 Collooney to Castlebaldwin bypass and the N61 between Boyle and Roscommon. We are delighted that Sligo has been designated a regional hub, a key economic centre for the north west. With its infrastructure, Sligo is perfectly placed to drive growth in areas such as south Donegal, Sligo county, Leitrim and Roscommon.
However, there are issues. The main issue is Brexit. I am back and forth to Westminster and the lack of understanding of the island of Ireland and of the Good Friday Agreement is worrying. I pay tribute to Labour MPs, such as Mr. Tom Watson, and Conservative MPs, such as Mr. Dominic Grieve. Mr. Grieve MP comes from a different perspective than I - I think he comes from the same perspective as Senator Marshall - but he understands the Union and what Brexit could do to it. We are on the same side because we understand it. As he stated, a no-deal Brexit is a catastrophe and he does not want to go down in history as an MP who facilitated this. People are beginning to come to this realisation. I think they understand that. However, we are in the centre of a madness that is effectively a Conservative leadership battle and people will promise whatever one is having oneself to become leader.
The prize is to be Prime Minister of the United Kingdom. People have to come to their senses because there is no upside to Brexit for the island of Ireland, the United Kingdom or the EU. I hope they will come to our senses eventually. The vast majority of the MPs and Lords at Westminster, if they could get their way, would reverse this awful decision to opt for Brexit. I hope common sense will prevail in the coming weeks and months.
I thank the Senators who contributed. I will try to provide answers on as many of the issues raised as possible.
Senator Horkan mentioned the national children's hospital, the broadband plan and other capital projects. I can only give him the 2019 figures that were budgeted for at this time last year. There was current expenditure of €59 billion and capital expenditure of €7.3 billion, with an overall figure of over €65 billion for current and capital expenditure. That is an enormous amount. The two projects to which the Senator referred will be funded over years, one over decades. In terms of the overruns, there will be projects over that period which will cost more than anticipated while others will cost less. I have not really commented much on those two projects. However, the projects with which we do poorly in terms of pricing are those which we do only once. We started the Luas under price because we had not done such a project here previously. When we began work on the Jack Lynch tunnel 20 years ago, we had not done anything similar previously and the project was underpriced by 50%. For Terminal 2 at Dublin Airport, we had not done a project of that type before and it came in over price by 50%. Everybody said the sky was falling and nothing else would happen because of the underpricing. Terminal 2 is a great example. We were told when it opened, close to the peak of the catastrophe that was befalling us, that it would never be used. Six years later, it was full.
I remind Senators that when they were going around the country looking for votes from the county councillors five years ago, they were told that we would have to knock down all the ghost estates as quickly as possible because there were too many houses. Now we have a housing crisis. The then Minister for Finance, Deputy Noonan, was in this House five years ago and was scoffed at when he stated that our economy would take off like a rocket. Now, our GDP growth is slowing but the economy is still growing at a substantial rate. In fact, ours has been the fastest-growing economy in the European Union for the past four years. Senators must not forget these things. There are cycles. We are trying to judge where we are and where we are going to be in the aftermath of a potentially wild economic shock of a type that has never been measured before. That is extremely difficult. The swing from surplus to deficit is enormous. It is difficult and we are doing the best we can in the context of deciding what we are going to do. We have not hidden any figures. We are putting them all out there.
To touch on a couple of other aspects, Senator Horkan also asked about the €700 million expenditure and Senator Conway-Walsh questioned whether that is really the figure. Reference was made to the Christmas bonus. That is funded out of some of the social protection scheme, which is in surplus year on year. It is not a headline figure. That is from where some of the money comes. The social protection budget comprises the biggest departmental expenditure budget of the State. It is funded out of those two aspects and is about €300 million. It does not all come out of current expenditure or a new Estimate during the year. For the past three years, our figures have been ahead of target. We cannot just hold our breath and hope that it is going to be ahead of target. We are doing the best we can to predict the figures. The Department of Finance has been very good in recent years in the context of making such predictions.
