Wednesday, 27 April 2016
Ireland's Stability Programme Update April 2016: Statements
I welcome the opportunity to be here today to discuss the stability programme update. In terms of process, we have a legal obligation to submit a stability programme to Brussels by the end of April. All member states are required to do this, unless they are in a programme. Thankfully, the days when we were in a programme are over for Ireland.
The stability programme sets out the Government's macroeconomic and fiscal forecasts for Ireland and is the first update of the Government's projections since budget
2016 in October of last year. The SPU is presented in draft form and I am, as usual, willing to take on board useful comments made by Deputies. The final version will be submitted to Brussels tomorrow, or at the latest on Friday. The macroeconomic forecasts underpinning the stability programme have already been endorsed by the Irish Fiscal Advisory Council. That is the process. The Department of Finance generates the statistics, they are submitted to the Irish Fiscal Advisory Council and, when it agrees, the documents are prepared for submission to the European Commission.
As part of the annual European semester process, the European Commission assesses the budgetary strategy of each member state by reference to its stability programme. On this occasion it is important to note that the economic and fiscal forecasts contained in this document are prepared on a technical, no-policy-change basis. We are not setting out any new policies within this document. This is the standard practice where there is a political interregnum.
This document makes no reference to fiscal space. This can be set out in a Spring Economic Statement or summer statement at a later stage. The Spring Economic Statement, which an incoming Government should be in a position to generate in the first half of May, will be the subject of a major debate in this House and will contain policy proposals in the normal way. At the time of the budget last year, my Department estimated a net fiscal space of €8.5 billion over the period 2017 to 2021. The Department of Finance also clarified that if the medium-term objective, MTO, was changed, it would free up an additional €1.5 billion of fiscal space over this timeline. The MTO has subsequently been changed. In addition, some other inputs have changed. On foot of these changes, my Department currently estimates the net fiscal space to be somewhere in the region of €10 billion to €11 billion over the period 2017 to 2021. For next year, again arising from some changes into the inputs of calculation, the net fiscal space is estimated at around €900 million. I stress that this is work in progress and subject to revision. There are many moving parts in the calculation, including inputs from the European Commission that only become available over the summer, and this may give rise to further variations in the figure before budget day.
The House will recall that the figures last year varied considerably between the spring statement and budget day. The likelihood is that any variation of the €900 million figure will be an upward variation rather than a downward variation. This is not absolutely certain at this point because, as I have said, there is a number of moving parts and we are dependent on the European Commission for some of the data on which these calculations are made and that data will not be available until some time in the summer.
Turning to the economic situation, I am greatly encouraged by the data flow over the past year or so showing that the recovery is gaining momentum with the economy growing at the fastest rate in Europe, with growth of 7.8% recorded in 2015. The expansion in economic activity, initially led by the exporting sectors, has broadened with growth now increasingly driven by domestic factors allowing households and businesses plan for the future with a renewed sense of optimism. This is very important as the domestic sectors are both jobs rich and tax rich. Central to this progress has been the restoration of Irish competitiveness which is a prerequisite for sustainable economic growth.
The latest data show GDP increased by 9.2% year-on-year in the fourth quarter of last year. This comes on the back of a similar increase of 7.2% in the third quarter. These are strong figures and tally with what I see on the ground; people, especially those working in the private sector, have more money in their pockets, consumer confidence is recovering and businesses are expanding. The job now is to broaden the recovery so that every individual in all parts of the country benefits from the better situation.
My Department is forecasting GDP growth of 4.9% this year and 3.9% next year, likely to put us at the top of the European league table once again. Over the remainder of the forecast horizon out to 2021, the economy has the capacity to grow by 3% to 3.25% per annum with positive contributions from both exports and domestic demand. These forecasts have been marked upwards since the forecast presented here on budget day in October last and they are in line with Central Bank forecasts, ESRI forecasts and some forecasts generated by the private sector. As a matter of fact, we are slightly adrift of the Central Bank forecast which predicted 5.1% for this year.
The economic recovery is perhaps most clearly evident in the labour market in which we have now had 13 successive quarters of employment growth. Approximately 140,000 jobs have been created since the launch of the Government's Action Plan for Jobs initiative in early 2012. Encouragingly, employment is set to exceed the 2 million mark this year for the first time since early 2009.
In 2015, robust employment growth of 2.6% was recorded, representing the addition of 50,000 jobs. Importantly, growth remains broad based. Employment gains have been posted in full-year terms by all 14 sectors reported by the CSO, with the construction sector showing particularly strong momentum. Growth also remains driven by an increase in full-time employment. Deputies will recall that the CSO, for statistical purposes, divides the economy into 14 sectors, two of which are public sectors - the other 12 are private sectors. There was no growth in employment in the public sectors because of employment embargoes but that has changed and there are people being taken on in the public sector. More importantly, all 12 private sectors of the economy have now taken on extra employees. I suppose the sector that was most tardy in recovery, the construction sector, increased employment by 10,000 persons in 2015.
In parallel, consecutive declines in unemployment have been recorded over the past ten quarters. The latest data indicate that the unemployment rate had fallen to 8.6% at the end of March - the lowest since 2008. Overall, there are now 140,000 fewer unemployed people than at the peak in late 2011. Encouragingly, we continue to see significant declines in long-term unemployment indicating that carefully crafted activation strategies to date are continuing to bear fruit. This, however, is not the end point; policy efforts will continue to focus on further reducing the unemployment rate.
Over the short run, we expect labour market dynamics to continue to strengthen. The Department of Finance is projecting an additional 50,000 jobs will be created this year. It is worth noting that in the early stages of the recovery, many of the jobs created were part-time jobs. In recent quarters, this has changed and there is a movement from part-time jobs to full-time jobs. The bulk of the jobs now being created are full-time jobs and this is a further strengthening of the economy. Taking all these matters into account, unemployment is forecast to remain on a downward trajectory and is expected to fall to 8% by December of this year. We remain on track to reach full employment of 2.1 million by 2018, as outlined in the Action Plan for Jobs.
I thank the Deputies.
Underpinned by the improving economic environment, one of the main achievements of the outgoing Government has been the dramatic improvement to our fiscal position. These hard-won improvements to our public finances provide a sustainable budgetary platform on which funding for provision of public services can be provided for the years ahead. A clear indication of the enormous distance we have travelled can be gauged when one considers that the general government deficit was 12.6% of GDP when we took office in 2011. For this year, it is currently projected to be at 1.1% of GDP and it is projected to fall further to 0.4% of GDP next year. Therefore, we are within striking distance of a balanced budget.
Underlining these developments, just last week the fiscal outturn data for 2015 indicated that the excessive deficit has been corrected in a durable manner. The underlying general government deficit for 2015 was 1.3% of GDP. This now means that Ireland should exit the excessive deficit procedure, as expected, later this summer.
This means that from this year the Irish public finances will be subject to the rules of the preventive arm of the Stability and Growth Pact. Our new fiscal anchor will now become the achievement of a structural deficit of 0.5% of GDP.
While the nominal deficit continues to decline, we still have a structural deficit. However, based on our current trajectory and assumptions set out in the stability programme, on a no-policy change basis, we are on track to achieve our medium-term objective, that is, a balanced budget in structural terms by 2018. Under this new fiscal regime, increases in public expenditure will be sustainably financed and safeguarded from dependence on cyclical revenues. These rules are designed to ensure that fiscal policy enhances economic growth and macroeconomic stability.
The benefits accruing from our policy approach in managing the public finances can be seen in the expenditure and revenue trends contained in the stability programme. Over the 2015-2021 period it covers, it is forecast that on the current basis, the economy will grow by more than 35% in nominal terms resulting in more people in work and providing higher living standards. The resulting combined revenues from taxation and appropriations-in-aid are expected to increase by 25% or just under €14.5 billion. Meanwhile gross voted expenditure will increase by just 8.8%, or €4.8 billion, over this horizon. This positive differential between our revenue and expenditure growth rates will underpin our public finance dynamics over the forecast period.
These positive developments are clearly seen when recent debt developments are considered. Our general Government debt-to-GDP ratio peaked at over 120% in 2012 and has declined to 94% at the end of 2015, assisted by strong economic growth and declining deficits. Furthermore, my Department is projecting a debt ratio of 88% of GDP by the end of this year, well below the euro area average. This positive trend is projected to continue on a sharp downward path over the forecast horizon.
The market reaction to our management of the public finances is clear, with the cost of borrowing close to historic lows, reflecting our continued economic and fiscal improvements and assisted by wider developments. Irish bond yield movements are now trading in line with core European sovereign yields, having successfully decoupled from the eurozone periphery, to which we had become linked. In 2011, the yield on a ten-year Irish Government bonds reached 14%. Now, it has remained steady through 2016, trading at below 1%. The NTMA's last auction, on 14 April, of the ten-year bond maturing in 2026 raised €750 million at a yield of 0.82%.
The Government has decided to change the medium-term objective, MTO, to -0.5% of GDP. This is not a policy change, given that a future Government is free to exceed the MTO if it so chooses. In other words, a future Minister for Finance can overachieve the MTO. It is a technical assumption. If there is a change of Government and Minister for Finance, the incoming Minister may decide to beat the MTO and continue with zero as the definition of a balanced budget. I thank Deputy Pearse Doherty for raising the issue with the Taoiseach. This is why it is still a no policy change position in this paper. While the Government has indicated the way it would change policy, it does not tie an incoming Government of different personnel.
The economic outlook is subject to increasing uncertainty. The upcoming referendum on Brexit and a weakening in the international outlook are key risks facing the Irish economy. While many of the risks are external, there are also internal risks. Chief among the internal risks is the risk of losing control of expenditure by adopting policies that we cannot afford. The best way to deal with these risks is through prudent management of the public finances and competitiveness-oriented policies. That is what the Government has been doing. We have come a long way. We are on the right path and we must stay on this path. I thank the Ceann Comhairle for his indulgence and I thank colleagues for allowing me to over-run my time and complete my statement.
The reforms to the Stability and Growth Pact, implemented as part of the obscurely named two pack of EU regulations, require member states to publish, no later than 30 April each year, their national medium-term fiscal plans in accordance with their medium-term budgetary framework. These plans are a central element of the intensified surveillance at EU-level of the conduct of national fiscal policy. In light of this requirement, the Department of Finance has published the stability programme update, SPU, for 2016. As the Minister for Finance has stated, by deciding to submit this update, the Government is complying with EU rules. However, as the foreword to the SPU makes clear, the fiscal - expenditure and tax - forecasts set out in the document are prepared on a technical, no-policy change basis in line with those set out in budget 2016 and do not take account of subsequent economic developments, potential tax buoyancy or identified expenditure pressures which will need to be addressed. Therefore, the document does not, and in the absence of an agreed programme for Government, cannot, set out a medium-term plan for Ireland's public finances.
This approach is adopted given that it will be a matter for a new Government, whenever it takes office, to set out its medium-term fiscal strategy responding to the major challenges our country faces, as well as to the Commission's assessment of Ireland's fiscal position represented in the SPU. The SPU does, however, contain updated macroeconomic forecasts which, in line with the forecasts of authoritative national and international bodies, forecast an even stronger economic performance in 2016 than the Government expected last year when we presented our budget, notwithstanding the identified international uncertainties. The economic forecasts in the SPU highlight that the Irish economy has the potential to continue to generate strong growth; continue to increase employment, as the Minister set out; and generate the fiscal resources required to continue to reinforce the social, economic and financial sustainability of our State, which teetered on the brink in 2011.
The SPU published in April 2011 stresses the scale of the threat faced at that time when the headline general Government deficit reached an incredible 32% of GDP for 2010. The underlying deficit, reflecting the gap, excluding the support required for the banking sector, between the Government's income and day-to-day expenditure to pay for items such as social welfare, health and public sector pay, was estimated at 12% of GDP. The April 2011 SPU confirmed that there was no scope for the State to rely on economic growth to help resolve its budgetary crisis, forecasting a decline of 1% in real GDP for 2010 with growth of only 0.8% forecast for 2011.
With this scale of an economic and fiscal crisis, hardship was being experienced by people across the country, with the SPU noting that the standardised unemployment rate for the early months of 2011 was almost 15%. With Ireland in an EU-IMF programme, the choices facing the Government were very stark, not only to regain the country's economic sovereignty but to return the economy to sustainable growth and the public finances to stability. The fiscal adjustment implemented in order successfully to exit the EU-IMF programme of support and return sustainability to the public finances inevitably required a major fiscal consolidation. Adjustment measures taken from the onset of the financial crisis to restore the public finances are estimated as having amounted to one fifth of GDP. Gross voted expenditure was reduced from its peak of just over €63 billion in 2009 to €54 billion in 2014.
We have seen the type of measures imposed under EU-IMF programmes in other jurisdictions to achieve this scale of adjustment and their impact on the role of the State in society and on social cohesion. In Ireland, in implementing painful expenditure reductions, the Government's priority was to ensure a balanced and targeted approach was adopted in order to protect key public services and social supports to the greatest extent possible at a time of increasing demand often driven by demographic pressures. This national approach to essential fiscal adjustment during the past five years was central to maintaining social cohesion, laying firm foundations for a return to growth and restoring Ireland's economic reputation which has helped ensure the continued inflow of foreign investment. The key areas of health, social protection and education were prioritised, and together they account for over 80% of all gross current expenditure.
