Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Since taking office in 2011, the Government has been determined to fulfil the mandate given to us by the people, to repair the economy and public finances, to create jobs and to give hope and confidence to our citizens of a better future. The scale of the economic crisis that we have gone through has been unprecedented in Ireland’s history. We have essentially lost a decade in terms of economic growth and job creation. Difficult decisions have been taken and huge sacrifices have been made by the people. This has not been in vain, however.

The spring economic statement published today confirms the path taken was the right one. As we now plan for the remainder of this decade, our citizens have every reason to be confident and hopeful about their future. It will be a future of steady, stable economic growth with more people working in secure and sustainable jobs than ever before in the history of the State. It will be a future of stable public finances that will deliver money in people’s pockets, higher quality public services and strategic investment in essential infrastructure throughout the country.

Such a bright future, however, is not guaranteed and is contingent on a continuation of the policies and reforms introduced and being followed by this Government. There are external risks, no doubt, but the choices taken in this House also matter. A return to the “If I have it, I will spend it” ways of the past or indeed the “Even if I do not have it, I will still spend it” policy stance taken by the Opposition over the past four years is by far the biggest risk to economic growth, job creation and the prosperity of our people. Any rowing back on the reform measures through, for example, narrowing the tax base, increasing taxes on work and on businesses, halting labour force activation measures, or reducing Ireland’s competitiveness, will cost jobs, reduce growth rates and tax receipts and reduce the living standards of the people.

Protecting and securing the hard-won gains of the past four years and building on them for the future is the priority. The facts clearly show the policies of this Government have worked and will continue to work in the years ahead. The economy is growing at the fastest rate in Europe, namely by 4.8% in 2014 while the Department of Finance is forecasting growth of 4% for this year. Steady, stable economic growth of 3.25% on average is forecast for the remainder of the decade. The recovery is jobs-rich, with 95,000 jobs added from the low point in 2012. My Department is forecasting we will pass the 2 million people in employment mark next year, replace all of the jobs lost during the downturn by 2018 and, in total, between 2015 and 2020, add 200,000 new jobs.

Net outward migration is expected to cease next year with a return to inward migration from 2017 onwards. The young people who have left are coming back and will continue to do so. The public finances are under control with the deficit falling below 3% this year and debt levels are set to move down towards the European average in the next few years. As a result, we will be in a position to implement another expansionary budget this year and every year out to 2020, if this is deemed prudent and appropriate. We will meet our medium-term objective of a balanced budget in structural terms over the forecast horizon.

The Spring Economic Statement being published today sets out the policies to build upon the recovery and deliver these objectives over the remainder of this decade through a continuation of prudent, medium-term, focused budgetary and economic policies that will secure sustainable increases in jobs and in living standards.

The April 2015 Update of the Stability Programme is also being published today and will be submitted to the European Commission later this week in line with our requirements under the European semester.

The Spring Economic Statement is part of a much broader reform of the budgetary framework. The next phase in this new framework is the National Economic Dialogue which will take place in July. This will widen consultation on the budget with key stakeholders, while fully respecting the role of the Government and the Oireachtas to make policy. The National Economic Dialogue is about ensuring that we have an informed and mature discussion regarding both the short- and medium-term priorities. Full details on these reforms to the budgetary process are included in section 5.3 of the Spring Economic Statement, which has been circulated to everybody.

Turning to the economic situation, I am greatly encouraged by the data flow over the last year or so, which clearly shows that the recovery is gaining momentum and, importantly, is becoming more broadly based. This is just the start of the recovery and the figures tally with what I see on the ground - more people are working, people have more income in their pockets, people are more confident about the future and businesses are being created and are expanding.

Following GDP growth of nearly 5% last year, my Department is projecting GDP growth of 4% this year, with positive contributions from both exports and domestic demand. Over the remainder of the decade the Department of Finance estimates that the economy has the capacity to expand by around 3.25% on average per annum.

