Dara Murphy (Cork North Central, Fine Gael) | Oireachtas source

I thank the Chairman. It is a great pleasure to be back at my former committee. I acknowledge the presence of members of the Committee of the Regions who are here and also my colleagues from the Oireachtas. I will give a brief report on the General Affairs Council, but the rest of the presentation is not particularly brief. It is substantive and I ask for the Chairman's indulgence in that regard. I am more than happy to take questions.

I thank the committee for the opportunity to be here and to hear the members' views and questions on Ireland's draft national reform programme, NRP, which has been circulated. As the committee will be aware, the preparation and submission of an NRP is an important element in the European Semester process. Listening to the views of fellow parliamentarians is rightly acknowledged as an important part of the process, and is something that I strongly support. Before considering the contents of the NRP, I will refer briefly to the context in which it is being prepared.

Members of the committee will be familiar with the semester process and at our last engagement at the start of March I outlined some of the recent developments. It is worth noting that the March European Council concluded the first phase of European Semester 2015 by providing guidance to member states for submission in mid-April of their stability programme updates and national reform programmes. Based on preparatory work in the Council, the political emphasis now in place reinforces the economic priorities set by the new Commission in its first annual growth survey, which was produced last November. This year's process will therefore be advanced on the basis of three main pillars: a boost to investment; a renewed commitment to both national and EU-level structural reforms; and the pursuit of fiscal responsibility. The Council invited member states to reflect these priorities in their forthcoming national reform programmes and stability or convergence programmes, depending on which they are in.

At the end of February, the Commission presented a comprehensive assessment for each member state, under the 2015 cycle of the European Semester. This is a procedural improvement introduced for this year's process that is designed to support stronger national-level engagement with the Commission's assessment, including by key stakeholders and national parliaments.

Draft proposals for the next round of country specific recommendations, CSRs, are produced by the Commission in May, for adoption subject to amendment by the Council. In Ireland's case, the assessment in the new country report is a broadly positive one, reflecting the strength of the economic recovery under way and supporting, in turn, a gradual unwinding of the deep imbalances developed during the crisis period.

The semester process embraces Europe 2020, the EU's ten-year plan, adopted in 2010, based around five headline EU targets in the areas of employment, innovation, climate and energy, education and social inclusion. Under Europe 2020, each member state adopts national targets in these five areas and progress is monitored within the framework of the European Semester and reported on annually by member states in their NRPs. The Commission's consideration of the future development of the Europe 2020 strategy will be informed by the public consultation to which this committee made a contribution in November, as reviewed in the Seanad, which I attended, in March.

As the committee will be aware, last year was the first occasion on which Ireland was a full participant in the European Semester process upon exiting our programme and we received seven CSRs in 2014. Country specific recommendations are tailored, concrete recommendations for reforms that are considered in the relevant Council formations - on what is called a comply or explain basis - and finally endorsed by the European Council meeting at the end of June. Ireland's CSRs covered public finances, health care spending, active labour market policies, social inclusion, access to finance, non-performing loans in the financial sector and legal services. The draft NRP reports formally on progress in implementing them.

I am pleased to report that progress is broadly on track and consistent with policy directions already firmly established at national level.

The draft NRP also takes stock of progress towards our Europe 2020 targets in the areas of employment; research and development; climate change and energy; education; and social inclusion. While the NRP is a reasonably comprehensive text, it is expected to be concise and as such it is not possible to include every detail in any policy area or elaborate the full extent of Government action across each issue. However, it provides a good picture of the range and scale of reforms being advanced by the Government to ensure that Ireland’s economic recovery strengthens and remains fully sustainable. In this regard, there is strong synergy between the approaches being adopted in Ireland and at European level. The semester is part of the strengthened arrangements for policy co-ordination in the wake of the economic crisis. It reflects the fact that mismanagement of one economy in an economic and monetary union can have negative implications for the economies of other member states. We have, therefore, expressed strong support for the semester process and for the oversight it provides.

I will now provide Members with an overview of the draft document, following which I will be happy to take their questions. At its outset, the NRP will provide an overview of our macroeconomic position. This will be further updated and aligned with the Department of Finance’s latest macroeconomic forecasts when the stability programme update is finalised and published next week. As the committee will be aware, our economic performance over the past year has been strong and growth is expected to continue into 2015 and beyond.

