Dominic Hannigan (Meath East, Labour)
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I remind everyone to switch off their mobile phones. It is not sufficient to put them on silent mode because they will interfere with the recording equipment. If they could be switched off, that would be appreciated. I have received apologies from Deputies Dara Murphy and Joe O'Reilly and Senator Kathryn Reilly.

The Minister of State at the Department of Foreign Affairs and Trade is present to discuss the country specific recommendations, CSRs, that have emerged from the European semester. The Commission published the CSRs for member states two weeks ago. They will be considered and endorsed by EU leaders later this month before being adopted by the various Councils. However, before they are adopted, the committee has an opportunity to engage with the Minister of State on Ireland's CSRs. I welcome him and I invite him to make his opening statement.

Bernard Durkan (Kildare North, Fine Gael)
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I have to be in two places at once. I ask the Chairman not to be offended if I have to walk out shortly. It will not be a reflection on the proceedings. I will be back.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Chairman very much for the opportunity to discuss the Commission's proposed CSRs. These all touch on issues that will be at the heart of the Irish policy agenda over the coming months and years. It is, therefore, welcome to have this early opportunity to look at the June European Council and the decisions beyond.

Before going into the detail and nature of this process and examining our views on the recommendations, I will address why it is of benefit to Ireland to participate in the European Semester before examining how it will work and what will happen in the coming weeks and beyond. I will then offer a few perspectives on each CSR and the Government's priorities in respect of them. I refer to why there is a semester and why it is in the national interest to participate in it. The semester is fundamentally about advancing our own national interests.

It is about us taking steps that are necessary and working together with our society to put in place measures that will support the competitiveness of the Irish economy and support the ability of individuals and families to do well. It is about ensuring we have the ability in our society to generate the wealth in the future that will deliver a higher standard of living for all the people we represent.

Alongside that, we have seen the consequences of bad policy and decisions elsewhere and the impact they have had in other countries. Fundamentally, we have seen how decisions elsewhere can have consequences at home in Ireland. They can have ramifications that extend well beyond national boundaries. That is why we have the European semester. It is to help and support us in making decisions that we believe are important for getting more jobs into Ireland, for making it a fairer country and for ensuring there is more wealth in the future to support families and their standard of living. By doing this through a semester, it creates an environment in which other countries can do the same. All of these decisions are made together to move Europe forward in its entirety.

We should also be clear that everything within the country-specific recommendations is entirely consistent with policy decisions and outlooks that we have firmly established at home. I refer to the plans in regard to the medium-term economic strategy which look at the objectives the Government has from a budgetary point of view, at our deficit, at the difference between tax and spending and at the targets in regard to our debt, how many jobs we want in our country and how we want our economy to grow in the future. The policy content of other plans, such as the Action Plan for Jobs and Pathways to Work, is absolutely consistent with being inside the European semester. I refer to the recommendations which have emerged from the European semester through the country-specific recommendations.

As I said, the main focus of this process is on the underlying performance of the Irish economy. This means, first and foremost, adapting our public policies and our public services to ensure we respond effectively to the challenges and opportunities of an increasingly knowledge-intensive and increasingly interconnected global economy. It means identifying the steps that can be taken over the next 12 to 18 months to deliver growth that is sustainable and inclusive and consistent with what Europe is trying to do overall through its 2020 strategy, on which I will touch in a moment. It means, in particular for Ireland, keeping at the very top of our political agenda our collective response to addressing what clearly remains continued high and unacceptable levels of unemployment. That is the reason behind the semester, the reason we are participating in it and the reason it is being done in a way that involves all countries playing a role.

I will now look at the process. The Commission's country-specific recommendations package was produced on 2 June and it brings us into the closing phase of the semester process for 2014. It is about developing and implementing jointly agreed measures to support growth and jobs. In essence, it means that in many policy areas, we agree particular priorities at EU level and we implement them at national level.

This process brings together the different strands of the European Union's stronger post-crisis economic governance arrangements. There are two key phases in this regard. First, we agree on our shared challenges through the annual growth survey. The committee will remember that there were five main priorities here and they were endorsed at the December and March European Councils - in other words, at the meeting of Heads of State and Government. These five priorities are: pursuing differentiated - in other words, plans specific to different countries - growth-friendly budgetary changes; restoring lending to our economies; promoting growth and competitiveness for today and tomorrow; tackling unemployment and the social consequences of the unemployment crisis; and modernising public administration.

Second, and following from this, we agree specific orientations for each member state, tailored in the light of the priorities I mentioned to reflect the national circumstances of each country. These country-specific recommendations are prepared by the Commission for agreement by the Council and endorsement by the June European Council. They then fall to be taken forward by the member states through the national budget and policy cycles in the second half of the year.

The crisis has taught us important lessons about the interdependence of the economic and budgetary policies pursued across the member states. In other words, what happens in one country can affect what in all member states. We all know this is particularly true given our sharing of a single currency. We enjoy a shared dividend or a benefit when our different economies are performing well and responding successfully to globalisation - in other words, the changes that link all of our different economies together. We have a shared interest in safeguarding against the emergence of avoidable and shared instabilities. That is why we developed the stronger economic governance arrangements now in place, including the so-called two-pack which was agreed under the Irish Presidency and why the European semester process is anchored in policy co-ordination at EU level in the first half of the year, supporting stronger mutual surveillance, peer review and shared learning. It is a forward-looking process that aligns preparations for the national budgets with agreed economic and social policy objectives.

I will move on to the overall country-specific recommendations package and speak briefly on each one. The Commission presented its country-specific recommendations package on 2 June. This followed a number of specific inputs by the Government, on which I made a presentation at a previous committee meeting. They included the national reform programme under the Europe 2020 strategy which relates back to the five priorities to which I alluded earlier and the stability programme updates under the enhanced Stability and Growth Pact. That plan looks at all the different targets and strategies in regard to budgetary objectives, such as deficits and debt levels, and the level of employment we seek to deliver in the future.

