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

I welcome the opportunity to discuss the summer economic statement, which outlines the broad parameters that will underpin discussions of economic and fiscal policy over the medium term. In the short term, it sets the framework for discussions on budget 2017 over the coming months. As Members will be aware, the recent stability programme update, SPU, submitted to the European Commission in April was completed before the formation of the Government. Accordingly, the SPU was prepared on a purely technical, no-policy-change basis. This is the established practice in circumstances such as those that applied in April, when the Government remained to be formed following the election.

To put this week's publication in context, it represents a key element of the proposed new budgetary reform framework and the initiation of a process of enhanced engagement by the Oireachtas in budgetary scrutiny. This will be followed by the national economic dialogue next week. The dialogue is an important element of the budgetary framework and its objective is to facilitate an open and inclusive exchange on the competing economic perspectives in advance of budget 2017. Representatives of community, voluntary and environmental groups, business, unions, research institutes, the academic community and the diaspora will be invited to contribute to this dialogue.

Oireachtas involvement is very important. Therefore, all members of the Select Committee on Arrangements for Budgetary Scrutiny have also been invited.

The third element of the process, which represents a new departure, will involve the publication next month by the Department of Public Expenditure and Reform of a mid-year expenditure report. I will leave it to my colleague the Minister for Public Expenditure and Reform, Deputy Paschal Donohoe, to discuss this initiative, which will provide valuable input to the Dáil's consideration of priorities for budget 2017.

A further development is the circulation next month by my Department of tax strategy papers to the relevant sectoral Oireachtas committees. The tax strategy group is made up of representatives from various Departments and political advisors. The tax strategy papers set out existing measures across all tax heads and contain issues for discussion and costed options for tax changes.

Turning to the economic situation, I am greatly encouraged by the latest data showing that the economic recovery is now firmly established, with growth of 7.8% recorded in 2015. The budgetary position is also set on a safe and sustainable path, with a headline deficit of 2.3% recorded in 2015. Accordingly, we have now formally exited the excessive deficit procedure. Under the preventative arm of the European fiscal rules, Ireland will have greater room for budgetary manoeuvre to accommodate increases in Government expenditure and tax reductions in a prudent and sustainable manner. Importantly, the expansion in economic activity initially led by the exporting sectors has broadened, with growth now increasingly driven by domestic factors as both consumer and business confidence continue to recover. This is very important, as the domestic sectors are both jobs-rich and tax-rich.

My Department is forecasting GDP growth of around 5% this year and 4% next year. From 2018 onwards, GDP is expected to grow broadly in line with the potential growth rate of the economy, with positive contributions from both exports and domestic demand. In this context, I should emphasise that economic growth is not an end in itself; rather, it is a means through which a social recovery can be achieved. Growth provides the resources necessary to advance social progress, promote inclusivity and provide high-quality public services to all citizens. That is why economic growth is so important.

The economic recovery is perhaps most clearly evident in the labour market, where we have now had fourteen successive quarters of employment growth, representing an increase of almost 160,000 jobs since the low point of the crisis. The latest data show that employment increased by 2.4% year on year in the first quarter of 2016, representing the addition of almost 47,000 jobs. Importantly, the recovery remains broadly based, with gains recorded in virtually all economic sectors reported by the Central Statistics Office, with the construction sector showing particularly strong momentum. In parallel, the unemployment rate has fallen to 7.8% in May, which is down from a peak of over 15% in early 2012.

Over the short run, we expect labour market dynamics to continue to strengthen. My Department is projecting that an additional 50,000 jobs will be created this year. As a result, employment is set to exceed the two million mark this year for the first time since 2008. These figures are a testament to the continued success of the Government's Action Plan for Jobs, which will help ensure that we reach full employment of 2.1 million by 2018.

Turning to fiscal developments, following a very difficult period, the public finances are continuing to move in the right direction. In fact, I am pleased to state that significant progress has been made in this regard. The underlying deficit of 1.3% recorded last year is further evidence that the public finances are being placed on a sustainable footing. Encouragingly, Ireland has successfully exited the excessive deficit procedure in a timely and durable manner. As Members will be aware, from this year the Irish public finances will be subject to the rules of the preventative arm of the Stability and Growth Pact. It is important to point out that our new fiscal objective is to achieve a structural deficit of 0.5% of GDP. Based on the revised trajectory and assumptions set out in the summer economic statement, I am pleased to state that we will achieve this medium-term objective by 2018. It is worth noting that under the new fiscal regime, increases in public expenditure will be sustainably financed and safeguarded from dependence on cyclical revenues. These rules are designed to ensure that fiscal policy enhances economic growth and macroeconomic stability. This is something that should be welcomed.

I am greatly encouraged by the latest Exchequer returns, which provide a real-time indication of the pertaining budgetary position. After the first five months of 2016, tax revenues were three quarters of a billion euro, or 4.3% above expectations, representing an annual increase of 9%, or just over €1.5 billion, when compared to the same period in 2015. This solid performance provides confidence and facilitates an increase in the tax revenue forecast for 2016. This revised projection is for an additional €900 million, which equates to an increase of around 2% when compared to the budget 2016 forecast.

Have I much time left?

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