Eamon Ryan (Dublin Bay South, Green Party) | Oireachtas source

I am happy to be able to give some thoughts on the summer economic statement. It is timely in the sense that we are in the middle of scoping work at the budget scrutiny committee and it is coming at a time when budgeting and the economic approach of the State are very much in the mind of a number of Deputies who are involved in that committee.

I would like to voice one thought, or, more precisely, a reflection, having read the document carefully yesterday. There was a comment that "The strong rebound of the Irish economy did not happen by accident; it is the direct consequence of determined policy implementation by the previous Government." There is only one point to flag, if I may, while I have the opportunity to do so. I do not dispute that the previous Government put in place policies that put us in a good position economically, but could we perhaps remember the late Brian Lenihan, who died five years ago almost this month? To a certain extent, we should be honest in admitting that there was a continuity in economic strategy and policy between that previous Government, the one I was involved in, and the subsequent one, which the Minister, Deputy Donohoe, was involved in. For a variety of reasons, the public does not believe it. They are not silly. They can see that there was a continuity in economic strategy and approach. However, we should be honest also so that we know what we are doing, how we operated and what we did. Much of the response was set out in the four-year plan which the then Minister, the late Deputy Lenihan, myself and other Deputies were involved in. If Brian Lenihan were here today, he would have been surprised at the extent of the turnaround. To be honest, in those darkest days in 2010, if anyone had said that in five or six years' time the economy would be growing at 7% per annum and unemployment would be coming down again, we would have been amazed. As a strategy, it has worked. I remember seeing the closing comments from Professor Alan Ahearne in the banking inquiry, as the Minister of State, Deputy Eoghan Murphy, will recall. I cannot remember the German academic whom Professor Ahearne cited, but he did cite international experts in looking at what happened in Ireland from the outside. We got ourselves into a very deep hole and in some ways we got ourselves out of it.

I suppose I should also add praise and recognition for the officials from the Departments of Finance and Public Expenditure and Reform, to whom I am not by nature close. In government I spent my time fighting with the Department of Finance officials and others, and I had a healthy combative arrangement, but they also worked hard in the national interest, particularly in the past eight or nine years, getting us out of that crisis and they deserve real recognition for the work they have done. If I were giving advice, which is surely our job here, it would be to the effect that there is a slight flaw in the character of the Department of Finance and Department of Public Expenditure and Reform in the sense that they do not have a great yearning for capital expenditure. They are nervous about the State making big investment decisions. One of the criticisms that could validly be made in the past five years or so of the approach to our economic recovery - it was one that was mentioned explicitly, among others, by the IMF and the European Commission - is that we over-cut on the capital side, and I think such criticism is correct. Politically, it is understandable because it is much easier to cut capital expenditure than to cut current expenditure in difficult circumstances, but I think we made a mistake. We over-cut on the capital expenditure side and we are seeing the consequences of it now. My central key point or argument, if I had been able to influence this before it was printed, would have been that while there has been, effectively, a €1 billion increase in the capital budget, it is not enough. In the allocation of resources, which is a budgeting issue, we should be putting more into the capital side. I will give a couple of examples of how that might be possible while still living within the budget rules under which we find ourselves. In the transport area, if we are looking back on that period in which we made the mistake of cutting the capital budget too much, one real, terrible mistake in my mind was not going ahead with the metro north project. It was sitting there ready to go. A €500 million EIB loan had been agreed; we would have got the cheapest deal possible. The contractors had spent years and millions of euro setting up the bidding process. It was the perfect counter-cyclical capital project. It would be nearly finished at this stage had we gone ahead with it in early 2011, when it was ready to go, but it was cut. We are playing catch-up on that now. It is funny that I find myself on the side of IBEC and the Dublin Chamber of Commerce, which does not happen often. The Dublin Chamber of Commerce made the key point that in the transport budget €1.3 billion is needed merely to maintain the existing assets, and we need a radical ramping up. The figures may be disputed. Also, to look at our own city, Dublin is the engine of the economy, as Mr. Derry Gray, the head of the Dublin Chamber of Commerce, stated here at a meeting last week. We have got to keep the engine working. Dublin is spending €150 million per annum. On a per capitabasis, Manchester is spending more than twice that and London is spending more than three times that, and that is what we are competing with. We are also living in a city which will suffer from gridlock, because the M50 will be gridlocked. We have a significant problem.We need an immediate ramping up of investment in short-term measures that we can take while we are waiting for the big public transport projects to start, including bus lanes, cycle lanes and critical infrastructure to make our city work, and that budgeting is not there. I see no commitment here to the scale of ramping-up that is required for such necessary transport investment.

Similarly, in housing, I agree with Deputy Donnelly. The critical economic approach we must adopt is to maintain our competitiveness and reduce the cost of living rather than going back to what we did in the early 2000s, which was merely to increase wages and put ourselves into an uncompetitive position, and the provision of housing is critical in that regard. It was interesting to listen to the debate at the Committee on Housing and Homelessness, where they were setting out how can we get around the European rules. There is a mechanism for us to go to a cost-rental form of social housing where there is a guaranteed future rental income that covers the cost of the construction, with which, I believe, we could go with a strong case to EUROSTAT or the European Commission stating that it should be allowed within the fiscal rules. It is long-term lending with a long-term revenue stream and, ultimately, it is a critical policy objective to improve competitiveness. I do not see that scale of investment being planned here.

