Martin Mansergh (Tipperary South, Fianna Fail)

There is no denying that our fiscal position has weakened from that envisaged at budget time with tax revenue some €736 million behind what was expected at the end of April. However, it is important to note that income tax and corporation tax are broadly in line with expectations and, as such, are good indicators of the economy. It is important, however, to point out that the current situation is manageable given the strong position of the public finances which I have already mentioned. It is also important to stress that, despite the underlying strength of the public finances, the Government is determined there will be no unnecessary loosening of fiscal policy. This implies that it is crucial for Government Departments to adhere to the significant levels of current day-to-day expenditure provided for their activities this year.

As pointed out by the Minister for Finance in budget 2008, we must get back to lower single digit increases in current spending as quickly and as prudently as possible, particularly if we are to maintain capital investment as set out in the national development plan. The Minister for Finance said: "A measured deceleration is required, not a sudden slamming of brakes, especially when we are entering a period of below-trend growth by Irish standards." Over the past few months we have managed to avoid shocks to the economy imparted by Government tightening that would have had to take place in previous times but that we have created the latitude to avoid on this occasion.

The Government's priorities are clear and straightforward. They are to protect the weaker in society through maintaining a high level of social spending; deliver better and more effective public services; seek value for money at all levels of public spending; and continue to invest heavily in public infrastructure. While the increased expenditure of recent years, facilitated by corresponding economic growth, has brought many positive benefits we are now entering a period of lower economic growth. Therefore, to avoid unnecessary debt and continue to afford the massive capital investment, it is vital for all our futures that we maintain the basic correspondence between the growth in spending and the growth in our resources.

Despite the constraints imposed by slower economic growth, the Government's priorities for current spending remain health, education and social welfare which account for almost 80% of total current spending. The Government is aware that achieving its objectives in these areas is not simply a matter of injecting larger amounts of resources into them. A key challenge, therefore, for Government now and for the future is to ensure desired outcomes are achieved across the public service with optimum efficiency in terms of resources.

The process of public service reform has been under way for over a decade. It has not been piecemeal and any objective analysis would conclude that the public service has come a long way since the strategic management initiative was launched. During that time our public services have been expanded, improved and reformed. There have been significant improvements in the areas of financial management, human resources management, regulatory reform, e-Government initiatives and customer service delivery.

The implementation of the modernisation agenda continues to be driven by the various partnership agreements across the public service. The current partnership agreement, Towards 2016, builds on the progress made under previous agreements and ensures continued co-operation with change and modernisation initiatives as well as improvements in productivity right across the public service. It provides an important framework for meeting the economic and social challenges ahead and builds on the achievements of previous agreements. The Government is committed to developing the modernisation agenda through the partnership process.

While there is no doubt that significant progress has been made in the past decade or so in modernising the public service, we must also acknowledge that many more changes are awaited and needed. That is why the Government asked the OECD to undertake a review of the Irish public service. The report of this review was published recently and it acknowledges the central role played by the public service in contributing to an economic success story that many OECD countries would like to emulate. It states we are on a sound trajectory of modernisation but that we could further improve the yield from reforms by renewing focus on their pace and sequencing to make them more mutually reinforcing. The review marks an important step in the ongoing modernisation of the Irish public service. The Taoiseach will shortly announce the appointment of a task force on public service reform to report to the Government with a comprehensive programme for action.

In their motion which they put down for debate tonight, the Labour Deputies call for various actions to be taken by the Government to address what they call the economic downturn. While I do not propose to outline all of the Government's policies to address the economic difficulties that we face in the short term, I should comment on some of those which are relevant to what these Deputies have asked the Government to do.

On the call for a substantial programme of school building, the Government is already providing for a very substantial school building programme which is aimed at continuing to modernise the stock of school accommodation while targeting the needs of communities that are experiencing rapid demographic changes. Under the new national development plan, funding of €4.5 billion has been allocated for this purpose over the lifetime of the plan. This represents the largest investment programme in schools in the history of the State. It is expected to provide 45,000 additional permanent school places in new primary schools and 22,500 additional permanent new places in post-primary schools, together with additional permanent school places and enhanced facilities in existing primary schools. benefiting 40,000 pupils and 60,000 pupils in existing post-primary schools.

These projects, when taken with a number of other projects in developing areas involving extensions to existing schools, will provide approximately 7,500 additional school places for September 2008. In addition, construction is due to commence in 2008 on the first bundle of schools to be procured under public private partnership arrangements as part of the Government's new expanded PPP programme.

The Government is strongly committed to supporting investment in high-tech and high-risk ventures. Two years ago the Minister for Enterprise, Trade and Employment launched the seed and venture capital scheme for 2007-12 specifically to address the problem of a lack of early stage finance in the market for innovative start-up firms. Investment by Enterprise Ireland in this scheme is a vital contributor to the development of a more robust, commercially viable and sustainable seed and venture capital industry in Ireland.