The evidence in favour of this specific national approach to budgetary recovery is unassailable. Core weekly social welfare rates were protected. Social welfare expenditure increased as a percentage of our total budget. The investment in the health sector ensured key front-line services were maintained. The number of whole time equivalent, WTE, staff in the health sector increased from 97,010 at the end of 2013 to 105,183 in March 2016. This represents an increase of 8,173, almost 8.5%, over the period. Over 80% of this increase related to front-line staff. Free GP care is to be extended this year to children under 12.
As recently highlighted in EUROSTAT data, Ireland's spending on health as a percentage of total general government expenditure was the highest in the EU in 2014.
The education sector has faced increasing demands over recent years. More than 900 additional mainstream teachers and 630 new resource teachers were sanctioned for 2015 compared to the previous year. In the same period, an extra 830 special needs assistants were sanctioned, reflecting the Government's prioritisation of special needs. Budget 2016 made provision for more than 2,200 new teaching posts, including 600 new resource teachers and 100 special needs assistant posts. The staffing schedule is being reduced this year from 28:1 to 27:1 at primary level and from 19:1 to 18.7:1 at second level. The outgoing Government has protected the funding allocations for DEIS expenditure, which prioritises the educational needs of young children from disadvantaged areas.
Returning people to work was essential in the recovery strategy. The seasonally adjusted unemployment rate for March of this year was 8.6%, which represented a reduction on the crushing peak of over 15% unemployment in 2011. This priority of creating jobs did not mean jobs at any price. In February 2011, the minimum wage rate was reduced from €8.65 per hour to €7.65 per hour. One of the first steps taken by the outgoing Government when it took office in March 2011 was to reverse that cut. From January of this year, the minimum wage increased to €9.15 per hour.
The achievements in safeguarding and developing core social benefits and key public services within the severe constraints that existed should be viewed alongside the substantial progress that was made in returning order to the public finances. As this year's stability programme update sets out, a headline deficit of 2.3% of GDP was achieved last year with an underlying general government deficit of 1.3% of GDP. This is in sharp contrast to the 2010 figures of 32% for the headline deficit and 12% for the underlying deficit that were set out in the first stability programme update, which we published in April 2011 when we came into office. The general government deficit, on a no policy change basis, is forecast to be 1.1% in 2016. I expect this figure to be comfortably exceeded. Real growth has been revised upwards since October and is forecast to be 4.9%. General government debt is forecast to come in below 90% of GDP this year, with a net forecast of 75% of GDP. Our national debt now stands at the European average and will fall further this year. Not long ago, some of the parties opposite and indeed some of the economic commentariat were telling us that our debt was unsustainable and would prevent us from raising funds in the markets.
The fiscal and economic position facing the new Government could not be more different from that we encountered when we came into office in 2011. As was the case in 1997, we are leaving office with the public finances and the economy in a far better condition than they were in when we found them. The efforts we have made to return sustainability to the public finances over recent years have ensured that increased resources will be available to the new Government to direct to ensure social and economic progress for all our people. That new opportunity should not be squandered. The real social pressures that built up during the crisis period should and must be addressed with care, speed and a strategic long-term perspective. The Irish people have paid too high a price over the past seven years to see a return to short-term political expediency trumping the long-term interests of our country.
I welcome the opportunity to speak on the draft stability programme update that was published by the Department of Finance last night. I concur with those who have made the point that additional time should have been provided to study the document. I have read it but I would have liked more time to consider it in more detail. I have some initial comments to make. The stability programme update must be read alongside the speeches that have been made by the Ministers, Deputies Noonan and Howlin, this morning. We got a significant new piece of information about a change in the medium-term objective when we were told that the Government is availing of the additional fiscal leeway that the European Commission has allowed in order to move from a medium-term objective of having a balanced budget in structural terms to having a deficit of 0.5%. According to the speech we heard from the Minister, Deputy Noonan, this change will ultimately provide additional resources - one can call it "fiscal space" if one wishes - of approximately €1.5 billion. This will increase the projected overall fiscal space, or available resources, for the period from 2017 to 2021 to between €10 billion and €11 billion. Of course all of this is based on assumptions and projections. In the shorter term, the context of budget 2017 is now becoming clearer. When we received the most recent set of forecasts at the time of last October's budget, the expectation was that budget 2017 would have approximately €500 million of available resources. In the course of the discussions on Government formation we have engaged in over recent weeks, it was indicated to us that this figure was to increase to between €700 million and €800 million. The Minister, Deputy Noonan, has confirmed today that the figure is now likely to be approximately €900 million. This significant shift means that additional resources are available, which in turn will create issues around expectations and deciding on what this country's priorities should be.
As a party, Fianna Fáil very much welcomes the broad-based economic recovery that is now well under way. The priority for the incoming Government and for this Dáil, working collectively, must be to secure the economic recovery in the first instance. Only after we have made sure it is a fair and inclusive recovery can we decide what to prioritise as we make decisions on how to use the resources generated by that recovery. From our perspective as a political party, the whole purpose of having a strong economy is to deliver a fair society. That will be our pitch throughout the term of this Dáil as we set out our policy priorities. I will touch on a few of those priorities in a moment. This is the first significant debate in the Dáil on economic matters since the recent general election. Along with my colleagues in Fianna Fail, I look forward to a detailed engagement on the floor of the House and in the Oireachtas committees on a broad range of economic issues. We are very conscious of the responsibility placed on us by the Irish public. The prudent management of the economy is central to the fulfilment of that responsibility. I commend the officials in the Department of Finance on the work they did in preparing this document. The political backdrop to their efforts meant they had to work amid a great deal of uncertainty. This document, which is dry by its very nature, is important because it sets out the economic landscape which this country is now facing.
I wish to reiterate the key priorities of Fianna Fáil's economic strategy, as set out by my colleagues and I during the general election campaign. We are in favour of maintaining a supportive macroeconomic environment and sound public finances. We recognise that expenditure-increasing or revenue-reducing measures depend on projected economic growth. The projections remain quite strong, with growth of 4.9% projected for this year. We believe in improving the incentive to work and the reward from work through reductions in the tax burden, with an emphasis on those on low and middle incomes and the self-employed. A greater emphasis on maintaining and improving our cost base through ensuring competitiveness is a central consideration in policy-making. We believe in reducing operating costs and delivering improvements in infrastructure, skills and the banking sector. Over the course of this Dáil, we will flesh out our policies across a range of areas relating to these items and seek to build Dáil support for such measures. That is the new political reality in which we will all now operate. There is a need to try to build consensus, challenge one another more robustly and build support for measures that are being introduced.
The stability programme update we are debating today makes it clear that the risks to the Irish economy are now at their highest level since 2008. Indeed, the most acute risk - that Britain, which is our nearest neighbour, will leave the EU - will be determined within two months. This is a stark reality that we need to consider. When Ireland previously held referendums on its relationship with the EU, people voted on a specific treaty and, as such, it was a more straightforward task to work out exactly what the consequences of a vote in one direction or the other would be.
That is not the case in the situation now facing the United Kingdom. It is unknown at this stage what relationship Britain would have with the rest of the world, including Ireland, post-Brexit. Given the very deep and important economic ties between Ireland and the United Kingdom, this would have huge implications for Ireland.
Much of the election campaign discussion centred on how much money would be available in the next few years, on which issue I touched in my opening remarks. The way in which that debate proceeded left the public bewildered. The report does not address that issue definitively, although we have been given some additional information by the Minister on the floor of the House today. I note that the Government is now accepting that there will be an easing of the fiscal target in the context of the medium-term objective, MTO. At this stage I would like to reaffirm the position of Fianna Fáil as a political party. We affirm our commitment to meeting in full the domestic and EU fiscal rules. If Ireland's medium-term objective is revised by Government decision to a deficit of 0.5%, as now appears to be the case, in our view, Ireland should continue to target a balanced budget in both headline and structural terms. In simple terms, if we accept the slightly easier deficit target, we should continue to aim to outperform it. That is the Fianna Fáil position on the issue.
Fianna Fáil was the first party to come forward with proposals for a rainy day fund, which proposals we will outline in more detail to the House when normal business resumes. We also have many ideas about reform of the budgetary process. The Dáil reform committee is dealing with this issue, but in our view politics is entering a new era, one in which the ideas of Deputies on all sides of the House will have to be listened to in a meaningful way and considered for implementation. This new era also brings an entirely different way of considering budgetary measures. This process of scrutiny will have to commence long before the deadline of mid-October. That is the bottom line and we are all going to have to accept the new reality.
It is Fianna Fáil's belief that the focus of additional resources should be on improving public services and reversing some of the most damaging cuts, while at the same time outlining a pathway to reform and reduce the burden of taxation, with particular emphasis on low and middle incomes. The split in terms of expenditure and taxation should, in our view, broadly be 2:1, such that in the context of budget 2017 and there being €900 million available, the split should be approximately €600 million for investment in public services and €300 million for a tax package.
The Minister, Deputy Michael Noonan, is likely to hold a senior position in the incoming Government. Its number one priority must be tackling the housing emergency which has moved beyond the point of crisis at this stage. The issues of homelessness, the shortage of rental accommodation, as well as social housing accommodation, and the lack of a private housing supply are interconnected. What is required is an ambitious social housing building programme. There is also a need to address the barriers that are preventing a private housing supply from coming on stream. Tinkering at the edges will not address the issue. The fundamental challenge facing the incoming Government and the Dáil collectively is addressing of what is now a national emergency in housing provision. Fianna Fáil will be constructive in bringing forward ideas and proposals to help address the crisis.
I am glad to have had an opportunity to make some initial points on this issue. I look forward over the course of this Dáil term to working collaboratively on economic issues, acting in the national interest, in building on economic recovery, ensuring it is fair and inclusive, such that we use the fruits of the recovery to set out our vision for the country, while protecting decent public services and rewarding those who have an opportunity to work.
I echo the comments made earlier by the Sinn Féin Party. There is much talk about a new dawn, new politics and there being no more surprises in budgets. There is no reason this debate could not have been scheduled for later this evening or tomorrow. It has been stated the Commission must receive this document tomorrow. However, as far as I am aware, the ultimate deadline is the end of the month. This is the wrong way to do business. It is treating Members of the House with disdain, particularly those whose responsibility it is, on behalf of their parties or groups, to tease out the detail and compare it with other budget documents, stability programme updates, EU data and so on. It was wrong for this debate to be scheduled prior to Members having time to scrutinise the document. That said, I have read it, although I have not scrutinised it in as detailed a manner as I would like.
The document contains a wealth of information that needs to be parsed and examined in detail. This work would usually have been undertaken next week by a committee, but it may be a number of weeks before a committee is established. This debate, while welcome, will not get to the detail or nuts and bolts of all of the issues involved. We may need an interim measure such as the Minister making available his officials to spokespersons to go through the document in detail.
That is appreciated.
On the Minister's statement and that of the Taoiseach, that there is no policy change, of course, there is a policy change. Let us accept that. What we are dealing with are important issues for the State. The MTO change is a significant policy change. It will allow us to achieve our medium-term objectives in 2018 if we, as a country, or the Government, accept that the figure is 0.5%. The outflow is that the fiscal space increases by €1.5 billion. We are not talking about pennies or pounds. This is a huge policy change, one with which I agree. The European Commission sets the minimum medium-term objectives. The medium-term objective accepted by the Government has to be included in the stability programme update. It is a policy change, as stated in black and white on the first page of the document, and we should not pretend that it is otherwise because those who may disagree with it should know that it is a policy change and the consequences and either accept it as either being good or bad. From my point of view, it is good.
As in the case of any policy change, a future Government will have the ability to change it, be it a policy to a build a school or a hospital or to increase or reduce taxes. I know that the Minister, Deputy Michael Noonan, was trying to save the blushes of the Taoiseach earlier this morning, but these issues, in the context of the figure of €1.5 billion involved, deserve more than an attempt to save the blushes of the Taoiseach. We should be asking ourselves if accepting a medium-term objective of 0.5% is the right thing to do in the interests of the country. This is a policy change and the way we need to judge it should be based on the risks the country will face in the future.
On paper, the economy is doing very well. I note from the data that in terms of GDP, our growth rates are outperforming those of countries such as India. However, behind these figures are issues unique to Ireland. We know from economists who study the performance of the economy that the GDP figure is not a good reflection of where we are as a country. Looking at the headline figures for investment one would form the view that investment in Ireland was growing, but when one gets into the detail, one discovers that the basis for it is that a small number of multinationals have located intellectual properties in ireland, which has bumped up the figures. If these are stripped out, it shows that there is a lack of investment in the country. There is a major problem in that while these multinational corporations provide much needed employment here and some tax receipts, although not enough, this skews the figures for overall GDP which then also causes major problems when we are considering how the resources of the economy should be divvied up.
One thing that is very clear from the document is that one can see the trend in the next few years in total expenditure and tax revenue based on a no-change policy. One can see that it will go from 32.8% of total revenues in relation to GDP last year to 29.4% in 2021. They are the tax revenue figures. What the Government is planning to do and what Fianna Fáil want to do is reduce that figure further. When the Taoiseach says he wants a taxation stimulus, like that in the USA, he does not need to worry as the Government already has it. We have lower taxes than in the USA. The Government is already projecting a figure of 29.4% based on a no-change policy, yet it wants to reduce taxes further and reduce the resources that come to the State.
