Mick Wallace (Wexford, Independent)
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10. To ask the Minister for Public Expenditure and Reform his views on the data from the International Monetary Fund's fiscal monitor, which reported that Ireland has one of the lowest Government expenditures in the European Union; his plans to consider this in his preparations for the upcoming budget; and if he will make a statement on the matter. [33311/15]

Mick Wallace (Wexford, Independent)
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According to NERI's Quarterly Economic Observer, which uses the data from the IMF's fiscal monitor, Ireland currently has the third lowest government expenditure in the EU. It stated that if the current trend of low taxes, leading to lower public service provision, leading to higher cost of living and consequently to calls for tax cuts continues Ireland could end up with the lowest public expenditure in the EU. In the upcoming budget the Government is proposing a 50:50 split between the two. Does he not believe we should lean more heavily on investments rather than tax cuts given that so many people are in a difficult place?

Brendan Howlin (Wexford, Labour)
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The economic crisis obviously had a profound impact on the public finances. Nobody in this House would deny that. The fiscal adjustment implemented in order that Ireland could successfully exit the troika programme and return sustainability to our public finances required expenditure reductions. Gross voted expenditure was reduced from its peak of just over €63 billion in 2009, when infamously we were told we were awash with money, to €54 billion last year. Consequently any international comparison of Government expenditure needs to be viewed in that context.

In implementing expenditure reductions, the Government's priority was to ensure that a targeted approach was adopted in order to protect key public services and social supports to the greatest extent possible. The key sectors of health, education and social protection were prioritised throughout this period, and this year these three areas of health, education and social protection account for some 80% of the Government's gross voted spending on the current side.

The fiscal forecasts in April's stability programme update outline that in 2016 general Government expenditure, excluding debt interest, is projected to be just 32% of GDP or 37.5% of GNP. As a proportion of the overall economy, this would leave Government spending next year at roughly the same size it was in 2001.

Budget 2015 marked a turning point in our fiscal and economic recovery, as expenditure reductions were no longer required to meet our fiscal targets. The Government was in a position to hold overall spending steady and to make some targeted increases in selected areas. The capital plan which I published this week involves an additional €27 billion of capital spending over the period 2016 to 2021.

In setting out expenditure measures for next year's budget, Government will seek to enhance further key public services while building on the progress we have made in returning our economy to stability.

Mick Wallace (Wexford, Independent)
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In 2015 public investment made up 1.8% of GDP. The €27 billion package over six years the Minister mentioned represents 1.9% of GDP. So between this year and 2021, the annual average increase in public investment will be less than €250 million, compared with the Government's intention to provide €750 million in tax cuts. Rather than a 50:50 split I believe the Minister would have preferred to lean more towards investment in the services rather than tax cuts. As the Minister knows, indirect taxation in Ireland is pretty draconian and obviously impacts most on those with least money. Would the Minister not admit that he would rather see a better balance in favour of service investment?

Brendan Howlin (Wexford, Labour)
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The proportion of expenditure versus tax reduction will be debated in the course of the general election campaign next year.

Mick Wallace (Wexford, Independent)
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Does the Minister mean this year?

Brendan Howlin (Wexford, Labour)
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In terms of the public sector spend, I frequently read different takes on what we actually spend and very peculiar analyses and comparisons being made. A very interesting article published by Seamus Coffey, the UCC economist, indicates that across all countries health, education and social protection for families and working-age population represent the biggest chunk of expenditure normally. In 2013 the average expenditure across those three areas in the 28 countries of the EU was the equivalent of 19.7% of GDP. In Ireland we spent 22.8% of GDP, which ranked Ireland as the seventh highest spending EU country on health, education and social protection.

Mick Wallace (Wexford, Independent)
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The different take we can get on figures is amazing.

Brendan Howlin (Wexford, Labour)
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That is what I am saying.

Mick Wallace (Wexford, Independent)
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To counteract the Minister's argument, Michael Taft has stated:

The Government proposes investment levels not seen since the stagnation years of the early 1980s. Indeed, the Government six-year programme will be the lowest of any six-year tranche at any time since 1970.

The long-term annual average level of public investment is 3.5 percent of GDP with peaks in the 1970s and in the run-up to the crash. To reach our long-term average by 2021 would mean an investment package of €41 billion, or a 50 percent increase on the Government’s package.

Let neither of us get lost in the figures and in what the economists say. I return to my question: I will ask the Minister once more. Would he agree that, given that, we should lean more on the investment side rather than tax cuts? As a Labour Party man I would like to think that he would definitely think that. I ask him to answer that question.

Brendan Howlin (Wexford, Labour)
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The problem about quoting statistics and facts is that we all have facts to support our argument. However, there is objective fact: there must be some objective truth in all of this. In truth, I am reading from a UCC economist who has analysed the figures. He indicated that measuring as a percentage of GDP is problematic for Ireland because of the operation of multinational companies.

Deputy Wallace is aware that GNP is often a much more accurate assessment of Ireland. If one takes a hybrid of the two, Ireland ranks third in expenditure on the social areas. Only Denmark and Finland spend more of their income on those critical areas. We need to know the facts before we draw conclusions. This is taxpayers' money and we need to know what we are spending and what we are getting for it. We need to have a system based on the truth before we all, if one likes, arm ourselves with economic facts to bolster a theory we have.

To return to the Deputy's question, I will set out my view and that of the Labour Party on the division of tax and spend when the election campaign starts next year. In terms of this year, we have an agreement with our partners in government. In view of the very significant increase in taxes over the crisis period, including universal charge, all trade unions are campaigning very actively on it, as they consider it a punitive tax, in particular for low and medium income earners and they say we need to rebalance that this year. We will probably have a different view, as the Deputy might envisage, beyond this year.