Wednesday, 24 October 2012
Prospects for Irish Economy: Statements (Resumed)
While Ireland continues to spend more than it takes in, the task ahead for the Government is very difficult as we seek, through a combination of increased taxation and cuts in expenditure, to balance the nation's budget. This is a necessity to get the country back on track. Considerable progress has been achieved to date in steadying the ship of State. There are indications of modest growth in GDP of 0.7% and given the significant deterioration in the economies of many of our trading partners, this success has been achieved in the face of strong headwinds. In 2010 the State deficit amounted to 10.6% of GDP. The aim is to bring this figure down to 8.6% this year, with the overall aim of bringing it below 3% by 2015.
We are all too well aware of the role played by the banking collapse in the economic course of recent Irish history. It was some time before the full brunt of the imploding property market was fully felt in banking circles. That implosion has resulted in bank recapitalisation which to date has cost the State €64 billion. The difficulty experienced in the banking system was not, however, solely an Irish phenomenon. There is now a European-wide realisation that a way has to be found to break the link between sovereign nations and the banks. It is imperative that such assistance is made available to every country experiencing difficulties.
The people have worked hard to uphold our side of the bailout bargain. There have been real and measurable achievements. I compliment the Taoiseach on his efforts over the weekend to ensure the Irish efforts would be recognised at European level and that we would achieve our just rewards with a breaking of the link between sovereign and banking debts. There has been much speculation surrounding this topic. Given the difficulties being experienced throughout the country, it is becoming increasingly imperative that the negotiations at European level and the many high level meetings are translated into a measurable and advantageous deal which would greatly help the economic sustainability of the country. It would provide hope the problem could in time be overcome.
The country is facing one of its toughest budgets. There has been much talk of low-hanging fruit, but that is just a distant memory. Each and every expenditure cut will have to be made and will be felt throughout the country. I fully respect the fact that the Minister for Finance, Deputy Michael Noonan, and his officials are tasked with making these very difficult decisions. However, it is imperative that this be done in the fairest way possible. When it comes to increasing the tax take, those who can afford to pay more will have to pay more. Even in these desperate economic times, we have choices. I suggest two groups, in particular, need to be shielded from the harsh cuts. These are people with intellectual disabilities and those with severe physical disabilities, particularly those in receipt of a home help service. Cuts to the budgets of various organisations dealing with people with intellectual disabilities have been steady and deep in recent years. This year there was an impasse when parents of school-leavers with intellectual disabilities were left in limbo as to what would happen to the children in September and whether sufficient places would be funded. Further cuts will directly impact on the ability of these groups to deal with school-leavers next year. Over time this could result in a complete erosion of essential services for people with intellectual disabilities.
Consistent cuts in funding for the home help scheme have left these workers in a terrible position. As the end of the year looms, the pressure on those working in the service is increasing, as there is an attempt to stay within budget. However, sickness and ill health are no respecter of calendar years and people with palliative care needs are as likely to be discharged in November as in January. These are but two areas which must be shielded from cuts at all costs in what will be the harshest budget the country has ever experienced, given that it will follow steady and deep cuts in recent years. The rationale behind the protection of these two areas is self-evident. Families of elderly persons and people with intellectual disabilities worry about the future of their loved ones as the budget looms. Those working with people with intellectual or physical disabilities must also be remembered, as the cuts to date have already made their working lives infinitely more difficult as they seek to work from day to day with ever dwindling resources.
The country has shown that it is willing to work through its issues and problems. We need to get a deal from the European Union. The Taoiseach has said it is not the speed of a deal that matters but rather its quality. We passed the fiscal compact treaty and have shown that we are willing to work within the programme. It is time we were given a deal on the bank debt, one that would give the people the confidence to look forward in order to get back on track.
We should acknowledge the sectors of the economy which are doing well. I know unemployment levels are high, but the agriculture sector is doing very well and has the potential to create more jobs. I expect the budget to be pro-jobs. We will get out of this mess. We will have to face one or two tough years, but we need to be positive because the people outside this House expect that from us. We will deal with the harsh decisions and must lead from the front. The European Union has an important role to play in this regard.
The economic challenges confronting Ireland in restoring economic stability and returning to a sustainable path of economic growth are the most daunting we have faced for a generation. More than ever, enhancing our competitiveness is vital, even more so in the face of international economic uncertainty and given the possible risk of a downturn in some of our main markets. Improving export performance has been our only source of economic growth and will remain essential to achieving the recovery needed to work our way out of our economic and social difficulties.
