Brendan Howlin (Wexford, Labour) | Oireachtas source

The purpose of this spring statement is to set out our present economic and fiscal situation and to generate discussion about our nation's economic priorities over the medium term, not only from the Members of this House, but indeed from the broader Irish community. As the Minister for Finance has outlined, we are looking forward to having between €1.2 billion and €1.5 billion of fiscal space for budget 2016. We will allocate these resources, as he said, on an equal basis between additional spending and reducing the tax burden on low and middle-income earners. Additional investment may also be possible arising from reduced spending on unemployment payments as the numbers at work continue to grow.

Today is about recognising the point we have now reached in our recovery and then setting out the context for budget 2016. Today is not an alternative to that budget; it is a point-in-time assessment of where we stand right now and the challenges we face. I want to outline some of the challenges facing public expenditure as our economy recovers. I will also set out some of the priorities on which we will need to focus over the coming years.

I am confident we can build on the progress achieved if we continue, as we have done for the past four years, to make the right decisions. Having come through the worst economic shock in our history as a State, our primary focus must be, and will be, on sustainability. The Minister for Finance and I share one overriding priority. That is to ensure that what we endured as a nation over the past seven years never happens again. We will not throw away the hard-won progress the people of Ireland have made.

As a result of the decisions we have taken, the State's finances are in a demonstrably better position. The imperative now is to ensure we continue to act responsibly. Last year, gross voted expenditure amounted to some €54 billion. This is a reduction of over €9 billion from the 2009 peak. During that period, current spending was reduced by nearly 10% and capital spending by half, albeit from historical highs. These reductions were made at a time of increased demands and pressures on public services. These included significantly increased numbers of people needing unemployment payments, more medical card holders, and additional students in the education sector. Unlike the private sector, which in a recession sees falls in demand, the demands on public services increase during a recession. In addition, we are facing demographic changes that present challenges for our health and pensions system. A prudent plan for the public finances must prepare for those changes.

The economic crash has taught us that nobody owes Ireland a living. We received emergency funding at a time when the markets stopped lending to us. We owe it to ourselves to ensure we do not allow a return to that position. That is why we have sought to broaden the tax base to prevent an over-dependence on property and transaction taxes, which contributed to the crisis in the State's finances.

On the spending side, we are now planning our expenditure on a multi-annual basis, rather than from year to year. We have implemented a programme of reforms to improve the State's budgetary architecture. Today's economic statement forms the newest part of that reformed budgetary process. Additional reforms in recent years include the introduction of multi-annual expenditure ceilings, regular comprehensive reviews of public expenditure, publication of the updated public spending code, implementation of performance budgeting, and the establishment of the Irish Government economic and evaluation service. We have brought a greater level of transparency and efficiency to the allocation and spending of public money. None of these reforms is in itself a game changer and they are yet to bed themselves in the public mind. They do, however, represent a fundamental improvement in the way we do public business.

It became fashionable for a while to decry this country and its potential. However, the turnaround we have achieved in our economy is indicative of the fundamental strengths of the Irish people and the Irish nation. We are now the fastest-growing economy in Europe. Our recovery from this crisis has been as remarkable as our original descent into it. Ireland is a small, open, flexible economy with the ability to react fast to changing markets. Our population is comparatively young by European standards. We have developed an ability to attract investment that is the envy of the rest of the world. The days when we could plan our economy in isolation are long gone. We are reactors to, not drivers of, global economic demand. We are dependent on the international marketplace to sell our goods and services and we are exposed to external developments. We have learned just how vulnerable we can be to a global downturn exacerbated by domestic policy mistakes.

Our purpose into the future should be to mitigate these threats where we can, to build into our economy resilience, and to focus on how we can continue to grow our economy. Success in these efforts will allow us to build the society that reflects Irish values - one that is fair, caring and decent, one in which people are rewarded for work, and one where every region and county shares equally in the progress. Most in this House know that a fair society cannot be built on the back of a weak economy.

The challenges that come with economic recovery have a context. Increases in public expenditure must be affordable. That is why the European Union has adopted rules to support sustainability. Endorsed by the Irish people in a referendum in 2012, the new fiscal rules serve as a tool to help us to responsibly manage our recovery. The rules mean that any future growth in public expenditure will not exceed the level of potential economic growth, unless we specifically levy additional taxes to fund it. For a country like Ireland where the national debt, as the Minister for Finance has indicated, is high, this is a lesson we do not need to relearn. These rules are new and hopefully will evolve over time and be refined but there is no denying the fundamental truth at their heart. Public expenditure must be sustainable. We must plan carefully, using evidence-based decision-making to ensure that we invest people's money in ways that will be of maximum benefit to the people of Ireland, not just for the next year or two but over the medium and longer term.

As I have already indicated, reductions in spending have made a significant contribution to the overall fiscal consolidation. However, our approach was never to simply apply blanket reductions to all areas of spending. In the context of a poorly performing economy and a weak labour market, we recognised that we need to support economic growth and protect our society's most vulnerable people to the greatest extent possible.

Budget 2015 marked a very welcome point in our journey of recovery. It was the first since 2009 that reductions in expenditure were not required to meet our set fiscal targets. Now, as outlined in today's fiscal forecasts and in the documentation before every Member of the House, when we prepare for budget 2016 we can look forward to increased gross voted current expenditure by an additional €600 million to €750 million. This increase will allow Government to deal with underlying demographic pressures in key areas such as social protection, education and health. It will allow us to target enhancements in key public services.

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