Dáil debates

Wednesday, 27 October 2010

Macro-Economic and Fiscal Outlook: Statements

 

4:00 pm

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)

Tááthas orm deis a bheith agam labhairt ar an ábhar tábhachtach seo. I am pleased to have an opportunity to speak in what is a very important debate. There is no question but that we face huge challenges. However, we should analyse all of the issues we face in a dispassionate manner because, if we do so, we might find solutions to the very difficult problems we face.

On the credit side, the budget targets that were laid out last year in terms of income and expenditure of the State will be achieved. The big challenge we face, however, is that both internationally and nationally the growth forecast for the next four years is not as was expected. What will happen in the future is, of course, unknown and a matter of conjecture. What is important is that whatever budgetary strategy we have for the next four years is based on figures that are credible at home and abroad. For that reason, we have had to change the growth forecast.

It was Galbraith who said that economic forecasting makes astrology look respectable. Nonetheless, the big challenge we face is that no matter what we think of economic forecasting, it has a huge effect on the markets and, therefore, we have had to readjust our tack. I compliment the Fine Gael Party for recognising that there is no going beyond the budget deficit target of 3% of GDP by 2014. That is a very important consensus. There is no need for consensus on every issue and a bit of debate and difference is healthy. However, it is important that people can agree on the basic fundamentals and particularly important that this fundamental is agreed upon.

With regard to the extrapolation from there to the figure of €15 billion, the position is quite simple. A forecast of growth has been made - it is no big secret what that forecast is - and that inevitably leads us from where we are at present to a €15 billion amount to be made up. Again, on the credit side, it is important to recognise that Ireland's economic performance has improved dramatically in the past year. We have gone from negative growth of 9% to zero or slightly better growth this year, which is very important.

I listened to Deputy Fergus O'Dowd ask where the money went. It is important to recognise that whereas financial issues arose that we would all have preferred did not arise, the main expenditure increases are very clearly identifiable. Nowhere are they identifiable more clearly than in my Department, which makes transfers to pensioners, those with disabilities, lone parents and the unemployed

The increase in the social welfare budget since 2000 is very significant. In 2000, the expenditure of my Department was €6.7 billion whereas it is €21 billion this year. This represents a threefold increase over a period during which there was nothing like a threefold increase in the rate of inflation. Thankfully, the social welfare rate improved dramatically over the period in question. People will say that is easily explained because there is much more unemployment but when one examines the unemployment cost, one will note the unemployment bill for jobseeker's benefit and jobseeker's allowance is €4.3 billion. Allowing for the fact that there were always approximately 200,000 people on the live register, the extra cost would be somewhere in excess of €2 billion. This explains a small fraction, approximately 10%, of the extra expenditure. The vast majority of the extra moneys spent by the Department of Social Protection were spent because we improved the system.

Carers are very dear to my heart because all of us have family members who are involved in caring for loved ones, relatives and others we know. Caring is a very arduous task. The figures in this regard are very dramatic. In 2000, we were spending €99 million on caring. This year, the figure will be €726 million, which represents a sevenfold increase. When people ask where the money went, they must analyse the figures and recognise that the bulk of it was spent on additional investment in education, health and social protection. These are worth protecting and securing for the future. This is where we face the challenge. If we were to arrive in circumstances in which we could not borrow the money required for day-to-day expenditure while reducing the deficit on a scaled basis and opting for growth, the cut we would have to impose would be horrendous altogether. Therefore, the Government is endeavouring to find a middle way, that is, by trimming expenditure now and encouraging growth to try to find a way to reduce the deficit over time with the minimum impact on our vastly improved services.

When one takes into account the statistic that approximately one in every three euro allocated for day-to-day expenditure is borrowed, it becomes obvious to one what would happen if one's ability to borrow money at a reasonable price on the market were to diminish or, as the Taoiseach said this morning, if one could not borrow at all. Therefore, it is imperative that we make the tough decisions required, even though they are really difficult to make, particularly in my Department, given that one is more than conscious of the effects of those decisions on people. In this case it is a question of the old adage that a stitch in time saves nine. By making the adjustments now and front-loading them, we will save the people from much greater cuts and adjustments in the future.

With regard to my Department, there are other ways of saving money. We must work increasingly harder on control measures. I am introducing many more control measures. I hope to have the identity card in the new year. Every euro saved through keeping social welfare away from somebody who is not entitled to it is another euro that can be paid to somebody who is entitled to it. One of the messages we must get across to the people is that conniving with or supporting people who are defrauding the social welfare system is literally taking money out of the pockets of those who are disabled,old or genuinely unemployed. The black economy can and does do great damage to us. It also has a great effect on those in the legitimate economy because they cannot compete.

I have received support from Members of different parties for ensuring that we employ ever-better activation and control measures in order to abolish opportunities to cheat the social welfare system. I have been working very hard on the question of activation whereby a win-win scenario is achieved and whereby opportunities are given to those who are genuinely unemployed and want to be involved in community work. There is an opportunity to identify those who are not interested in working because they already have an income. We are currently running a number of pilot schemes in this regard and doing much more intensive activation work. It will be very interesting to see the results.

Let me make an analogy concerning what we must do, which analogy my colleagues in the Green Party will like because it is derived from nature. Often, if one wants a tree to grow, one must prune it. If one does not prune it, it will not grow the following year. On the other hand, if one prunes the tree too tightly, one might kill it. Our challenge is to prune correctly such that we will stimulate maximum growth. The means of stimulating maximum growth are those that will allow us to borrow cheaply on the international markets so we will not waste taxpayers' money on unnecessary interest and which will earn international credibility such that people will invest in our country. Such a method of pruning will, in the longer term, achieve the best balance and allow us to maintain the fundamental systems we have put in place.

This leads me to a point about which Fine Gael is particularly exercised and on which I agree, namely, that employment growth and economic growth comprise the key to emerging from our problems in the longer term. I agree with Fine Gael in this regard although I do not agree with every detail of its plans. It is telling us there is money that is not available.

Comments

No comments

Log in or join to post a public comment.