Economic recovery is yielding benefits in the labour market. The figures show that 95,000 net new jobs have been created since the low point of the crisis, and the latest data show job creation in 11 of the 14 sectors of the economy reported by the Central Statistics Office. The Action Plan for Jobs has played a key role in bringing together all Government Departments and the target of 100,000 additional jobs by 2016 will be met this year, a year earlier than committed to. Unemployment has fallen by five percentage points since its peak and we will continue to work to reduce it further.

A continuation of the current strategy will see 2 million people at work by the end of 2016. The employment lost during the downturn will be recovered by 2018 and there will be more people working in Ireland by 2020 than ever before.

Stable public finances are essential for economic growth and the first task of the Government was to stabilise the deficit and put it on a downward trajectory. However, the annual budget is not simply an exercise to meet a deficit target. The design of a budget is part of a much broader strategy to manage the economy for growth and job creation. In each of the budgets introduced since 2011, rebuilding the economy sector-by-sector has been a key feature. So unlike the past, in the future we will not be reliant on one particular sector – the construction sector – for jobs and growth, and the transactional taxes that flow from this. We must never again repeat the boom-and-bust economic model. Over the remainder of this decade we expect all sectors of the economy to contribute to growth and employment.

In some areas, such as tourism and agri-food, the approach has been about building on our comparative advantage and exploiting new external market opportunities. The reduction of the VAT rate to 9% in the tourism and hospitality sector, the abolition of air travel tax, and tax changes to support farmers gearing up for the ending of the milk quota, have all proven very successful. In other areas, particularly construction, the focus has been on repairing a sector that was hugely affected by the crisis. The Government has presented plans to continue the sector-by-sector approach to growing the economy.

I would like to give a few examples of the level of ambition embodied in these strategies. Our tourism strategy, People, Place and Policy – Growing Tourism to 2025, aims to increase revenue from overseas visitors by €1.5 billion to €5 billion and to increase employment in the sector by one fifth to 250,000 by 2025.

The IDA's Winning: Foreign Direct Investment 2015–2019 aims to win 900 new investments for Ireland over the period to 2019, creating 80,000 new jobs and 35,000 net jobs. It also sets an objective of winning €3 billion in new research and development investment projects.

Enterprise Ireland's Driving Enterprise and Delivering Jobs strategy to 2016 sets out a range of actions and initiatives that will create over 40,000 new jobs in Irish companies, increasing Irish exports by €5 billion to €22 billion by 2016 and beyond that to €27 billion by 2020.

The international financial services sector 2015 to 2020 policy targets 10,000 new jobs in the IFS sector by 2020.

Construction 2020 sets out the Government’s strategy for a renewed construction sector which can meet the medium-term demand for about 25,000 new dwellings a year over the next 15 years as well as the other infrastructure needs of the economy.

The Government is driving a very ambitious and successful growth agenda for the agrifood sector under Food Harvest 2020. The strategy’s target amount for all primary output of almost €6 billion was virtually achieved by 2014, while a 42% increase in exports and a 40% increase in value added by 2020 remain on course to be achieved.

The rapid development of new payments technologies is fundamentally changing the landscape and throwing up new opportunities and challenges. The advent of the single euro payments area, SEPA, has created a single, integrated payments market in Europe for the first time that can be developed further. Ireland is already an attractive destination for international payment firms but the Government wants to maximise our potential in this sector of the economy and has tasked Enterprise Ireland, in the IFS2020 strategy, with establishing a payments forum to review the positioning, opportunities and dependencies of the sector.

Irish Water has set out an ambitious strategy to invest €5.5 billion between 2014 and 2021. The increased investment over the period ahead will be vital in ensuring communities can access reliable, high quality drinking water and sewerage services, and our economy can continue to facilitate and attract water-intensive industries – ICT, pharmachemical companies and agrifood – which, combined, currently provide well over 200,000 jobs. The investment is also required to prevent the massive wastage of water through leaks and to ensure a reliable safe water supply for all our citizens.

