Brian Cowen (Laois-Offaly, Fianna Fail)

I welcome this opportunity to address Seanad Éireann on the Government's pre-budget Estimates for 2006. Before I proceed to outline the Government's spending plans for next year, I would like to review the economic and budgetary outlook and the background to the 2006 Estimates. In framing the Estimates, the Government has continued its policy of prudent management of the economy and public finances. We will comfortably achieve our budget targets for 2005. With tax revenues for 2005 running strongly ahead of projections we will have a higher current budget surplus than was forecast at budget time last year.

As a result of these policies, we have achieved sustained economic and social progress over the past decade. Our economic growth rate of 7% has been more than twice the EU average since 1997. At the end of this year, our debt to GDP ratio, at about 29%, will be one of the lowest in Europe. We are effectively a full employment economy. There are now around 500,000 more people at work compared with 1997. Over 720,000 income earners are likely to be out of the tax net this year compared with 380,000 in 1997, when we took office.

The pursuit of prudent fiscal policies has also generated the resources to enable the Government to make real improvements in day-to-day services and to target priority social needs. On a pre-budget basis, gross current expenditure in 2006 at €42.2 billion will have increased by two and a half times the 1997 level. These increased resources have financed real improvements in public services and made a real difference to the quality of people's lives.

We have provided for significant increases in social welfare payment rates. The rate of payment of the old age contributory pension has been increased from €99 per week in 1997 to €179.30 in 2005. This is a nominal increase of 81% at a time when cost of living increases were just under 40%.

The rate of payment of child benefit for a first and second child in 1997 was €38 and this has now risen to a rate of payment of €141.60 in 2005, an increase of 185% in real terms. We have reduced the pupil-teacher ratio at primary level from 22.3:1 in 1996-97 to 17:1 in 2003-04 and at second level from 16:1 to 13.6:1 in the same period.

The Government has increased frontline staff in the health service from 76% of total staff in 1997 to 80%. These include 2,000 additional medical and dental personnel, almost 7,000 additional nurses, 620 additional consultant posts, bringing the total to 1,947, as well as nearly 7,000 other health professionals such as speech and language therapists, physiotherapists and social workers. Patient discharges from hospitals in 2004, in-patient and day cases, increased by 4.4% over 2003. In line with international best practice, the emphasis is on day work and these discharges increased by 8% in the same period.

Investment is critical to supporting sustainable economic growth and national competitiveness. The Government has more than trebled Exchequer capital investment from €2 billion in 1997 to almost €6.6 billion, including capital carryover, in 2006. More than 70 national roads projects totalling over 500 km. have been completed since 1997, including 280 km to motorway or dual carriageway standard. Service enhancements include the doubling of the capacity on the DART and the Luas now carries an average of over 65,000 passengers a day. Over 45,000 social housing units have been built, while €8.5 billion will have been invested in our schools, hospitals and other facilities in the health and education areas since we came into office.

Gross public expenditure is expected to be around €45.5 billion in 2005. It is expected that there will be a small underspend on current expenditure of around €75 million. Exchequer capital spending this year will be almost €6 billion, including carryover of €237 million from 2004, an increase of 15%. The multi-annual system for managing capital with its 10% carryover arrangement facilitates better management of capital programmes and projects. It ensures that significant amounts of money are not lost to the capital budget and, as a result, €286 million of capital not spent in 2005 will be available to Departments for spending in 2006.

The 2006 pre-budget Estimates provide for gross expenditure of around €48.5 billion. Of this figure, €42.2 billion is current and €6.3 billion is capital. It represents an increase of almost €3 billion over 2005 or around 6.6%. Some €2.7 billion of the overall additional spending provision of €3 billion in 2006 is allocated to day-to-day public services, bringing the total gross provision to €42.2 billion for the year. This is a 6.9% increase on the 2005 forecast outturn. Nearly €1.9 billion, or 70%, of the additional €2.7 billion is provided for three priority areas, namely, the social welfare allocation for 2006 is €12.4 billion on a pre-budget basis; the Department of Health and Children allocation will be over €12 billion, an increase of €750 million or about 9% on an underlying basis when account is taken of a number of exceptional one-off expenses this year in respect of the establishment of the HSE; and the Department of Education and Science allocation in 2006 will increase by €530 million, or about 8%, to €7.2 billion. I will make additional provision for social welfare payment rates on budget day to build on the substantial improvements in welfare provision already made by this Government since 1997.

In addition to this €750 million increase on health spending, a provisional allocation of €400 million is being made in 2006 towards the cost of repaying charges for long-stay care in former health board funded institutions. Some €250 million is included in the allocation for service improvements including, among other things, disability and mental health services, the commissioning of new units, primary care services, and medical education and training. The increases in disability services are over and above the package announced in the budget last year.

The €530 million increase in current funding for education will allow for service improvements in key areas such as a one point reduction in the staffing schedule for primary schools with effect from September 2006, as well as a further one point reduction in 2007, creating about 200 additional posts in primary schools in both 2006 and 2007. We are also providing for the full year cost of 590 additional resource teachers for pupils with special needs appointed in September 2005.

One in five teachers in our primary schools is dealing specifically with special needs. The cost of 270 new posts is also being provided under the programme for delivering equality of opportunity. The "three for two" arrangement on school buses is being phased out by December 2006. There will be an increase of 10.8% in funding for capitation grants for the maintenance and upkeep of our schools, while there is also an increased provision for third level research and development, in line with strategic needs of the economy.