The Commission's package is also informed by the 17 in-depth reviews produced on 5 March - one for each of the 16 member states identified in the alert mechanism report as being at risk for macro-economic imbalances and one for Ireland following our exit in December from the EU-IMF programme. The Commission has presented country-specific recommendations proposals for 26 member states. The other two - Greece and Cyprus - remain under specific adjustment programmes. Ireland is a full participant in this year's arrangements. The CSRs will now be settled within the Council over the coming weeks. Ministers in the areas of employment protection and social policy will agree their country-specific recommendations on 19 June and on 20 June, ECOFIN Ministers will finalise the country-specific recommendations on budgetary and economic policies.

On 24 June the General Affairs Council, at which I will represent Ireland, will approve an integrated set of final country-specific recommendations, CSRs, which will then be endorsed by the Heads of State and Government at their meeting on 26 and 27 June. These will be reflected in a final Council recommendation to be adopted by Finance Ministers in early July. Preparatory work by the relevant Council committees began last week and is now well under way.

There are seven country-specific recommendations for Ireland. These are in the areas of stabilising the public finances, health care spending, labour market policies, social inclusion, access to finance, non-performing loans in the financial sector and legal services. Before turning to each of them, it is fair to say that there are no particular surprises for Ireland. Following many troika reviews, many of the key issues are well rehearsed. We have raised some minor technical and drafting issues with the Commission which cover its assessment and the CSRs themselves. These fall for consideration through the Council committee work that got under way last week.

On the whole, we see the CSRs as broadly sensible policy directions that will underpin the positive trajectory we have re-established for the Irish economy following a very difficult and protracted recession. Last year marked Ireland's first year of net employment growth since 2007 and 2014 will see a return to net employment growth for the EU as a whole. A strong momentum for this recovery into 2015 and beyond will now be reinforced by the CSR package to be endorsed by the European Council at the end of this month.

I will now speak about each recommendation. The first CSR focuses on the further work necessary to restore balance to our public finances, responsibility for which rests with the Ministers for Finance and Public Expenditure and Reform. Notwithstanding the very significant fiscal or budgetary adjustments of approximately €30 billion already undertaken, the Department of Finance's official forecast is for an Exchequer deficit of 4.8% this year. The Government is committed to reducing this deficit below 3% of GDP in 2015, consistent with exiting the excessive deficit procedure, the mechanism for monitoring deficit levels in various national economies. The amount of further consolidation necessary will be determined in the context of the October budget, informed by the latest forecasts and endorsed by Irish Fiscal Advisory Council. We have raised a drafting issue with the Commission with regard to this CSR. We do not agree that expenditure ceilings require further enforcement. We have amended the Constitution to ratify the stability treaty and have already legislated for relevant expenditure ceilings.

The second CSR refers to health spending and is focused on cost-effectiveness in the health sector as part of our overall management of public finances. Lead responsibility rests with the Ministers for Health and Public Expenditure and Reform. The direction set is fully consistent with the reform programme, Future Health, produced in 2012. It should also be seen in the context of the significantly increased demand on services associated with the crisis. This includes 500,000 more medical card holders since 2008, an increase of more than one quarter. We envisage further savings on pharmaceutical spending this year. We are developing a business case for procuring a new integrated financial management system and aim to roll out individual health identifiers in early 2015. We have also raised a wording issue here, as the January target specified for the health identifiers in the draft CSR is not realistic. We expect to agree a suitable amendment.

Dominic Hannigan (Meath East, Labour)
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To clarify, is what has been raised a wording issue or the fact it is not realistic? Are these two phrases consistent?

Paschal Donohoe (Dublin Central, Fine Gael)
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It is consistent. It refers to the timing of achieving this objective as recommended by the Commission. We will achieve it but we believe it will take a different length of time from that in the CSR.

The third CSRs is focused on further strengthening of our active labour market policies. This means building a bridge to the workplace for the unemployed. It also means being responsive to an accelerated pace of change by supporting continuous upgrading of skills and capabilities. Lead responsibility is with the Ministers for Social Protection and Education and Skills. The Intreo one-stop shops will be fully rolled out by the end of 2014. We have produced a new five year further education and training strategy following the establishment of SOLAS in October last. We continue to support a significant expansion in training and work placement, including through rolling out the first phase of the youth guarantee. While we face a significant challenge in expanding service provision within current resource constraints, the further development of our active labour market policies remains unambiguously at the very top of our agenda. The next phase of this work will be reflected in the forthcoming Pathways to Work 2014.

The fourth CSR focuses on a set of policy challenges in the area of social inclusion. These are jobless homes, child poverty and child care services. Lead responsibility is primarily with the Ministers for Social Protection and Children and Youth Affairs. Low work intensity is the official EU indicator for households with little or no paid employment. It is clear that the share of the Irish population in such households, at almost one in four, is significantly above the EU average. Key policy responses include Intreo, reform of lone parent supports and development of the housing assistance payment. The advisory group on tax and social welfare is due to report shortly on structuring a smoother transition from welfare to work. Further research is under way through the National Economic and Social Council to support clearer identification of key problems and solutions. There is, however, little doubt that increased labour market participation remains the best route out of poverty, and that affordable child care will continue to play an important role in this context.

The fifth CSR is focused on policy supports for SMEs, with a particular emphasis on access to finance. These are issues on which the Ministers for Finance and Jobs, Enterprise and Innovation lead. The Minister for Jobs, Enterprise and Innovation, Deputy Bruton, is finalising proposals to improve the operation of the credit guarantee scheme. A review of the microfinance scheme will commence shortly. The Minister for Finance, Deputy Noonan, recently launched the SME online tool that will help Irish start-ups and small businesses navigate the range of supports for which they may be eligible. The establishment of the strategic banking corporation of Ireland was announced on 22 May. This envisages a mix of funding from the German bank KfW, the European Investment Bank and the National Pensions Reserve Fund. The first phase is expected to make available €500 million, with work continuing to expand its scope and size. We will ensure strong political momentum behind these initiatives to support SME finance through ongoing development and implementation of work under the Action Plan for Jobs.