There is evidence that competitiveness is helped by improved costs, productivity, education services, investment in infrastructure and research and development. However, these improvements are not happening quickly enough to help the prospects of thousands who need jobs. Decisive and calculated actions are required to create an environment in which business can flourish, job creation can become a reality and exports can continue to grow. Small firms are central to the plan for national recovery. It is essential that the necessary supports be provided to ensure the viability of almost 200,000 of these firms which provide employment for up to 500,000 people. One must also take into account another 100,000 who are proprietors and family members directly engaged in businesses, although they may not draw a fixed wage or salary.
These figures combined mean approximately 600,000 people are involved in the small and medium business sector.
Market demand is fundamental to the success of small and medium businesses and the vitality of the domestic market is critical. Recent evidence on consumer spending suggests many people are being forced to save owing to personal debt, while those who have disposable income are not spending in these times of economic uncertainty. Retail sales continue to fall and consumer sentiment continues its downward trend. People are worried about their employment prospects, the impact of the next budget, mortgage interest rates and so forth. A lack of credit, high energy costs, rates and general overheads are compounding the difficulties facing small and medium businesses. Government intervention to address the obstacles they face is required urgently. It is imperative that immediate action is taken on all these issues.
Ireland's development model in the 1970s, 1980s and 1990s was driven by foreign direct investment. This form of industrial and economic development worked well and delivered high quality employment and significant export growth. Future reliance on the foreign direct investment model of development is becoming more uncertain owing to global factors such as the massive investment by the United States in Asia and the relocation of many viable companies from Ireland to low wage countries. We will have to refocus on indigenous sectors that demonstrate global potential, agrifood being the most obvious. Ireland is also strong in the area of the arts and cultural tourism. The general tourism product is not being capitalised on and its potential remains substantially underdeveloped.
We must focus on research and development in areas such as food, health, education and energy. Ireland is well placed to take advantage of the potential to generate renewable energy and we have begun to take advantage of conditions along the Atlantic coast to generate wind power. Last year, Ireland set a new wind energy record when 1,284 MW of wind generated electricity was exported to the national transmission system. While still in its infancy as an industry, we have all seen studies showing the potential that Atlantic wave energy could deliver. Ireland is well on its way to meeting its new renewable targets through its wind power initiatives, but greater rewards could be gained from such developments. For example, the export market offers significant potential, including a project being developed by EirGrid to export excess renewable energy to the United Kingdom through the Irish Sea interconnector. The UK uses more than ten times as much electricity as Ireland and has also set renewable targets. Clearly, therefore, a project to export renewable energy from Ireland to Britain would be mutually beneficial.
The Government must review the education system, with a view to catering for increased demand for people with information technology skills and IT jobs in general. Approximately 1,000 workers were recruited from abroad last year to fill information technology jobs, some of which pay salaries of up to €70,000 per annum. This means more than one quarter of new IT jobs are being filled by people recruited outside the country. An analysis of figures from the Department of Jobs, Enterprise and Innovation shows the number of new employment permits issued to staff to work in the information technology industry soared to 932 last year compared to only 551 in 2010. These figures do not take account of staff hired in the European Economic Area, which includes the European Union and countries such as Iceland, Liechtenstein and Norway, whose citizens are entitled to move freely and do not require employment permits.
The Government and its agencies should vigorously pursue initiatives to attract and upskill workers to enter technology careers. Current programmes such as the Springboard ICT scheme are not being fully utilised. The one year, full-time higher diploma conversion programme run by the Higher Education Authority and the graduate skills conversion programme, which is focused on non-ICT candidates, should also be developed. Companies have available to them a State supported programme, the ICT Ireland Skillnet training network, which assists in providing training for employees. We must redouble our efforts to ensure the skills required for the jobs market are available. It is also important to cater to the needs of many innovative employers.
I referred to agrifood. The recent announcement by the Kerry Group of a major investment in a new plant in County Kildare demonstrates the potential of our agrifood and dairy sectors. The investment will create 1,000 new jobs in addition to 400 jobs during the construction stage. I am sure a number of other progressive indigenous companies will make similar contributions to the recovery of the economy. It is unfortunate, however, that the Kerry Group, which was nurtured from its infancy in County Kerry with the support of Kerry people, has not located many jobs or made many investments in County Kerry for some years. I am aware its plant in Listowel is doing well and it also has an administration office in Tralee and several supply outlets located around the country. I ask the Minister of State, Deputy White, to convey to the Minister and the Minister of State at the Department of Jobs, Enterprise and Innovation, Deputies Richard Bruton and John Perry, that County Kerry is a major jobs blackspot and the problem needs to be addressed.
The aquaculture aside of the food sector shows great potential. I recently tabled a priority question to the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, on this issue. The Minister has a major vision for the food industry along the coastline. Many of the applications for aquaculture licences in bays and harbours remain to be processed, however, and commercial producers must also complete the licensing system. The current process must be expedited. If each of the 600 applications for licences by commercial producers were to produce 20 jobs, some 12,000 jobs could be created. When one adds to this figure the many other jobs that could be created in the other sectors to which I have referred, it becomes clear that we can move forward positively.