Expenditure last year was at a figure of 35%, which based on a no-change policy in the next five years would go to 26.6%. Of course, some of the fiscal space is going to be used to increase expenditure and there will be demographic and other pressures. The problem is that, even with that fiscal space available, we are going to see expenditure levels as a proportion of GDP reduced.
Let me make a point. As well as the fiscal space, there is a figure of €900 million included in the base which, would not have been the case in previous years for demographics, capital programmes and the Lansdowne Road agreement. The expenditure figure is much bigger than it was historically.
When I talk about the fiscal space, I am talking about the net fiscal space available. On the problem with these figures, we heard an example yesterday in the debate on mental health services. There is €12 million being stripped away from mental health services, yet we have the highest suicides rates in the European Union for females aged between 15 and 19 years and people across the State who are unable to access mental health supports from the HSE and a hospital system that is in absolute crisis.
Expenditure pressures have been identified at a figure of about 0.25% of GDP, or about €580 million. It is said this will be accommodated within the fiscal space, but we need the detail from the Minister. Where are the expenditure pressures-----
-----and how will they be accommodated within the fiscal space? On the increase in the net fiscal space from €500 million to €900 million, there should be a technical paper. In this day and age, the Minister cannot come into the Dáil and simply say, "By the way, the amount of money we can spend in the budget next year has nearly doubled." Those days are gone. That is Charlie McCreevy style. The Opposition wishes to engage on what is in the best interests of the country, with different ideologies on investment, public services and so on but with the same principle of wanting what is best for the country, not wanting to bankrupt it, as has happened under previous Governments. If the Government wants to treat the Opposition with respect, we need the papers to back it up. We need the papers that explain where the other €400 million in the net fiscal space for this year is coming from. There has to be a series of engagements all the way through to the budget when the figures are being hardened up during the summer months.
On some of the risks involved, we have had a debate on Brexit, on which Sinn Féin is campaigning on part of the island for a "No" vote. The implications are something we have raised consistently through Senator Kathryn Reilly in the committee on Brexit. Carbon credits are mentioned in the document as one of the risks. We will have to spend hundreds of millions of euro because we will not reach our targets in 2020. That needs to be quantified. We have seen from the replies to previous parliamentary questions that on one element of it, we are probably going to be out by about 2% and that each 1% will cost the State about €150 million. We also do not know what the greenhouse gases effect will mean in terms of cost. We need an estimation of the risks involved.
I will finish on this point. These data lead us to what the priorities of the country should be. One of the major challenges the country faces is posed by capital investment. We have the second lowest level of capital investment in Europe. That is not acceptable or sustainable. We have discussed Irish Water, on which there will be a debate later. In the context of that debate, what is required is investment in water infrastructure. How we fund that investment is the big issue in terms of whether we use water charges. That is a minor issue in terms of the actual need for investment.
The key is accepting that there is a policy debate, forming a committee as soon as possible and making the Minister's officials available to spokespersons and other Members who wish to tease out this issue.
I echo the point that it is completely unacceptable that we have a document on the State's financial position given to Members at 10 p.m, and that we are expected to give a proper analysis of it with that notice. I register my protest in that regard.
Before I get into the substance of the stability programme, I point out that there is no mention whatsoever of the issue of water, yet we have pronouncements from the European Union this week which essentially imply that it would be reckless to get rid of the water charges regime and Irish Water because we have commitments in terms of water conservation and water quality. These sentiments were echoed by the Minister for the Environment, Community and Local Government, Deputy Alan Kelly, Deputy Eamon Ryan of the Green Party and Fine Gael. My God - the European Union, Fine Gael, the Green Party and the Labour Party have some neck in talking about water conservation. They were the ones who slashed the capital programme for water infrastructure. The reason we have sewage floating out to sea and the reason we have failed to deal with the chronic problem in water infrastructure is the troika and their puppets in the Fianna Fáil-Green Party Government and the subsequent Fine Gael-Labour Party Government slashed the capital programme. It was those of us who are opposing water charges and Irish Water who opposed these capital cuts.
The real test is going to be when we get water charges and Irish Water off the pitch and start to argue about how much money we need to fix the water infrastructure. I bet that yet again the Government - Fine Gael and Fianna Fáil - will be on the wrong side of the argument. The truth is that Irish Water's investment programme is pathetic. We need to increase it significantly. More generally, as alluded to, we need to significantly up the capital investment programme which has collapsed across the board and produced not just a crisis in water infrastructure but also the worst housing and homelessness crisis in the history of the State and a desperate deficit in the level of investment needed for things such as primary care services, hospitals and a range of other infrastructure.
In the stability update the capital investment programme is set to move from the current level of about €5 billion a year to only €6 billion by 2017. That is a marginal improvement. This represents a collapse of investment compared to what it was in 2008, when the figure was €8.6 billion. Even by 2017, according to the outlook presented, we will still be spending more than €2 billion less in areas such as water services, housing and other vital infrastructure than we were spending in 2008. In this regard, the elephant in the room is the leve of debt interest. That is the issue. We will still be chronically under-investing in vital infrastructure such as housing and water services, while simultaneously paying out €8 billion in interest this year and for years to come. Money has been sucked out of vital spending on infrastructure.
That brings me to the point about risks. The Government states we must be careful in dealing with the external risks which have been heightened - they most certainly are when one looks at the situation in China - as well as the internal risk of spending too much. No, the risk is not that we will spend too much. The risk is that we will spend too little, in terms of capital investment, in boosting domestic industry and enterprise and developing the domestic economy in a way that will insulate it from domestic shocks.
Most certainly, that investment should not be sourced from debt. On this, I agree. We do not want to inflate our debt and put our economy in hock to international bondholders. The best way to progress is to repudiate the private financial debt on which we are forking out €8 billion a year and increase capital investment and current expenditure by redistributing some of the wealth in our economy by making the corporations and the super rich pay their taxes. We should proceed not by debt financing but by redistribution of wealth.
It is very instructive to contrast the approach of the caretaker Government to a debate on water charges with its approach to the stability programme update. Obviously, we had to drag a debate out of the Government and only got it when a deal on water was done in a backroom. On the stability programme, the Government went to the European Commission and said we do not really have a Government and that maybe we cannot produce the stability programme update. The Commission said it wanted the stability programme update by the end of the month. The Government then said that it would produce a document at 10 o'clock one night and that the next day it would have a discussion in the Dáil so it could tick the box and say it was discussed in the national Parliament. It shows the way that Europe operates and the power of the undemocratic, unelected European Commission that the Government simply goes along with it.
I think Deputy Durkan will find that we are all in Europe.
When people look at this stability programme debate, the key question they will ask is "Stability for who?". We do not all have the same interests in this State. There can be stability for some at the expense of others. That is what has happened so far. There is massive stability for the richest people in our society. The Sunday Timespublished its rich list at the weekend showing an increase of approximately 3% for the richest 250 people in personal wealth over the course of the last year alone. There is a great deal of stability for corporations whose profits have increased by 31% from €35 billion to €52 billion from 2009 to 2014. At the same time, the taxes paid by corporations increased by only 18%. There is a great deal of stability, as Deputy Boyd Barrett said, for the bondholders who get their private debts paid for by ordinary people on a yearly basis like clockwork. On the other hand, there is massive instability in people's lives. Hourly wages are still lower than they were at the start of the crisis. Of all children, 40% are living in conditions of multiple deprivation. Of workers, one quarter receive less than the living wage. We have a massive housing and homelessness crisis. How does that tally with the growth figures presented? It tallies in two ways. First, the growth figures are massively inflated because of the fact that corporations use Ireland as, in effect, a tax haven. That means GDP figures in particular, but also GNP figures due to contract manufacturing, are massively inflated. They do not reflect the reality. The increase in consumer expenditure of approximately 3% is more real in terms of what is actually happening in the economy. Second, even taking that some level of recovery exists, such recovery is fundamentally unequal. There is no greater illustration of that than the Panama papers we have seen exposing global operations by the super rich and large corporations to avoid paying tax in whatever way possible to the extent of stashing away massive amounts of money. In terms of Ireland, a recent report set out that 1,400 of the richest people here avoided paying €250 million in 2013 using legal tax breaks. For the 1%, there are Panama accounts. For us, there are deteriorating public services and attempts to take property tax from people.
The nature of stability for them at the expense of instability for ordinary people is not going to change as long as the policies and politics of neoliberalism and austerity remain in place. This whole procedure of the European semester - the two pack, the six pack and the notion of fiscal space - is all designed to ensure that stays in place. The world economy has not been discussed enough today. There will be a further shock in the world economy. It is almost nine years since the start of this massive, deep crisis of capitalism and there has been no recovery. There is persistent deflation, low levels of growth in the advanced economies and very high levels of unemployment. A further shock is going to come, most likely from China, and the unsustainable model of Irish capitalism is going to be exposed. It is a model of hoping another Celtic tiger is going to come along and of not making corporations pay their taxes instead of developing a sustainable manufacturing and industrial base here. We need an alternative model. In my view, it is a socialist model. It is about making the rich and the corporations pay their taxes but it is also about breaking the straitjacket of EU fiscal rules and of capitalism, refusing to pay the debt that is not our debt, a nationalised public banking system and public ownership of the key sections of the economy.
Under the pact, EU Governments are supposed to bring their deficits to below 3% of GDP and debts are not supposed to be higher than 60% of GDP. However, the rules seem to allow some budget items to be stripped out, including the cost of extraordinary events. It looks like Italy, Lithuania, Austria, Spain and France are going to break the rules around the 3% in 2016 and yet Ireland insists on being a real good boy. We do not want to break the rules. Recently, the Commission said that the budgetary impact of the exceptional inflow of refugees would be taken into account when assessing possible deviations from the rules for 2015 and 2016. Finance Ministers have already said they wanted money spent on dealing with the current flow of refugees not to count towards national deficits under the block's budgetary rules. France says it has huge security concerns and, oh, may have to break the rules as well. Rome has requested extra leeway within the EU rules worth 0.2% of GDP to compensate for extraordinary costs incurred on foot of the refugee crisis.
In Ireland, there is a lack of social housing and of affordable private housing. There is a lack of affordable rental units. What we have is a lack of money and of political will to address the problem. We are not building houses. One of the main reasons is that the Government has waited on the private sector - the markets - to come in and do the business for the last five years but that has not happened. If the Government wants to solve the housing crisis, it must start spending money. Where is it going to get it? I suggest it does what Lithuania, Italy, France, Spain and Austria are doing and breaks the rules. What about us borrowing €10 billion at less than 1% in order to invest in housing? It is not rocket science and would make a great deal of sense.
Aside from the fact that the State needs to directly build social housing in the range of approximately €10 billion in the next two years to alleviate the problem, it should organise finance if it wants the private sector to build houses also, which it does, as the banks will not provide it. One cannot get money out of a bank in Ireland today to build houses unless one is a US investment fund, in which case one would not need it. US funds have access to their own money. Irish builders cannot get money to build houses. A scheme must be designed whereby the Government - the State - plays a role in raising finance in order to stimulate the construction of housing. If the next Government is not prepared to challenge Europe, as France, Spain, Italy, Lithuania and Austria are prepared to do, it will be a disgrace.
The refugee crisis in Europe is a terrible one. I agree that countries should be given leeway to deal with it. That is a far better reason than allowing the French to spend billions of euro on security after the ISIS attack, which was a response to France's bombing the living daylights out of homes in Iraq and Syria. How can anyone argue that our drastic housing crisis does not merit extra help from Europe and leeway in the rules? If the French security issue is worth breathing space in the fiscal rules, how in God's name can Europe argue that we are not entitled to the same? It has even told us that our infrastructural investment levels are too low. They are some of the lowest in Europe. This is a no-brainer.
It was sad listening to the Minister, Deputy Howlin, like the little lad in the playground bragging to the big lads about all of the sweets he had given out while they were nudging one another and saying that they had not seen any evidence of sweets. He was protesting too much, bragging about social welfare rates increasing under the last Government when that was really a reflection of the wealth transfer to the wealthy and a compensation for the poor wages being paid. The Government's strategy is wrong, as was summed up by the Minister, Deputy Noonan's remarks on the economic recovery being most clearly evident in the labour market. That is precisely the area in which the problems in the economy are the most evident. In the 1950s, we brought workers back from Britain to build houses. Not so long ago, someone could leave school and get a permanent and pensionable job in a local authority. Now, we have the spectre of graduates working in repeat internships or JobBridge schemes for low wages. Our new recruits in the public sector, be they gardaí or nurses, get less per hour than a worker in Aldi or Lidl. It is a race to the bottom and we are building a low-wage economy based on neoliberal economic policies that the stability programme is designed to perpetuate and develop further.
The programme update tells us that we will formally exit the excessive deficit procedure, EDP, this summer. That should be great cause for celebration - hooray, hooray - but we must remind ourselves as we pop the champagne why we were in the programme in the first place and why the public was shackled and put on the hook for billions of euro in gambling debts in which we had no hand, act or part. Coming out of the EDP, we will go straight into the new austerity of the preventative measures of the Stability and Growth Pact under which we must achieve our medium-term budgetary objective, MTO.
