Wednesday, 13 June 2018
Ceisteanna - Questions (Resumed)
National Risk Assessment
I propose to take Questions Nos. 1 and 2 together.
The national risk assessment is an annual exercise which aims to ensure a broad-based and inclusive debate on the strategic risks facing the country.
One of the lessons of the recent crisis is that Government did not pay enough attention to dissenting opinions and the national risk assessment provides an opportunity for an open and inclusive conversation on risks. It focuses on the identification of risks and is not intended to replicate or displace the detailed risk management and mitigation that happens across Departments and agencies in regard to individual risks.
This is the fifth year the Government has produced the national risk assessment and it has highlighted important issues since first published in 2014, including one of the earliest official acknowledgments of the risks arising from a potential Brexit if the British people decided to vote "Yes" in the referendum.
As with previous years, my Department, working with the cross-departmental steering group, prepares the initial draft. It also reflects feedback from an open debate in April where representatives from business, media, research and education institutions, civil society groups and the public sector were invited to discuss a draft list of risks.
Following approval by the Government on 22 May, the draft was laid before the Oireachtas and published for public consultation.
The draft includes some new risks this year including the impact of social media on public debate, and the risk of overheating the economy.
Existing risks have also evolved. For example, the risks arising from Brexit have developed significantly and remain very prominent, while other risks include international uncertainties on tax and trade, climate change, access to secure energy supplies and our capacity to meet skills needs.
The increasing pace of change means that disruptive technological trends are a risk to many sectors of the economy, while infrastructure constraints and housing supply and affordability issues are risks despite policy responses being implemented.
The draft national risk assessment is available on my Department’s website and the deadline for submissions is 20 June. There has been a very encouraging response to the draft, and the Department would welcome all feedback including from Members of the Oireachtas.
Following this public consultation, the list of strategic risks and the report will be finalised and published in July.
I thank the Taoiseach for outlining the process relating to the 2018 draft national risk assessment. I would like to concentrate on one of the new risks that has been identified, namely, that of the economy overheating. I am a member of the Committee on Budgetary Oversight and we have discussed that matter at length. I get a sense sometimes that economists who missed predicting the previous economic crash want to make sure they do not get caught out again and that they are getting ready to predict the next one. As we ramp up our spending on construction significantly, there is no doubt there is a risk that this can have an impact in terms of overheating. Will the Taoiseach indicate how much analysis has been done on the risk of not investing in the housing sector, where such investment is so badly needed, and in key infrastructure projects such as those outlined in Project Ireland 2040, including in respect of roads, hospitals and schools? We have had the lost decade and we have to restore investment levels. We will be taking a big risk if we do not make the necessary vital investment in key infrastructure in order to allow people to work and live well into the future.
The economists to whom I refer also presume that we will continue the boom-to-bust cycle. It would be a major risk if the spending decisions that are made have more to do with short-term spending strategies rather than key infrastructure projects. We want to move away from that boom-to-bust cycle. I would be concerned about commitments and promises from the Opposition. We have examined Fianna Fáil's proposals and discovered that they will cost €1.5 billion for 2018 alone in terms of extra Government spending. We must look to see how we can mitigate all these risks to stop us returning to the boom-to-bust cycle. We do not want to return to the mistakes of the past, we want to ensure that we invest in key infrastructure.
The recently published draft national risk assessment is a comprehensive document. We will not have time to discuss it at length but I would like to focus on one particular aspect, which rightly identifies the supply of housing as one of the most immediate domestic challenges facing the State. Sinn Féin acknowledges that there is no easy-fix solution. Unfortunately, we are dealing with legacy issues of past Fianna Fáil Governments and the previous Fine Gael-Labour Government, which failed in terms of housing, and the absolute determination of the more conservative parties to stop building social housing and outsource it to the private sector. The reality is that, by any yardstick, this Government has failed in the context of housing. The Minister was asked about that earlier and he became very defensive when discussing the facts. He might be able to throw figures out in terms of some modest improvements in home building but nobody can argue that the Government has not done anything near what is necessary in order to deal with the housing crisis. Will the Taoiseach indicate the additional measures that will be taken by the Government in this regard?
When we look at the documentation, we see that there are two very different national risk assessments. The first is a general and quite political assessment drawn up under the supervision of Ministers and the second is a very focused and expert one drawn up by the emergency management services. The striking thing about the risks identified in the general document is how often there is an attempt to say that everything is in hand or to avoid specifics. For example, there is no proper quantification of fiscal risks and all we have to go upon are the anonymous briefings the Minister for Finance has been giving to journalists about how he is saving the nation from a reckless Opposition.
In the context of Brexit, surprisingly, the draft does not mention the impact of the current stated objective of the European Union in the negotiations. Michel Barnier has stated that the European Union is offering a comprehensive free trade agreement but not continued membership of the customs union and the Single Market because these cannot be accommodated within the British red lines. According to the Copenhagen study, this will represent a permanent loss of 4.3% of our GDP. Can the Taoiseach confirm that according to the information available to him, the current offer of the European Union to the United Kingdom is in line with that and will therefore cost €2,693 per person? That is the impact using last year's figures so the impact will be bigger.
Regarding the other risk assessment by the Office of Emergency Planning, again, it is a clear representation of the threats. It has been drawn up in line with the guidelines put in place by Deputy O'Dea over a decade ago and this format has been very effective to date. Can the Taoiseach tell us if he has examined this risk assessment, which was completed last year, to ensure that sufficient resources are in place to meet the highest priority threats? The overall emergency management plan created by Deputy O'Dea has been effective and the only change in recent times has been the increased prominence of politicians in press conferences. Can the Taoiseach tell us what happened to the new emergency planning document? I was informed two and a half years ago that it was ready for Government approval.
