Brendan Howlin (Wexford, Labour)

Go raibh maith agat.

Introduction

As I begin, I would like to say that I am conscious that the last Minister who stood up here to announce the Government's spending plans was the late Deputy Brian Lenihan. I believe it is appropriate that his commitment to his country and the public interest should be acknowledged here today.

Tomorrow, the Minister for Finance, Deputy Michael Noonan, will deliver his first budget. Today, I am, on behalf of the Government, announcing the expenditure Estimates which will complement tomorrow's announcements. I would like to thank my parliamentary colleagues for facilitating this changed arrangement. The change is not simply about two Departments and two Ministers. Our budgetary process, as I will outline later, is about to change fundamentally. I would like to thank all of my colleagues in Government for their support during this process. This is a collective effort, with all members of the Government involved.

Economic and Fiscal Context

There is no hiding from the fact that, as a Government, we must take very difficult decisions, but these are decisions that we must take in the long-term and strategic interests of the State and its citizens.

We are going through a painful process of adjustment. Public anger is acute because the public was not responsible for putting us in the position we are in. Twelve months on from the arrival of the troika, we have seen some improvement. Our position has stabilised. Twelve months ago, we were Europe's problem. Now, problems in the European and global economy threaten our recovery. As a Labour Party Minister I never expected that I would be making the type of announcements I am making today. We have been forced to make difficult and unpalatable decisions, but we, as a Government, are committed to being honest and up-front with people in the hard choices that we must make.

We have a significant fiscal deficit which needs to be closed. This is understood by all. We are bound by our commitments to our international partners. They are our lenders of last resort. For now, we depend on them to pay our way. Our country has suffered the greatest economic crisis in living memory, leading to a large fall in Exchequer revenues. Tax revenues fell from €47.25 billion in 2007 to €31.75 billion in 2010, a fall of one third in just three years. We are now rebuilding our revenue base, but we do not have the resources to fund all the services that we would like to provide.

The Structure of Spending

The Minister for Finance has published the medium-term fiscal statement, which sets out the contribution to our consolidation effort from the different elements of the budget: taxation and current and capital spending.

For 2012, we must implement a fiscal consolidation of €3.8 billion to deliver a deficit of 8.6% of GDP. Of the total adjustment, €2.2 billion, or just less than 60%, will be on the expenditure side of the account, with the remainder of the adjustment being implemented through revenue measures. Capital spending will contribute €755 million to the consolidation of expenditure in 2012. Despite the difficult budgetary parameters, the capital investment programme for 2012 to 2016 will amount to approximately €17 billion, including €3.9 billion next year. Day-to-day expenditure from the Exchequer will contribute about €1.4 billion to this consolidation, which is equivalent to 2.7 % of total current spending. As an indication of the Government's determination to alleviate the burden caused by measures announced today, this is €300 million less than provided for in the last Government's national recovery plan, despite the upward revision in our overall consolidation.

Spending Pressures

Over the period 2009 to 2012, nominal current voted spending will be down from its peak by almost 7%. These reductions are at a time when we are facing increased demand for public services and when there are strong spending pressures. In a recession, the Government is a spender of last resort. Our spending is by necessity greater than our income this year. Government cannot simply abandon people who are dependent, sometimes critically, on public services. This is an important point. Despite reductions in overall numbers of public servants and public spending, we are delivering considerably more financial supports and services to our people. It is a point frequently forgotten in public debate.

The pressures on our social welfare budget are enormous. The financial allocation for jobseekers' payments alone is now over three times the 2006 level. The demand for health services has also increased and the number of medical card holders has increased by a staggering 500,000 since 2007. In the education sector, demographic pressures mean that we need more teachers and class rooms to accommodate more children. This is unavoidable. The provision for State pensions has increased from €3.7 billion in 2007 to a projected outturn this year of €4.7 billion. We will need to continue to increase this financial allocation year-on-year due to our demographic profile. Next year an additional allocation of €175 million will be required. While acknowledging these pressures, Government spending must nevertheless fall next year and in each subsequent year to 2015.

Comprehensive Review of Expenditure

Today's expenditure announcements are driven by a comprehensive review of expenditure carried out by the Government in the past eight months. The review entailed root and branch analysis and assessment of all programmes of expenditure in an attempt to identify priorities for scarce resources in the years ahead. Everything was looked at and options for savings drawn up by all Departments and Ministers.

Today does not mark the end of the expenditure reviews, rather it is a first step. We must constantly and consistently monitor and review public expenditure. We cannot afford not to do so. We have decided that a fresh CRE-type exercise should be conducted on a regular basis to reset the multi-year expenditure ceilings in line with emerging Government priorities and informed by new evaluations of which expenditure programmes are delivering real value for money. To this end, it is anticipated that the next CRE will be undertaken in 2013-14 to inform the next phase of fiscal planning. The Government has a shared determination to ensure taxpayers receive value for money for the investment they make in public services.

Of course, the fact that there was a detailed and careful review of options does not make the difficult choices any easier, given the structure of spending. Spending on social supports makes up 38% of current spending. Public service pay comprises 30% and public service pensions, 6%. All other programme expenditure makes up the rest.

From a sectoral perspective, the vast bulk of Government current expenditure is accounted for by health care, social protection and education. Together, these three Departments account for 80% plus of total current spending. We cannot make the savings we need to make without touching sensitive policy areas.

GUIDING PRINCIPLES

The expenditure decisions announced today reflect the need to prioritise. With this in mind, the difficult decisions made were based on three guiding principles: fairness, jobs and reform.

Fairness

We must ensure the burden of recovery is shared fairly and that the most vulnerable in society are protected as far as possible. We need to maintain social solidarity in the face of difficult times. My colleague, the Minister for Social Protection, recently referred to the challenge of social inclusion in an environment in which unemployment has increased, incomes have fallen and the revenue available to the Government to fund public services has decreased. Despite this, the Government remains committed to building a socially inclusive and fair society and we are determined to do our utmost to protect the most vulnerable in society.

Jobs

Central to all this is jobs. We need to keep people working and get others back to work. Budget 2012 will make further inroads to dismantling barriers to employment, complementing progress on reorienting labour market activation and training policy. The Government recently committed to deliver a multi-annual action plan for jobs with quarterly targets for delivery every year and a monitoring group to oversee implementation. The action plan for jobs will address seven principal areas: improving competitiveness and intensifying competition in sheltered sectors, supporting indigenous start-ups, assisting indigenous business to grow, attracting inward entrepreneurial start-ups, developing and deepening the impact of foreign direct investment, developing employment initiatives within the community and exploiting sectoral opportunities identified as priorities we can grow.

The Government will shortly publish a policy statement on labour market activation called Pathways to Work, in which we will set out our strategy to reform labour market activation policy to prevent the drift into, and help the reduction of, long-term unemployment. During 2012 we will prioritise places, including in the further education and training sector, specifically for those on the live register for 12 months or more. We will also provide for a further roll-out of the Springboard initiative to provide conversion courses to upskill and reskill unemployed people to meet skills shortages in new and emerging sectors.

I am also providing for an allocation of €20 million for a new labour market activation fund. This fund which will be specifically targeted at the long-term unemployed will deliver upwards of 6,500 places next year.

Reform

Reforming how government works to reduce costs and protect front-line services is also one of the Government's guiding principles. The Government's agenda is reform. We have already reduced the pay of the Taoiseach and Ministers, reduced allowances and secretarial supports for former taoisigh, reformed ministerial transport arrangements, changed pay and conditions for senior public servants, reduced the number of Oireachtas committees, cut the overall cost of special advisers to Ministers-----

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