Deputy Pearse Doherty was correct, in that a change has been proposed today. It is sickening and insulting to democracy that we have a Government with zero mandate from the electorate. Face it - the Government took a hounding. It has no authority to endorse any document in the name of the Irish people-----
-----yet that is what is being done. It is a disgrace and is only being done because the Government is doffing the cap yet again to the European Commission officials, who made it clear in the bilateral talks with the Irish delegation on 6 April that they expected Dublin to make a submission on time. The Government said, "That is grand, master. No problem. We will do that".
The problem is that institutionalised neoliberalism and budgetary surveillance by unelected bureaucrats in the European Commission were enshrined in the six-pack agreement. Deputy Wallace is correct about that. The six-pack is one of the reasons offered as to why we cannot borrow to build social housing, in that doing so would push us over the 3% central government deficit-GDP figure. It is a nonsense and an insult to democracy. In a recent article, Professor John Weeks of the University of London discussed the authoritarianism of the EU and the six-pack. He stated:
It asserts the power of the unelected European Commission, as the executive of the European Union, to monitor ("detect") whether the public budget of an elected member government conforms to EU fiscal rules. If it does not, the Commission claims the power to prevent the implementation of that budget, then to specify the changes ("corrections") required.
Is this the EU democracy that the Tánaiste told the Dáil was so wonderful last week? We are signing up to enforced perpetual economic stagnation in Europe. Economies that could previously use their budgets to stimulate public expenditure and growth are being hamstrung. According to Professor Weeks, who put it much better than me, we are forcing "member governments to apply policies analogous to the practice 200 years ago of bloodletting to restore health to the ill". I am not prepared to let the blood of the Irish people any longer, but a Government with no mandate believes that it can.
Before I get into what will be a limited response to the stability programme update because of the time available, I will call out what is happening in the Dáil right now. The stability programme update is a serious document. It is the start of the budgetary process, as acknowledged in official documentation. It is not just a technical and statistical document, as the Taoiseach called it this morning. The update sets the country's expenditure ceilings for next year. This document frames the budget. As such, a detailed discussion of its contents is important. For example, a table in last year's update made all manner of highly technical adjustments to the likes of the expected growth and inflation rates that radically changed the fiscal space that was available this year. Things that are happening and not happening in Ireland today are directly related to the technical analysis contained in last year's stability programme update. This is not a technical and statistical backup analysis. It frames the entire budgetary process.
Let us consider what has happened. We got this document at 10 p.m. last night but were not told about it, so I only picked it up at 7:30 a.m. this morning. We found out yesterday that there would be statements on this important document today. The acting Ministers, Deputies Noonan and Howlin, entered the Chamber, made speeches that they had clearly had a great deal of time and resources to prepare, tolerated Deputies Michael McGrath and Pearse Doherty and then left. With genuine respect for the Minister who is sitting opposite representing the Government, her Department is Arts, Heritage and the Gaeltacht. This debate is nonsense.
The acting Minister, Deputy Noonan-----
I can comment on whatever I want. It is very relevant that neither Minister, Deputy Noonan nor Deputy Howlin, thought fit to listen to what the Dáil had to say about the start of the budgetary process.
It is relevant that neither is present. The Minister, Deputy Noonan, stated that he would take on board feedback from the Chamber. How can we give meaningful feedback with approximately two hours' preparation, no meeting with Department of Finance officials and no briefings? It cannot be done. Even if it could, how could the Ministers possibly take our feedback and incorporate it into this document? The Minister, Deputy Noonan, stated that the document had to be with the European Commission by tomorrow or Friday at the latest.
I am calling out what is happening. This is meant to be new politics and political reform. Last autumn, the OECD drafted a thorough review of Ireland's budgetary process.
It states: "To be effective, the measures proposed above [namely, the measures coming out of the Department of Public Expenditure and Reform for better parliamentary engagement] will need to be underpinned by a renewed commitment by Government, at political and administrative levels, to engage with the Oireachtas as a partner throughout the budget process." It is difficult to explain quite how I feel about what is going on here this morning without using unparliamentary language so I will leave it at that. What is before us is nonsense. It is an insult to the Dáil, the Independents and the political parties. The finance spokespeople or other appointed Members would gladly have met finance officials and the two relevant Ministers. This is important stuff.
On the back page of the documentation, page 47, there is a copy of the letter from Professor John McHale in his capacity as chairman of the Irish Fiscal Advisory Council. It is dated 20 April. That was quite some time ago as it is now 27 April. A week ago, Professor McHale was able to write to the general secretary and state the council was provided with the SPU forecast on 7 April, which is 20 days ago. Twenty days ago, the Department gave these figures to the Irish Fiscal Advisory Council. Seven days ago, the council wrote back to the Department and said it was broadly satisfied with its projections. Today, the day before the document must legally be sent to Europe, we in the Dáil finally get to see it and debate it without either of the Ministers present. I actually had several questions for the Minister for Finance, Deputy Michael Noonan, and the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, based on what they had to say.
On a point of order, the impression is being created that the Government is not represented at all. A Government is sitting here, and officials are sitting here taking notes. It is totally untrue to make that kind of allegation.
I had several questions for the two Ministers and I will happily put them to the Minister present, Deputy Humphreys. However, I doubt that she is in a position to answer the technical questions I have.
What level of demographic adjustment has been made to the fiscal space? Why is the fiscal space not laid out in the document? Does the underlying fiscal space include projected overruns of €500 million? How is the projected overrun broken down? What percentage of inflation assumption has been applied to the expenditure ceiling for this year? Last year, the assumption was incorrect.
In the time I have left for what is essentially a meaningless debate, I contend it is good news that we hear from the Ministers that the fiscal space is potentially €900 million. If we have expenditure overruns – the SPU says we could have them to the tune of €500 million but I believe they will amount to much more – the figure will come down. However, it is imperative that whatever fiscal space is available be used for investment.
Part of the debate defining the election campaign concerned whether the universal social charge should be abolished. The Social Democrats took a position contending that we need to maintain the existing tax base, and the Government said we should cut taxes further. We found out yesterday that the rolling out of the broadband programme will be delayed by up to two years. We found out yesterday that patients in the public health system are awaiting up to 25 times longer than patients in the private system for important oncology scans. We know from the Association of Garda Sergeants and Inspectors that the Garda needs to hire and train approximately 800 additional gardaí and that the force is under-resourced to the tune of 20%. We know that one in nine children in the country is living in consistent poverty. We know that the capital expenditure programme set out in this stability programme update is one of the lowest in the EU, which opens us up to very significant social and economic risks and challenges.
The argument given by the outgoing Government to reduce the tax base further was that we need to “make work pay”. I believe that is the phrase that was used. Last week, the OECD released the latest analysis of the so-called tax wedge for 34 OECD countries. This is a combination of tax on work and tax on employers related to work. It shows that for a married couple with one earner and two children, Ireland has the lowest tax wedge in the OECD. Of the four examples given, Ireland was among the lowest seven countries in terms of tax on work in the OECD.
We do not need to erode the tax base further. We need to maintain a stable tax base and invest. I request, as did Deputy Doherty, that detailed briefings, although they are too late for the stability programme update, be provided by the Department of Finance. We need to start preparing for the budgetary cycle now. We will need access to finance officials to go through a lot of this in detail.
I agree with Deputy Donnelly that how we engage this process is important. I recollect that one of the central findings of the Nyberg and Regling-Watson reports indicates that what brought us into economic difficulties was a tendency towards group-think in Irish society and the Irish political system, in addition to a lack of willingness to question. That is what we are engaged in. Let me start by asking the Minister, Deputy Heather Humphreys, who said she is willing to answer some questions, to ask the attending departmental official, whom I presume is from the Department of Finance or the Department of Public Expenditure and Reform, the process by which we could amend a document going to Europe.
On a point of order, it is not the tradition in this House that officials are asked during a debate to respond to points raised. Ministers will respond at the end of the debate in the normal manner. That is the way this House has always worked.
Let me pursue Deputy Donnelly's point, which is valid. If we are to engage in politics in a different way, particularly on critical financial instruments and policy statements going to Europe, it would be appropriate to have the relevant Ministers or officials present who would be able to provide the answers to questions of the kind I am asking. It is important in ordering our business and getting our budgetary and economic policies right that we start by getting the process right.
We will raise that at the Sub-committee on Dáil Reform, which is to meet later this afternoon. It is an important point.
Can I address the substance? It is welcome that we at least have the chance. I am glad that, even at the last minute prior to this document being sent off to Brussels, we have this chance.
However, we should return to this issue. Rather than having the Minister provide a further five-minute statement at the end of this debate, the Dáil, in ordering its business either this week or next, should provide some form of mechanism to allow responses to be made to Deputies' contributions. In the absence of a committee, the Dáil should be able to order its business in a way that allows interaction and real debate. We must heed the point made in the Nyberg, Regling-Watson and Honohan reports that groupthink and a lack of questioning, dialogue and interaction are among the main reasons we got ourselves into economic difficulties.
One of the changes I would like to make relates to long and medium-term risks. Is it possible to adjust the risk analysis featured in table 16 on page 26 of the stability programme update? Political instability should be included with domestic risks. The way in which the Dáil and a new minority Government work poses one of the greatest risks to our economic circumstances. This factor should be reflected in the report. While it would be difficult for the Departments of Finance and Public Expenditure and Reform to make this change, it is required if we are to be accurate and honest about the economic risks we face.
The other two risks are loss of competitiveness, which is set out in the update, and the underinvestment in capital expenditure over the past five years to which a number of Deputies alluded. Having criticised the absence of certain Ministers, I will respond to a point made by Deputy Richard Boyd Barrett. During the difficult period in which the Green Party was in government, it was our shared assessment that, in responding to the crisis, we had to avoid imposing an excessive reduction in the capital budget. As Minister, I was engaged in an investment plan for clean energy involving expenditure of approximately €30 billion. Unfortunately, this proposed investment was subsequently cut. The Green Party also insisted that any troika agreement make provision for financing and building the Dublin metro, including European Investment Bank funding for the project. I regret that this project was also cut.
Deputy Boyd Barrett also referred to Irish Water. I am proud that expenditure on water and wastewater services under the then Minister for the Environment, Heritage and Local Government, Mr. John Gormley, was twice as high as it has been in the past five years. We spent €500 million per annum on this area because we recognised it as a priority.
There is common agreement that the low level of capital expenditure presents one of the greatest risks to the economy. Some of our infrastructure bottlenecks present the greatest risk to the economy and its growth rates of between 4% and 5%. Competitiveness risks are related to infrastructure investment because the cost of providing housing, especially in Dublin, is increasing pressure for wage rises. This issue affects our competitiveness.
I welcome the change in the medium-term objective to allow us to increase expenditure. I would target any such increase on housing in the forthcoming budget. I understand this could be done within European rules because a smoothing exercise applies to each four-year period during which capital expenditure is measured. As a result, an increase in expenditure next year could be multiplied without breaking the medium-term objective or the other stability criteria. Capital expenditure and current expenditure are accounted for differently. The scale of expenditure on housing could and should be ramped up radically because housing, as several speakers noted, is the biggest crisis we face.
Public investment should drive housing construction. If, as the Construction Industry Federation argues, Central Bank limits are keeping housing prices below the cost of housing, making housing construction unfeasible, the State should build homes. Removing the 15% profit margin achieved by the private sector would allow us to close the gap. Further, the development of the cost-rental model set out by the National Economic and Social Council would allow us to raise funding for a public housing programme elsewhere. I understand Austria and other countries which operate such a programme are able to do this off balance sheet. This would provide greater leeway to tackle the current underinvestment in housing.
I would like to change the risk assessments to reflect a second crisis, namely, the crisis in the transport systems of our major cities, specifically Dublin, Cork, Galway and Limerick. The economy is growing at a rate of 5%, yet there are no major large rail-based public transport projects ready to go. As the Acting Chairman, Deputy Lahart, will know from his locality, the traffic system is grinding to a halt as the M50 enters gridlock. These risks to the economy need to be reflected in the stability programme update. There is a commensurate need to radically increase expenditure on bus networks and walking and cycling infrastructure as the first immediate response to these risks.
In addition to the immediate challenges I have outlined, we also face challenges in health and education. The provision of funding for third level education, for example, must be tackled immediately.
I hope the Dáil or a committee will be able to debate these issues further and some of the political issues we face will be overcome. We could use the proposed medium-term review set out in the capital programme to do some serious thinking about the long-term investment we will make in capital spending to get the national spatial strategy right. We must ensure we do not build houses by numbers and instead build the right types of housing in the right places.
We must also address the climate change challenge by radically ramping up investment in new, clean energy and efficient systems that will make the country more productive. If a Government can be formed, it should spend time working to achieve consensus on strategic investments in order that capital expenditure, when ramped up from 2018-19 onwards, is allocated to areas that make sense.
One hundred years ago this week, the men and women of the Rising declared a Republic and read the Proclamation from the steps of the GPO. The Proclamation includes the following statement: "We declare the right of the people of Ireland to the ownership of Ireland, and to the unfettered control of Irish destinies, to be sovereign and indefeasible". Sadly, successive Governments, in particular the most recent Fine Gael-Labour Party Government and its predecessor, the Fianna Fáil-Green Party Government, surrendered our sovereignty and economic independence. As a result, the glossy brochure before us amounts to a programme for continued austerity for low and middle income families.