I support the national risk assessment process, which we introduced when in government in 2014. It is a very broad canvas and it is difficult to ask specific questions on so many strategic issues. We have other opportunities to deal with issues like Brexit and so on but I want to ask about two. First, an area I am increasingly more concerned about relates to our commitments in regard to climate change, not only the physical impact - we have had two status red storms in Ireland during the past winter with very significant damage to us - but also because we will be subject to very serious fines due to not meeting our international commitments on greenhouse gas abatement. We need to get serious about that now. We have no prospect of meeting the targets unless we set out a clear strategy. I am interested in the Taoiseach's views on how that matter is to be addressed.
Second, external interference in our democratic process is an issue we raised yesterday but is one we should not let go off our agenda. We need to have a robust mechanism to ensure that external forces do not manipulate any elections we have into the future.
I will deal first Deputy Heydon's question on the very risk of overheating of our economy. This is a very real risk but one which we should not over-exaggerate..
The enormous political challenge over the next couple of months, or perhaps the next year, is to break the cycle of boom and bust that we have had in Ireland for generations, the procyclical economic policies that slash taxes and increase welfare and spending when things are going well only to take it all away again when things are going badly. We should do the reverse. We should balance the books, start running a small surplus into the future and start paying down our debt so that when the economy slows down, as it inevitably will, or when there is another recession - that might be far away but it might happen - we will be in a position to increase spending and cut taxes, which is what should be done during a recession. That was not possible in the past because of irresponsible economic policies and I am determined that it should not happen again.
There were two features to the overheating that occurred previously. There was a credit bubble, with excessive lending by the banks to the construction industry, in particular, and to people buying homes. That does not appear to be the case currently. I do not see evidence of a credit bubble. Second, extra day-to-day spending was funded with windfall taxation from stamp duty. It was a huge mistake by previous Governments to commit to extra current, ongoing spending across the board that was funded by a temporary windfall in taxation from stamp duty. We must bear in mind the vulnerability of corporation tax receipts and not allow ourselves to repeat that mistake. We are nowhere near that yet, but corporation tax revenues are buoyant and we should not make the mistake of using them, as they might not always be available, to fund long-term commitments.
We should use the buoyant receipts from corporation tax for items such as investment in infrastructure, as Deputy Heydon mentioned. He is spot-on in that regard. We must increase infrastructure spending in transport, housing, schools, universities, healthcare facilities and climate change. That makes both economic and social sense. Our spending on public infrastructure is up 18% so far this year, and it will increase by another 25% next year. We are tackling some deep social problems, for example, the social housing shortage and the general housing shortage. We are also removing bottlenecks to future growth by investing in transport. That makes good economic sense. Continuing to increase our spend on public infrastructure, road projects and school projects will not cause overheating. Other errors may cause that.
In terms of the facts about housing that were mentioned by Deputy Cullinane, I will not go over the debate we had earlier. We all acknowledge the housing shortage and the crisis that exists with homelessness. I acknowledge that there are more people in emergency accommodation today than there were a year ago. I am not in denial about the challenge we face in that regard. However, one fact the Minister, Deputy Eoghan Murphy, did not mention in the debate earlier is the figures that have just been released on rents. They show that rents increased by just 1% in the last quarter and by 1.1% in the previous quarter. That is two quarters in which rent has increased by approximately 1% as compared with a year-on-year increase of approximately 7%-----
That indicates rents are stabilising and that the policy of rent pressure zones is working. The 600,000 tenants who have not experienced a significant rent increase in the past year or so know that.
The risk assessments on Brexit are real and serious. It all depends on the type of Brexit, whether it is a hard Brexit or one where the UK stays in the customs union and is aligned with the Single Market. There are many different scenarios and the period of transition, if there is one, will be important in that regard. None of the many analyses I have seen to date indicates that even a hard Brexit would put Ireland into recession. They indicate that in all the scenarios for Brexit our economy will grow more slowly than it might have otherwise and employment growth will be less than it might otherwise have been. The issue is the opportunity cost as opposed to triggering a recession or a downturn. However, we must be wise to even that possibility because it represents a major change in our economy and our trading relations. That is the reason the Government is working so hard to ensure we continue to have the closest possible relationship with the UK after Brexit - that there is a transition period and that things change as little as possible after it. That is where we are at the moment in the negotiations, but they are not easy negotiations.
The office of emergency planning has worked very well. I have no difficulty crediting the former Minister for Defence, Deputy O'Dea, with establishing it. A great deal has been learned from the various emergencies it has handled. The chairperson, Mr. Sean Hogan, and his staff have done a good job. I noted a slightly snide remark from the Leader of the Opposition about Ministers being more prominent at press conferences and so forth.
Ministers are more prominent at press conferences. We are also more prominent at the meetings. What has been different over the past year or two is that during a weather emergency Ministers have been involved by attending the meetings and the press conferences.
While one inevitably comes in for criticism for this let us not forget the alternative, which was provided by Fianna Fáil and the Green Party during the major snow event of 2010. The then Minister for Transport, former Deputy Noel Dempsey, was away in Malta and the then Minister for the Environment, Heritage and Local Government in the Custom House decided he was not responsible at all and that he was not the Minister for snow. Any reasonable person would prefer the type of engagement they get from the Ministers in this Government to the absence and lack of engagement they had from the previous one.