The sixth CSR is focused on non-performing loans in the banking sector. It addresses a very difficult set of issues arising from the complete collapse of our banking system. There is, therefore, a strong continuity with a challenging agenda already advanced up to December last. An integrated mortgage arrears strategy is now firmly in place. It includes personal insolvency, the mortgage advisory service and the mortgage to rent scheme. The most recent mortgage arrears resolution targets were produced by the Central Bank on 4 June, setting out expectations to the end of 2014 of sustainable solutions for 85% of customers more than 90 days in arrears and concluded solutions to reach 45%. For SMEs, the Central Bank has been setting quarterly institution-specific targets since June 2013.

This means moving distressed borrowers to longer term forbearance solutions. Progress by Irish banks in restructuring their small to medium-sized enterprise, SME, loan books are well advanced. In terms of distressed commercial real estate exposures, this is an ongoing process through the work of NAMA, including last year's wind-up of IBRC. Work on establishing a central credit register is being taken forward by the Central Bank.

The last recommendation focuses on legal services reform. This issue has been repeatedly highlighted by our National Competitiveness Council, NCC, for many years. Under the Action Plan for Jobs, we are committed to enacting the Legal Services Regulation Bill 2011 by the end of this year so that we might strike a better balance between the interests of consumers and legal professionals. The work on this is being led by the Minister for Justice and Equality.

We agree that we must improve data collection in respect of the efficiency of court caseload disposal, but this is another area in which we expect to secure agreement on a more suitable wording, including by removing the reference to the quality of judicial proceedings. Work in this regard is being taken forward by the Courts Service, with a particular focus on the upgrading of ICT systems.

The recommendations touch on a wide range of issues relevant to the preparation for the October budget and, more generally, ongoing public policy development. This point is worth emphasising. In my discussions with this and other committees on how we engage with the EU's processes, much of our debate has related to debt or deficit levels. As members can see from the overview I have supplied, there is a broader engagement on many aspects of Irish governance that subsequently impacts issues such as debt, growth and jobs. The breadth of this process is something that I have always emphasised when appearing before this committee to discuss the semester and it cuts across the responsibilities of a number of Ministers and Departments. The detailed timing and relative prioritisation of individual policy measures will remain firmly a matter for determination by their respective Ministers and the Government.

This meeting forms part of an important process of developing a more visible role for the Oireachtas in the European semester process. It builds from our previous meeting in April on finalising our national reform plans for submission to the European Commission later that month. I understand that the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, held a useful discussion with the jobs committee on Tuesday in advance of his Council meeting, which will settle the country-specific recommendations, CSRs, on employment and social policies. The Minister for Finance, Deputy Noonan, is due to have his pre-ECOFIN meeting with the finance committee on 18 June, where I expect the agenda will touch on the recommendations for budgetary and economic policy. There will be statements in the Dáil on 25 June in advance of the European Council. While my presentation has focused on the process and overall nature of the recommendations, there has been and will be an opportunity to touch on the CSR relevant to each committee. Endorsement of the final package by the June European Council will, in turn, provide and line up plenty of opportunities for further engagement on all policy areas across the relevant committees during the months beyond.

I thank the Chairman for the opportunity to make this presentation. I look forward to members' questions and comments.

Dominic Hannigan (Meath East, Labour)
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I thank the Minister of State.

Seán Kyne (Galway West, Fine Gael)
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I welcome the Minister of State to the committee. He mentioned that there would be no great surprises in these recommendations. The Government has been dealing with the relevant matters for a while. The recommendations continue on from the troika's programme. On Tuesday, I asked a question of the Minister, Deputy Bruton, at the jobs committee. These are classed as recommendations, but what is their legality? Are they directives, recommendations or expectations?

The Government will play a role in implementing the CSRs, but is the Minister of State directly responsible for liaising within the Government to ensure their implementation? Are the CSRs similar to those of other countries? Bank restructuring, access to finance and reducing unemployment are surely issues across the EU. The Director-General for Enterprise and Industry, Mr. Daniel Calleja Crespo, appeared before the jobs committee yesterday. Access to finance is a particular issue in his country, as is its high unemployment rate. Can anything be learned from how the other countries are dealing with such issues?

Personal and public debt present a significant challenge and are the subject matter of a recommendation. In March, the Commission described it as one of the remaining macroeconomic imbalances. How much of an issue will it pose? Will we be able to meet the targets for the public deficit and ongoing personal debt?

John Halligan (Waterford, Independent)
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Quite bluntly, my problem is that we have listened to many recommendations from Europe through the years. In his introduction, the Minister of State referred to how we had seen the consequences of bad policy mistakes at home and abroad. I would amend that, as we are still seeing the ramifications of bad policy on Ireland and further afield.

This is a question of sustainable jobs across Europe. Consider the high rate of unemployment, particularly youth unemployment. The Minister of State's document refers to social inclusion and inducing spending in the economy, which is of paramount importance to the country's survival economically. If we cannot induce spending other than what we see from external investment, we will face a major difficulty. The issues of social inclusion, a reasonable quality of life, unemployment, child poverty, our high literacy and numeracy rates and so on are interlinked in the creation of sustainable jobs. If we cannot create those, this report's recommendations will mean nothing. We discuss bringing unemployment figures down, but that is substantially done through the creation of schemes that focus on taking people out of the social welfare system for an extra €20. They are paid a rate that almost impoverishes their families. I supplied examples in the Dáil. One chap was on a scheme under which he got an extra €20, €15 of which was taxed. The Minister for Social Protection, Deputy Burton, could not comment, as she did not know why that would be the case.

