Dáil debates

Wednesday, 6 July 2016

Other Questions

Government Expenditure

1:55 pm

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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28. To ask the Minister for Public Expenditure and Reform why his Department is ready to oversee a reduction in Government expenditure as a percentage of gross domestic product as shown by the summer economic statement figures given the serious issues facing public infrastructure. [19804/16]

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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I tabled a parliamentary question on this issue last week and received a reply from the Minister for Finance, which set out the State's total gross expenditure as a percentage of GDP over the course of the next five years, comparing that to this year and over the next five years. In 2016, the total gross expenditure as a percentage of GDP was 24.1%. That will shrink to 22% by 2021 because of the Government's budgetary plans. Is it not a fact that the Government is shrinking the State?

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The additional capital expenditure that the Minister for Finance and myself announced is precisely in recognition of the additional investment needs our economy has. The figures we outlined in the summer economic statement were very clear. We indicated that €5 billion worth of additional funding would be made available for capital investment, which is €1 billion more than we had originally indicated before the economic statement was announced. That is an increase of 18.5% on the previous Exchequer-funded capital investment programme. Across the period, if and when we can deliver that additional investment, capital investment as a percentage of national income will increase from 3.2% to 3.7% by 2021.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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The Minister is using GNP figures, not GDP ones. Leaving that aside, however, the reality is that figures do not lie. The total amount of money the State will spend as a percentage of GDP is 24.1% this year and 22% to 2021. In a letter to Jean-Claude Juncker, An Taoiseach, Deputy Enda Kenny, said that public investment in Ireland currently stands at just 1.8% of GDP. That is the lowest level in Ireland for many years. His letter went on to talk about the need for flexibilities.

The OECD, Tasc, IBEC and ICTU are all calling for greater State investment. The figures in the summer economic statement are included in these calculations. The reply to my parliamentary question builds in the so-called extra public spend to which the Government is committed. Even with that, the amount of money we spend every year is declining as a percentage of GDP and that is because of tax policies. It is building in tax cuts the Government will plan over the next five years. That flies in the face of a need for greater capital investment.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I have outlined to the Deputy that the percentage of our national income that is absorbed through capital investment is going to increase. It will increase because of the Government's decision that any additional resources that become available will go into capital investment.

The Deputy makes a point regarding total Government expenditure as a percentage of national income and what will happen to that in the future. Much of what happens in the latter period of the summer economic statement is as a result of the decision taken to set up a rainy-day contingency fund, so that as additional resources become available we will prioritise them in two areas. We will make €1 billion per year available after the books have balanced. In addition to that, as additional resources become available we will go into capital investment.

Does the Deputy not acknowledge that we are now seeking to increase capital expenditure as a percentage of our national income and to increase the total level of capital expenditure? We did this as part of the economic statement published a week ago.

Photo of David CullinaneDavid Cullinane (Waterford, Sinn Fein)
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Yes, but the Minister entirely misses the point because the economy is growing. GDP growth is evidence of a growing economy. This does not just concern expenditure: we also tabled a similar question on income. The total amount of income the State takes in as a percentage of GDP year-on-year for the next five years is going down. The total amount of spend as a percentage of GDP is going down year-on-year also.

This means we are taking in less and we are spending less as a percentage of the overall economy. That is the reality. These figures are the basis for budgetary plans, which flies in the face of what the Taoiseach is saying in correspondence to President Juncker. It also flies in the face of what many organisations are quite rightly calling for, namely, more capital investment as a percentage of GDP. That is how the European Union measures capital investment. We have one of the lowest levels of capital investment in the European Union. I agree that it might marginally improve because of the additional money being spent. The Minister is correct that, in terms of what was being spent in previous years, additional money is now being spent. However, as a percentage of GDP, because the economy is growing, it is actually less, which is the point the Minister is missing.

2:05 pm

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I am not missing any point.

I welcome that the Deputy has at least acknowledged that we are planning to increase capital expenditure. Four to five billion euro is not a small amount of money. It is an increase of 18% on the €27 billion already provided for additional schools and hospitals, to maintain the roads we have constructed and to provide new transport projects where needed. The Government has prioritised capital expenditure if additional resources become available to the State precisely because we accept there is a need to do so. As I stated earlier, this is enabled by the recovery that Sinn Féin claimed would not happen. Now that it is happening, we have these resources available to us.

I heard what organisations and stakeholders had to say during the National Economic Dialogue regarding the important role the State plays in capital investment. That is one of the reasons we made this decision.

Question No. 29 answered with Question No. 24.