I want to touch on some of the points raised by Senator McDowell. Like Senator Kieran O'Donnell, he referred to the level of indebtedness. We have a constraint in that our level of public and private indebtedness. I want to put that on record. We have a higher level of debt than we are comfortable with. Put in context, the level of indebtedness is 100% of GNI* but we are reducing it. We do not use the GDP figures because they do not quite compare fairly with jurisdictions that do not have the same level of foreign direct investment. While our indebtedness is at 100% of GNI*, the European average is 85%. Our gross national debt, which is approximately €205 billion, can be reduced by 5% or so because we have figures on our cash balances, such as the money we have in the banks, our investment there and other moneys potentially coming from NAMA. That brings us to indebtedness of about 95% of GNI*. No matter what way we analyse these figures, our national indebtedness is about 10% higher than the European average and we are not comfortable with that figure. That will remain a constraint should we have to borrow further in the future. Should we have the worst type of Brexit, namely, a wild and disorderly one with no deal, it could potentially mean that we will have to borrow billions in the future. However, we may not have the capacity to do so. Looking at where we are currently, because the Department of Finance, the Oireachtas and the Dáil put a structure in place, the markets are satisfied to lend to us at a rate of approximately 1%. That is quite an achievement when one considers where we were in 2009 or 2010, when the markets would not lend and the State and the people lost their economic sovereignty. Others came in and told us what to do. A programme was agreed and we have emerged from that.
I want also to consider our level of personal indebtedness. I sat with some Senators on the banking inquiry. From 1997 to 2007, we went from the lowest level of private indebtedness in Europe to the highest. It was inconceivable to think that this was allowed to continue, but it was, and we went from approximately 47% GDP indebtedness to 240%. That is a scandalous and outrageous increase, but those factors do not influence us any more because the level of indebtedness is decreasing, although I accept that it is still too high. The level of private indebtedness is decreasing and that must happen. The public has been doing a number of things in the past decade. It has been paying down loans at a time when doing so has been difficult. It is quite an achievement to bring down that level of private indebtedness in the teeth of an economic storm such as that which we faced over the past decade. The public has done that because it is responsible and people do not want to be in the level of debt that might leave them without financial capacity if another economic shock were to happen. That is being responsible in businesses and privately and the State is doing the same. I am not kicking Fianna Fáil but the Government of which it was part and which was in office between 2004 and 2008 did terrific damage to the State. I am not looking back or rewriting history but it was irresponsible to continue to pursue the expenditure levels and the unsustainable model of taxation that obtained at the time. That irresponsibility led to the catastrophe that happened between 2008 and 2010. In 2011, the new Government came in to try and address it. I give the respect to the Government after 2008, with the then Taoiseach, Brian Cowen, who was the man in charge in the Department of Finance during the period about which I am so critical. That period wiped out the wealth of so many people, large number of whom are still too highly indebted.
It wiped out those individuals' wealth. With business wealth and private wealth, the banking sector loss in that period was €140 billion wiped out. That was the cost. Brian Cowen and Brian Lenihan - Lord have mercy on him - did what was required, which was an enormous recalibration in one budget that was a €6 billion change. It was unheard of and when we look back we can ask how we did it and how it happened. Nobody wants the troughs and spikes to have to do that again. This is what Sinn Féin wants us to do again. There has never been more hypocrisy in Irish politics than what Sinn Féin is pedalling right now. I wanted Senator Conway-Walsh to stay and listen to what I am saying. Sinn Féin wants the Government to tax, tax, tax more and more, and spend, spend, spend more and more. That cannot happen. That has been tried during the period 2004 to 2010. It is not credible to do what Sinn Féin wants us to do. We cannot do it. There would be troughs and spikes. People would lose their wealth again and lose the expenditures that we want to put into services because the health budget and the social protection budget would be cut, possibly by €20 billion. If we have to go back to Sinn Féin's version of things a massive cut would happen and health is the next biggest expenditure item. I put it to the Senator that Fine Gael does not want to do that and I think she knows that. I have always said that we do not have everything right but we have not got everything wrong.
