Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I apologise for being a bit delayed coming to the Chamber. I was at the Committee on Budgetary Oversight where we were hearing from Dr. Stephen Kinsella and Mr. Colm McCarthy on a number of issues, including some discussion on the summer economic statement. I welcome the opportunity le cúpla focal a rá ar an ábhar seo tráthnóna. Tá na díospóireachtaí seo tábhachtach. It is important that we have these debates but it is also important that we have them on a factual basis and on the basis that the information provided is credible and robust. Unfortunately, we do not have this today because in the summer economic statement we have statistics presented in terms of medium-term expenditure that lack credibility. These are not my words and I will go into them in some detail in a moment. The problem is that if we have statistics that lack credibility then we have a document that is fantasy. The expenditure projections are not real and credible and will not be met. We are having a discussion about some of the serious risks that face the Irish economy, whether Brexit, a trade war in the United States, changes to the international tax regime or changes being discussed at European level. All of these challenges and threats, such as overheating in certain sections of the economy, must have sensible, detailed and proper analysis but when the statistics presented in the summer economic statement have already been called out by our own independent fiscal watchdog as lacking credibility and being implausible then we are not having a debate that is rooted in reality; we are having in part a bit of a fantasy debate on what is really there and what is not there. This is the problem.

The Minister announced in the summer economic statement that the unallocated expenditure for next year is in the region of €700 million in either additional spending or tax cutting measures. As I pointed out to the Taoiseach earlier, the commitment he gave at the Ard-Fheis last November will not get very far, given that it would cost €500 million or more to start to implement that tax pledge. The reality is that even as the Minister presents the figure of €700 million again today, he has not taken account of the fact that the Christmas bonus is not factored in. It makes no sense, and this is why I speak about fantasy figures, in this day and age, when we know the Christmas bonus will be paid, that the €300 million needed to pay it is not factored in. Immediately the €700 million becomes €400 million. The Minister has not factored in the fact that all the indications are that we will see another health overrun and overspend. I would rephrase it and state there was an unrealistic allocation for health in the first place with regard to some of the reforms that need to be made to ensure we do not waste money in the health budget. Therefore, this overrun in itself, coupled with the Christmas bonus, takes away the €700 million almost immediately.

This is the problem with the figures that have been presented. One of the differences that exist between these figures and those in the stability programme update published in April is that at least the Minister has accommodated for the fact that some of the runaway projects in capital expenditure, namely, the national broadband plan and the children's hospital, will need an additional €200 million next year. This has been factored in. With regard to the core problem, I will read from the Minister's summer economic statement. Table 3 in paragraph 4.2 shows budgetary projections for 2018 to 2024. It sets out the key fiscal metrics consistent with the stability programme update in 2019. These projections represent the basis of the summer economic statement, therefore, the summer economic statement is based on the fiscal metrics consistent with the stability programme update in 2019. What did our fiscal watchdog say about these fiscal metrics? What did it say about the figures in the stability programme update in 2019? It states in its report:

The expenditure forecasts [in the stability programme update] are not credible: they are based on technical assumptions which do not reflect either likely future policies or the future cost of meeting existing commitments. The technical assumptions used imply an implausible slowdown in expenditure growth, overstating the likely budget balance.

This is not coming from me. It is coming from the Fiscal Advisory Council appointed by the Government, that is independent and provides us with the basis of what we need to work on, and from there we can look at the different ideological positions we have, where we believe investment needs to take place in the economy and where certain sectors need to be supported. When we are doing this on the back of implausible and unreliable statistics that are not credible, then what is the point? There is a real responsibility and an onus on the Minister to stand up when the debate concludes and explain to me, other Members and the Fiscal Advisory Council why he has just dismissed its warnings and comments that the projections are not credible. Why has regurgitated them in this report?

We see very clearly the negative impacts of Brexit. As has been mentioned, the position will be €28.5 billion worse over the next five years in the context of a disorderly Brexit. What is not clear is that the Minister makes the point in the summer economic statement that if a disorderly Brexit is the likely outcome then what he will do is employ the budgetary strategy parameters set out in option A, which is the baseline transition period and no crash out, with a number of other measures.

Those other measures are automatic in some cases, as has been said, such as social welfare protections for those who will be made unemployed. What really scares me is that there is one line referring to "temporary, targeted funding for the sectors most affected". We have a one-line response, therefore, concerning the effects of a disorderly Brexit scenario which would have a €28.5 billion impact on the economy over a five-year period. That is not good enough. We need more than that. What does that line mean? Surely the Departments, including the Minister's own Department, know what that line means. There is a need to spell out and flesh out what we are going to do in the case of Ireland being faced with a nearly €30 billion hit over a five-year period. That deserves more than a one-line response in this document.

We have argued, as the Minister knows, for a Brexit stabilisation fund. We have argued as well that that fund needs to have an initial injection of €2 billion and that the moneys going into it should come from the resources being put into the rainy day fund. Those contributions to the Brexit stabilisation fund should come from this year's and next year's contributions to the rainy day fund and also from the Ireland Strategic Investment Fund, ISIF. As the Minister knows, we have been very critical of the design of the rainy day fund. We echo the comments of the Irish Fiscal Advisory Council, IFAC on this matter. The Minister will be aware that IFAC has called out the design of the rainy day fund. The problem with the rainy day fund is that it is counter-cyclical at this point in the cycle, in that it takes money out of the economy, but it will not be in a downturn.

I am reminded of the advertisement for paint which states that it does exactly what it says on the tin. The problem with the rainy day fund is that it does exactly the opposite of what it says on the tin. It cannot be employed when it is raining. It can only be employed for structural reforms, for bailing out banks or for natural disasters. It is very clear under the current rules, however, that it is not there to support, for example, additional social welfare payments. That might be one of the measures we might need. The rainy day fund is also not intended to support the agrifood industry, which would also be seriously affected, and it does not allow for support for small towns or small and medium-sized businesses, SMEs, impacted upon by Brexit.

The Minister has also ignored the IFAC and the Economic and Social Research Institute, ESRI, pointing out an over-reliance on corporation tax receipts. That over-reliance is increasing and becoming more concentrated and volatile. The figures presented as the basis for the Minister's budget, therefore, use resources which are volatile. We need a real vision regarding how we deal with some of the areas of our economy in need of additional investment, such as childcare. Such an investment would support labour participation rates. Those rates are slipping at a time and we need to maintain them at a time when unemployment is low. We also need investment in third-level education so that we have our foundations right. We also need supports for families struggling to meet the crisis in the cost of living.

None of that is spelt out in this document. I am very disappointed that the Minister has used figures that are unreliable and which have been critiqued by the IFAC and the ESRI. I am also disappointed that he has not responded adequately to the major challenge posed by a disorderly Brexit. Hopefully, we will never see the impact of that challenge come to pass and visiting these shores.

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