Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I welcome Professor McHale and all his colleagues from the advisory council and I thank them for their work. It is an important contribution to the debate on the public finances, which will feed into the preparation of the budget in December. From reading the report and listening to the opening remarks of Professor McHale, the centrality of growth becomes clear. It seems that during recent years the halo of 3% growth is always next year or the year after but it has never come. Despite this we are basing all our fiscal projections on 3% real GDP growth in 2014. The Government is forecasting 2.2% real GDP growth for next year, although I suspect this will probably be revised downwards in the medium-term fiscal statement next month. Where does the council believe that growth will come from? It seems it would require a spectacular performance by exports over a sustained period to have real GDP growth of 3% on average in the coming years given that all the other elements of output are likely to remain depressed. Consumer demand in Ireland is likely to continue to contract because of the effect of the forthcoming budgets, Government spending will reduce and the environment for private sector investment does not appear to be especially positive at the moment. The concern I expressed last year in the budget debate was that we continue to be too optimistic in some of the forecasts. These form the basis of the plan to bring Ireland to within the 3% deficit target. I am keen to hear the council's views in this regard.

The council has addressed the issue of debt sustainability in its report. It indicated there is a 40% chance that the debt-to-GDP ratio will fail to come under control by 2015. Is it possible that this risk is higher? Ultimately, does it not come down to economic growth? At the moment there is no evidence that growth is materialising. Since the council signed off on the report before us, the latest CSO quarterly accounts have been published. They show GDP to be absolutely flat in quarter 2 at 0.0%. There was an unexpected rise in GDP but that has been explained by an anomaly relating to profit inflows. The forecast this year, a modest 0.7% growth, may not be achieved and the projected 2.2% growth for next year appears to be optimistic at the moment. I am keen to hear the council's views in this regard.

The council also addressed the need for the Government to keep adjustments under review, including in tax rates, public sector pay, pensions and welfare rates. The council will be aware that this runs contrary to commitments made in the programme for Government and repeated several times by the Taoiseach and the Minister for Finance. Recently, the Government recommitted itself to maintaining the Croke Park agreement through to 2014. How difficult will it be to achieve an adjustment of €3.5 billion in the coming budget without touching any of the three pillars that the Government indicated it would not revisit?

I am keen to hear the council's views on the statement by the three finance Ministers from Germany, the Netherlands and Finland some days ago. It would appear to unravel to some extent the spirit of the agreement reached by the Heads of State and Government last June. What impact will this development have? It seems the markets have factored into their thinking that Ireland will get some deal on the banking debt but it appears that if this does take place it will be some distance down the road when the single supervisory authority is up and running and has had its effectiveness proved. That is some distance away. The number of caveats and the conditionality set out in statement of two nights ago causes us some concern on the fiscal side and I am keen to hear the council's views in this regard.

The council recommended an extra €1.9 billion in fiscal consolidation. I realise the recommendation is not for next year but for 2014 and, substantially, 2015. The council has referred to trying to strike a balance between reducing the deficit and not killing the economy completely. This indicates that the council does not have full faith in the forecasts made or that it does not have confidence that, under the current strategy, projections and policy parameters, we will reach a 3% deficit by 2015. Is the council confident this will be achieved? Will the delegation explain how? It is a difficult sell for ordinary people, who are reeling from the effects of recent budgets. They know what is coming in future budgets as well. How would the council explain that the imposition of an additional €1.9 billion would be the right thing to do in the coming years?