The infrastructural plans are ambitious. We need more public housing and we are spending more on this than ever before with €2.4 billion funding. There is a challenge in doing this that we add to the prospect of overheating the economy. Again, we are trying to do a balancing act. Senator McDowell referred to a responsive electoral cycle and this is what we are doing.
The Taoiseach has a strong personal view on tax cuts for medium earners. There are very few jurisdictions where people who earn the average industrial wage are in the higher tax brackets. When one adds in social protection payments the Irish higher tax bracket is 59%. How does a person who earns just over €35,000 go into that tax bracket? In the UK a person can earn £50,000 before he or she gets into the 50% tax bracket. It is a huge drag in trying to get foreign direct investment companies of every hue and colour to establish in Ireland, and the one reason is that the level of personal tax here is higher than in most other jurisdictions.
On another aspect of personal tax - and Senator Rose Conway-Walsh and Sinn Féin's farcical tax analysis - the tax take on income has doubled in quantum from the lowest point to where we are now in 2019. It has gone from €11 billion to €22 billion. That is an enormous doubling in a short period of time. I have made the point on the floor of this House previously, that this could not happen in any other jurisdiction, but it has happened here. The income tax take in Ireland from those on the average wage is too high and Fine Gael is trying to do something about that. During last November's Fine Gael conference the Taoiseach made the point that we will do this if the tax revenue's allow, but if they do not then it might take longer. We will be careful in the upcoming budget and we will deal with people as best we can.
Senator Boyhan spoke of budget transparency. There has been a huge improvement. Many of us remember the era when it was crash, bang, wallop and it all happened on one day and everything was a State secret until the morning. Given where we started we now have the stability programme update, SPU, and the summer economic statement, with papers having been put in place. We also have the Oireachtas Joint Committee on Budgetary Oversight and the establishment of the Irish Fiscal Advisory Council, IFAC. Deputy Michael Noonan has been quoted. IFAC is there to do a job, which is to scrutinise what we are doing economically, and it is doing that. IFAC had some harsh things to say but that is its job. Our job in the Department of Finance is to listen and take on board what IFAC says, and we do. IFAC also said that a lot of things were being done correctly, but this was not reported at all. This, however, is the manner of reporting.
Reference was made to public understanding of debt and the budget. I believe this is a good plan and how to present the information in such a way that the public will understand it easier and better is something we could take into consideration. I will be honest with Senators that I was in the Oireachtas for a couple of years before I could get my head around the arithmetic on budget day. I am not sure that anybody who says they are able to very quickly understand it all is telling the truth.
Senator Ó Donnghaile spoke about indebtedness. I put it to the Sinn Féin Senators that 2.3 million people are currently working in the State. We have never had 2.3 million people working before. This is an outstanding achievement. This Government got people back to work who potentially had no prospect of getting back to work. We are close to full employment and it is absolutely outstanding.
I also want to touch on some important aspects. We have to continue our capital projects now and in the future. The first victim of the 2004-2008 Government was the capital budgets, which nearly stopped. That was a mistake. That spending should have continued. It is, however, easy to look back now and be wise with hindsight. Capital projects should have been funded and the M20 should have been built by now. The M20 will not just connect Cork and Limerick, it will also connect Cork with Galway. These are our second, third and fourth biggest cities. I am aware that some people think it is wrong to build roads and motorways but I absolutely disagree with that. Ireland is a large island with a small number of people and now we are better at transporting people around it. It is important to get those types of infrastructure projects over the line.
The corporate tax analysis will be presented within weeks. We have to present that analysis and if one looks at where Ireland has come from a number of years ago it has gone from €4 billion to €10 billion. This is a result of the changes made by this Government on the corporate tax analysis. It will not change from the headline rate. Senators Ó Donnghaile and Conway-Walsh have left the Chamber but I would put it to them that populism is dangerous. We see where populism has got the UK with Brexit. We must be careful to call out the Sinn Féin strategy, which is the old Fianna Fáil strategy and it is wrong. I am not having a go at Fianna Fáil but the mistakes of the past have been learned.