This is a problem across Europe. There have been many recommendations through the years, but that is exactly what they end up being. I see nothing concrete or evidential in terms of how we will implement them. For instance, from where will these sustainable, long-term jobs come? Jobs are everything in any economy. It is not possible to keep 220,000 people - this number depends on the figures one uses, as it could be anything between 170,000 to 250,000 - in long-term unemployment. Not only would it draw billions of euro every year from the social welfare budget, but also from the health budget, dampening the economy and curtailing growth therein.

In the past six months in particular, people have had a problem with Europe. They expressed it in how they voted. We get nothing concrete from Europe. For example, I can make recommendations on how something should be done.

What we need are concrete proposals for the creation of sustainable jobs in Ireland and to address all of the issues covered in this report, including social inclusion, child poverty, unemployment and the provision of a reasonable quality of life for people. That is a reasonable request. There is nothing in this report to support the claim that within two years we will have induced spending in the economy and reduced our rate of inflation, because we will have provided people with quality jobs which, in turn, enabled them to spend money and assist in rebuilding the economy. This is where Europe falls down consistently. It simply produces tonnes of recommendations to which there is no substance.

I am not being critical of the Minister of State. Where in this report is the evidence that in two or three years something substantial will happen in the Irish economy that will help growth and reduce our illiteracy rate and child poverty level, which is extremely high? We need to be able to point to somewhere in this report which supports the claim that within a two or three year period Ireland will have dealt with its high level of unemployment.

Seán Crowe (Dublin South West, Sinn Fein)
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I, too, welcome the Minister of State to the meeting. I would like to follow on from some of the comments made by Deputy Halligan. The objectives of European Semester 2015 include pursuance of differential growth, friendly fiscal consolidation, restoring lending to the economy, promoting growth and competitiveness, tackling unemployment, social consequences of the crisis, modernising public administration and so on. No one here has any problem with any of that. However, what we would like to know is how this is to be achieved.

I am disappointed that the Commission's recommendations appear to call on the Irish Government and other Governments across Europe to continue with their austerity programmes, which have been disastrous for middle and low income families. The message following the European elections not only in Ireland, but across Europe, is that people want a different approach. The approach suggested in this report while at face value is fine will not deliver for people in difficulty. We have a two-tier Europe. The growth necessary to create employment has not happened. Many economies across Europe are in the doldrums.

The anticipated growth rate of forecasts is never met. What steps are being taken to ensure a more accurate picture in this regard and, more important, what steps are being taken to ensure real growth in the economy? The Minister of State referred to active labour market policies, including the roll out of the Intreo one-stop shops and a significant expansion in training and work placements. Yesterday, I raised in the Dáil the reduction by 20 in the number of VTOS places in my constituency. For no logical reason, these places are being allocated to Balbriggan. While the population of Tallaght and Walkinstown is double that of Balbriggan, the latter is getting 20 additional places. There is no logic in relation to what is being done.

The Minister of State also said in relation to social inclusion that there is little doubt that increased labour market participation remains the best route out of poverty and that affordable child care will continue to play an important role in this context. I know from speaking to lone parents and parents in general that the problem is a lack of affordable child care. What is being done to address this problem? Other issues addressed in the report include a reduction in the cost of legal services and so on, which is positive. Reference was made to the Commission's conservative attitude in regard to how growth in an economy is brought about. In regard to its proposals for a widening of the tax base, a sharpening of environmental taxes and wider application of the property tax, what is the Irish Government's reply in light of people saying they have had enough and cannot afford to pay more? In taking more money out of local economies we are creating more unemployment.

While I am critical of the overall tone of the recommendations, I do not have a problem with some of them, including the need for progress on reducing legal services and drugs costs and so on. It is often stated that Ireland has a small population and should work out its own drugs bill. Is there a need for a European-wide review of the cost of drugs? Many drugs are produced by pharmaceutical companies located in Ireland yet drugs cost more in Ireland than anywhere else across Europe. The companies that have located here are welcome. Ireland has no separate agreement with these companies. While I would welcome health savings, how will these be achieved?

Other recommendations include reform of societal issues such as mortgage arrears, taking on vested interests in health and legal services and so on. We are at the top of the class in relation to austerity but at the bottom of the class in relation to most other issues. At the end of the day, one can take what one likes from this report but there is a democratic deficit within the EU. This is being said not only by Sinn Féin and the Independents, but other organisations dealing with poverty. In my view, we are only going through the motions today. Unless there is substance in terms of what Government is doing, we are only going through the motions.

Colm Burke (Fine Gael)
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I apologise to the Minister of State for leaving earlier but I had to attend a vote in the Seanad. Like Deputy Crowe, I would like to comment on the drugs cost issue. The cost of drugs in this country has been allowed to increase from €560 million in 2000 to €2 billion by 2010, which is an almost 300% increase in a short time. The legislation in relation to generic drugs has since been introduced. Currently, €2 billion of the €13.2 billion health budget is spent on medicines and so on. We do not appear to have brought on board all of the players in the health care sector. For example, the IMO recently appeared before the Joint Committee on Health and Children and was heavily critical of various issues in relation to Government. The point I made to them was they had a part to play. The complaint from hospitals is that there is over-prescribing by GPs and GPs are complaining about medication being prescribed in hospitals. There appears to be no attempt to work together to bring down the huge cost of drugs to the health budget. We have fallen down in terms of getting people to work together. It is in everybody's interest that this huge cost be reduced. Legislation is welcome but this is not only about legislation, it is about getting people on board. If in the morning a facility to which people could bring unused medicines was open, one would have no problem filling a skip very quickly. We are not doing enough in this area. It is an issue that must be addressed.

The second issue of concern for me is that of legal services costs. A matter I tabled for discussion on today's Adjournment Debate in the Seanad was, unfortunately, not selected.

I will return to it next week. I raised the matter 18 months ago of a third Taxing Master being appointed to the High Court. We are talking about legal costs but people have finished cases as long as three years ago and nobody has been paid because decisions are not being made when cases have been dealt with by the courts and costs are not finalised. The only solution is to appoint a third Taxing Master to sort out the problem. Taxing Masters have reduced costs substantially but we should give the people involved in providing a service the opportunity to get paid. I raised the issue 18 months ago but now we have a worse problem than before. The matter must be sorted out once and for all.