The fiscal treaty rules previous Governments allowed the European Union to impose on us and the annual debt interest repayments of €7 billion that flow out of this country have a practical outcome for every household. They mean a continuation of the chaos in the health services, an ongoing housing and homelessness crisis, with more than 100,000 families on local authority housing waiting lists, major problems in the mental health service, underfunding of education and roads that are almost impassable in most, if not all, counties.
To mitigate the debt repayment provisions of the fiscal treaty, virtually all Irish fixed assets, including many homes, have been sold off to international vulture capitalists. If one pays to use the facilities in a shopping centre, part of the 10 cent charge will go to Texas Capital Bank, Allianz or a similar company. The Twenty-six Counties Exchequer is paying €7 billion per annum on debts incurred to avoid taxing the super-rich and repay the gambling debts of international investors who invested in Irish banks.
Rents and loan repayments from businesses and home owners pour out of the country to international capitalists. UCD economics professor, Morgan Kelly, says that Irish small and medium sized businesses owe €28 billion. It is probable that research would show there is a higher proportion of Irish output pouring out of the country now than was the case before the land league campaign led by Michael Davitt commenced in the late 1800s.
The fiscal treaty agreed following the Lisbon treaty has created a new colonialism in Europe. This treaty flies in the face of the 1916 Proclamation. It is not a sovereignty sharing treaty. It effectively sets aside Irish sovereignty and hands it over to big European Union powers. It must be renegotiated. This could best be done in the framework of a debt neutralisation conference. Ireland should demand such a conference and seek support for it from other peripheral countries such as Greece, Portugal, Cyprus, Spain and others. We must seek the renegotiation of the fiscal treaty and the halting and cessation of the payment of €7 billion in debt servicing which is crucifying families across the country. The Taoiseach told us approximately 18 months ago that we would see a game change and that this €7 billion would be wiped out. Of course that never happened. It must happen now if ordinary families, low and middle income families, are to have a reasonable standard of living in the future.
If anything underlines the empty rhetoric of new politics, it is this empty Chamber. If anything underlines the emptiness of new politics, it is being given a document today with no time to read it. If anything underlines the emptiness of our ongoing celebration of our independence, it is being told that we can make no input into this document and that it is going to Europe with or without any discussion here. The Minister for Finance has described this document simply as a statistical document. That is utterly contemptuous of the elected Members in this Chamber.
I am going to balance the statistics referred to by the Minister, which we have not had a chance to go into, despite my best efforts, with other statistics. I will begin with mental health. Yesterday, I spent three hours in the Chamber and had with me, but did not get a chance to use it, A Vision for Change. Page 106 of that document refers to the ongoing cost per year of mental health issues as €11 billion. I will repeat that figure because I had grave difficulty with the figure, which is extrapolated from Northern Irish figures. On a pro ratapopulation basis, the document suggests a total annual cost of mental health of €11 billion. That is what it is costing us by not dealing with and funding mental health properly.
Domestic violence is another issue. Two weeks ago or less, a conference on domestic violence suggested the ongoing cost of this to the economy is €2.2 billion per year and yet this is not mentioned today in any statistic here. As mentioned by Fianna Fáil, we have a national emergency in housing, with 120,000 households on a waiting list. Galway city, with which I am familiar, has 15,000 people - 5,000 households - on the housing waiting list, some that are waiting for up to 15 years for a home. We get blinded by figures, so I repeat that figure - 15,000 people. However, there is no mention of that here.
We have almost the lowest rate of investment in infrastructure in Europe but there is no mention of that here. Some 35,000 young people left Ireland last year but there is no mention of that anywhere here. On women and gender, women represent 60% of all low paid workers in Ireland. A half of women workers earn less than €20,000. This is below the medium level but there is no mention of that. Our health system is causing problems. The system itself is unhealthy and is not dealing with people who are sick and yet there is no mention of that here.
I do not subscribe to an economy that looks on all of these issues as inevitable problems. They are not inevitable problems but problems that have been created by this very policy. However, even within this policy, there is scope. As we have been told, there is a fiscal space and yet there has been no passionate outpouring from the Government and new politics that they will use this fiscal space to address the inequality in society. There is mention in this document of risk assessment. There is a huge risk to our economy if we do not deal with mental health and if we do not provide homes quickly. There is an even greater risk in regard to domestic violence because it permeates every generation and every aspect of society. At a conservative estimate, it costs €60,000 to follow up on one victim of domestic violence.
I would at the least have expected some discussion today, having been given time to look at the document, on how we could participate on the basis of "consensus", a wonderful word used by the Green Party. I certainly have a lot to say on behalf of the people who gave me the privilege of being here today. I am not here to be castigated by various people on either side who tell us we have not taken part in government. I have been here every day since I was elected. I have researched, prepared and stood up here but I am talking to an empty Dáil, as are other committed people here. This debate is absolutely empty rhetoric in regard to new politics.
Finally, the fiscal council was mentioned by Deputy Donnelly. It has a very restricted role and remit. At the least, we should be discussing how its remit could be expanded so as to examine the implications of recommendations coming from it in terms of equality and poverty.
I welcome the opportunity to have this debate. I would say, particularly to new Deputies, that no Deputy in this House has a monopoly on compassion. Elected Members from all sides of the House have come here with a mandate to try to do the best they can for their people. We all see the challenges in housing, mental health, education and in trying to provide jobs for our people. We all also know that the country has come from a difficult place and is on a journey we need to sustain.
We need to look at the needs of a strong economy and of delivering services to people as two sides of the same coin. The truth is that looking at our budget situation today, we do not have any resources to spend on new programmes. It will not be until 2018 that we will see a balanced budget. If we look at the economic success we have had in the past five years, with 142,000 people back at work, the tragedy of that success is that although it generated €10 billion in recovery, 75% of that money had to be put into filling the black hole that was left by the crash. We must recognise that we are a small and open trading economy and to survive and grow in that environment, we must be able to win new export markets.
It is interesting to look at this stability report in comparison with the one in 2011 when the Government entered power. The contrast is dramatic. At that stage, we were borrowing 10% of GDP but that is now down to 1%. Borrowing in the open markets was costing us 14% but that is now down to under 1%. We had just lost 300,000 jobs in our economy but now we have created 140,000. This is not being complacent about the future but recognises that we have rebuilt, not on the old fault lines of construction and so on that caused the crash, but on new sectors such as IT, food and tourism, sectors with a strong sustainable future.
It is interesting to compare the stability report with the report of 2011 and the forecasts for where the country would be in 2015. We have made significant strides and come out much better than forecast. The investment rates are more than double what was predicted in 2015 and the rate of increase in exports has more than doubled. The number of people at work is 63,000 more than was expected. We have to realise, however, that sustaining this progress is not going to be automatic. It has been hard work winning export markets and rebuilding confidence that sees investment at such high levels. There is a real danger that people will think that because the economy is growing at very healthy rates, suddenly we are back to where we were in 2008, but that misses the point, dramatically and in many ways. Deputy Eamon Ryan touched on this. We have a had a decade of lost investment. Had we been able to sustain the levels of public investment at between 4% and 5% of GDP we would have had nearly €15 billion more invested in the hardware of public services such as the transport system. We are now seeing a recovery in investment which is very welcome, but the notion that this recovery can now be cashed in and paid out, in extra pay and other things, misses the point. Three quarters of the new growth has come from investment in the past two years. In the stability update, healthy growth is forecast for the next two years and nearly three quarters of the new growth will come from investment, but these investments are the seed potatoes of the future. They are not to be consumed now as if they were disposable income. We are trying to fill a lost decade and create the framework and necessary underpinning to continue to create jobs. It is really important to understand this. We will try to create the drivers of long-term sustainable growth, on the back of which we will be able to build in line with the ambitions we all share. The work I am doing is to make sure every person can find a job here. Getting back to full employment is a hugely important vision, on the back of which not only will we restore dignity to 200,000 people and give them a chance to create a home of their own and have stability in their lives and a stable outlook on the world, but we will also create the resources to invest in the services that were sadly lost in the decade that has passed.
We need to create a virtuous circle, as described by the Competitiveness Council. The achievements of the public and private sectors in the past couple of years are reflected in the fantastic work being done with diminishing resources in the public sector and the fantastic work being done in the private sector, especially in the new technologies and research and development in food and other things. There is a virtuous circle if we can build on these new achievements to deliver higher living standards for everyone, with more resources for public services and more jobs, but if one tries to do it in reverse by starting with spending the fruits of the money and paying ourselves more before we deliver the new achievements, sadly the virtuous circle will go into reverse. This is one of the things we learned from the crisis - in the economy which was built in 2000-07, 66% of new jobs were in the construction sector and public services and we were attempting to build and spend our way to economic progress. This time around 45% has come from exports, compared to only 1% of jobs from new export markets back then. We have a much more balanced economy and can look to the future with a great deal of confidence on the basis of where we now stand, but we need to make sure we continue to build the virtuous circle by achieving the new output in both the public and private sectors on which we will be able to build.
I have been in this House a long time and seen two occasions on which there were opportunities. The first was when we joined the European Union when there was a great opportunity to leap forward, but policymakers made the wrong decisions to go for a public spending approach to the economy, leading to a dramatic crash in the 1980s. The second was after we had joined the eurozone when the very same phenomenon occurred, namely, cheap money in the economy. This led both the public and private sectors to decide they could borrow that money and spend to build living standards without the underpinning of a strong economy. These visions came crashing down on both occasions, with huge destruction of people's livelihoods and prospects and huge emigration followed. It is important that we understand the resources we need to build a better housing system, a better mental health system or better health services and so on have not yet been created.
People talk about fiscal space. It is about running two things in tandem, namely, creating the strong economy that can deliver resources and investing well in mental health, education and health services. We have to keep these two horses together, in harness, as they are two sides of the same coin. I heard Deputy Seamus Healy trot out the same stuff we have heard so many times before to the effect that, in some way, the European Union owes us by writing off our debt and that if only we tapped into 1% of the population, everything would be solved.
That is not the reality. Anyone who has gone out to work to make a living knows that no one owes him or her a living. One must create the opportunity. We have set out our ambitions for full employment, a housing sector that can provide an affordable home for everyone and fair access to health and education services. We can do this, but we can only do it on the basis of our economic success and ability to win new markets and produce goods people want to buy. On the back of this we can build the society we want to create. No one owes us a living and we must do these things through the ingenuity of the people.
I concur with the concerns expressed about the manner in which this debate was organised and the lack of time for a proper consideration of the paper presented. The context of the debate is the general election in which it was very clear there that was zero connection between the vast majority of the people of the country and the macroeconomic figures laid out in the document which is about to be submitted to the Commission in Brussels. The daily lives of families, small businesses, farmers and communities, both in this city and rural areas, are utterly disconnected from the fairy book story laid out in the document before us. This Dáil needs to commit itself collectively to ensuring the disconnect and alienation among communities, families and small businesses from these macroeconomic figures is dealt with. Otherwise, it will completely fail in its mandate, whatever side one is on in the economy.
In the context of the deal to form a Government, I will express a personal concern. There is a lot of speculation that the Department of Public Expenditure and Reform is about to be re-merged with the Department of Finance. I strongly caution against this. The focus on expenditure and particularly public service reform will not be served by bringing it back into the Department of Finance, a Department that wants to control everything and justify nothing and which has a tradition and culture of secrecy, as we have seen here today, as well as of exercising utter control and showing a lack of a connection with real problems.
Second, we have had a debate on health and the many areas in which considerable resources are being invested. There is a need for more resources, but there is also a need to examine how resources are being spent. I believe taking public service reform away from its parent Department and returning it to the Department of Finance, perhaps under the control of a Minister of State, will not work. I was that Minister of State at one time. It will not work unless it is connected to a senior Cabinet Minister and there is some comprehension on the part of the parent Department of the need for the investment of resources and to see where they are going.
While I have huge respect for the acting Minister, Deputy Richard Bruton, I believe he has not heard the message from the electorate on the disconnect between the previous Government and what is happening in people's daily lives. Yes, it is fine to send these flash documents to Brussels. However, people are not seeking pay rises. They seek fairness. They want to know that if they go to an emergency department, they will not have to remain there for 36 hours waiting for a trolley and that if they require surgery, they will not have to wait two years for it. They want to know that they will be treated with fairness, equality and respect in the many public services available. That is the greatest risk and it is not outlined in the document. Because of where it is being sent, it will not outline that the societal risks of this pursuit of the economic model being pushed on us by the ECB are greater than any economic risk. I have said it previously and will repeat it now that the European Commission is failing completely in its remit. It has handed over any sense of a social obligation to the ECB. It is time that all those us who care about the European Union and the European project and who value what it has done brought the Commission back to representing and standing up for the people of the Union.
With regard to the risks involved, many Deputies have spoken about the need for increased capital expenditure. That is agreed across the parties. We need houses and greater investment in infrastructure because we need both the infrastructure and the employment potential it creates. Along with it we must also start to invest immediately in human infrastructure. There is no sense in outlining and agreeing a housing and infrastructure investment programme when we are gutting the apprenticeship expenditure programme. We will scramble again, as happened in the early 2000s, to find people to fill roles and jobs if we ignore the talent available by ignoring young apprentices. We also must re-imagine apprentices and bring people with those talents who are older and might not normally be the target of an apprenticeship programme into it to use their old talents and give them the chance to refresh. Unless we provide or redirect funding and resources into an education system focused on apprenticeships and training for skills, we will not get value for money when rolling out housing and infrastructure programmes because we will be scrambling for labour to build them. That is the first thing that must be done in terms of an apprenticeship programme.