I congratulate my former colleague from Seanad Éireann, the Minister of State at the Department of Health, Deputy Alex White, on his recent appointment. I have not spoken in the House since the announcement was made and wish the Minister of State the best of luck. I know he will bring great rigour to his important function in government. During this time in the Seanad, he was involved in many discussions on economic matters, especially during the time of the bank guarantee and the arrival of the troika on our shores.
He understands these matters and I am glad he is here to listen to the debate.
I want to make a number of points in the limited time available to me. I begin by emphasising that, despite some of the media commentary and the analysis by many people who are termed as experts, significant progress has been made in certain sectors of the economy even in the 18 months since the change of Government. One of the strongest statistics is on the area of employment in the private sector which indicates that slightly under 17,000 additional people are working in the private sector in the 18 months since the change of Government, which is a significant figure. Obviously, it is one we would like to see grow substantially in the coming months but it is something that is often forgotten in the general discussion that has taken place on economic matters in recent months in particular.
There have been also significant indicators that those outside of our shores believe the Government has got to grips with the country's economic difficulties. The most obvious indicator of that is that nine year bond yields are at a figure now which is approximately one third of where they were 18 months ago. That is a significant external indication that those people who consider lending to and investing in Ireland may have a more positive view of our outlook than we have and certainly than we often hear represented in the analysis of some experts in this country.
Other significant improvements have been made by the Government. I get somewhat disheartened when I hear members of the Fianna Fáil Party in particular go to great pains to state that since they went into opposition the Government would not be able to renegotiate certain aspects of the memorandum of understanding with the troika. Significant progress has been made in that area, not least the decision to reverse the cut in the minimum wage, which was one of those tokenistic gestures in which the previous Government engaged. Between 2% and 3% of the population are employed on the minimum wage but they were singled out for sacrifice by the previous Government. I am glad that through the efforts of the two Ministers working in the finance area, and the Taoiseach and the Tánaiste, that change was made. I am also glad the Government achieved a significant reduction in the cost of our borrowing over what was agreed by the previous Government. There was a saving in the region of €10 billion with regard to the changes achieved in the interest rates for the funding of which we are having to avail, which is a significant reduction and significant for the taxpayer.
On the matter of banking debt, we were all pleased with the announcement last June from the Heads of Government meeting that a special case was being made for Ireland regarding our banking debt. There was some disappointment, to put it mildly, on all sides, not least on the Government back benches and myself personally, as a result of the actions in particular of the finance Ministers of Finland, the Netherlands and Germany who had a private meeting at which they appeared to renegue on that commitment. There was also some confusion following the Council meeting last week as a result of what some people claim were difficulties with translation. I am not sure what happened but I am glad the Taoiseach and the German Chancellor clarified the position over the weekend that Ireland's situation is being viewed as a different case and that negotiations continue in that regard to ensure the two aspects of our banking debt, namely, the promissory notes and the recapitalised investment into the other banking institutions, are being renegotiated continuously. I wish the Minister and the officials in the Department success in those negotiations because it is imperative not just for the economic recovery of the country but for the self-belief and motivation of the general population that this yoke of debt that was placed upon ordinary taxpayers by the previous Government in its ludicrous decision to nationalise Anglo Irish Bank, and therefore nationalise its debt, and negotiate an arrangement which had fairly punitive interest rates is lifted as it has had a significantly demoralising effect on people. I do not underestimate the job of the Minister and his officials in renegotiating what was agreed by the previous Government but it is important that it is successful, and the announcement following the discussion between the Taoiseach and the Chancellor on Sunday was positive in that regard.
Significant progress has been also made on our level of exports and balance of payments. In the early days of the Celtic tiger up to 2002 we prided ourselves on our very good figures in that regard but post-2002 our economy was based on a property bubble. The previous Government became subsumed hook, line and sinker in the belief that that property bubble would continue and that its success would roll on indefinitely into the future. It built up public expenditure on the back of taxes that were unsustainable. What we have seen in recent years is a reduction in very important public services simply because the tax revenues from that property source have collapsed. That has resulted in much pain caused to ordinary families across the country, something that we all must acknowledge. It was through the unsustainable head-long promotion of property that those revenues were built and many people at the time, contrary to some of the coverage since, raised the issue with regard to our property market and the sustainability of tax revenues from that source. I recall raising it in the Seanad about seven or eight years ago when Charlie McCreevy was the Minister for Finance and I was the Fine Gael spokesperson for finance but there was a general attitude, best given by Mr. Ahern when he was Taoiseach which was dismissive, to say the least, of people who questioned whether those sources of funding could continue into the future.