Cases that would take less than four hours have no decision on costs a year later. We speak about money flowing in the economy but, unfortunately, in this area people who have provided a service have not been paid. We have a part to play in this process. We can talk about a legal services Bill all we like but if we are not prepared to provide the adjudication process for decisions to be made in order that people can get paid fairly for the work done, we are wasting our time with any reform. I ask that the matter be examined.

Eric Byrne (Dublin South Central, Labour)
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I welcome the Minister of State. I have some comments on the contribution from Sinn Féin and Independents. They should wake up, frankly, as those members are asking the most ridiculous questions.

John Halligan (Waterford, Independent)
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Perhaps it is the Taoiseach who should wake up.

Eric Byrne (Dublin South Central, Labour)
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We are creating 1,500 jobs per month but when this Government entered office, we were losing 1,500 jobs per month.

John Halligan (Waterford, Independent)
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No.

Eric Byrne (Dublin South Central, Labour)
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That is job creation. When we came into office, the country was in the hands of the IMF or the troika. We got rid of them and for the first time we are dealing with country-specific recommendations. When we came into office, the euro was in a state of flux and it could have gone under. For those who do not want to listen, the financial reports every morning on the news indicate that the euro is running at $1.36. It was not like that when the Government entered office three years ago.

John Halligan (Waterford, Independent)
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How does that affect people?

Eric Byrne (Dublin South Central, Labour)
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The EU report makes some horrendous observations which must be attacked. The electorate voted for the fiscal treaty, so it is not as if we are doing something the people do not support. The Minister of State is not responsible for health or justice matters, unfortunately, although he has covered some points in his contribution. How can we explain, for example, that our public health care expenditure was the highest in the European Union. In 2012 it was running at 8.7% of gross national income, significantly in excess of the EU average of 7.3% of GNI? We know how delicate is the issue of providing health services but according to these figures, we have the highest relative public expenditure in Europe.

Dominic Hannigan (Meath East, Labour)
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It is a young population as well.

Eric Byrne (Dublin South Central, Labour)
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Yes.

John Halligan (Waterford, Independent)
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We spend most on administration.

Eric Byrne (Dublin South Central, Labour)
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Since 2008 we have added an additional 500,000 medical cards. What is going on? If 40% of people in this country require a medical card it is indicative of a very divided society with a poor level of income. How can expenditure for outpatient drugs be comparatively high with respect to Europe? What is Europe saying specifically about how we are spending so much money in health care services compared with the rest of Europe, although we do not seem to have the quality service we advocate.

There are horrendous figures relating to unemployment. We have the highest proportion of people living in households with low work intensity, which equals poverty and, interestingly, usually equals single parent families headed by women. Women are yet again trapped in an unsatisfactory world that is possibly created by our legislation. We have heard about mother and child homes, mothers with five children living in cars while seeking accommodation and others being interviewed about homelessness. We should ask ourselves the fundamental question of where the hell are the men. Where were the men who threw out mothers and their children because of a pregnancy? Where are the fathers of the women who present as homeless? How are miraculous births occurring in everybody's constituency?

Dominic Hannigan (Meath East, Labour)
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The issue is not on today's agenda.

Eric Byrne (Dublin South Central, Labour)
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How will the Minister of State address the pockets of unemployment traps that have been mentioned? There is specific mention of medical cards and rent supplements, believe it or not. If these are traps, they should be eliminated. There can be no lifestyle that can trap people in poverty, and it is our political obligation to remove any elements of poverty.

The next issue really gets to me, so the Chairman should bear with me. Mention has been made of legal services legislation, and a Senator is seeking another Taxing Master. What sort of a legal system do we have when a former Attorney General in practice can present a bill to the State and a Taxing Master can argue it is €500,000 too much? What sort of a system have we when a so-called Taxing Master can achieve such a great reduction? Why are the legal eagles not criminalised when they try to steal taxpayers' money when they present unsustainable bills? I am not arguing that we should have more Taxing Masters but we need to examine fundamentally how legal personnel can present bills to the State which they expect to be paid-----

Dominic Hannigan (Meath East, Labour)
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The Deputy is under privilege when speaking about people outside the House.

Eric Byrne (Dublin South Central, Labour)
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I have not named anybody.

Dominic Hannigan (Meath East, Labour)
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The initial warning includes referring to people in a way to make them identifiable.

Eric Byrne (Dublin South Central, Labour)
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The concept of what a market can bear seems to apply to the legal profession and I ask the Minister of State to address that.

Dominic Hannigan (Meath East, Labour)
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Deputy Durkan is next and I remind speakers to try to keep their contribution to three minutes.

Bernard Durkan (Kildare North, Fine Gael)
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The Chairman will be glad to know mine will be its usual short duration. This is an important meeting and the review by way of the semester is welcome, along with the observations from entities in Europe. That tends to encourage us to focus on issues that must be dealt with. That works in two directions and I would largely find common cause with colleagues in their views. I will not go through them again.

Some of us as chairs of various committees were summoned to Brussels approximately six or seven years ago when it was disclosed what the financial position was and what was likely to happen. We observed all put before us and we explained to the powers that be the difficulty we would have as a nation in meeting the challenges ahead. I was concerned at the time and I was concerned three years ago because I thought we would never survive the burden thrust upon us as a result of uncontrolled activity by persons unknown through our economic sphere. That said, the time has come to separate fact from fiction.

It is very easy for people to argue that we should abolish austerity. That is not something to be done with the wave of a wand. We must deal with the issue presented to us, which is analogous to what happens in a household. If a household has domestic bills to pay, the head has the option of not paying them. In effect, this is burning the bondholders.