We must have a proper internship scheme. I refer to the revelations in the Sunday Business Postlast weekend about the JobBridge programme. Many Deputies have been speaking about this issue for some time and I acknowledge the work the former Senator and now Deputy David Cullinane has done on it. Last weekend the JobBridge programme was exposed for what it was, but an internship scheme can be good. One can gain good experience if employers are willing to deal with it properly. We must examine the cohort of people who are long-term unemployed and give them the skills they need to take part in the recovery. Again, there is a disconnect between the fiscal figures and getting the long-term unemployed, particularly those who are older, back into some role with their skills, life skills and life experiences in terms of a recovery that means something to them and their families.
With regard to communities and small businesses, there is a focus on exports, with which the Minister, Deputy Richard Bruton, continued. That is good and we have good infrastructure in place. However, we are still not joining the dots for small businesses in services and retail that are continuing to struggle. Yes, the service industry is thriving in Dublin 2, Dublin 4, Dublin 6 and the city centre, but when one leaves those confines, it becomes progressively weaker. It is still not strong because money is still not in people's pockets and there is no confidence. We cannot ignore the 300,000 people who are working in the retail industry. We are struggling to get our heads around providing a future for them in the face of competition on the Internet. In ignoring the retail industry we are ignoring the future of small communities in cities and rural areas. If there are to be vibrant communities, be they in the villages of this city or in rural areas, there must be a retail sector that thrives and has a role. We must provide support to ensure the retail sector has a future because that is a threat to community stability as we continue to struggle with providing a future for communities. Again, it is not a threat in the view of the European Central Bank, but it should be in terms of the long-term threat to the country.
What is not included in the document is very important. Several Deputies have referred to the health system, including the mental health system, housing issues and the collapse in communities. That is what we must include in the document. That is how a proper document would look in the context of outlining the stability of a nation as opposed to the stability of the books. The stability of a nation is much more important and it is more fundamentally our role as legislators. That is also the message the electorate gave us at the end of February. A macro recovery that means nothing to people in their homes, communities, businesses and farms is nothing unless it comes with societal responsibility and is felt in these homes, businesses and farms. While people are struggling to access basic health, mental health and education services in so many facilities, they will not be happy with a recovery or the notion of a macro economic vision that ignores the reality of their lives.
I did not make that mistake now.
I am sorry that the acting Minister, Deputy Richard Bruton, has left the Chamber. I listened with a sense of frustration to his assertion that nobody in the Chamber had a monopoly of compassion. Whatever he might have meant by that comment, it translates to an assumption that we are here to serve the interests of citizens not on the basis of equality, justice, decency or rights but on the basis of compassion. I represent a working class community and, frankly, they do not want the compassion of the acting Minister, the members of Fine Gael or any other Member elected to this House. What they want is a fair chance and to live in a decent society. They do not believe, as the acting Minister asserted, that anybody owes them a living. That is the most common slur cast against the working class in society, people who have stumbled on hard times and who rely on decent thresholds of social decency in society - the assertion that they believe somebody owes them a living. What we owe ourselves and each other is to be honest. We owe it to the citizens of the State to be straight with them and we owe it ourselves and the generations to come to construct not just a dynamic economy that benefits those at the top but also a fair and sustainable economy that benefits all of us in terms of access to decent work, not JobBridge schemes, and decent services and, finally, to address the appalling vista of all of the usual things to which the acting Minister referred. He appeared to take umbrage at Deputy Seamus Healy and said he was trotting out the same old things. I am sorry if it bores him, if the facts of life bore him or if repetition of the fact that almost 90,000 families are in mortgage arrears is dull.
There is also the fact 1.3 million of our people experience deprivation and that in this jurisdiction, supposedly the fastest growing economy in Europe, we now have the third highest deprivation rate, at 25%, for children age nought to six years. I am sorry if this is dull and if it irritates elements in the Chamber because people keep presenting the nuisance of repeating these things but they are worthy of repetition because this is what is happening.
Shiny documents aside, if any government or administration cannot face up to these challenges and admit to them or address them, then all of the shiny documents in the world are not worth the paper on which they are written. The fact the shiny document, it seems, is not amenable to amendment from those of us on the opposition benches tells its own story and raises a not surprising question mark in respect of any real commitment to Dáil reform but I am not hugely surprised by this.
Earlier, my colleague, Deputy Doherty, referred to young Irish women between the ages of 15 and 19, who have the highest rate of suicide in the European Union. We can add to this young Irish men between the same ages, who have the second highest rate of suicide in the European Union. If one wishes a measure of where we are at, this is it. The great tragedy and difficulty is that with the active assistance of Fine Gael, Fianna Fáil, the Labour Party and others, the State has been signed up to a fiscal regime and fiscal rules which act, effectively, as a straitjacket in respect of the spending decisions we can make. I am not talking about wild irresponsible spending which may have been characteristic of other parties in the past. I am speaking about responsible economic and social investment.
We have the shiny document. We have had it for only a short while and, of course, the length of time to debate it is entirely inadequate. I want the Minister, Deputy Bruton, and his colleagues to know their compassion is not what is required. What is required is their cop-on, decency and understanding that people have rights and are not reliant on the compassion of their hearts.
There is no doubt a recovery is under way. We all accept this. There is no doubt the public finances are better now than they were two, five or even ten years ago. There is no doubt the fiscal space, on which we can have disagreements, means we will have approximately €10 billion extra to spend over the next five years depending on what we want do with it. I do not dispute the figures in the spring forecast and stability programme update presented to us but the reality is all of these figures must be put in the context of Fine Gael's taxation and budgetary policies and the policies of Fianna Fáil which in my view are very similar. They put forward very similar fiscal policies in the election.
The figures in the budgetary plans on page 44 of the document, referred to by Deputy Doherty earlier, on the total revenue spend as a percentage of GDP and the total expenditure spend as a percentage of GDP really expose the fact that the low tax, low spend policies of Fine Gael and Fianna Fáil will continue for the next five years. The revenue spend as a percentage of GDP will reduce by 3% and the expenditure spend as a percentage of GDP will be cut by 8.5%. This does not mean we have much scope to be able to deal with the housing crisis, the health crisis and the real levels of poverty and all of the inequalities we have in this State.
Let us look at the report we received, as shiny as it is, at all of the statistics and figures in it - the Minister will sell in a very positive way some of these figures - and juxtapose the report with, for example, the report from a voluntary housing association published two weeks ago, which showed record levels of homelessness throughout the State, and the UNICEF report published last week, which showed one in five children in the State goes without basic needs, and measure the report against Irish Cancer Society's report published this week, which laid bare the real inequalities we have in health care in the State where public patients wait in some cases 25 times longer than private patients, and against the OECD's report on low pay published last year, which showed that one in five workers in the State is in a low paid job with many suffering from deprivation, and the EUROSTAT report published last year, which showed record levels of income inequality in the State. This is the reality of the policies which have been pursued by the party of the Minister of State and by Fianna Fáil. The consequence and outworking of these policies mean children go hungry, families end up in mortgage distress, children sleep in emergency accommodation, patients lie on hospital trolleys, older people do not get home help and families live in poverty, and all of this will get worse.
I read the chapter in the update report on the labour market, which does not at all deal with the reality of emigration and the impact it has had on the unemployment figures. It does not at all deal with the massive issue of low pay and it does not deal with the so-called labour activation schemes and the impact they have on the figures. It is a very shallow assessment of the labour market and the real challenges in low pay we have in the State. It does not deal with many of the potential shocks and challenges which face the labour market in the State.
We welcome the fact we will have changes on how budgets are formulated and the fact Fine Gael has stated it wants to hear the views of the Opposition, and we will bring forward our policies and views. However, we can have all the documents we want but the reality is that as we move into a new dispensation, if the budgetary plans in the document are delivered and we have a reduction in revenues and expenditures as a percentage of GDP, then how will we deal with the real catastrophe we have in housing and the challenges in health care, public spending and public services? We will not be able to do it. It was already remarked that we have one of the lowest capital spends in the entire European Union as a percentage of GDP but Fine Gael wants to reduce it so it can give more tax cuts to the wealthy and super wealthy in the State over and above ensuring that children, older people, sick people and those who need supports get them. This is the reality of the policies being pursued by the outgoing Government and, I would say, that will be pursued with the support of Fianna Fáil if some arrangement is concocted over the coming days.
The stability programme update, SPU, document tells a positive story of remarkable change and of challenge which has yet to be overcome. In April 2011, shortly after the Labour Party entered government, that year's SPU told a grim story. It spoke of a critical need to try to get the public finances into some kind of order, of ensuring the sustainability of the Government's debt position, of hauling the banking sector back to health, of getting people back to work, of saving public servants from the type of redundancies they faced in other countries, which had seen the collapse of their banking systems, of the unparalleled collapse we had in the housing market and of the 330,000 people who lost their jobs. This was Fianna Fáil's equality and progressiveness, as all those who lost their jobs saw their income decrease. The income distribution among the people of the country became progressive because everybody's income was lower. People need to be careful and think it through when they speak about what is progressive and what is regressive.
As grim as the forecasts were then, they proved to be overly optimistic, forecasting that unemployment would peak at about 14.5% when in fact it went above 15%. Similarly, the SPU in 2011 predicted overall Government debt would peak at 118%; it eventually hit 120%. In truth - and we must consider this honestly - the scale and depth of Ireland's crisis was worse than anybody could have accurately foreseen, yet we see just five years on, as the Government prepares to leave office, that the situation has been utterly transformed. The SPU shows that in 2015, the economy grew by 7.8%, the strongest performance in Europe by a very wide margin and well ahead of expectations. The number of people at work rose by more than 50,000. Shortly we will have 2 million people back at work. Unemployment has fallen below 9% for the first time since December 2008. Many people in this Chamber think unemployment does not matter at all, but it does matter. Many people trade in suggestions that unemployment is of no concern, but it is of huge concern to the families, individuals and communities affected by it.
In 2015 and in each of the previous four years Ireland more than achieved its targets for the public finances. We have comfortably come below our debt and deficit reduction targets. With a headline deficit of 2.3% of GDP and an underlying deficit of 1.3%, we are comfortably below the 3% reference rate for an excessive deficit under the fiscal treaty. Therefore, for the first time since 2009, Ireland will be outside the excessive deficit procedure. The debt-to-GDP ratio fell to 93.8%, close to the European average, and is on a strong downward trajectory. Effectively, therefore, the 2016 SPU set out in unambiguous terms the rescue of the Irish economy and our public finances from a state close to bankruptcy five years ago, the very strong performance over the last 12 months and the transformation in the prospects of the country over the next five to 10 years.
None of this is to say that everything is rosy because it is not. Behind every new job is a person or a family benefiting from recovery in their own lives, but not everyone who wants a job has got a job yet. Unemployment has fallen significantly but has not fallen far enough, and the point of recovery for many individuals, families and communities is to see people back in the town, village, suburb or city, working and having financial independence, and working in jobs with good pay and conditions. I agree with what Deputy Calleary said about apprenticeship. It is one of the things I have spent a lot of time building into the social welfare structure. Starter apprenticeships and first steps onto the road of a job for some of our young people who, unfortunately, do not have the contacts - a dad, uncle or other relative - who can, as with the apprenticeships of old, walk them down to a workplace where they will get an apprenticeship. Apprenticeship, like everything else, has changed very significantly.
The housing crisis will take time to work out but, in the meantime, thousands of families need practical, affordable interim solutions. The number of mortgage arrears, as was acknowledged earlier, has been steadily falling but that is no consolation to those families who remain in arrears and need more help. While great strides have been made in expanding the network of primary care centres, the health system as a whole, as we all know, remains under severe pressure. I am acutely conscious that on all these fronts and more the effects of the crisis are still being felt and that many people are still struggling to see recovery in their own lives and to see the hope that their children will get on a career path, whether that be college, an apprenticeship or whatever it is that the children want to do.
What the 2016 SPU presents is the opportunity to build on the progress made to date, put sustainable solutions in place and help people to get to a better place in their lives. The outlook for the economy has improved since budget day and the public finances are again projected to beat targets, but we do have very significant issues in Ireland, the European Union and the globalised economy. We now live in a globalised economic space. One of the reasons that Ireland has done well is that foreign direct investment never faltered during the most difficult years because it was not financed out of local banks in the Irish economy.
However, we have seen, for instance, the revelations in recent weeks contained in the Panama papers of two distinct but related problems: a global web of interlinked legal and financial firms that facilitate illegality, which is a matter for the relevant policing authorities to pursue; and the support by this web of interconnected services of legal but morally dubious tax planning that allows firms and wealthy individuals to minimise their tax liabilities at the expense of national exchequers and citizens. Much of this aggressive tax planning is carried out in secret behind the shield of the kind of paper companies identified in the Panama papers leaks. Such tax planning is an international issue that requires a co-ordinated international response because, through such a response, all national exchequers would benefit. I persuaded Deputy Calleary's late colleague, the former Minister, Brian Lenihan Jnr., to introduce minimum effective income tax rates. As I have said before, we do not yet have the same regime in effect for corporates so we need to ensure that tax avoidance by very wealthy individuals and firms is both mitigated and minimised. There has been a lot of talk this morning of fairness, but the core of fairness in a democratic system is that people contribute in a fair way their share of tax, no more and no less, and every citizen should pay his or her fair share of tax. Ensuring such an outcome would boost our tax revenues even further in the years ahead.