I emphasise an issue I raised last year. I am aware there are ongoing discussions within the Minister's Department with a view to introducing minimum pricing for alcohol. I want a much more effective method of gathering revenue, although whether it would be effective from a health angle is open to question. Under our licensing laws more than 50% of alcohol is sold in the off-licence trade, yet people who have a licensed premises are charged a licence fee based on their turnover. However, the large multiples which sell millions of euro worth of alcohol - most of the alcohol that causes the binge drinking problems about which we are all rightly concerned - pay a flat rate fee of €500 for a beer licence, €500 for a wine licence and €500 for a spirits licence. I am not saying the rates should be equalised between the on and off-licence trade but a licensing system based on turnover for the off-licence trade, in particular the large multiples, would generate revenue as well as increase the price of leading alcohol products which are on the shelves of our multiples.
The Minister of State will agree that when the Government took office there was a real sense of hope that the changes promised by both the Labour Party and Fine Gael prior to the election would herald a change in the economic direction this State was taking. There is no doubt that the challenges facing the Government are significant, and no one will underestimate these. Our economic sovereignty has been handed over to outside forces by Fianna Fáil, a fact we should never forget. Some of the individuals who sit on the Fianna Fáil benches and lecture us in the Chamber are the very people who ruined this economy, bankrupted the State and drove large numbers of our citizens into poverty. Now they speak as if they had been sitting on the Opposition benches for the past 14 years. They take no responsibility for what they have done. As far as I am concerned, they have no morals, integrity or credibility. They implemented policies to serve their own selfish political agenda and for no other reason, a fact we should never let them forget. Some Fianna Fáil members who have left the House live on huge pensions while the policies they implemented have forced many of our people into income poverty, mortgage debt and tough decisions over whether to put food on the table or pay an electricity bill. That is Fianna Fáil’s legacy. Some of its Members who preach to all sides in the Chamber should take a long hard look in the mirror and think before they open their mouths.
As we now approach the second budget of this Fine Gael-Labour Party Government, people are beginning to lose hope that it will bring about the changes it promised. Some commitments in the programme for Government have already been reneged on, such as that of tackling upward-only rent reviews. The longer this goes on, the more despondent people become. It is the responsibility not just of the Government but of the Opposition to put forward credible alternatives and give those suffering in our society some sense of hope.
Most countries that go through a recession recognise the importance of education and will protect funding for the sector. They recognise it has a key role in the recovery of any economy and in ensuring young people and those on the dole are given the skills and training to get them into employment and contribute to economic recovery. The Minister of State will be aware there was a protest earlier today outside Leinster House by several teacher unions at which they voiced their concern and disgust at the number of cuts to the education sector in previous budgets. The change to the income of new-entrant teachers is having a detrimental effect on morale. Many of them are now faced with the prospect of earning significantly less than teachers who entered the profession two years ago. Given that these are the individuals we are asking to assume responsibility for educating the next generation of citizens upon whom we will rely for recovery of the economy, it is a shame the Government has seen fit to target their incomes. It is a detrimental step and one for which we will suffer in the longer term. It also shows the lack of importance of education for the Government.
For the forthcoming budget, the Minister for Education and Skills has said up to €77 million will have to come out of the education budget. Over the next two years, the total reduction will come to €147 million. This figure excludes cuts announced in last year’s budget, such as the multi-annual reduction in capitation grants. These types of cut will impact on the quality of education provided in our schools and universities. There is no way of skirting around this issue. The Minister of State, Deputy Alex White, will agree with that, although he may not say it publicly. The Minister for Education and Skills has said he is doing everything he can to ensure front-line services are protected. However, it is just not possible to take that amount of funding out of an education budget without affecting front-line services or the quality of education provision. I have no doubt the Minister has a tough job and is facing some significant challenges in the sector. However, it is not just his responsibility to protect education. It is the responsibility of all members of the Cabinet to put a special emphasis on the protection of the education budget. That is the budget that has a potential impact on our opportunity to regain our economic sovereignty.
Schools are now being forced to ask parents, who are already facing really hard choices in their own personal finances, for voluntary contributions to balance their budgets due to cuts to capitation grants. I have seen letters from schools, particularly primary schools, in Cork asking parents for their children to bring in basic essentials such as toilet roll and hand-wash. They are also asked to take home unfinished lunches and parings from pencils because the schools cannot afford to empty their bins. I implore the Government to ensure the education budget is protected in the forthcoming budget. If the planned cuts of €77 million go ahead, there is no doubt the cost of sending kids to school will increase, and this cost will have to be borne by already hard-pressed parents struggling to make ends meet. It should be remembered they will also face cuts in other areas such as social welfare. I hope the Minister of State will highlight to his party colleague, the Minister for Education and Skills, Deputy Ruairí Quinn, the need to ensure the education budget cuts are tempered as much as possible.