In that case, the money required for next week's or next month's commodities or mortgage will have to come from somewhere else. Where will it come from? Where is it proposed to get this so-called pot of gold we have been hearing about for the past two or three years? The fact is it does not exist. Those who pretend it exists are indulging in mindless propaganda, which is to advance their political cause and nothing else. It is high time we faced reality. If we as administrators do not face reality for this country, somebody else will do it for us.

I fully concur with the views expressed by my colleague. The time for pretence is gone. We have got a job to do and it is a very difficult job. I support and acknowledge the efforts of the Irish people and the Irish Government in doing what was an impossible job. I also congratulate the Government on doing the impossible in the face of some of the most cynical and opportunistic opposition of all time.

Dominic Hannigan (Meath East, Labour)
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The Deputy should speak on the CSRs.

Bernard Durkan (Kildare North, Fine Gael)
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It has been done in support of the Irish people-----

John Halligan (Waterford, Independent)
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The Irish people gave their answer in the local and European elections.

Bernard Durkan (Kildare North, Fine Gael)
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Those who continue to promote their faded, outdated policies for their own advancement should be recognised as such.

The second matter I wish to address is important as well.

Dominic Hannigan (Meath East, Labour)
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Is it on the CSRs?

Bernard Durkan (Kildare North, Fine Gael)
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It is on the CSRs, the semester and the way we go forward. The recent elections should have us all focused on developments in the European Union and in the individual member states. That is happening here. One of my concerns is the dramatic advance of extreme views in the European Union and the extreme views of the representatives elected to the European Parliament. In the past, when people sought to address issues of economic insecurity in a similar fashion, it brought about serious disaster. I am concerned that we are heading in that direction again. Extreme views are emerging on the hard right and the hard left. If that continues, the result will be disastrous and every country in the European Union, including this country, will pay the highest price. Those who pretend that will not happen should read their history more carefully.

The same set of circumstances prevailed in the 1930s as have prevailed in the past four or five years. People in the United States at least made an attempt to confront and resolve their problems, and did so, but in Europe people turned on each other. The Chairman will attend the COSAC meeting in the next few days. I strongly urge that he and his colleagues in the EU bring this to the attention of all the authorities in Europe and ask why these people were elected to represent these extreme views. What is the purpose or objective, where are they going, who sent them there and for what purpose? Perhaps the Chairman can return with the answers to those questions. The Minister should peruse some of those issues with a view to giving us at least an insight into what might be the response. If there is no response, I guarantee it will be too late five years hence.

Dominic Hannigan (Meath East, Labour)
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I can guarantee that we will certainly raise the questions on Monday. There is a session on democratic legitimacy in the days after the European election so we will be discussing these issues. I am not sure whether we can bring home answers, but we will certainly raise the questions. The next speaker is Senator Noone.

Catherine Noone (Fine Gael)
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With regard to the Legal Services Regulation Bill, I concur with Senator Colm Burke about the Taxing Master. However, the horse has bolted on that issue, in a sense. The appointment of a third Taxing Master should not be required if both Taxing Masters were fully up to speed. That is probably neither here nor there because it was a judicial appointment, but it is a real issue. It is easy for Deputy Byrne to talk about the headline grabbing issues-----

Eric Byrne (Dublin South Central, Labour)
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Will the Senator declare an interest?

Catherine Noone (Fine Gael)
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I declare an interest. I am a member of the legal profession and I know what I am talking about in this regard.

Eric Byrne (Dublin South Central, Labour)
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So do we, the taxpayers.

Catherine Noone (Fine Gael)
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I am a taxpayer too. Perhaps the Deputy will give me a chance to speak. With regard to the reduction, I would abhor that type of behaviour by anybody in the legal profession. Most ordinary members of the legal profession do not charge near those types of fees. The vast majority of solicitors and so forth are trying to keep people employed and the vast majority of barristers are not making anything like the headline figures the Deputy mentions. That is the reality. Nobody expects anybody in the legal service-----

Dominic Hannigan (Meath East, Labour)
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Put questions to the Minister of State through the Chair.

Catherine Noone (Fine Gael)
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It must be addressed because that type of bashing happens all the time. The vast majority of lawyers have not been feeling particularly wealthy in the economic situation of recent years. A little reality must be brought to bear on the type of headline grabbing argument that is so often trotted out. Many lawyers are put to the pin of their collars, and I am not seeking headlines.

Dominic Hannigan (Meath East, Labour)
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We are fortunate to have the Minister of State here today to talk about the CSRs. Will Members address the Minister about those issues and not stray?

Catherine Noone (Fine Gael)
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Deputy Byrne also raised the health issue and medical cards. The increasing level of obesity is a related matter. We perform very badly at European level with regard to physical education. The hours of physical education in our schools are very low. I do not know if that would be a recommendation but it is something to which the Minister of State might give attention for a European-driven initiative.

Dominic Hannigan (Meath East, Labour)
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I remind the Senator that she will be in the company of Deputy Byrne for the weekend-----

Catherine Noone (Fine Gael)
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Yes, we will kill one another.

Dominic Hannigan (Meath East, Labour)
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-----so no doubt she can raise these subjects at will.

Eric Byrne (Dublin South Central, Labour)
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That would not appeal to her.

Aideen Hayden (Labour)
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I thank the Minister of State for appearing before the committee. With regard to country specific recommendation No. 1, dealing with financial consolidation, we must note that there has been a significant increase in tax revenue in this country recently and also a significant real drop in public expenditure. I do not believe we should agree to taking another €2 billion out of the economy. Last year the Joint Committee on Finance, Public Expenditure and Reform listened to the views of a number of actors, including the Irish Business and Employers Confederation, IBEC, the Small Firms Association and others who, surprisingly, at that time and without the continued improvement we have seen in the economy, were very concerned that to remove any additional expenditure from the economy would have an adverse effect. In fact, when it comes to removing money from areas such as social welfare expenditure, the knock-on effect on the wider economy is even greater. I raise that as a caution in respect of CSR No. 1.