We have as well within the SPU the prospect of a significant surplus over the next five years. These are very strong figures, but the opportunities they offer have to be realised. We must recognise that the projections in the SPU and the additional resources are contingent on the growth assumptions underlying them. Therefore, given the risks the Irish economy faces, these assumptions cannot be taken for granted. If the recovery falters, there will be a corresponding reduction in the resources available. One very significant risk that we have already discussed this week is the prospect of Brexit, which, if it were to materialise, would likely be very damaging to our economy.
Another risk is instability at home. While our ability to influence external risks is limited, to say the least, we have the power to mitigate the risk of political instability. It is therefore imperative that a new Government is put in place as soon as possible to guard against the risks on the horizon and, I hope, maximise the opportunity ahead of us as a country.
The SPU outlines what we will tell the European institutions about the state of play in this country and what the risks are and how we will frame our budgets within the parameters that are permitted. However, I do not believe that we are giving them an accurate picture, and we can hardly expect them to understand the impact European policies are having in the country if we do not give them an accurate picture.
After all, Ireland is the country that picked up in excess of 40% of the European banking collapse and dominates in terms of its ability to borrow. We also have a distinctive characteristic in regard to GDP as opposed to GNP which to a degree distorts the extent of our debt ratio. Our debt-to-GNP ratio would be far worse. For example, much as multinational companies are an important feature in the Irish economy, such companies are transient. Hopefully, some of them will stay a long time and provide good jobs, but one cannot ignore that such is the case.
The risks to the economy is the area that I looked at in this document. The document, on page 26, describes the housing supply pressures. The likelihood is that it would be a high risk but, under impact and main transmission channel, it is seen as a medium risk. The document states that supply constraints in the housing sector might adversely impact on competitiveness by restricting the mobility of labour. It has far more of an impact than that and we are significantly understating the problem. The housing supply pressures, which most of us have been describing as a crisis for a considerable period of time, could not be described as medium risk. These must be high risk. There are over 100,000 applicants on the housing waiting list and if one averages those out as three persons per application, as there will be single households and households with multiple members, it would amount to approximately 15% of the population. It is a significant number.
Housing and homelessness is a serious problem with 1,800 children in this city alone living in emergency accommodation, and that is where one can count the figures. In other parts of the country, including County Kildare, they are not as easy to count where applicants are more likely to be told to self-accommodate, which means bunking up with family, possibly with a whole family living in a small bedroom. It is still an emergency environment and there is a price to pay for that family in the future. The business sector, including multinational companies, highlights the lack of affordable accommodation as an impediment to recruitment. The cost of accommodation is a key factor in the cost of living. It is decreasing people's ability to spend in the domestic economy and it is understandably driving up wage demands. This document needs to be amended to accommodate the real risk here, which is not a medium risk. It is now a high risk. The Government should not understate the problem because if it does, then we will not be in a position to look for solutions. The fiscal rules limit the scope to borrow on balance sheet and yet that is precisely what we need to do if we are to invest in the housing stock and achieve a more stable housing sector. If we keep saying that everything is grand when it is not, all we will continue to get is a collective pat on the head.
Some other areas are not stated as well as they should be, for example, the area of congestion and our climate commitments. Congestion and our ability to deal with it because of our low levels of capital investment is a critical issue, yet it is not identified as a risk. According to the Dublin Chamber of Commerce, 57% of Dublin companies state traffic congestion is having an increased impact on their business. IBEC, not a body I would be seen to rush to quote, makes valid points. In IBEC's view, the overall capital plan is not nearly as ambitious as it ought to be. It hopes that the next Government will have an opportunity to put this right in the medium-term review in early 2017 by acting on the recommendations for the remaining years of the plan, that it should deliver additional high-quality jobs in Irish business and industry, more reliable convenient public transport and reduce congestion, with a consequent improvement on the quality of life for citizens. Why is this not being highlighted? I remember us getting a large amount of funding transferred on the basis of the negative impact of congestion. Those were European funds spent here to acknowledge it. Luas, for example, was one of the projects that happened as a consequence. It has a much bigger impact in the Dublin region because it affects the outer counties and it is the main driver of the economy in the absence of more balanced regional development.
If one starts looking at that in the context of fulfilling Ireland's climate obligations, there is a real risk of us having to pay out hard cash in large quantities in three sectors, the first of which is transport. We need to invest, for example, in something like the interconnector which will connect up our rail lines and deliver a public transport system that has a benefit in both directions. Such a system will cost a great deal but that is an investment that must be seen in a long-term context. If we do not so invest we are likely to spend as much on fines in the future than we will on the infrastructure.
Of the three main sectors in terms of climate, another big sector would be the built environment. Not only should we build sustainable houses in the future but if we are to avoid an oil shock in the future, we must reduce the amount of fossil fuels used in existing buildings by retrofitting them. Essentially, that is an investment for the future.
Agriculture is probably our biggest challenge in that regard because of the importance of both the food and agriculture sectors, and we await to see what the sectoral plans have to say on that. However, the level of ambition that has been stated so far pales into insignificance and already we are destined to miss our targets by 2020. We will only fall further back if we do not reach those targets. We must put that in as a real risk.
The other big area inhibiting the ability of people to go to work, in terms of the cost of living and competitiveness, is that we have the most expensive child care system in Europe. It is a Hobson's choice for parents in terms of the costs involved in going to work. Often low-income families find it impossible to juggle that. One cannot but see the lack of investment in these systems, which should be public systems, in the context of a risk because they impact on the economy, on the ability of parents to function and on the cost of living. They are real risks from an economic point of view.
Earlier Deputy Eamon Ryan asked how does one make amendments to the document by virtue of the fact that we are having this debate today. It is like, as former Deputy Joe Higgins stated, playing handball against a haystack. That is what is coming back. Essentially, we all recognise there has been protracted delay in a government being formed and in the Dáil functioning as it would normally, but there were actions that could have been taken by way of providing an update, a channel for input and then debate to reinforce that. That was not offered and it was a major missed opportunity in terms of the tone of this Dáil. The Government is giving the European institutions a document that is inadequate. If the document is not completely stating the picture it must be asked if it is a work of fact or a work of fiction.
I am pleased to speak on these statements on the Draft Stability Programme Update, which includes the Department of Finance's spring forecasts, for April 2016. I had a look through the document which includes many interesting figures which I want to highlight.
I always compare the document to the one produced the previous year to see how it stood up. If what was proposed this time last year was substantially the situation on budget day, it was a useful document. If it was wide of the mark, its use was very limited and it was probably unhelpful to political discourse. The document refers to the fiscal space. Last year's document referred to a fiscal space of €1.3 billion or €1.4 billion. I forget the figure because I have not checked my notes from 12 months ago. All summer, for six months, the debate raged on how we would divide the fiscal space between tax and expenditure. Fianna Fáil argued for fairness, as we did all along in our responses to the Budget Statements over the past three years, because the Fine Gael Government always wanted to give more money in tax cuts to higher earners and cut expenditure on front-line services. This is the hallmark of Fine Gael. It took much debate to get Fine Gael to accept a 50:50 split between expenditure and taxation. In the recent election, most parties were of the opinion that we needed more in expenditure for front-line services compared to tax cuts for the wealthy.
Last week, I spoke to junior certificate students at the CBS in Portlaoise. There were approximately 30 students in the classroom, aged approximately 15 years. We got into a discussion about the national finances and they asked what happens in the Dáil. I explained that one of the most significant decisions we make in the Dáil is how much of the fiscal space available goes on tax cuts and how much on public expenditure. I told them this issue was the essential difference between the parties in the Dáil and I asked for a show of hands on whether they favoured tax cuts so people had more money to spend and less for front-line services, such as health and education, or more for front-line services and a little less in tax cuts. The people in the group were very clever and intelligent and the vote was three or four to one in favour in favour of expenditure on front-line services. They see in their daily lives the troubles their parents have making ends meet, the difficulty of the cost of education, especially if somebody is going on to third level education, and dealing with the health service where 500,000 people await a routine appointment before they get on a list for treatment. They understood it.
A small minority in the class favoured tax cuts and thought people who had worked hard and earned money should keep more of it. This minority point of view prevails among a certain group of people and while I do not agree with it, it is a valid point of view. It is interesting that the next generation can see the issue of social justice. They agreed on how the split in the fiscal space should be spent.
The document we received this time last year referred to a fiscal space of €1.4 billion or €1.5 billion. Although it may have been right at the time, it was wrong when it came to budget day. The weekend before the budget last year, the Government marched into the House and announced Supplementary Estimates of €1.6 billion. The week before the 2016 budget, there was a fiscal space of over €3 billion, comprising the Supplementary Estimates of €1.6 billion and the €1.4 billion the Government found on budget day. In last year's spring statement, the Government had underestimated the fiscal space on budget day by 50%. While the Government had estimated a fiscal space of €1.4 billion, we had a fiscal space of €3 billion a week before the budget. More than half of it went on a Supplementary Estimate, given that we could not upset the ratios we were dealing with as part of the fiscal treaty, which I understand.
My only question is how wrong these figures are in terms of the fiscal space that will be available next September. It will be all the more important, given that last year, the information could be kept internally among a few officials and a Minister in the Department of Finance. I do not know if it was shared with the full Government. While the EMC and maybe four people in the House knew about it, nobody else knew.
Will we have a new budgetary process in September and October in advance of the budget dealing with these issues? This is not the basis of a document that can be part of the process next September. Last year's document was woefully off the mark last September and this will need to be revised next September when we begin our budget debate a month before the budget, or whenever, that we are basing it on the actual situation, not on something that is six months old. There will be policy changes in the meantime and the document will have to be updated in terms of new policy initiatives that are not included and a more up to date estimate of the financial position. Last year, we had an unexplained bonanza due to corporation tax and there was much talk about it internationally. Some companies are probably trying to put their best foot forward and make an increased contribution to corporation tax to ensure they do not look like they are not paying a certain amount. This is the most important single issue.
While this document is useful for today, it will be no use when we discuss the budget here next September. We will need a substantial document. Those who are producing it will have to go through it with the Oireachtas committee. The rules have changed regarding Supplementary Estimates and if there is a shortfall in the Department, it can raise funds elsewhere or obtain them from another Department. This will have a significant influence next September in the run up to next year's budget. We will need all those figures available in public at an Oireachtas committee, not to be announced as a surprise on budget day. It will be useful. While the document we have is a useful set of statistics, it will not be the basis of a discussion on the budget next autumn.
The document mentions threats from external influences extensively and we will have a better read on it in autumn. I refer to table 11 on page 17 - Budgetary outturn 2015 and projections 2016-2021. It shows that the current budget balance - current revenue minus current expenditure not including national debt and interest payments - will be in surplus this year, which is good. In 2018, we will have a positive Government balance as a percentage of GDP as long as the economy holds up, which is welcome. The national debt is expected to continue at the same level. According to Table 12 on page 19, the gross debt was €201 billion at the end of last year and is expected to be €201 billion at the end of 2021. Although the national debt will not be reduced by a single penny, the figures will look good because the percentage of national debt will have decreased solely on the basis of increasing GNP. Table A2.2 on page 41 is General Government budgetary forecasts 2015-2021. Item D.41 on this table is interest expenditure, primarily on the national debt. We will pay €6.3 billion this year, €6.3 billion next year, €6.1 billion in 2018, €6 billion in 2019, €5.8 billion in 2020 and €5.4 billion in 2021.
While we talk much in the Chamber about a €12 million budget moving from one area to another, we have never had a debate about interest on the national debt in my years here. We do not discuss the non-voted expenditure account. It is wrong. Approximately €10 billion goes through the account, including EU transfers. While some of the matters are contractually entered into and cannot be changed, it is wrong that there is not a debate in the Chamber every year on the interest on the national debt. We will come in and talk for two days on €12 million in the mental health budget but there is no talk about the interest and expenditure on the national debt. Although it cannot go away, the nation would benefit from an open debate on the issue to see if there is any way it can be reduced. It is important that we examine it.
The total expenditure for this year noted in the chart is €73.8 billion, minus the €6 billion national debt. It will allow expenditure of €67 billion on other items and this increases at a maximum rate of less than €1 billion per annum over the lifetime.
I look forward to seeing an updated and revised document based on new policy positions next September as well as up to date estimates and projections of Government receipts and expenditure, so that we will have a useful document to discuss at that time in advance of the budget.
As this is the first time I have had an opportunity to speak in the Thirty-second Dáil, I want to thank the people of Cavan-Monaghan for electing me to this House and for putting their trust in me to serve them once again. While stability programme updates are a relatively new phenomenon, the reality is they are a legacy of the crash. This positive policy measure is designed to keep a closer grasp on our finances and thereby avoid repeating the mistakes of the past. It is about keeping a check on our progress. The stability programme update is also an important element of the new Europe-wide budgetary processes that have become the norm and, in my view, are in the best interests of taxpayers.