This broad based economic strategy is supported by a domestically refocused banking and financial system, beginning to lend into a much broader range of sectors. Banking supervision has been improved with a strengthening of the powers of the Central Bank, while at a European level the move towards a Banking Union is continuing. All of these will help prevent excessive credit growth in one sector of the economy in the future. It will also ensure that our small and medium businesses, SMEs, and households have access to multiple sources of low cost credit, an essential ingredient for growth.

Addressing personal indebtedness is essential as our economy returns to strength. A mortgage is the single biggest debt most people will ever take on. The number of households unable to meet their monthly mortgage repayments increased with the decline in the economy, as incomes fell and unemployment increased. Supporting homeowners in arrears has been a priority for this Government and a broad strategy has been introduced to keep as many families in their homes as possible. This strategy has assisted borrowers and lenders reaching agreement to restructure about 115,000 mortgage accounts.

As the economy continues to improve and incomes rise, the number of arrears cases is falling. However, there are over 37,000 mortgage accounts, representing about 30,000 homeowners, in long-term arrears of over two years. The Government is actively considering a range of options to strengthen the mortgage arrears framework in order to ensure that families in long-term arrears can find a solution. For the majority of these families the best route to a sustainable and binding solution is through engagement with their bank. Many others will find solutions through the options offered by the Insolvency Service of Ireland.

The Government intends making an announcement on the issue in the coming weeks. A particular focus will be on enhancing the role of the Insolvency Service of Ireland and the range of solutions that become available through an insolvency arrangement.

Access to credit for households is as important as access to credit for businesses, but the mortgage interest rates being charged by banks in Ireland have not been reduced in line with the rate reductions implemented by the ECB. I recently discussed this issue with the Governor of the Central Bank and he updated me on the ongoing work that the Central Bank is carrying out on this issue. The Central Bank will report back to me in the coming weeks and I intend to initiate during the month of May discussions with the six main lenders in Irish banking on the issue. I look forward to hearing their plans for reducing interest rates.

Sustainable public finances are a prerequisite for improvements in living standards. The Government is committed to prudent management of the public finances in the years ahead and there will be no return to the boom and bust model of the past. This commitment is supported by the fiscal rules that are applicable to Ireland and all member states of the European Union. The fiscal rules are designed to support economic growth. The need to bring the deficit below 3% of GDP has been the anchor for our fiscal policy over the last number of years. This was a hugely important commitment and each year we set a target to reduce the deficit on a phased basis. Each year we overachieved on our fiscal target which sent a strong message to the public, SMEs, the FDI sector and investors at home and abroad that Ireland was regaining control of our public finances. This, in turn, led to increased confidence and investment and lower interest rates and borrowing costs thereby supporting growth and job creation throughout the country.

Over the period 2011 to 2015, the deficit was reduced from €15 billion to €4.5 billion. These targets were achieved with fewer tax increases and expenditure cuts than originally envisaged when the troika was brought into the country. With the last budget, we reached the end of austerity budgets and did so much earlier than we had initially planned. The Department of Finance is now forecasting a deficit of 2.3% of GDP in 2015. There are obviously risks to this forecast and it is essential that discipline is maintained in the management of the public finances. With the deficit falling below 3%, a different set of rules will apply from next year and we will be required to make progress towards a balanced budget in structural terms. This will be the new anchor for budgetary policy and it is designed to ensure that budgetary policy supports economic growth. Put simply, it is designed to ensure that the days of "if I have it, I'll spend it" are over. The new approach will protect the Irish people from the boom and bust policies of the past. If these rules had been in place and properly applied and adhered to in the early 2000s, Ireland would have been far better positioned to weather the global financial crisis.

As the House will be aware, the rules can throw up anomalies from time to time and I recently raised this issue with my European colleagues. What I was concerned to ensure was a credible application of the rules rather than a change in them. I am pleased to inform the House that the European Commission has accepted that we in Ireland have a strong point and agreed to a change in the application of the rules. As a result, the Government will be in a position to introduce our second expansionary budget in October.

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