Seán Fleming (Laois-Offaly, Fianna Fail)
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10. To ask the Minister for Public Expenditure and Reform his views on the view expressed by the Fiscal Advisory Council that the Spring Economic Statement projections did not take into account expenditure needs in health, education and welfare associated with the demographic pressures which will arise in the years ahead; and if he will make a statement on the matter. [26393/15]

Seán Fleming (Laois-Offaly, Fianna Fail)
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Will the Minister comment on the views expressed by the Fiscal Advisory Council on the Spring Economic Statement that the projections did not adequately take into account expenditure needs in health, education and welfare associated with demographic pressures?

Brendan Howlin (Wexford, Labour)
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I indicated in an earlier response that I welcomed the establishment of the Irish Fiscal Advisory Council, IFAC, which brings an independent expert perspective to assessing fiscal matters. In its recent report, IFAC commented on the demographic pressures on expenditure in the context of the forecasts made in the Spring Economic Statement, SES. As the demographic profile of our population changes, certain sectors, including social protection, health, and education, will face additional demands. In my statement to the House on the SES, I outlined that demographic changes in the health area will cost an estimated €200 million per year over the coming years, the cost of the contributory and non-contributory State pension schemes is projected to increase by €200 million per year out to 2026, and by 2021 we will need an extra 3,500 teachers at primary and secondary level.

However, expenditure demands in other areas are also changing. Key priorities of the Government have been to provide a societal safety net for those who lost their jobs during the economic crisis, with expenditure on live register-related payments increasing significantly in recent years, and to create the environment for a sustainable recovery in employment. Unemployment has reduced from its peak of more than 15% in 2012 to 9.7% most recently. With this recovery in employment, expenditure on live register-related payments has reduced.

The fiscal projections in the spring economic statement for the post-2016 period reflect a no policy change scenario from an expenditure perspective, other than provision being made for an increase of €300 million in gross voted expenditure per annum to offset demographic pressures outlined above in sectors that account for 80% of gross voted current expenditure in 2015. In addition, given the improvements forecast in the labour market, with unemployment forecast to fall from 9.6% in 2015 to 6.9% in 2020, certain live register related savings will make funds available to meet expenditure pressures in other areas. This is the balance we have struck in formulating the statement.

Seán Fleming (Laois-Offaly, Fianna Fail)
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The Minister indicated that an informal balance was reached behind the scenes between savings from jobseeker's allowance and expenditure in other areas, but this was not made clear in the published documentation. That is probably the reason for the fiscal advisory council's analysis. I do not think anyone believes €200 million will be adequate for health in light of our ageing population. Supplementary Estimates are introduced annually for sums in the order of €600 million. The fiscal advisory council pointed out that the old age dependency ratio, that is, the population aged over 70 years in proportion to the working age population, is expected to rise by 2% by 2020 and to continue rising thereafter. That is one of the most significant issues that have to be taken into account. It is not just a question of pensions because there are implications for the health budget and demographic pressures. There is insufficient transparency in the document in terms of spelling out those details.

Brendan Howlin (Wexford, Labour)
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This is the first time a Government has made, six months in advance of a budget, its best effort to provide the economic framework for budgetary decisions with extensive supporting documentation. We previously submitted stability programme updates to Brussels after fairly cursory debates, but the spring economic statement is a new departure. The Deputy is correct that forecasts for demographic pressures in health do not take account of any new services or drugs that might be needed, some of which may be expensive. This is why, in general terms, we publish the spring economic statement on a no policy basis. Real-time decisions will be made by Governments based on the fiscal space available to them in compliance with the Stability and Growth Pact and on the divide between expenditure and tax. These decisions will have to be made yearly. Despite these caveats, I consider it a good exposition of where we think the economy is currently placed, the fiscal space available to us next year and our intentions in respect of the divide between tax reductions and further public expenditure. Decisions on these areas will, of course, be refined at budget time.

Seán Fleming (Laois-Offaly, Fianna Fail)
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While I acknowledge that it is published on a no policy change basis-----

Brendan Howlin (Wexford, Labour)
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Beyond next year.

Seán Fleming (Laois-Offaly, Fianna Fail)
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-----the Government has made policy commitments which are not factored into the spring statement. What we are getting does not reflect the Government's intentions. The Minister admitted this is a first stab at the new procedure. We have this document six months before the budget thanks to the European Semester rules. Similar statements are being made in the other parliaments at the same time because we all have to publish our budgets by mid-October. However, this is not the first time we made such statements. Last year the Government published its economic forecasts without a debate in the Chamber. The reason for our debate this year was to allow the Government to claim it is doing wonderfully in the run up to the election. The document issued 12 months ago indicated an adjustment of €2 billion would be required but by the time of the budget €1 billion was available in the opposite direction, which means the spring forecast was out by €3 billion. I do not know how inaccurate it will be this year but there is no basis for assuming the forecasts in the spring statement will bear any relation to the figures announced on budget day.

Brendan Howlin (Wexford, Labour)
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I do not think the Deputy is decrying the fact we made more progress than we expected. The economic situation improved more than we prudently forecast in the stability programme update. We did not issue a spring economic statement before this year. We issued a stability programme update, which is a different animal. The update is a technical set of documents prepared for the European Commission in accordance with the Stability and Growth Pact. These updates are prepared annually and, while they are managed by the Minister for Finance, I understand they were subject to cursory debate. This year we presented a more robust analysis to the House and the nation. That is a new departure in terms of how we prepare economic policy, and as we emerge from our difficult years, it will be a useful exercise in preparing for the budget in October. It is preferable to the old approach whereby the Minister for Finance kept everything as a great secret until the budget was announced.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
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The relevant Deputy is not present for Question No. 11.