I find it a little amusing that Eir presented its numbers for the broadband plan of some €3 billion. Then they were through. I think it is great that Eir is able to do it now for €1 billion. An aspect of this certainly needs to stand up to scrutiny. If it is €1 billion now why was it not €1 billion when Eir presented its plan for €3 billion when the tender went in?
On the €700 million and Senator Dolan's query, there is a figure for demographics. There is €700 million in unallocated funding but the €2.1 billion package, which is allocated, has €500 million for demographics. As our population increases and as more people require health and education, €500 million is pre-built into that. There is €400 million for the public sector pay deal, which is agreed and in place. Some €300 million is allocated for carry-over costs from the figures calculated to start in 2019 but which will flow into 2020. When one adds up this €500 million, €400 million and €300 million one can see that much of the €2.1 billion that is allocated is allocated for demographics, for the public sector pay deal and for carry-over costs.
A significant part of it will be forward spent. The €700 million has not been allocated but that will be done by the Government, with the agreement of Fianna Fáil, under the confidence and supply arrangement. That is to be done between now and the budget, based on what the Taoiseach expects to happen in the context of Brexit.
In light of Senator Dolan's suggestion, I will request that the Department of Finance consider a citizens' guide for people with disabilities. He spoke about people living on the edge. Some people want to paint Fine Gael as a mad, right-wing party. Fine Gael is a centrist party. Most politics is fought in the centre and most centrists have a bit of left and a bit of right. It is easy to paint people in one way but at least most parties in our jurisdiction operate in the centre. I support that because I believe it is the right way. aspect when compared with the politics of other jurisdictions. I support that and believe it is the right way.
Even during the financial crisis, the €20 billion social protection budget was maintained. That was quite an achievement. As I have often noted, very few jurisdictions could have brought in €11 billion in income tax and paid out €20 billion social protection payments in the teeth of that crisis. It was done to protect people on the edge. There remains a budget of €20 billion to protect those people and a budget of €17 billion for health. To put that in context, another €8 billion will be spent on the private health budget. When that is calculated by adding the two figures and dividing the sum by the number of people in the State, we spend more in Ireland on health than most other OECD countries. The amount is not the issue but rather how we spend it. As I have stated on dozens of occasions, it is difficult to reform a sector when people choose not to allow that reform to happen at the pace required.
On public services and social infrastructure, the latter comprises the social protection budget and the health budget. As already stated, I am pleased that most people in Ireland operate in the centre rather than to the hard left or hard right. That is good.
I have spoken for longer than I anticipated. In summary, we are in a very volatile period and that is how it will remain for some time. The British Conservative Party will elect a new leader at the end of July. I predict that the month of August will be extremely volatile. In September, the month in which party conferences are held in the UK, events will be even more volatile. That will be a better time for us to try to secure a deal between the UK and the European Union. I do not know if that will be possible but we must try. It has been very pleasing that, in the conversation on Brexit, Ireland has shown the benefit for a small nation of being supported by a continent during a difficult period. The other 26 member states of the EU have been superb in their support of Ireland. It is appreciated and we are grateful for it. I anticipate that the support will remain and may even get bigger and better. Many Brexiteers have been surprised by that because the expectation was the opposite. It was expected that Brexit would start the downfall of the EU but, in a peculiar and semi-perverse way, it has strengthened the it. Brexit has shown Ireland and the other small member states, of which there are many more than the larger ones, the benefit of being in a club and of being supported by a continent rather than being isolated and having the potential to be picked off when faced with difficult circumstances.
Ireland faces difficult circumstances. We have not hidden the figures; they are there for all to see. This could be a very disruptive period but we have the support of the EU and the Prime Ministers of 26 other member states. While there will be new Presidents and while a new Council, Commission and European Central Bank will be appointed, all those Prime Ministers have nonetheless supported our Prime Minister. The support of this Chamber, of parties generally in both Chambers and that which the Taoiseach has received show how much better it is to operate as a united group rather than with parties split or divided and causing disruption, as has been seen in the UK.
When is it proposed to sit again?
At 10.30 a.m tomorrow