The Government's commitment to encouraging investment by giving tax concessions to entrepreneurs is also shown by the renewal again of the business expansion scheme, BES, and of the associated seed capital scheme, SCS. Following an extensive review of the schemes in 2006, the Finance Act 2007 extended the schemes to 31 December 2013 and increased the aggregate amount that a company can raise under the schemes from €1 million to €2 million. The individual investment limits were increased from €31,750 to €150,000 in the case of the BES and to €100,000 in the case of the SCS. As the schemes are State aids, these changes required that an application be made to the European Commission for approval. This approval was received in August 2007 and a commencement order giving effect to the changes was signed by the Minister for Finance in the following month.

On housing, the Government is committed to investing €18 billion in housing programmes through the national development plan, with €2.5 billion being allocated to our wide range of housing programmes during 2008. The supply of affordable housing from these schemes has consistently increased in the past few years from approximately 2,000 units in 2004 to almost 3,600 units last year and further expansion is envisaged under the national development plan in line with Towards 2016 commitments. To underpin this expansion, the Minister for the Environment, Heritage and Local Government asked the Affordable Homes Partnership to consider how to enhance the range of existing affordable housing mechanisms.

The resulting report, entitled Increasing Affordable Housing Supply, has been published. The report's recommendations are based on optimising the output from the existing mechanisms and include a proposal to introduce a new affordable housing product based on an equity loan arrangement to be used in conjunction with the existing schemes. A public consultation on this report was launched recently and will be concluded within a few weeks. There will also be structured engagement with the social partners, housing practitioners and financiers on this report. These consultations will address, inter alia, views on the proposed new product, the targeting of affordable housing and the need for affordable renting, and the results of the consultation will inform the further development of affordable housing policy.

In addition, the housing miscellaneous provisions Bill, which is expected to be published during the present Dáil session, will include provisions to give effect to the incremental purchase scheme which was signalled in the housing policy statement, Delivering Homes, Sustaining Communities. This scheme will be targeted at households with an income lower than that required for affordable housing. Arrangements are also being considered for the piloting of the proposed scheme in certain areas.

As regards the call for a major programme of training and reskilling of those losing their jobs in manufacturing and construction, Deputies will be aware that FÁS, the national training and employment authority, has a specific policy in place to deal with redundancies and company closures. It offers a tailored approach as early as possible to the workers affected with a view to assisting them to access alternative employment. This applies to workers in all sectors, including construction. FÁS also has a fast-track redundancy notification system in place with the Department of Enterprise, Trade and Employment to ensure that a speedy and appropriate response is provided for redundant workers.

FÁS is developing a strategy in response to the current slowdown in the construction sector and any anticipated future redundancies. This strategy will contain a number of initiatives and measures such as working in close collaboration with the Construction Industry Federation and other key stakeholders to encourage redundant construction workers to seek retraining in skills that are in short supply in the economy. I want to point out that FÁS actively engages with the unemployed after three months on the live register to assist them progress towards employment, training or active labour market programmes. FÁS also places particular emphasis on the training of low-skilled workers in vulnerable industries to ensure that in the event of becoming unemployed, they will have the skills necessary to make the transition to other employment.

In the past two decades social partnership has played a key role in delivering real economic and social benefits. The concept of social partnership is consistent and compatible with the republicanism invoked by Deputy Higgins. Among the core strengths of social partnership, which arises from the involvement of the key stakeholders in our economy in the process, is a clear shared sense of the economic difficulties that are emerging and an associated strong sense of realism regarding the nature of the competitive challenge for Ireland. This realism is needed now more than ever to ensure that competitiveness is restored so that the focus of economic activity can be successfully moved away from residential construction towards export-led growth.

In this context the Government is aware of the crucial importance to the economy of a successful outcome of the national pay talks which have recently begun. The Government has shown leadership by making a decision to defer the increases recommended by the Review Body on Higher Remuneration in the Public Sector for Ministers and Ministers of State. Pay developments in the period immediately ahead must reflect the more challenging economic and competitiveness scenario that we now face and must be accompanied by improvements in productivity, not just in the private sector but across all parts of the public service.

Achieving a national pay deal that supports competitiveness gains in a globalised economy will be a key element in enabling our economy to ride out any storm. We know that our economy is flexible and that we have overcome difficulties before. At the time of the bursting of the dot.com bubble at the beginning of the decade there were fears that it would have a serious impact on the economy, but that did not happen because the economy proved itself to be resilient and emerged with renewed vigour. While the outlook for the short term is not favourable, we can face it from a position of strength.

I am delighted to have had the opportunity to remind the House of the record of substantial achievement in the management of the economy by successive Governments in the past ten years, even in the past 21 years. I am also delighted to have had the opportunity to present to the House a realistic assessment of the present state of the economy and of its future prospects. The Government knows that over the short term it faces new difficulties and constraints. However, it is well equipped to overcome these problems because it has ensured that the public finances are sound and it has identified the priorities to secure future growth while at the same time protecting the weaker in society and deliver on its objectives in these tougher times. Moreover, it has the competence and experience in implementing the correct policies.

The period of high growth that has recently ended began in 1993-94 under the Fianna Fáil-Labour Government. It was sustained by the rainbow Government and it continued through until 2007.

See this speech in context