Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am glad to avail of this opportunity to discuss public expenditure and, in particular, the Revised Estimates for 2009, which have been discussed by the relevant committees in recent weeks.

It will be useful to outline the economic context of the Revised Estimates. Our economy has been hit by substantial external and internal shocks and we are expecting a cumulative loss in national income of approximately 13% between 2008 and 2010. On the external side, the fall-out from the deepest and most widespread international recession in more than half a century is having major repercussions in Ireland, particularly given the globally integrated nature of our economy. Domestically, the adjustment in the residential construction sector to more sustainable levels of output will subtract nearly 4% from economic activity this year, accounting for roughly half of the anticipated annual decline in GDP. Arising from this are spillover effects to other sectors of the economy, as reflected in the weakening labour market in recent months.

Our approach is to position the economy to benefit from the global recovery as it emerges. Our export sectors are proving robust and our labour force continues to be highly skilled and flexible. We are continuing to invest in education at all levels in order to ensure we have the skills demanded by our increasingly knowledge intensive economy. Our international cost competitiveness is improving, due in part to wage flexibility in both the public and private sectors. This is a significant achievement which many countries would wish to emulate. Adjustments have been made to work practices and other labour market costs to safeguard employment.

The Government remains committed to providing a pro-enterprise environment and maintaining our relatively low tax burden on business. We are also maintaining capital spending at a high level by international standards to allow us to continue our investment in productive infrastructure. Through implementing the correct policies now we will safeguard our recent progress, much of which has survived the downturn, and secure our future prospects. Strong, sustainable public finances are key to ensuring confidence in the Irish economy and the actions taken by the Government to date to address the budgetary difficulties will ensure this.

The Government is committed to restoring order to the public finances and the allocations presented in the Revised Estimates for Public Services in 2009 play a key role in this. These Estimates reflect the necessary expenditure measures introduced by the Government over the past year while protecting possible vital front line services as much as possible. I will not recap the various measures that were adopted other than to say that there were four stages of budgetary adjustment since July 2008, including the October 2009 budget, the further savings secured in February along with the public service pension levy and the supplementary budget in the spring.

The process of adjustment for this year has been completed and amounts to a cumulative fiscal correction of 5%, one of the highest in western Europe. That the Government secured it within one year is a tremendous achievement. Given the scale of the international downturn, the adjustment was essential. It is obvious that international confidence in the country has recovered because of the steps taken by the Government, notwithstanding the banking sector practices that came to light. These actions were essential to stabilise the public finances and to ensure that the general government deficit does not exceed 10.75% of GDP in 2009. While this is a high-level deficit, it represents the most appropriate target for the year, given the current conditions in the Irish economy.

As Deputies are aware, the supplementary budget also set out a plan to bring the general government deficit to within 3% of GDP by 2013. This strategy has received the backing of the EU Commission. As the House knows, the special group on public service numbers and expenditure programmes, SGPSNEP, is reviewing the scope for reducing or refocusing the existing range of expenditure programmes. Given the scale of the expenditure adjustments now required, no area of expenditure can be excluded from this process. Not only are spending programmes being examined, but the overall efficiency of the public service is being considered, including any ways of doing business that are out of step with the needs of a modern, responsive public service. The group is also examining and will make recommendations for further rationalisation of State agencies beyond the measures announced in budget 2009. I expect to receive the report in the next few weeks. Clearly, this will give the Government options and enable a public debate on the choices that we face. How much time have I used?

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