Joe Costello (Dublin Central, Labour)
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Question 21: To ask the Tánaiste and Minister for Finance if his attention has been drawn to the recently published European Commission assessment of Ireland's Stability and Convergence Programme; his views on same and its assessment of Ireland's budgetary situation; if he will undertake corrective action to improve that situation; if he will introduce further reforms to the pension system in line with its recommendations; and if he will make a statement on the matter. [7747/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am aware of the European Commission's assessment of the Irish economy. The assessment represents a reasonable view of the Irish economy and acknowledges the overall strong position of the public finances. The assessment refers to challenges in the "transition to a period of lower economic growth, mainly linked to a return to more sustainable levels of activity in the housing sector". This is consistent with the position as outlined in budget 2008.

Notwithstanding the fact that the Irish economy is currently facing into one of its most difficult and challenging periods for some time, with domestic and external factors likely to restrain growth prospects in the short term, it is important to recognise that our overall growth performance is still impressive by international standards. Indeed in the press release accompanying the assessment, the commission notes that Ireland is adjusting to "more normal, but still very healthy, economic growth levels".

On a general Government basis, we have recorded surpluses in ten of the past eleven years and we also have one of the lowest levels of public debt in the EU.

Fiscal policy is playing a key role in terms of providing support for the economy as we enter this period of lower growth. Current spending is projected to rise by about 8% this year while tax revenues are expected to grow by around 3.5%. It is acknowledged that in the medium term we cannot continue to have expenditure growth rates well in excess of resources. Reflecting this, more moderate levels of increase in current expenditure are planned. This will be done in a phased and responsible manner. A measured deceleration in current expenditure growth is what is required as we enter this period of below trend growth.

Capital spending is expected to grow by approximately 12% this year as full implementation of the national development plan continues at pace. Even allowing for all this, only a modest deficit is in prospect for 2008. As I said at budget time, we are borrowing modestly to invest ambitiously.

The Government accepts that there can be no unnecessary loosening of fiscal policy and, in that context, the implementation of the national development plan remains a key priority. It will help boost the productive capacity of the economy and lay the foundations for future growth.

In the area of pensions, the Government is committed to putting in place a system that is financially, economically and socially sustainable. The recent Green Paper sets out a range of measures that could help in this respect and the consultation process currently under way provides an opportunity for all to consider and to provide their views in that context.

Joan Burton (Dublin West, Labour)
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Given what the Tánaiste said about maintaining capital growth and the national development plan, is he concerned about recent probes by the Garda and the Competition Authority into a €2.5 billion fraud on the taxpayer relating to capital contracts, including those procured through the Office of Public Works, OPW? While the Tánaiste shouted about the Opposition's alternative policies, I tried to suggest that the way to address some of the current problems may be to cut down on this kind of waste and inefficiency that sees the taxpayer overcharged and, it seems, massively defrauded. Has the Tánaiste taken an interest in this as it relates to his Department? Has he received reports on this and will he do anything about it?

Around the country the Health Service Executive is effectively proposing severe budget cuts, particularly on the operational side, allied to fairly crude bans on recruitment. At the same time the HSE's administrative budget is continuing to expand. Is the Tánaiste and Minister for Finance advising line Ministers and bodies like the HSE on making spending more effective and efficient?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The question relates to the report on the stability and convergence programme and reform of the pension system.

Brendan Howlin (Wexford, Labour)
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The Deputy broadened the scope of the question somewhat.

Brian Cowen (Laois-Offaly, Fianna Fail)
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She broadened it slightly. The Competition Authority exists to ensure anti-competitive practices are exposed and dealt with. If a probe is taking place at the moment we will see what its outcome is as there is always a fear that such fraud may occur, despite the best efforts of the OPW, which works on these matters in good faith.

The purpose of these health reforms is to recognise that the current situation is not sustainable in terms of the country's demographics. There is a need to reorganise services and the commitment in our social partnership programmes is to deconstruct current services and reconstruct them around the requirements of citizens. The challenge to social partnership in this regard is great and I welcome the health forum as the means by which this can be addressed in the spirit of social partnership. I hope that the work that has begun will show fruit quickly.

One of the health service's problems is its ability to work within the budgets allocated to it. Under the law it is required to devise service plans consistent with the allocation it has received. We know from the areas of health, education and social welfare that people find what they believe are good ways of spending large budgets. As a former Minister for Health and Children, I can say that, in the interests of a sustainable reformed health service that meets the basic requirements of our people, we need budgetary discipline in this area, perhaps more than any other. The alternative is the possible dislocation of services, due to a failure to work within allocated budgets, that displaces future expenditure.

Richard Bruton (Dublin North Central, Fine Gael)
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The EU indicated the current fiscal stance could be out of line with the Stability and Growth Pact in 2009. The Minister for Finance was asked what measures would be taken to ensure current spending can be contained below nominal GNP. The record shows that this year it is 70% ahead of nominal growth and last year it was 60% ahead of nominal growth. Does the Tánaiste and Minister for Finance have an answer to the question posed by the EU?

Joan Burton (Dublin West, Labour)
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Has the Tánaiste been briefed on the story of a €2.5 billion fraud?

Brendan Howlin (Wexford, Labour)
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The Deputy must stay within the scope of the original question.

Joan Burton (Dublin West, Labour)
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If the economy is to get back on track we cannot afford to allow contracts to be rigged, as this story suggests. The investment in the national development plan is the centrepiece of future growth towards competitiveness. We cannot afford to have up to 110 construction firms involved in ripping off the taxpayer by inflating contract prices.

Brendan Howlin (Wexford, Labour)
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No doubt that could be the subject of an excellent further parliamentary question.

Brian Cowen (Laois-Offaly, Fianna Fail)
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In regard to Deputy Bruton's point, obviously I plan my budget on the basis of remaining compliant with the terms of the stability pact. The issue raised is a normal budget day matter. I included a contingency provision of 0.4% of GDP in 2009 and 0.8% of GDP in 2010. The inclusion of a contingency is a prudent way of conducting the public finances. As specified in the budget documentation, a contingency provision is made against factors outside the control of Government which may impact on the budget but which cannot be foreseen at this stage. Examples are variability and tax buoyancy and exceptional costs arising in areas of public expenditure. As such variations could be both positive and negative, it is considered appropriate to allow in the projections for a negative net impact on the Government balance and the Exchequer balance.

Richard Bruton (Dublin North Central, Fine Gael)
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That was not the question posed by the EU.

Brian Cowen (Laois-Offaly, Fianna Fail)
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No.

Brendan Howlin (Wexford, Labour)
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The time has more than expired.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I was explaining that the contingency provision in the 2009 figures is something that, perhaps, was not understood. We are in line with our Stability and Growth Pact commitments in that area. I have read the report.