With regard to the active labour market policies and the related matter of social inclusion, I am very concerned about what the Minister of State referred to in his statement as low work intensity, which is the official EU indicator for households with little or no paid employment. It is probably something we do not say often enough but it is important to point out that at the height of the Celtic tiger economy, in the period 2004 to 2007, this country had the second highest level of households with no member of a family employed. It is important to emphasise that in the European context. We are now ranked as the highest, but to go from number two to number one at a time when the bottom has fallen out of the economy is not entirely a surprise. There is a serious structural issue with households that are experiencing severe long-term unemployment. While we are making progress with people who have experienced unemployment over recent years, we have a structural problem with the long-term unemployed.

I welcome initiatives such as the introduction of the housing assistance payment, which allows people to move out of dependency on rent supplement and to go back to work. In my experience, when people have the ability to move on to a differential rent system, they tend to go back to work. They want to work. There are structural issues in terms of State payments and it is important we deal with them.

On the SME finance sector, I have a serious concern about SME procurement and I have raised it on a number of occasions. It has been my personal experience that often when the State puts work out to tender, it puts in request for tender requirements on companies and SMEs that are simply unrealistic. I can give an example.

I was involved in a request for tender for free legal services in a previous life when I was on a State board. The value of the contract was no more than €15,000, yet there was a requirement for €3 million in insurance. It is outrageous to look for that amount of insurance for a job worth €15,000.

Dominic Hannigan (Meath East, Labour)
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Was it public liability or professional indemnity?

Aideen Hayden (Labour)
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It was professional indemnity insurance. This morning there was an issue raised about the procurement of books for libraries, for example. Some of the requirements put Irish SMEs entirely out of the frame. This has been done by setting nonsense requirements that they could not possibly meet. We have to be very conscious when we start looking at so-called value for money that we do not remove value for society on another level. I ask the Minister to look at SME procurement requirements and, in particular, State requests for tenders.

With regard to non-performing loans, the good news is that the most recent statistics show that the number of mortgages in arrears for more than 90 days has decreased. A lot of the data have put a cloud over some of the issues that we need to address. One of them is that we have a major problem, not only with access to finance for the SME sector, but access to finance for middle and lower income households. The banking sector does not want to know middle to lower income households. We will have to look seriously and realistically at what we are going to do about introducing some type of third banking force into this country or looking to the local authorities within the context of mortgage finance for low income families.

We should look at the threats facing the economy when we look at some of these issues. In particular, I alert the committee to the warning made by the Central Bank today that housing and the strategic issues we have around housing are becoming a major structural threat to the improvement we have seen in the economy.

Dominic Hannigan (Meath East, Labour)
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I thank Senator Hayden. She has raised quite a few issues for the Minister of State to respond to.

Eric Byrne (Dublin South Central, Labour)
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The Minister of State is now Minister for all things. I congratulate him because he is now Minister for half a dozen Ministries.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank all the members for their questions. I will go through each of them in turn and will commence with Deputy Kyne's questions. He asked about the legal basis for the country-specific recommendations. They come from two different articles, 121 and 148, of the consolidated treaties of the European Union. With regard to the Deputy's key question on the sanction nature of these recommendations, they fall under the remit of the excessive deficit procedure. Those are the recommendations in the area of debt levels, deficit levels and all the things that could contribute to that, whether that is public spending and all the measures that underpin same. They could, at a point, lead to sanctions but there are many different steps in between that we would have to through to trigger the sanctions.

In saying all that, I wish to emphasise that much, if not all, of what is included in the country-specific recommendations we would have to do anyway to deal with many of the challenges posed by our national finances. That direct answer to the Deputy's question on the source of all this is that it is the two article references I mentioned. The sanction nature of this, were that to happen, is mostly loaded in the budgetary end of the country-specific recommendations.

With regard to the non-budgetary CSR, it operates on the basis of what is called "comply or explain". That means one is recommended to do them but if one does not do them, the relevant Minister must give an explanation at his or her relevant Council group. In Ireland's case, nearly all of what is included in these country-specific recommendations comes out of plans or strategies we are already implementing or have already published.

With regard to whether the CSRs are consistent across all countries, there are some areas of consistent focus, such as, for example, the areas of budget, debt levels and the need to promote the kind of growth that will deliver more jobs. There is a fair bit of variation depending on the particular needs of different countries.

The Deputy made a point about public and private debt. The public element of the debt is covered off, in terms of CSR No. 1, which relates to the fiscal and budgetary measures that we are looking to implement. Some of the private debt is at least included in the measures in CSR No. 5, which refers to what will happen in our banks in terms of access to finance, but definitely in terms of CSR No. 6 which relates to the issue of non-performing loans, which is a different way of looking at the very high levels of private debt we still have within our economy. I would note that there are different indicators that the level of private debt is reducing. As Senator Hayden said earlier, one of the most difficult sources of private debt can be mortgage arrears and mortgage debt. At least there are some signs of stability and progress in that area at the moment, which is welcome.

With regard to Deputy Halligan's questions, I agree with him that jobs and employment growth is the silver bullet that can unlock so much else and all the different interconnections to which he referred. I disagree with him strongly on the following matter. If I quote him incorrectly I am sure he will correct me. He said we need somebody to tell us how we will create good quality jobs, as he called them. My answer is that is our responsibility but other people will give us advice. The European Union will do what it can to create an environment within which jobs will be created but, first and foremost, it is the responsibility of national governments and parliaments and people at the different levels of local and national politics to rise to the challenge. People will give us advice but the people who are going to do the work and come up with ideas and implement them will be the national governments. We must be consistent in how we talk about Europe. On the one hand, we cannot say it has too much power and, on the other hand, criticise Europe by saying that what power it has it does not use. The people whose primary responsibility it is to improve the living standards of people within their own countries are national governments. We cannot outsource that responsibility to other people or pretend that will happen.