The NRP will also provide an update on measures being taken by the Government in respect of each of the seven country specific recommendations. The first of these recommendations pertains to our public finances. Considerable progress has been made in recent years, and the outlook for the period ahead is positive, as will be set out in detail in our stability programme update. Key reform measures set out in the NRP include the following: placing multi-annual expenditure ceilings on a statutory basis; establishing an Irish Fiscal Advisory Council; broadening the tax base, including through introduction of annual property tax, abolition or curtailment of tax reliefs and increases in minimum tax rates for high earners; and devising a roadmap for Ireland’s tax competitiveness, which was launched in budget 2015 and sets out a medium-term strategy for Ireland’s corporation tax policy.

The second recommendation pertains to reform of the health care sector. A significant programme of reform is being advanced in this area. The Government’s future health strategy, which was published in 2012, is driving reforms across four strands, namely, health and well being, structural reform, services reform and financial reform. The introduction of generic substitution and reference pricing delivered €50 million in savings in 2014, with a further €25 million expected to be saved in 2015. By the end of 2014 the penetration of generic drugs had reached 68% by volume, compared to a target of 60%. The use of individual health identifiers is another important reform which will commence with the introduction of free GP care to children under the age of six years in June 2015. As the committee will be aware, priorities for continuing health reform were published by the Minister for Health in January of this year.

Our third recommendation pertains to labour market activation, including long-term unemployment, the youth guarantee and reform of further education and training. This has been a key focus for Government since taking up office, with the twin strategies of the Action Plan for Jobs and Pathways to Work supporting job creation and helping those on the live register to return to work. This is another area for which a detailed whole-of-government approach has delivered strong results and it is now reasonable to look forward to a return to full employment in the economy, something that would have been inconceivable a few years ago. The Action Plan for Jobs for 2015 sets a target of 2.1 million people in employment by 2018, which is two years ahead of the original schedule. There is a particular focus under the action plan on regional development and measures to support the domestic economy in sectors including construction, retail, tourism and hospitality and agriculture and food. The updated Pathways to Work programme for 2015, which was published in October 2014, contains a suite of enhanced reforms with special focus on long-term and youth unemployment. For example, this year will see the roll-out of a new employment service model called JobPath which will support the long-term unemployed in their efforts to access today’s labour market. We all know how difficult this can be, particularly for those who have spent a number of years out of work. The Government is determined to ensure that they have the supports they need to access work and to reach their full potential. Approximately 57,000 education and training places are reserved for the long-term unemployed in 2015, subject to demand. A minimum of 16,000 places for the long-term unemployed are being created in public employment programmes, including the extension of the highly successful JobsPlus initiative.

Our fourth recommendation pertains to low work intensity households and poverty. It is important to note that Pathways to Work is supporting jobless households access the labour market. This recommendation reflects an ongoing discussion between Ireland and the Commission aimed at ensuring that, in addressing this issue, we are working on the basis of sound and reliable data. There are different ways to measure low work intensity and jobless households, and if we are to be confident that our policy responses are right for Ireland, we need to ensure that the correct measures are adopted. I refer the committee to the details set out in the NRP on this subject. The Government is firmly committed to supporting people, including those with family responsibilities, into work, to ensure that work pays and to avoid creating poverty traps that hold people back. We have been introducing reforms to the one-parent family payment on an incremental basis, which aim at strengthening links between lone parents, who are a key cohort in the jobless household population, and the labour market. Some 30,000 recipients of the payment with children over the age of seven years will transition from the payment in 2015. Tailored child care schemes, including for after school care, have been introduced to support this process. More widely, some €260 million is being invested annually by the Government in child care support programmes reaching more than 100,000 children each year and an interdepartmental group has been established to explore ways of ensuring that current and future investments deliver more affordable, accessible and high quality early years and school age care and education. The group is due to present a range of options to the Government by June 2015.

Our fifth recommendation pertains to SME financing and debt. The Government has taken numerous steps to ensure that SMEs, which play an important role in our economy, can access the finance that they need to grow and thrive. Among the key policy initiatives developed in 2014, which contributed to the evolution of a more robust and effective institutional architecture for the financing of SMEs, were the establishment of the Strategic Banking Corporation of Ireland, which is providing up to €800 million of funds; the development of an innovative SME State support online tool to provide an entrepreneur with a list of the possible Government business supports; amendment of the Credit Guarantee Act 2012 and introduction of a new more flexible credit guarantee scheme; the announcement by the Minister for Finance of the commencement of work on an integrated export finance strategy in 2015; a review of Microfinance Fund Ireland; participation by Permanent TSB in the credit review process; and the transition of the NPRF into the Ireland Strategic Investment Fund.

