Tom Parlon (Laois-Offaly, Progressive Democrats)

I am pleased to have the opportunity on budget day to outline the provisions of the 2006 budget to Senators and to listen to the debate. The measures announced in today's budget build on the sound economic policies consistently pursued by this Government over the past nine years.

As the Minister for Finance, Deputy Cowen, emphasised, this country has made remarkable economic and social progress. This budget aims to consolidate this progress and to provide the right framework for continued prosperity for future generations. It strikes an appropriate balance between the objectives of promoting sustainable economic growth and improving equity and opportunity for all our people.

The budget prioritises measures to meet these objectives through a strategy with the following key elements — investment in infrastructure and education; addressing the needs of older people; supporting the less well-off and helping those on average and lower incomes; targeting families with children in a new five-year child care package; introducing measures to safeguard the environment; and promoting equity in the tax system through changes to tax reliefs and reducing tax and other burdens on the enterprise sector, particularly smaller firms.

Before outlining the main budget items, I will set out the broad economic outlook for Ireland. As a small open economy, our fortunes are determined to a large extent by developments in the international economy. The good news about the international economic situation is that commentators are forecasting strong global growth over the next few years. This should mean that markets for goods and services produced here in Ireland will grow more strongly. The challenge for us is to manage our affairs so we can avail of these opportunities. The budget aims to create and maintain the right framework conditions so that Irish firms and employees can exploit these opportunities.

While the overall international outlook is a positive one, there are risk factors which could throw this off course. The oil market remains tight and further price rises cannot be ruled out. The imbalances in the global economy, including the US, continue to persist and widen. There are signs of a pick-up in the euro area but this remains somewhat fragile. All of these factors are outside our control. We must remain vigilant and ensure that we retain the necessary headroom and flexibility to cope with any adverse external shock. We can take encouragement from the fact that our economy showed its resilience and flexibility in the international downturn at the turn of the century. The budget will support and nurture these features of our economy.

Turning to the domestic situation, it is clear that the economic background to this budget is a very favourable one. Economic growth remains strong, with GDP growth this year estimated at 4.6% and GNP at 4.8%. In the stability programme update published today, the Department forecasts continued robust growth of between 4.5% and 5% over the 2006 to 2008 period. The economy's ability to create jobs continues to exceed expectations. With Central Statistics Office employment data now available for the first three quarters of 2005, it is estimated that total employment will grow by 89,000 or 4.7% for the year as a whole. The total number of people at work in the economy is now approximately 2 million, which is a remarkable performance. Strong growth is projected in 2006 and later years and the economy will maintain its effective full employment status. Inflation has come down. This year, the Department expects that our inflation rate will be in line with, or even slightly below, the euro area average on a comparable basis. Over the next few years, low inflation is expected to prevail, with the consumer price index rising by 2.5% on average. The public finances are sound. We will achieve our budget targets for 2005. Our debt-GDP ratio will be 28% at year end, compared with over 63% in 1997.

The budgetary targets are for a general Government deficit next year of 0.6% and a debt-GDP ratio remaining at 28%. Total public expenditure will exceed €50 billion. Capital spending will be close to 5% of GNP, the highest rate in the EU. With such a high level of planned expenditure, the Minister rightly put significant emphasis on the Government's intention to ensure value for the taxpayers' money and drew attention to the measures he has recently put in place to bring this about.

The Minister devoted a considerable proportion of his statement to the priority area of investment in infrastructure. As Members will have noted, he announced a total funding envelope of some €43.5 billion for investment over the period 2006 to 2010. Of this, some €5.5 billion will be funded by public private partnerships, thereby harnessing private sector involvement and expertise in the task of improving our capital stock. This funding will support investment across a range of key economic and social infrastructure areas including health, housing, culture, transport and education.

Of particular note was the Minister's announcement of a new €300 million, five-year innovation fund for the higher education sector. Coupled with an allocation of €900 million for investment in university and institute of technology facilities, the Government has committed some €1.2 billion to this sector up to 2010. This investment is a critical plank of the Government's strategy to promote the knowledge economy.

The overall funding envelope announced by the Minister also includes some €14 billion for the first five years of the recently launched Transport 21 plan. This shows the Government's commitment to this vital plan, which aims to develop a world-class transport infrastructure for our country. This commitment of resources means that the implementation of the plan can get under way in 2006. The Minister gave examples of the many critical road and public transport projects in Dublin and throughout the country where work will commence or continue in 2006.

On the subject of capital investment, I will take this opportunity to say a few words about the plans of my own office, the Office of Public Works, which continues to deliver many capital and construction projects. The OPW capital budget for 2006 is €400 million, of which just over 50% is in respect of decentralisation.

As Members will be aware, the decentralisation programme is by far the largest and most wide-ranging in the history of the State, involving the relocation of over 10,000 civil and public service jobs to some 53 locations in 25 counties. A capital envelope of over €800 million has been set aside over the next number of years for decentralisation. As it falls to me to oversee this programme, I am pleased to inform the Seanad that a considerable amount of work has already taken place.