As this report outlines, we are expecting economic growth of almost 5% this year. Our economic landscape has changed utterly over the last five or six years. In 2010, before I entered national politics, I worked as a manager in the local credit union in Cootehill. I remember I felt sick to the pit of my stomach the day it was announced that Ireland was entering a bailout and the troika was coming. I was very worried about the fate of this country and the future of young people, the local area and the local town. This worrying and terrible time was filled with huge uncertainty. We can all remember trying to get our heads around the jaw-dropping figures that were mentioned at the time. It was estimated that Ireland needed €85 billion in international loans to keep our hospitals open, our schools running and our public servants paid. It was not much longer than five years ago. We can all remember the harsh cuts that were implemented over a number of years to bring the public finances back under control. Indeed, I am sure we can all remember the speculation that a second bailout would be needed in late 2012. Instead, we successfully exited the bailout at the end of 2013.
We can all remember those difficult years. As we look ahead to what will be a third year of record growth, we must not forget those difficult years or take our renewed economic prosperity for granted. We cannot assume that growth will continue regardless of policy. One of the flaws of the recent general election campaign was that it was based in part on a phoney war about how the main parties and others would spend the spoils of the economic recovery in the years ahead. That argument missed the point that there will be no money if we squander our hard-fought economic progress. I do not want to see the sacrifices of the Irish people squandered and our progress unravelled. Perhaps the most important line in this stability programme update is "While the central scenario for economic activity in Ireland over the next 18 months or so is a reasonably benign one, internationally the level of uncertainty is higher than at any stage since the height of the financial crisis." It is more important than ever, therefore, to continue the approach that has been taken over recent years. This approach is based on sustaining a jobs-led recovery that is underpinned by a focus on enterprise and innovation.
It is important to note that the economic and fiscal forecasts set out in this economic update are prepared on a technical, no policy change basis. Therefore, if we want to achieve the impressive growth rates that have been set out in this document, the economic policies that have been implemented by the outgoing Government must be implemented. Job creation has been and will continue to be a top priority for Fine Gael. Some 138,000 jobs have been created since the Action Plan for Jobs was launched in 2012. It is expected that a further 50,000 jobs will be added to the economy this year. In my own county of Monaghan, for example, unemployment rates have fallen by approximately one third. Young people are returning home and new businesses are opening. The Department of Finance expects employment to move above the 2 million mark this year for the first time since early 2009. Crucially, employment is now more balanced than before, with employment growth across a wide range of sectors rather than an over-reliance on the construction sector. The employment rate is set to average 8.4% and should be close to 8% by the end of the year. Fine Gael will continue its relentless focus on job creation to ensure everyone has a chance to access employment. To date, we have published plans on entrepreneurship, innovation, skills, foreign direct investment strategies and regional plans for each of the eight regions in the country. Most Deputies will agree that we need to continue with this targeted approach if we are to spread job growth in every region throughout the country.
I would like to speak briefly about how the Department of Arts, Heritage and the Gaeltacht has benefited from the economic recovery. When I entered the Department in July 2014, the era of cuts had just come to an end. The arts and heritage sectors suffered considerably during the economic downturn. Budgets were significantly reduced across the Arts Council and other cultural institutions. As a consequence of the turnaround in our public finances, I have been in a position to increase budgets over the last two years. It has also been possible to invest significantly in the centenary commemorations and thereby deliver a broad and extensive programme of inclusive and respectful events right across the country. Most of the money being spent on the commemorations is being used to create at a number of historically important locations a series of permanent reminders, new visitor centres, facilities and immersive attractions which will be used for generations to come. Just yesterday, I attended the launch of the new military archives building at Cathal Brugha Barracks with the President. This magnificent new facility provides a modern home for the military archives for the first time.
We are also investing in our cultural institutions, with ambitious plans for the years ahead. A major €30 million project at the National Gallery is nearing its final phase. Work on an €8 million expansion project at the National Archives will get under way later this year. I am very excited about the planned upgrading works at the National Library beside Leinster House on Kildare Street. I know Deputy Catherine Murphy is very interested in that project. I was delighted to announce last year that we will be investing €10 million in the library's historic building, which has suffered from underinvestment for decades. If economic stability is maintained, I hope further increased investment will be possible at the National Library and out other cultural institutions in the years ahead. I hope the new Government will continue to focus on the film industry as a very important one. The Minister, Deputy Noonan, announced yesterday that the increased cap on the section 481 film tax credit will come into effect from 1 May next. This change will help to attract further big-budget productions to Ireland.
Having a stable and strong economy will allow us to address the challenges we face, not only in my own Department but also in areas like homelessness, housing and health. We cannot create a fair and just society unless we have a strong economy. We have made significant inroads into repairing the public finances. In 2011, the deficit was 12.6% of GDP. This year, it will be 1.1% of GDP. As this stability programme update outlines, we must remain very conscious of the numerous risks and the large degree of uncertainty that exists internationally, including the upcoming referendum in the UK on its membership of the EU. The best way to deal with this uncertainty is to keep our house in order. Just as we are dealing with the new economic landscape that has developed in recent years, we are facing a new political landscape. Our over-riding priority must be to maintain stability. There is an onus on every Member of this Dáil to support policies that will safeguard the economic progress that has been made and spread the fruits of prosperity. Some Deputies are best at shouting about this country's problems. They stir up emotions without providing any solutions. If we do not continue to engage in responsible management of the public finances and pursue competitiveness-oriented policies that help us to compete in an increasingly globalised world economy, we will not be acting in the best interests of the Irish people.
I would like to register a protest regarding the level of surveillance this country has come under. I know the Minister, Deputy Humphreys, mentioned that such surveillance is a good thing but I think it is a good thing when the democratic wishes of the people are fully reflected in economic policies rather than being qualified by eurocrats and other unaccountable people who are neither aligned to our economic interests nor accountable to the Irish people.
This process is worse. Owing to the eternal Fine Gael and Fianna Fáil negotiations the stability programme update has been directed by Ministers without a mandate and written by faceless civil servants to the expectations and demands of unelected eurocrats.
The Taoiseach said earlier that in terms of what is provided for in this document it is a case of business as usual; no change, which is a far cry from the Government using last year's document as a publicity exercise with regard to the spring statement. It was like a press statement on steroids in advance of the general election, the purpose of which was to put the Government into good light before it had to go before the people. Unfortunately, it became a damp squib at the time.
For me one of the most significant issues not debated in this Chamber but debated among people in academia is the fact that we are dealing with measurements that are inaccurate. The saying "You can't manage if you can't measure" comes to mind. There is broad agreement outside of this Chamber that Irish GDP levels are not reflective of economic output and that there are huge distortions in the economy with regard to income flows to non-residents, particularly profits, and dividends to foreign direct investment enterprises. GNP is also suffering. GNP is understood to be a better measurement of the income of the State and has in recent times been about 20% less than GDP. However, there is a distortion arising in that particular metric as well due to the trend of large American companies to headquarter in Ireland for tax reasons. A further distortion in the figures arises out of foreign firms booking foreign manufacturing in Ireland for tax avoidance purposes, in other words, contracts manufacturing. Michael Hennigan of Finfacts, who has done a good bit of work on this, believes that of the estimated €250 billion worth of export value for 2015, half of it is fake, with €60 billion related to the double Irish tax dodge used by companies such as Google, Microsoft and Oracle, etc. and the remainder coming from contracts manufacturing.
These are not theoretic distortions. They are significant and real distortions which muddy our ability to properly measure and analyse the development of our economy and create major problems with regard to many other metrics that we use. The issue of debt to GDP ratio is often discussed. If GDP is an inaccurate measurement of the economy then our debt to GDP ratio is inaccurate. We also discuss the level of investment in education with regard to GDP, which, too, is inaccurate, as is our level of health service provision and taxation with regard to GDP. The whole process of economic debate in this State is in itself distorted due to the fact that we do not have the necessary measurements.
Last year, the finance committee, of which I was a member, discussed the issue of corporation taxes and the reason they were so far ahead of profile. I asked the chief economist of the Department of Finance to explain the reason for this and while he gave a few peripheral reasons as to why that could be the case it was obvious the Department of Finance did not fully understand why corporation taxes were so ahead of profile at that time. It is shocking that we do not have the tools in this State to properly measure the economy and, therefore, properly take the policy decisions that would derive from those measurements. This is not just a theoretical or statistical distortion. The economy is distorted. There is no doubt but that there is a massive over-dependence with regard to exports towards foreign direct investment. Foreign direct investment maintains the bulk of our exports in this State. This leaves us fiercely exposed to external shocks, such as fluctuations in exchange rates, interest rates and oil prices and are not matters within our control. The election of Donald Trump as the President of the USA would have an adverse shock on Ireland's economy.
There is also a huge imbalance or distortion with regard to the size of Irish businesses and enterprises. In comparison with the Danish and Austrian economies Ireland has a small cohort of large to medium-sized enterprises. We also have a small cohort of indigenous businesses that export. This causes major problems. It is estimated that of the €250 billion of exports only €30 billion comes from internal exports. This leaves the Irish economy and jobs massively exposed to shocks. One of the first responsibilities of the incoming Government is to ensure that these issues are resolved such that we do not have an imbalanced economy, as we did a few years ago.
I am pleased to have an opportunity to discuss the stability programme update. I thank Deputies from all sides who contributed to the debate.
I would like first to address Deputy Mary Lou McDonald's concern in regard to a point made by the Minister for Jobs, Enterprise and Innovation, Deputy Bruton. I will attempt to reiterate the point he was making, which is an important one, namely, that nobody in this House has a monopoly of concern for the well-being of the Irish people. There is much talk about new politics. The best way to approach new politics would be for each of us to accept each other's bona fides. Everybody in this House wants to see our housing crisis tackled, people to have jobs, mortgage arrears to be tackled and the benefits of economic recovery shared. We will debate vociferously and rigorously in terms of how best to do that, which is the point the Minister, Deputy Bruton, was making. It is a point we should all accept as we embark on the Thirty-second Dáil.
It is important to acknowledge and accept what this stability programme update is and is not. It is a technical document which we are legally required to submit to Europe. When we were a programme country we were not required to submit it so the fact that we are submitting it is a sign of the economic progress that Ireland is making. This document is not a budget or a spring economic statement, which are matters for the incoming Government. I echo the comments of the Tánaiste and others that the incoming Government will be put in place shortly so that we can put in place the policy measures that Deputies have rightly referred to as policy measures one would expect to see in a spring economic statement and a budget. Policy matters and we need to get into the meat of those discussions.
The data provided in this stability programme update show the great economic progress that has been made. There is a recognition from all sides that such progress has been made. The challenge for the incoming Government and the Thirty-Second Dáil is to make that recovery felt in every home and community in every part of the country. The message which I picked up on the doorsteps during the general election campaign, which message I am sure other Members also picked up, is that people realise there is an economic recovery but they need to feel it in their lives. That is our collective challenge, and a particular challenge for the incoming Government.
My colleagues, the Minister for Finance, Deputy Noonan, and Minister for Public Expenditure and Reform, Deputy Howlin, spoke earlier about the statistics in this document. They are not the Government's statistics, they are the facts. This is not how we tell our story to the world, as some asserted, this is the truth. These are the economic positions in which our country finds itself. The statistics provided are endorsed by the independent Fiscal Advisory Council. It is important to reiterate a point made by other Deputies, namely, economic recovery has not come about without significant sacrifice and pain on the part of the Irish people. Economic recovery was not easy. It hurt people and caused people pain. People had to make sacrifices. We do not need to be patted on the head by various economic institutions or European authorities and told we are great boys and girls. It was painful. The challenge now is to ensure the hard won fruits of the structural reforms of the outgoing Government, supported by the Irish people, are felt by every family.
It is important to also acknowledge that the recovery has bee job-rich. This is beginning to make a real impact on people's lives. We ensure economic recovery is felt by everybody through employment.
We have seen an additional 140,000 people in work in Ireland since the launch of the Government's Action Plan for Jobs initiative in early 2012. I hope the incoming Government will continue that mechanism of an action plan for jobs. In response to Deputy Dara Calleary's points, I hope the incoming Government will acknowledge the need to spread it to all parts of the country through the new regional Action Plan for Jobs.
I take the point Deputy Peadar Tóibín made about corporation tax. I know that this is an issue he has raised and accept his bona fides on it. In a letter to the Minister for Finance published on the Department of Finance's website we have seen the chairman of the Revenue Commissioners acknowledge that it is not seen as cyclical but as sustainable. However, the Deputy is right. This House and any new committee need to monitor the position carefully.
This will be a real test of new politics. "New politics" cannot just be buzzwords. It is going to move to choices and a new budget committee. It is going to involve Deputies debating how we want to spend the limited extra resources available to us. That is not what the SPU is about. It is about the facts. The next phase of the debate is about policy. That is a debate I hope we can get to very quickly.
The final point I wish to make is that we are not balancing the books for the sake of it. Balancing the books is not something one does for the fun of it or to have a bit of craic. One balances the books to have resources in case there are external shocks such as Brexit or anything else in order to continue to provide services such as the State pension, for the minimum wage and the extra investment in services that we need. Balancing the books and being concerned about debt-to-GDP ratios are not issues that should be dismissed as something about which the Government and civil servants care. They matter to working class people, as Deputy Mary Lou McDonald likes to put it, and the people she wishes to represent.