Our sixth recommendation relates to bank performance against mortgage arrears restructuring targets and SME debt. Tackling mortgage arrears is a priority for Government and, as the committee will be aware, the Government will shortly bring forward a range of further actions in this regard. The NRP sets out some of the work that has already been undertaken and the progress that has been made.

At the end of 2014, the number of private dwelling home mortgage accounts classified as restructured by the banks stood at 114,674 - an improvement of 29% over the 2013 figures. Progress has continued in 2015.

The Central Bank set further mortgage arrears resolution targets for quarter three and quarter four of 2014, and has reported that the banks have continued to meet or exceed the targets set for them. It has also confirmed that the banks have reported that they have met their required targets on SME loans arrears to date. NAMA, which addresses distressed real-estate exposures, continues to outperform targets and is well ahead of schedule, having redeemed €17.6 billion of NAMA senior bonds, which exceeds its target of 50%.

Our seventh recommendation relates to the Legal Services Regulation Bill and court data collection. As the committee will be aware, debate on the Legal Services Regulation Bill has resumed, and it remains the Government’s aim to complete its passage so as to allow the legal services regulatory authority come into operation in mid-2015. Yesterday I took the first part of Report Stage, which was later completed by the Minister for Justice and Equality, Deputy Frances Fitzgerald. The Bill is now going to the Seanad. Therefore, it is making progress. The courts caseload data committee is overseeing an extensive range of work on enhancing computerised case support systems, and this is set out in the NRP.

I turn now to the national targets under the Europe 2020 strategy. These targets are horizontal and cross-cutting - for example, across employment and poverty reduction strategies. Our target is to raise to between 69% and 71% the employment rate for women and men aged 20 to 64, including through greater participation of young people, older workers and low-skilled workers and the better integration of legal migrants, and to review the target level of ambition in 2014 in the context of a proposed mid-term review of the Europe 2020 strategy. The mid-term review is currently ongoing. For 2014, the employment rate for women and men aged 20-64 was 67%, a welcome increase of three percentage points from 2012. This increase demonstrates the continuing improvement in the labour market after a fall from a high of 74% in the employment rate in 2007 to 71% in 2008 and less than 64% in 2012, which was the worst year for unemployment in the State. For us to reach the 2020 target, the employment rate will have to increase by 0.5 percentage points each year. We see this as feasible, provided the recent recovery is maintained into the medium term. As I have already mentioned, the Government is continuing to tackle unemployment and to support employment through the twin strategies of the Action Plan for Jobs and Pathways to Work.

Our target in the area of research and development is to raise combined public and private investment levels in this sector to 2.5% of GNP. We have significantly increased our investment in research and development in the past decade and more, while also introducing a range of measures to improve commercialisation of research and build strong links between the higher education sector and enterprise. In 2013 it is estimated that research and development intensity in Ireland was at 1.94% of GNP. As a result, Ireland has built a strong science base and is in the world’s top 20 countries for scientific output. This investment in the science base has had a positive impact on our industrial development. We are now in the process of developing a new strategy for science, technology and innovation, which is due for completion this summer.

The target for climate change and energy is to reduce emissions in the non-traded sector by 20% compared to 2005 levels, to increase the share of renewables in final energy consumption to 16%, and to move towards a 20% increase in energy efficiency.On climate change, under the 2009 EU effort-sharing decision, which applies to greenhouse gas emissions, GHG, outside the scope of the EU emissions trading scheme, Ireland must limit the growth of emissions to 20% below 2005 levels over the period 2013 to 2020. This emission reduction target under EU law is ambitious and very challenging from an Irish perspective, particularly given the large size of our agriculture sector and the scale of emissions associated with it. Our target for the period to 2020 consists of a series of declining annual targets, and compliance must be demonstrated with each annual target in turn. The targets for the years 2013 to 2016 are within reach, but beyond that point deficits will arise. The Climate Action and Low Carbon Development Bill 2015 is currently before the Houses, with enactment expected during the course of 2015.