In the justice area, the provision for current spending on the Garda Vote is being increased by €105 million, or 9%, to €1.3 billion. This will facilitate the implementation of the Government's commitment to expand the force by 2,000 to a new complement of 14,000. The 2006 provision will allow for the employment of 12,920 gardaí, an increase of 700 on 2004, or 2,000 on 1997 levels. Expenditure on child care in the Estimates has increased from €500 million in 1997 to €1.3 billion before the budget. I will make further provision for child care on budget day. The 2006 allocation for the equal opportunities child care programme is more than €100 million. Some €55 million in current spending will be provided for staffing grants to community child care facilities and supports to city and county child care committees, and an additional €47 million will be provided for capital spending. We envisage the creation of 15,000 extra places during this period. The 2006 pre-budget capital allocation will bring the number of extra child care places funded under the programme from none in 1997 to approximately 30,000 by the end of 2006. That child care programme began in the National Development Plan 2000-2006.

Expenditure on the provision of services for people with disabilities will come to approximately €3 billion this year, which constitutes an increase of more than €400 million over the 2004 figures. The 2006 Estimates provide for spending of almost €3.3 billion for disability specific services. This is an increase of €300 million or 10% and, as I have stated, includes €135 million under the special disability package announced in my last budget.

As for overseas development aid, the Government has committed itself to reaching a target of 0.7% of GNP by 2012 as well as an interim target of 0.5% of GNP by 2007. This will involve increasing the present provision of €500 million to €1.5 billion during that time. Next year's Estimates provide for a total commitment of €675 million, or 0.47%, of GNP for overseas development aid in 2006. This represents an increase of €129 million, or 24%, on the allocation this year, which came to €546 million. Ireland's contribution rate at 0.47% of GNP compares favourably with current indicative figures of 0.19% in the United States, an average of 0.3% in the OECD and an average of 0.43% in the EU for 2006.

With regard to capital spending, I will announce a new five year capital envelope from 2006 to 2010 on budget day. This will be consistent with the Government's overall priority commitment to capital investment. It will also incorporate the increased investment on transport within the Transport 21 framework. The total cash spend on investment on a pre-budget basis in 2006 will come to almost €6.6 billion, including the €186 million carryover from 2005 to 2006. This is an increase of almost €600 million, or 10%, over 2005, before any budget day additions.

The Government is committed to achieving value for money from public expenditure for the taxpayer. We have introduced a number of reforms in recent years such as the five year multi-annual capital envelopes, revised capital appraisal guidelines and planned improvements in construction and construction related contracts. Already, we see evidence of significant improvement in the management of capital projects. Of the 23 major roads projects under way under the aegis of the National Roads Authority this year, a total of 19 are either on or below budget and will be delivered on or ahead of schedule. While total project costs for all 23 projects this year was taken to be €1.18 billion, the outturn cost is expected to be €1.17 billion. Hence, that simple statistic gives the lie to the idea that the Government is incapable of managing major projects.

Building on recent reforms, we announced two new initiatives to further improve the approach to securing value for money, namely, an initiative on management of information and communications technology projects and consultancies as well as additional general measures on value for money, which I announced on 20 October this year. Departments have been asked to give effect to the measures which can be implemented immediately and work is under way with regard to updating the necessary guidelines and other required steps to implement all these measures.

With regard to public service pay and numbers, the gross provision for 2006 to fund public service pay and pensions is €16.4 billion, an increase of €1.1 billion, or 7%. It makes full provision for the final phase of Sustaining Progress and includes some €430 million for service improvements and extra numbers. The extra numbers are primarily employed in a front line capacity in health, education and the Garda. The percentage of total Government expenditure in respect of pay and pensions remains under 40%, which was also the position when the Government came to office in 1997.

The suggestion that pay has become a bigger component of total expenditure is not statistically correct. Despite the contrary perception created in some quarters, there has not been an increase in the share of overall current expenditure attributable to pay and pensions. In 1997, this came to approximately 40% of gross current spending and next year, on a pre-budget basis, it will come to almost 39%.

While the Government remains committed to controlling public sector numbers as part of its approach to managing public expenditure and securing better value for money, the policy is not implemented indiscriminately. Where necessary, the Government has been prepared to increase numbers to meet priority requirements in front line and essential services. The total number employed in the public service in 2005 comes to just over 290,000. We have held numbers in the Civil Service, the local authorities, defence and the non-commercial semi-State sectors below their 2002 levels. However, as I already mentioned and given the service improvements I have outlined, we have allowed increases in front line staff in the key areas of health, education and the Garda. The Opposition calls for more services while simultaneously criticising the Government for employing people to implement and provide such services. I have yet to work out its formula, whereby services will be provided in health and education without the employment of human beings.

We will provide some €3 billion in additional resources, bringing the total 2006 provision for public service spending on a pre-budget basis to €48.5 billion. The Government's fiscal and economic policies have transformed the economy and have led to significant economic and social progress. Naturally, challenges remain which we must meet. We will see further progress when I make additional provision on budget day for social welfare, child care, care of the elderly and capital investment. I commend the Government's pre-budget 2006 Estimates to the Seanad as figures for which any of my colleague in Europe would give his or her eye or teeth.