Deputy Crowe raised a number of specifics to which I want to respond. Before doing so I shall offer an overall comment in response to his overall approach. He correctly made a point that there are a number of poverty traps. We continue to be aware of them and that is why some changes have been made to lone parent supports which make an important contribution to dealing with poverty traps. For me, a measure that I think is hugely important, and I encounter the issue regularly during my constituency work in Dublin Central, is the poverty traps that exist for people in private rental accommodation and people who are uncertain in work. That is why the measure that has been announced by the Minister of State, Deputy Jan O'Sullivan, on the housing assistance payment, which was trialled, has now been rolled out. I know it is a measure that will positively affect a very large number of people by making those payments available in a way that will give them a bit more certainty about their ability to afford accommodation and will also give more certainty to people who can provide the accommodation.

In this case, much of it comes through landlords. That measure will contribute to the kinds of poverty traps colleagues raised.

With regard to the points made about substance and austerity, Sinn Féin is saying that it will abolish property tax, water charges and the universal social charge. In respect of expenditure, it will undo the cut to child benefit and undo all the painful measures implemented in the social welfare system. Sinn Féin also proposes to hire more nurses and teachers and to find more money to build more public housing and create more jobs. I would love to do all those things because I am keenly aware of the pain and suffering of people in respect of these changes. The question I have for Sinn Féin is how it will do that. How will it cut all these different taxes and abolish them completely? At the same time, how will it pay for all the things it says it wants to do? I know what people have gone through has been extremely painful. If our country was still in the situation where we had to pay an interest rate of 15% to borrow a single euro, we could not afford the level of social welfare payments and public services that we all want to deliver. If Deputy Crowe asks for substance, that is my argument for why we have put through these changes, which we know have caused difficulty. I want to hear how Deputy Crowe argues he will do it.

Many of the points made by Senator Burke are within the remit of the Department of Justice and Equality. It is not for me to respond as that Department will do so. One point to be aware of, which I will touch on in respect of the point made by Senator Noone, is contained in the European Commission document, which suggests that one of the costs SMEs regularly encounter is the huge cost of enforcing contracts and of legal work. Paragraph 16 states that legal "fees represent the majority of these costs", at 18.8%. This is the environment in which the Legal Services Regulation Bill is being examined and needs to be enacted. Senator Noone and Deputy Byrne exchanged views on the Taxing Master and legal costs. I am sure this will be dealt with in the context of the Legal Services Regulation Bill, which the Minister will prioritise later in the year.

Deputy Byrne noted something that caught my attention in paragraph 11, which states "Even though Ireland has a relatively young population, public healthcare expenditure was among the highest in the EU in 2012 at 8.7% of GNI, significantly above the EU average of 7.3%." Deputies Byrne and Hannigan pointed out that some of this is due to the awful economic recession, the granting of medical cards to people who need them, and the physical and mental consequences of what we have gone through. Nevertheless, the core point is that the level expenditure as a percentage of national income is high. The reasons behind it are matters the Minister for Health, Deputy Reilly, will address but the European Commission points to the fact there are still many different systems involved in how our money is spent and that the Health Identifiers Bill, which the Minister of State, Deputy Alex White, is dealing with, will give people a better means of identifying where they are in our health system, where they stand and how they are being moved through treatment. It will allow our levels of expenditure to be translated into a better level of care for the people we represent. The Deputy also referred to legal services, which I tried to answer in my response to Senator Noone.

I agree with the comments made by Deputy Durkan. He asked me two questions about the level of far right and far left forces represented in the European Parliament. It strikes me that, despite the severity of the crisis that Europe and Ireland have gone through over the past seven years, none of the forces have been successful in being elected to national government. They have attained a high level of representation in the European Parliament but, with only one exception, I am not aware of any of them being elected to national government. With regard to their role in the European Parliament, this is a major challenge for them. They must find a way of working with other parties in the European Parliament and working with each other. This leads to the challenge many forces of protest face. It is all well and good saying what one is against but when one has a role of influence, one must say what one will do. This is something they must deal with soon in the context of the new European Parliament, which will meet twice in plenary session in July.

Senator Noone asked some points about the Legal Services Regulation Bill, to which I have responded.

With regard to Senator Hayden's point on SMEs and procurement, I must direct her question to the Office of Public Works, which is the lead body on that. I am not in a position to respond to the detailed point. With regard to the sum of €2 billion, I stress the importance of the overall goal, which is to get to a 3% deficit by 2015. Why is that important? Were it to be achieved, our country could continue to borrow at affordable interest rates and, if we can do so, less money needs to be spent on servicing debt and more can be spent on public services.

Dominic Hannigan (Meath East, Labour)
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Is the percentage deficit the key figure for the Minister of State?

Paschal Donohoe (Dublin Central, Fine Gael)
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It is too early in the year, as the Minister for Finance has said, to determine the exact figure that will help us to get there. The final point, about housing, is a matter for other Ministers but I agree that a housing assistance payment is an important step forward and I look forward to seeing it being implemented in ways that will help the lives of many people.

Dominic Hannigan (Meath East, Labour)
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As the Minister of State pointed out, the Minister for Finance, Deputy Noonan, will attend a pre-ECOFIN meeting next week. Any Member, irrespective of whether he or she is a member of the committee, can ask specific questions of the Minister at that meeting. I thank the Minister of State for his attendance.

Paschal Donohoe (Dublin Central, Fine Gael)
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I think we have covered a broad spectrum of nearly every policy in 90 minutes. I wish members travelling to Albania and COSAC a productive visit. I visited Albania in January and I am certain they will have a productive visit. They will emerge more enlightened about Albania and with a richer view of what is going on in Europe after hearing the perspective of the Albanians during the visit to Albania and Montenegro.

I hope all the members who are going will have a very productive visit.

Dominic Hannigan (Meath East, Labour)
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I thank the Minister of State for attending today and assisting us in discussing the country specific recommendations. Is it agreed that we will continue in private session for the remainder of the meeting? Agreed.