On energy, the overarching objective of the Government's policy is to ensure secure and sustainable supplies of competitively priced energy to all consumers. The 2009 EU renewable energy directive set Ireland a legally binding target of meeting 16% of our energy requirements from renewable sources by 2020. In order to meet this target, Ireland is committed to meeting 40% of electricity demand from renewable sources, with 10% for transport and 12% for heat. In 2013, 7.8% of Ireland’s overall energy requirement was met by renewable energy. As a percentage of the targets for each of the three sectors, this equates to 20.9% of electricity demand, and 4.9% and 5.7% respectively of transport and heat power needs, being met by renewable energy in 2013.

The national energy efficiency action plan, NEEAP, which is the overarching policy framework for energy efficiency in Ireland, contains Ireland’s commitment to a 20% energy savings target across the economy by 2020 in pursuit of EU obligations. Recognising that Government must lead by example, we are committed to achieving a 33% reduction in public sector energy use by 2020. Ireland has already achieved 39% of our national target, and progress is also steady with respect to the 33% reduction in public sector energy use.

Targets in the area of education aim to address early school leaving and boost the number of people with third level qualifications. Specifically, they are to reduce the percentage of 18 to 24 year olds with at most lower secondary education and not in further education and training to 8%, and to increase the share of 30 to 34 year olds who have completed tertiary or equivalent education to at least 60%. The percentage of early school leavers in Ireland fell from 11.4% in 2010 to 8.4% by the end of 2013. This represents positive progress towards achievement of our 8% target.

The latest EU data show that Ireland's tertiary attainment for 30-34 year olds was 52.6% in 2012. Since 2009, Ireland has the highest rate for this indicator of all 28 member states. In the tertiary attainment rate for 25-34 year olds indicator presented by the OECD, Ireland ranks first in the European Union and fourth in the OECD.

On poverty our interim target is the reduce the number experiencing consistent poverty to 4% by 2016 and the target is to reduce it to 2% or less by 2020 from the 2010 baseline rate of 6.3%. Ireland's contribution to the Europe 2020 poverty target is to reduced by a minimum of 200,000 people the number in the population who are either in consistent poverty, at risk-of poverty or basic deprivation.

Following a review in 2012, the Government agreed a revised and enhanced national social target for poverty reduction, which is to reduce consistent poverty to 4% by 2016 and to 2% or less by 2020. As I have said the latest measure of consistent poverty is 8.2% in 2013. In recognition of the higher risks and life-long consequences of child poverty, a new child-specific social target was set in the National Policy Framework for Children and Young People 2014-2020, which is to lift 70,000 children out of consistent poverty by 2020

The General Affairs Council, GAC, took place in Luxembourg this week. The meeting was originally to focus on inter-institutional relations, however in light of the tragic events at the weekend, the Ministers also discussed the migration crisis in the Mediterranean. As we speak the Taoiseach is attending an emergency summit of EU leaders at the European Council to deal with the migrant crisis in the Mediterranean. As a follow-up to Monday's joint meeting of Foreign and Justice Ministers, the General Affairs Council discussed what EU members states could do to alleviate the crisis in migration and the situation in the Mediterranean.

Ministers expressed their solidarity with the victims and the countries concerned and agreed that there was an urgent need to step up common EU action to respond to the situation. The discussion focused on human trafficking, smuggling, border surveillance and solidarity. The need to address the root causes of displacement and forced migration was also discussed in detail. There was broad support for the ten point action plan proposed by the Commission and which is being discussed by the European Council today.

The General Affairs Council had a discussion on the proposal to revise the 2003 Inter-Institutional Agreement on Better Law Making to take account of post-Treaty of Lisbon realities. There was consensus that in the forthcoming negotiations of the Inter-Institutional Agreement, the General Affairs Council should prioritise better regulation, programming and delegated Acts.

In my intervention I welcomed the high priority the Commission has afforded the better regulation agenda and highlighted some areas where further progress could be made. I also highlighted the role of national parliaments in contributing to the good functioning of the European Union. Over lunch there was a discussion on the issue of counter-terrorism and measures to prevent radicalisation and to safeguard values.

The General Affairs Council marked the ten year anniversary of the signing of the accession treaties with Bulgaria and Romania. Ministers also adopted Council conclusions on the former Yugoslav Republic of Macedonia, expressing grave concern about the deteriorating situation there.

As the committee will appreciate the draft national reform programmes covers considerable ground across all Departments. In my lengthy contribution I have tried to capture some of the key elements, however it has not been possible to cover every detail.

I am more than happy to take questions from members. I am now at the disposal of the Chairman.