Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

The publication of the summer economic statement represents a very significant step in laying out the Government's medium-term strategy for sustaining economic growth, securing sensible and responsible budgetary policies and using the proceeds of both to continue to build services for all. Published a little over six weeks after the Government took up office, the summer economic statement details the economic and budgetary framework within which the Government's ambitious programme for a partnership Government can be delivered. In addition, the statement also plays a pivotal role in providing the foundation stone for a better budgetary process, which provides the opportunity for Government and the Oireachtas - while each continues to play its constitutionally ordained role - to address economic and social priorities.

Today also coincides with a momentous decision by the UK on EU membership. As set out in the statement, our interest is that the UK remain a valued and vital partner for Ireland in Europe and in the EU. Whatever the opinion polls say, no one can predict the result. There are clear risks to Ireland.

That is why a core message of the summer economic statement is that we must invest in, and save for, our future.

As the Minister for Finance said, we will have an estimated €995 million available in 2017 to provide for additional expenditure increases and taxation reduction and reform. The programme for Government provides for at least a two to one split of this available fiscal space between public spending increases and tax reductions. At the end of last year, we eliminated our unsustainable deficit. However, this underlines the need for fiscal and economic sustainability balanced with the continued need to provide essential and improved public services.Of course, all of this did not happen by accident. It came about as a result of the sacrifices of the people and difficult decisions. Consolidation measures totalling €30 billion were implemented over the period of 2008 to 2014, with expenditure reductions accounting for two thirds of those measures. A targeted approach was adopted in order to protect key public services and social supports to the greatest extent possible. As the Minister for Finance has outlined, we are now in a very different position. Our deficit is under control and debt is falling as a share of our national income. Nobody speaks now of the troika, promissory notes or the risk of default and yet these are all very recent experiences. This Government will not take expenditure decisions that endanger this hard won position.

One of the positives that this stronger fiscal position is that it allows greater potential for capital investment to increase our public infrastructure stock. The national capital plan published in September 2015 announced an Exchequer capital spend of €27 billion over a six year period. This was primarily targeted at addressing priority needs in transport, education, housing and health care. The scale of the Exchequer component of the plan was developed following a strategic review of infrastructure requirements and taking account of the Government's economic forecasts at the time. It was also planned to ensure that it was fully consistent with both our national and European fiscal rules. Supplementing Exchequer funded investment was investment from the wider semi-State sector and public private partnerships, PPPs, delivering total investment of €42 billion over the period of the plan. On the basis of the latest estimates of national income, the planned level of State backed capital investment represented an average of 3.2% of national income per annum over the period of the plan.

However, in the programme for a partnership Government, the Government committed to seeking Oireachtas approval for a cumulative additional €4 billion in Exchequer capital investment up to 2021. This was to be targeted in areas such as transport, broadband, education, health and flood defences. I am pleased to confirm that our stronger fiscal position allows us to provide for an even greater level of increase in capital investment than envisaged in the programme and to further increase our additional level of investment in our schools, hospitals, transport and other public infrastructure on which people depend. The statement published this week provides for an additional €1 billion in capital investmentover and above the €4 billion already signalled in the programme for a partnership Government. This brings the total extra spending on capital investment to €5billion over the period of the plan, an increase of 18.5% on the previously proposed Exchequer component of the plan and of 12% of the total plan. This will bring State backed capital investment increase as a percentage of our national income from the previously planned 3.2% to 3.7% over the period 2016 to 2021.

The allocation of this funding will be informed by the outcome of the mid-term capital review. It will provide the Government with an opportunity to consider the scope for an even higher level of capital investment, taking account of the information and projections available at that point on our economy. Of course, any other funding decisions and any decisions that may be made due to this additional funding will be made on the basis of value for money and the best interests of taxpayers.

Against this background, however, new challenges are also emerging. The demand for health care continues to grow. The rate of growth is, at times, increasing more rapidly than the capacity of our service to respond to it. It is critical that we strike a balance between the health needs of our people and the ability of the State to sustainably fund the service. This is why the Government has been able to allocate an additional €500 million to our health service in recent weeks. With this increase, total health spending for 2016 will be €14.1 billion, a year-on-year increase of 6%. This will be used to maintain and improve front-line services, tackle overcrowding and reduce waiting lists. With no scope for further increases in expenditure this year, it is now incumbent on the Department of Health and the HSE to manage this budget in a sustainable way, with all to be held to account for any failure to do so. The investment provides the health sector with the best opportunity to manage within its budget this year. I welcome the development of new accountability measures that the Department of Health is currently finalising. This approach will benefit both patients and taxpayers over the coming years.

Another huge challenge is housing and homelessness. The Government's action plan for housing will set out the details of how the State will increase housing supply to achieve our target of 25,000 homes per year. Reflecting the urgency of this, I launched a €200 million local authority infrastructure fund in conjunction with my colleague, the Minister for the Environment, Community and Local Government, Deputy Coveney. It will enable local authorities to provide access roads, bridges and other vital local supporting infrastructure to enable the development of up to 20,000 homes areas throughout the country, including areas of high demand such as Dublin and Cork. The fund will be open to all areas.

Meeting the twin challenges of providing additional and better health services and providing the necessary resources to increase significantly the supply of social and affordable housing to address our housing needs will inevitably have consequences for other resources that will be available to fund other priorities but these choices must be made because we must pursue sensible policies.

Regarding public service pay and pensions, I will reiterate what I have said on a number of occasions. The Lansdowne Road agreement provides the Government with the only framework for managing the competing demands of the need for better public services and the needs of those who work within our public services. Under the agreement, the first phase of pay restoration has already commenced. It is progressively weighted towards those at lower levels of pay. We must continue to develop a way of determining public service pay in a manner that balances the competing interests of the Exchequer, the State as employer and our public service employees. This is why the programme for Government contains a specific commitment to establish a public service pay commission to examine pay levels across the public service, including entry levels of pay.

Since the first public service reform plan was published in 2011, a significant programme of reform has been put in place. Its aim is to improve service delivery and outcomes for users of public services. The need for this is clear. The economic statement projects that total spending is projected to exceed €53.5 billion in 2017, with day-to-day spending broadly in line with that of 2008. As a result of this, it is critical that the process of reform is intensified over and above the significant achievements under the current plans. We must recognise that there can be no return to providing increased resources for public expenditure on the basis of measures or gains that will not be sustained. We must make every effort to identify and drive reforms and change at every level of our services to free-up and maximise the effectiveness of existing resources to meet priority and targeted public service needs.

Taking these decisions is not easy. The previous Government did not shy away from them and neither will this Government. In doing so, our only interest is the future of our society and the economy upon which it depends. This statement is a recognition that social progress and economic growth go hand in hand and that the purpose of a strong economy and sound public finances is to create the fair society to which we all aspire. Only by creating a working Ireland and supporting those in work and those wanting to work can we deliver better schools, hospitals and public services for all who use and rely on them.

See this speech in context