Third, and critically, the economic statement does not refer to the point made in the stability programme update about the real risk for the State, fiscally and also from the point of view of competitiveness and reputation, from our failure to meet climate change targets. There is no strategic investment statement in terms of energy infrastructure and energy efficiency. For example, the Sustainable Energy Authority of Ireland states that we need a threefold increase in investment to improve the efficiency of our houses, which would also reduce the cost of living, which would make us more competitive and avoid fines. I would argue, critically, that there is a possibility of our raising funding from the European Investment Bank and the European Fund for Strategic Investments as revenue streams to help cover some of that cost.

My key criticism of the Department of Finance and the Department of Public Expenditure and Reform is that we do not have the necessary capital investment plans in place. If we are allocating resources in terms of either tax reductions or increased current spending, I would put more into capital expenditure, because our key economic challenge, although it is hard to believe six years on from the difficult times we went through, is that we are facing an economy in two or three years' time that will be at full capacity. The constraints that exist require us to invest in capital infrastructure. I am sure the Minister, Deputy Donohoe, has been arguing that because, as a former Minister for Transport, Tourism and Sport, he knows what I am talking about. Fair play to the Minister for reversing the decision on the metro north, because he recognised that we were not planning to invest at the scale or capacity we need. If we could change this, we should change it on the capital expenditure side.

In his speech earlier, the Minister for Finance dropped the Minister opposite, Deputy Donohoe, in it slightly, if I can say that. He recognised that the new process involves the publication next month by the Department of Public Expenditure and Reform of a mid-year expenditure report. I was very interested in that because of my involvement with the scoping committee for budget review. There was nothing in the speech given by the Minister, Deputy Donohoe, explaining what the mid-year expenditure report would involve.

I have consistently been highlighting an issue in the budget review committee and if that involves us just turning up at the end of July with an aggregate level of outlined expenditure for each Department, and we do not have time in committees to start getting into the real work we need to do, which is assessing the different options within each sectoral vote, we will not do what we need to, which is increasing the productivity of our current and capital spending. In a sense, we must put it to the sectoral committees and all sides of the House to say that we are all talk here about spending more here or there but we must rise to the challenge. The committees should have a set budget and they can agree or disagree as to whether another Department should get more or less. We should ask where those committees will make savings in order to facilitate the spending plans that they want. We should put the responsibility to the committees and the Parliament. That is instead of us giving a wish list with no responsibility to show where we would get savings or productivity gains. That is what we must do on the current side.

We cannot go back to 2003, 2004 or 2005, as if it were normal to just ramp up current expenditure year in, year out, without getting the commensurate productivity gains. That is one of the reasons the sectoral committees will have a real responsibility in this new budget process. There cannot be a free lunch for every spending plan and we must show how there could be savings within a departmental budget if figures are to balance.

The Minister for Finance mentioned the rainy day fund and that makes sense as we must promote counter-cyclical investment strategy. If we continue to see growth of 4% or 5%, with budget surpluses, we should be careful - as noted by Professor John FitzGerald the other day - that we do not just push into an inflationary environment. Economics are strange currently, as we have been printing money for the past ten years, but deflation is still around. It is very hard to analyse what is going on in the macroeconomic sense.

I have a suggestion, although it may not be possible to bring it about. I will throw it up as one option to be investigated. The European Fund for Strategic Investment - the Junckers fund - has €350 billion leveraged on a €15 billion European Commission pot put in at the start. As I recall, at the beginning the Commission stated that if a Government makes a collective investment in the overall fund, it may allow for extension of our fiscal space within the EU rules; it indicated it would form a credit within the fiscal space. Maybe if we are going with a rainy day fund, we should put it into the European Fund for Strategic Investment. I agree with Deputy Michael McGrath's comments in that there should be criteria for tapping into the fund. Perhaps in the European capital fund, we could get benefit through the fiscal rules. Perhaps that is a complete non-starter but I will put it out there.

During last year's budget submission, the Irish Business and Employers Confederation, IBEC, stated that it was critical of the Government having fiscal policy driven by availability of funds rather than meeting the strategic needs of the country. That still holds. It argues there is no strategic policy approach behind it other than whatever is the fiscal space and the numbers. That tends to be the finance approach to the world. We need some sort of strategic plan for the country that does not repeat our mistakes from the early 2000s. At that time, we set an investment plan and we did a spatial strategy afterwards that bore no resemblance to the former; we then ignored it anyway with decentralisation, etc.

In the 2017 review of capital funding, we should stitch in an obligation on the Minister, Deputy Coveney, to do a proper national planning framework. It is not just about the numbers of houses we build but where they are built, how they will be connected with transport and how they will be made really efficient. We should make a strategic decision that we are going green as a country because of its comparative and competitive advantages, including brand advantage. That strategic planning must come first. The economic and budget strategy should follow rather than just having numbers determining everything. I do not get a sense of that yet from this Government. On this side, we must be willing to help and put our views on the strategic approach. For me, it is going green, investing in capital and involving the Parliament to get real productivity savings on the current side. We must have the ability to change as part of the dialogue and process. In July, the sectoral committees must get straight into what are some of the options rather than just looking at headline figures.

See this speech in context