Joan Burton (Dublin West, Labour)
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Question 78: To ask the Tánaiste and Minister for Finance if he is satisfied that the budgetary framework of revenues and expenditures set out by him in budget 2008 remains viable in view of the changed international financial environment and the revised downward projection of housing construction here and output for 2008; and if he will make a statement on the matter. [2387/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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On budget day, my Department projected a GDP growth rate of 3% for this year and a GNP growth rate of 2.8%. While lower than that experienced in recent years, this is still a robust rate of growth, given the prevailing international conditions. At budget time, my Department estimated that house completions in 2008 would be around 55,000 units.

I believe that, in aggregate terms, the budget day forecasts, which were presented to the House last month, are still appropriate. Of course, as was noted at budget time, there are risks, both internal and external, to these economic forecasts and my Department will, as always, continue to monitor the situation closely.

As regards the budgetary projections for tax and expenditure, it is still very early in the year and there is no reason to alter the budgetary forecasts at this time. Overall, current spending is budgeted to increase by approximately €4 billion or about 8%, capital spending by approximately €1 billion or around 12% and tax revenues by just over €1.6 billion or 3.5% in 2008. The general Government debt level is projected to be around 26% of GDP at the end of this year, one of the lowest levels in the euro area.

As with economic developments, my Department monitors tax receipts and expenditure on an ongoing basis and as more data becomes available during the year, any significant changes to the expected Exchequer position in 2008 will be signalled and presented at the end of each quarter.

It is important to remember that the fundamentals of the Irish economy remain strong and that the economy has responded quickly and effectively to changing economic conditions in the past. Short-term movements in financial markets have limited effects on wider economic trends. Of course, any deterioration in financial market conditions sustained over a prolonged period of time could spill over into economic developments.

Joan Burton (Dublin West, Labour)
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I thank the Minister for that reply. Does the Minister agree that last week was a bit of a train wreck for the Irish economy in terms of billions knocked off the value of Irish shares, particularly Irish pension funds? We have had a string of job loss announcements, including the most recent one in Wicklow, of several hundred jobs over the next year and a half. Every financial forecast since the general election and on through the budget is slightly worse than the previous one. Does the Tánaiste have figures for his expectation of housing output, including starts and completed houses, this year? Does he expect it to fall as low as 30,000 units? What will be the impact of this on tax receipts and revenue? What plans does the Tánaiste have, if we achieve the growth of 3% he suggests, to assist those who face court in respect of mortgage repayments and those who, having worked in the construction industry for ten years, now find it difficult to find employment? Does the Tánaiste have plans to give a fresh start at work to people whose experience is in the construction industry?

Brian Cowen (Laois-Offaly, Fianna Fail)
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There is evidence that there will be some reduction in the residential housing output and, therefore, less employment in the construction sector. However, as far as construction industry forecasts are concerned, there is still activity in commercial property, house renovation and the increased impact of extra investment in the Government's capital investment programme. There are some compensating factors. The construction industry is not made up solely of the new house residential market, important as that is.

Over the past decade, the number of people employed in the construction industry has doubled. With slower growth rates this year, the level of activity will be lower than the high base of 70,000 last year. We have made an assumption of a reduction of 25%, down to 55,000 units. We must wait and see how it pans out. This also assumes no change in interest rates. I cannot speculate on what will happen in respect of interest rates in the euro area. It would improper of me to do so, since it is a matter for the European Central Bank. Given the reduction in interest rates in the US, there is a possibility of an interest rate cut here. It is speculative and I do not suggest whether it will happen. The ECB has always emphasised price stability as the main mandate under the Stability and Growth Pact.

Any major turbulence in equity markets is unwanted and unwelcome, but these markets often exhibit short-term volatility. The impact should not be over-exaggerated. It is important to bear in mind that share prices go up and down all the time but the underlying real economy remains the same and we must focus on this aspect.

As a small, globally integrated economy with considerable exposure to the US economy, Ireland cannot be immune to external economic developments. The greater than normal level of uncertainty that characterised the global economy was identified as a key risk in my recent Budget Statement. While we can exert no influence over external developments, we can ensure our economy can absorb external shocks in an efficient manner. It is important to stress that the fundamentals of the economy remain strong. Therefore, we must address it from a position of relative strength.

Joan Burton (Dublin West, Labour)
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Is the Tánaiste trying to have it both ways? In the run-up to the election, he was happy to portray himself as the person responsible for Irish economic growth. Now that we are facing into difficulties, another set of bodies and factors is to blame such as the international financial situation, the European Central Bank and the Council of Ministers. The Minister has no hands-on approach, yet he has some responsibility to bear for the downturn in the economy and the impact it is having on families, particularly those losing their jobs in the construction industry.

Does the Minister have a response for the changed circumstances in which we find ourselves? The Government presides over a continuing set of service price increases which are part of the reason we have one of the highest inflation rates in the EU. The Minister is responsible for the good times but is not responsible when times get bad. Does the Minister have a response ready for what is happening in the economy?

Brian Cowen (Laois-Offaly, Fianna Fail)
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We have a responsibility whether times are good or bad. The consistent policy framework we have adopted over the past ten years has served the country well. During that period there was extraordinary economic growth and employment creation with a reduction of our indebtedness by half. We are in a position to withstand some of these external shocks far more capably than would otherwise have been the case.

I made a response in my budget to emerging economic downside risks. These had begun in August 2007 with the fall-out from the US sub-prime market problems that led to an international credit crunch. My budgetary stance represented a 1.5% of GDP stimulus to the economy at a time when the downturn was emerging. That was the right choice to make. I felt the right course was to borrow modestly to invest ambitiously.

An extra €1.7 billion will go into the economy on social expenditure, half of which will go to social welfare recipients to protect those on the lowest incomes. A €500 million tax package will put more money back into workers' pockets ensuring they benefit from their productivity. A further €1 billion extra over what was planned will go into the national development plan capital investment programme. That is a measured and responsible response to the downside risks that were beginning to emerge.