Tom Fleming (Kerry South, Independent) | Oireachtas source

Under the EU-IMF-ECB programme, we are committed to implementing several reform measures in respect of our budgetary management process. These will build on reforms undertaken to date in Ireland, especially since 2006, which have been aimed at increasing the transparency and effectiveness of the budget process. For several years our budgetary framework has been identified as substandard with regard to multi-annual fiscal planning and management. For example, annual expenditure growth averaged approximately 10% between 2001 and 2007, which outpaced the annual rates of economic growth during the same period.

The existing budgetary process focuses attention on the immediate year ahead, whereas expenditure trends and pressures which fall outside the annual frame of reference do not receive the same attention or control. By the time these future years are reached earlier projections will invariably have been superseded. Ireland operates the traditional annual cash-based system of government accounting. The Department of Finance often acknowledges that this approach has strengths in terms of management and control of the cash allocation from year to year. However, many key themes of public financial management during recent decades have not been ideally catered for by these arrangements.

One key budgetary reform has been the pre-budget outlook, which replaced the previous economic review and outlook published mid-year or during the summer by the Department of Finance. The pre-budget outlook is published in October and November and presents a multi-annual review of the economic and budgetary contexts within which the following December's budget is framed. Another key reform has been the introduction of a unified budget whereby all expenditure and tax policy decisions are put together on budget day and expenditure estimates are produced as part of the budget documentation. As a result of these reforms, Ireland is gradually reaching the required levels for a medium-term expenditure framework and for the development of multi-year budgeting and expenditure planning. These features have become an integral part of the financial management systems of many countries, including Sweden, Finland, the United Kingdom and the Netherlands. They have been practising these methods for several years, approximately since the turn of the century.

The Bill proposes that each financial year the Government will, upon a proposal from the Minister for Finance, approve an upper limit on the Government expenditure ceiling for the following three financial years. Section 17(3) provides that the Minister for Finance may propose to Government that this amount be revised for any one of the financial years in question. I welcome this initiative and I am pleased that there is provision for flexibility by the Minister for Finance.

Recently, there has been much emphasis on austerity measures. Let us consider the debate on the promissory notes. At the time, last February, I highlighted the fact that as far back as last October Christine Lagarde and the International Monetary Fund directed the European Central Bank and the European Union to ease off on the extreme austerity measures which were being imposed on the Irish public. It took six months before that was reiterated by a senior member of the troika. That is shameful. It should have been acknowledged if the Irish Government was informed behind the scenes. That much should have been brought forward to Dáil Éireann. I only became aware of it because I saw it in a newspaper article, which I put aside at the time. It is noteworthy that within the past five or six weeks it has been acknowledged and recognised that this statement came from someone in European officialdom.

There is good will from the Government.

There have been utterances from a number of Ministers. The Minister of State at the Department of Finance is here tonight and I would like him to give some clarity on Government policy on what is coming from the top down. Our situation has been compounded by layer after layer of harsh measures and people cannot take any more. From now on we must plan a strategy to get ourselves gradually up off our knees. We must have stimulus programmes and reach out to Europe to get additional support and help; we have made a start on this. We must accelerate our efforts in this area. We may then offer some hope to the public, who have been driven into the ground in many cases with the weather and shortages for farming communities at present. Great efforts are being made by the Minister for Agriculture, Food and the Marine and the Government on that, with co-operation from everyone. People are acting in a neighbourly fashion and helping each other out. The IFA and the farming organisations are on board as well. We hope we will get over this dire situation, because we are well aware that farming is the backbone of the Irish economy.

The ECB must recognise some of the damage done by the EU and all involved in it. I am sure the Government is trying hard and this is a delicate situation involving a whole European and global situation. There is recognition that we need a huge boost so we can lift the economy. There should be small business incentives which would stimulate more job creation, which is paramount to lifting us out of our deflation and reviving the ailing economy. It is crucial over the next three to five years if we are to make any sort of return to normality.

There are a number of issues. Section 17 of this Bill provides for the Government, following a proposal from the Minister for Finance, to approve an upper limit on Government expenditure, which comprises the aggregate amount of voted expenditure and expenditure of the Social Insurance Fund, SIF, and the national training fund for each of the following three years. The reality is that a review in September 2012 of Ireland's SIF showed a significant shortfall. The fund, which forms the core of the country's system of social insurance, is set to expand to €25.7 billion by 2066, or 5.7% of GDP, according to the most recent official actuarial review. The SIF finances long-term benefits such as pensions as well as short-term payments, including maternity benefit, jobseeker's benefit and carer's allowance. The actuarial review of the SIF set out the position of the fund at the end of December 2010 and gives projections as far as 2066. The fund currently has a significant shortfall of income over expenditure, provisionally at €1.5 billion for 2007, with expenditure of €9 billion but income of just €7.5 billion, according to the review. This poses an alarming situation that we must set about rectifying, and whatever measures that will have to be carried out must be put in place over a number of years. It certainly will not be done in the very short term. The Minister for Social Protection, however, is committed to rectifying this. She has stated the significant shortfall in the fund is being met by the Exchequer, and the prospect of acceleration of this deficit in the future represents a daunting challenge that must be addressed. The one thing we cannot lose sight of is our pensions, maternity benefits and the different funds for jobseekers, carers and those with a disability. We must ensure they get adequate funding.

We must acquire assistance from the European Social Fund and funding globally. I welcome the national training fund, which was also mentioned in the report.

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