Richard Bruton (Dublin North Central, Fine Gael) | Oireachtas source

Well, thanks very much, Chathaoirligh. And, first of all, can I just thank you for the invitation, and thank your members for, I mean, what is a truly enormous amount of work, which your members on the committee and you on the Chair are putting into this. I suppose just a few high level things. I think it's always been Fine Gael's view that to deliver enduring growth and living standards in a small, open economy like ours, it has to be built on two basic foundations. One is the foundation of enterprise, innovation and exports; that's the essence of a small trading economy, and the second is a smart state, that is alert, efficient, that's strategic in the way it delivers. And that became even more important when we joined the single currency because we were committing to a hard currency regime. We were going shoulder to shoulder with, you know, really strong economies like Germany.

It's my belief, very strongly, that, you know ... and, indeed, Fine Gael's belief, that the Irish economic crash, it wasn't a result of a tsunami way out in the ocean that swept away a whole bunch of very sustainable and clever economic policies, that the fault lines that made Ireland so vulnerable in those years had developed from bad policy over an extended period of time, and that far from building on enterprise, innovation and exports, economic success had come from speculation, property and debt. That was the contrast. That was the flaw, in the ... if you like, in the underlying, real economy. It was also was undermined, in my belief, by, you know, a State that had become sluggish, wasteful, self-indulgent, in the way it approached its spending and its delivery, and the challenge of public service reform.

I think if you look at the history of this period, I mean, Fine Gael's approach when we were in government with Labour in '94 to 97 was very clear. We had that strong export-driven growth. It was very solid management of the public finances, and that was continued, in my belief, between 1997 and 2000. But as the general election of ... approached, 2001 and 2002 saw the abandonment of a lot of that prudence. And the ... we, in Fine Gael, you know, consistently opposed the bad policy decisions that was building up those fault lines in the economy. And they were ... I'll just isolate four areas where I think it's, you know ... the biggest mistakes were made. One was around sound budgets. You know, as I say, it was abandoned in 2001 and 2002. Spending growth in those two years was something like 35% - extraordinary - way out of line with the growth and the underlying growth in the economy. And we warned Government of that consistently. We warned of the growing and precarious reliance on the construction sector. Towards the latter part of that period, 2006-2007, 25% of Government revenue was coming from construction, so 25% of the cost of running our hospitals, our schools, our gardaí, and so on was coming from the construction sector. That just wasn't a sustainable approach. And we demanded consistently reform in the way budgets were put together, the, sort of, way in which budgets were put together, where there was no proper scrutiny.

The best example, in my view, is to be seen in the lack of scrutiny of tax breaks .. that were ... billions of euros of tax breaks were given out without any scrutiny. A big, massive decision like decentralisation was introduced without the proposal even circulating among Government Departments where it could have been scrutinised. You know, the approach to budgeting was wholly wrong and it produced some very bad, imbalanced outputs.

The strong export performance is the second thing I would single out. That was consistently undermined and we warned consistently of the inflation, the erosion of the competitiveness of our economy by inflation in what economists would call the sheltered sector of the economy, areas regulated by Government or that weren't open to competition, at a time when exporters were facing really tough conditions in the eurozone markets. You know, export prices were generally falling, while this huge growth in domestic prices was undermining our competitiveness. And I think most ... it was most vividly illustrated, and I repeatedly drew that illustration, the growth in agency-supported employment, which is the ... you know, supported by IDA and Enterprise Ireland, they're the heart of our exporting strategy. In those early years, '94 to 2000, they grew by over 17,000 per year, extra people working in the export-oriented sector. That collapsed by 90% in the second period, between 2001 and 2007, so you ... it dropped back to just ... under 2,000. That was the imbalance that was growing. Those are the core of a small, open, trading economy, these companies that are out there winning you new markets and, you know, that was a really damaging element.

The other element was smart spending and, you know, we, in Fine Gael, published numerous reports, like Who Cares?, The Buck Stops Here, focusing in on the massive growth, which I think it had been 133% growth in spending in those short five or six years, just wasn't delivering value for money and you saw poor delivery on fancy plans, you know, plans, like decentralisation ... announced. At the end of its period, it delivered 10% of what it was supposed to. You know, fancy plans on health not delivering. You know, big spending increases but no one held accountable for the delivery and we very strongly, you know, drove for the need for public service reform and that was ... there's no doubt that the drive for public service reform was held back by the then social partnership arrangements, which prevented, you know, delivery of reform.

The fourth area I'd point out is robust regulation and we, back in 2002, when the regulatory structure was being put in place, we opposed that, and it's worth checking the record and going back, we opposed that at Second Stage for the very ... and we set out the reasons: because there had not been an examination of whether our regulatory system was fit for purpose. We had come through a period when you'd seen the Enrons and various breakdowns in financial oversight and we were putting in place a structure that was just simply putting a big bulldog clip around everything that was being done, no scrutiny of the underlying systems, and that was being rammed through and that was a wholly wrong approach. And, I think, right through that period I think we continued to pursue this inadequate oversight of banking. We also pursued this ... the failure to implement the recommendations of the Competition Authority, which was another area of smart regulation that was not being delivered.

I think the sad part of this was that the property boom papered over the vulnerabilities that were building up in our economy. You know, they provided employment that masked the loss of jobs in the export centres ... sectors. They provided tax revenue that masked the fact that they were unsustainable. Those tax revenues were built by young people taking out large mortgages, paying high elements of tax on housing and that's where the funding for a lot of the growth in spending was occurring. It was never a sustainable basis and I think, you know, Fine Gael had always a different approach to the then Government and, you know, the challenge for us then was how to manage those vulnerabilities and the core of our approach, as we approached the 2007 election, was to deliver on that ... this strategy of reverting to one built on enterprise, on innovation, on exports, on sound spending, and that has been a consistent hallmark of the approach we've taken. You can see it in '94 to '97, the critique of policy that we outlined all through those years and again in government in 2011 to 2015. Those, you know, sound bases of growing the basis of a sustainable, small economy that can grow living standards for everyone has been at the heart of our approach.

And, you know, I think we have to get back and that's what we have done in the last number of years, to build enduring growth in living standards by continually reinventing our competitive edge, by disciplining public policy, by evaluation and accountability in what we do. And that, I think, has been characterised, the approach we took throughout this period.