Brian Cowen (Laois-Offaly, Fianna Fail)

I thank the House for the wide range of statements and analyses made on the pre-budget outlook. I see this process of debate as a large part of budget reform, as set out in my opening speech.

Several points were made during the course of the debate about forecasts for the economy and how they have changed. Before reminding the House of the forecasts contained in the pre-budget outlook, it is no harm to focus on the changes in the economic environment this year.

Last December on budget day, I set out the Department's three-year growth forecasts for 2007 to 2009. At that stage GDP growth was forecast to grow on average by 4.7% with growth of 5.3% for 2007. I also forecast taxes would grow by 7.8% in 2007 and that on a cash basis the Exchequer would have a deficit of €546 million. The general Government balance was forecast to remain in surplus at 1.2% of GDP.

At the time, others took the view that my tax forecasts were somewhat prudent. The ESRI in its winter quarterly economic commentary forecast an Exchequer surplus of over €1 billion and a general Government balance of 2% of GDP. At the time its view for growth in GDP at 5.4% was no different from mine. Likewise, the Central Bank forecast GDP growth of 5.5% in its January 2007 quarterly bulletin. This general consensus lasted through the first six months of the year, but circumstances have now changed.

The pre-budget outlook is my updated forecast, but others such as the ESRI and the Central Bank produce quarterly forecasts. The ESRI still expected GDP growth of 5.4% for this year in its spring quarterly forecast but by its summer quarterly forecast it had revised growth down to 4.9% for this year. Most institutions that produce regular forecasts for the economy revised down their outlook over the summer and autumn. The economic environment has changed and the forecasts published in the pre-budget outlook reflect this.

Growth now is expected to be lower for the next several years with GDP expected to average 3.5% over the period to 2010. My forecasts for this year and next, are broadly in line with others that have produced forecasts over recent months. I reject any contentions to the contrary.

Deputy Bruton referred to the debt-driven property boom which completely misses the point. First, the level of new housing output has been ramped up in recent years in order to achieve greater balance between housing demand and supply. Had this large increase in house completions not occurred, first-time buyers and others would have been excluded from the market.

Second, while all Members are aware of the rise in personal indebtedness, less attention is given to developments on the asset side of the household balance sheet. Between 2001 and 2005, the ratio of net household assets to GDP has been on a rising trend. It is also worthwhile to note the age structure of the population, being younger than most other EU countries, is such that a relatively large proportion of the population is at the life cycle stage of borrowing to acquire real assets.

Deputy Bruton suggested the Government had become overly dependent on revenues from the property market, squandering the extra tax receipts from that area. While we undoubtedly benefited from the extra resources arising from the buoyancy in the property market, we have not staked all on them. We prudently used these receipts as a bonus to reduce debt levels while new services were not based on them.

Care has been taken not to plan the public finances around the assumption that tax receipts from the property and wider construction sector would continue to grow as they did in the recent past. It is important to put the increased contribution from stamp duty and capital gains tax in context. The budget forecast of the yields from stamp duty and capital gains tax combined, in 2007, represents about 15% of tax revenues overall. In contrast the big four taxes — VAT, income tax, corporation tax and excise duty — were expected to account for close to 85% of total tax revenues this year.

As in previous years, the Department adopted a cautionary approach and factored in an easing in property market activity this year when making its budget day economic and fiscal projections. This was reflected in the forecast rates of increase for stamp duty and capital gains tax, far below the growth rates experienced in recent years. The actual slowdown will be greater than initially anticipated, however. This is reflected in the performance of stamp duty and capital gains tax so far this year.

Property-related taxes are not the only taxes which have been growing strongly. Between 2001 and 2006 income tax increased by just over €3 billion and corporation tax by just over €2.5 billion, indications of a strong economy with more people in work and more companies returning healthy profits.

Several Members referred to the tax and PRSI commitments in the programme for Government. It is a five-year programme which states clearly all commitments are subject to the economic and fiscal framework. It is our intention to operate a responsible fiscal policy characterised by broad budget balance.

Some Members referred to the unallocated provision in table 6 of the pre-budget outlook as some sort of a war chest for the Government. This is a misrepresentation of the position, perhaps by some for political mischief. Table 6 sets out an illustrative budgetary position for the coming years. The inclusion of the unallocated provision is not new; last year's pre-budget outlook included a similar provision. This provision is indicative at this stage and I will be setting out in full detail on budget day my budgetary measures for both taxation and spending.

Some on the other side of the House refuse to be pleased with the spending information provided last week in the pre-budget outlook. Despite the considerable increase in data and information in the outlook, it still falls short of their expectations. Both Deputies Bruton and Burton want to determine the budget from the Opposition benches, deciding the priorities and what to spend moneys on exclusively on the basis of proposals and choices presented by them to me. This would usurp the role of the Government and is not consistent with the democratic process.

The purpose of the pre-budget Estimates is to provide a clear outline of the starting position for the information of all sides of the House. The Estimates show what moneys are needed to maintain existing services next year. From that starting position on an existing level of services basis, we can have a debate about where the existing priorities lie and where new priorities should be. A debate, however, by its nature, involves more than just one point of view. If anyone wants to know mine and the Government's priorities, I will be happy to point them out.

My core priority is the continued economic and social development of the country on the basis spelled out in the National Development Plan 2007-2013. The programme for Government and the Towards 2016 partnership agreement also set out priorities and proposals to be delivered upon as resources allow over the lifetime of the Government.

The Government remains open to reviewing the budgetary process to encourage a more constructive and relevant examination of how the State's finances are run. Yesterday, I referred to the positive role of the new annual output statements, under which Ministers must outline to the Dáil the public service targets they expect to deliver with the public moneys allocated to them. I look forward to examining points made by Members on all sides of the House.

The key point is that this Government has gone further than any other in opening up the budgetary process, reforming it and providing greater opportunities for engagement and input from all sides of the House. The annual output statements comprise one such initiative. The pre-budget Estimates as part of the unified budget is another and it is up to all Members of the House, including Opposition Deputies, to avail of the opportunities being provided to make them better and make them work. We can only provide that opportunity, but we cannot fulfil the role of every Member of the House.

The pre-budget outlook and the pre-budget Estimates are a major and positive development, in my view, both in terms of the very high level of existing public services they embody and the reformed and more transparent approach to policy making which they represent. I am therefore pleased to commend them to the House.

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