Dáil debates

Tuesday, 28 April 2015

3:00 pm

Photo of Brendan HowlinBrendan Howlin (Wexford, Labour) | Oireachtas source

Including these additional allocations, general Government expenditure, excluding debt interest, is forecast now at just 32% of GDP or 37.5% of GNP. As a proportion of the overall economy, Government spending is back now to roughly the size it was in 2001.

Post-2016, the no-policy-change position outlined in the documentation before the Members is an annual increase of €300 million in current expenditure. Given the improvement in the fiscal position set out today, we expect there to be more space to accommodate additional spending. What we have done, simply, is that after next year we have factored in demographic pressures. The extent of this space, as the Minister for Finance has indicated, will depend on continuing to pursue the correct policies.

Ireland is changing. Over the last decade, our general population has increased by 500,000 people. We have the highest percentage of people aged under 15 in the European Union and the joint highest fertility rate. Life expectancy has also risen and now almost 13% of our population are 65 years old. These changes are positive and welcome and the envy of many countries, but they also present service and resource challenges for our health, pensions and education systems.

On current projections, the ratio of working age people to those aged over 65 is expected to fall steadily from 5:1, which it is today, to just over 2:1 by 2060.

By 2021 the number of our citizens over the age of 65 will have increased by close to 40% from a decade earlier. This represents an extra 200,000 people. Overall, this portion of the population is projected to increase from 11% in 2010 to 15% in 2020 and to 24% by 2060. In the health area, demographic changes alone will cost an estimated €200 million per year over the coming years. This is partly why our focus has been on extending the reach of primary care and taking pressure away from our acute hospital system.

We may be a younger country than many of our European partners but we too are facing pressures on pensions. We currently spend over €6.5 billion annually on pension provision. More than 400,000 people are in receipt of one of the two main State pensions, contributory or non-contributory. The cost of paying for these two pension schemes alone is projected to increase by €200 million per year out to 2026. Let me be clear, however, that there is no threat to the pension. This Government is committed to pension provision and to sustaining the value of the pension. It is because of this commitment that in our discussions on spending, it is important to be clear about future trends. Not enough of our citizens are planning for the future to supplement their State pension entitlements. It is in this context that the Tánaiste has set up a working group to examine the pensions issue.

In education, the number of school children is, thankfully, set to increase every year over the next six years. By 2021 we will need an extra 3,500 teachers at primary and secondary level to provide education to an additional 50,000 pupils. The number of third level students is also projected to increase by 20,000 in the same period. These are welcome and positive developments but we must plan for them. Our economic future is bright as our highly educated work force expands but we need to plan to ensure our public finances can meet these real challenges.

Of course, we need to generate resources by growing our economy before we can spend money. On its own, the State cannot create wealth. Instead, it must do all it can to create the right conditions for prosperity through progressive taxation, appropriate regulation and targeted investment. Later, I will speak further on a number of the key areas for which investment is required– employment, education, infrastructure and public services. Before I do that, however, I should state that an economy is not a society. A functioning society is a fair one where the fruits of economic growth are shared among all the people. We are committed to continuing to provide necessary welfare and other supports to those who need them. That is why, throughout the crisis, we maintained core social welfare rates. It is also why, in the last budget, we increased child benefit rates, the living alone allowance and spending to address homelessness.

It is worth pointing out that Ireland has one of the most progressive tax and welfare systems in the OECD. In fact, the most recent figures indicate that Israel is the only OECD country that has a more progressive income tax system than ours. Continued investment and growth in our economy will give us the resources to assist those who need it most. This goes to the heart of our economic model.If we do not create the wealth we cannot redistribute it.

We take the view that reducing unemployment remains the best route to recovery. It increases the tax base and allows investment in public services. By continuing to get people back to work we make our recovery sustainable. Irish people want to work. This has been a central focus of this Government’s efforts and we are now starting to reap the benefits. Employment has increased in every quarter for over two years and we expect this trend to continue. Almost 100,000 new jobs have been created since the low point in mid-2012. We are achieving success through a range of measures, including the Action Plan for Jobs and investment in key capital projects such as social housing. Tackling long-term unemployment will remain our key focus. Our Pathways to Work programme supports almost 260,000 places with 85,000 of these reserved specifically for the long-term unemployed. In budget 2015, we doubled the number of positions on the JobsPlus scheme to 6,000, encouraging employers to hire the long-term unemployed specifically. Not only is the headline unemployment rate important; we must also increase employment throughout the country for all groups in our society and with this in mind, we introduced the Back to Work Family Dividend in the last budget.

A related issue is child care. A successful child care policy helps people who wish to do so to participate in the economy. The Minister for Children and Youth Affairs has established a working group on this issue and the Government looks forward to reviewing the outcome shortly. Obviously, we need to find a balance between the needs of children, parents and the wider economy.

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