Brian Cowen (Laois-Offaly, Fianna Fail)

I welcome this opportunity to address Seanad Éireann on the Government's pre-budget Estimates for 2007. The 2007 gross pre-budget Estimates provide for expenditure of just over €54 billion, comprising €46.7 billion on the current side and €7.6 billion on the capital side. This represents an increase of just over €4 billion, or 8.1% over the 2006 forecast outturn. The Estimates represent the correct balance between making necessary provision for our public services and ensuring the maintenance of a prudent and sustainable budgetary position. They build on the significant increases in public expenditure of recent years which have, as I will refer to shortly, led to a real improvement in public services in many areas. On budget day, I will set out some additional expenditure measures in the areas of health and social welfare.

The 2007 Estimates must be viewed against the background of the remarkable economic and social progress of the past decade. The economy has been transformed over the past ten years. It has grown at an annual average rate of over 7% in gross domestic product, GDP, terms since we returned to office. Our debt-GDP ratio will be approximately 25.5% of GDP in 2006. This debt-to-GDP ratio puts us at the second lowest in the euro area. Our unemployment rate, at around 4.25%, is one of the lowest in the European Union where the average unemployment rate, at 8%, is nearly double our rate. The level of employment this year exceeded 2 million for the first time in the history of the State.

We now spend €6,700 more on public services for every person in the country than we did in 1997. That extra expenditure has led to real improvements in our public services. On the capital side, as a result of this increased spending, great advances have been made in the provision of new roads, radically improved public transport, new and improved schools and hospitals, more social housing and other infrastructure, which have improved prosperity and enhanced the quality of life.

The following are only some examples of what has been achieved. We have made major progress on new motorways from Dublin to the south, the west and the north, resulting in significant savings in journey times. Major investment has been also made in roads in urban areas and in non-national roads in rural areas. Under the rail safety programme, 760 km of track were re-laid nationally by the end of last year, the quality of the rolling stock is being greatly upgraded and there has been significant enhancement of suburban rail capacity. The Luas has been built and in 2005 carried more than 22 million passengers or 60,000 per day. Sine 1997 some 100,000 households or approximately 250,000 people have benefited from various social and affordable housing programmes. In the period 2000 to 2005, 76 new schools were built at primary and post-primary level with construction under way at a further 23 new schools. Some 380 large-scale refurbishment or extension school projects were completed with the construction of a further 54 projects under way. More than 6,000 small-scale projects, involving upgrade works and small extensions were delivered. These are some of the major improvements made and other major improvements have been made in areas such as water and waste water services, child care and the provision of health facilities.

The reality is also of major improvements arising from our increased investment on current expenditure in the past decade. The total patient throughput in hospitals is up by more than 300,000 to more than 1 million per year. The waiting times for common surgical procedures have been dramatically reduced from years to two to five months. More than 3,000 home-care packages have been provided for older people where none existed in 1997. Approximately 1,500 additional acute hospital beds are in use.

Under this Government, the pupil-teacher ratio at primary level has fallen from 22:1 to 17:1 and at post-primary level it has been reduced from 16:1 to 13:1. There are now 7,000 primary teachers working solely with children with special needs. Alongside them, almost 8,000 special needs assistants provide an additional support to children with special needs compared with fewer than 300 when we took office. At third level there are now 45,000 more places, wider representation from all socio-economic groups and increasing numbers are graduating, especially in the key areas at postgraduate and PhD level. These and other positive changes for the better have improved the quality of our lives, enhanced social inclusion, improved access to opportunity and they will support our economic development in the years ahead. These examples refute any assertion that there is little to show from the investment put in place by the Government.

Turning to the 2007 Estimates, for the third year in a row expenditure is forecast to be within profile, reflecting the Government's sound management of the public finances. In the 2006 Revised Estimates Volume the gross current spending provision was €43.8 billion. Latest indications are that the outturn on current spending for this year will be €43.5 billion or broadly on target.

With regard to the capital spending outturn, when account is taken of €182 million which Departments currently indicate they will carry forward for spending in 2007, the capital cash spend will be €6.8 billion this year. That is an increase of 16% over the cash spend last year. Of the planned increase of just more than €4 billion for next year, €3 billion is for current spending on day to day services and just less €1 billion is for capital spending.

The Exchequer capital allocation to address key infrastructural priorities for next year is €7.6 billion, which represents an increase of 12.7% over the forecast outturn for 2006. On a cash basis when account is taken of the forecast carryover spend into next year, the year on year increase will be some 13.6%. This capital provision will fund the following service improvements. A provision of €1.5 billion for roads will build on the substantial investment made to date by Government and will fund and continue to upgrade many of the major inter-urban routes to motorway or high quality dual carriageway standard. These routes are on schedule for completion by 2010. Overall eight road projects involving more than 84 kms in length are scheduled for completion next year and six projects amounting to 212 kms in length will commence.

A large increase of 58% in investment or approximately €780 million demonstrates our commitment to investment in public transport. It will fund key projects including the further development and expansion of the Luas, the commencement of phase one of the western rail corridor and Cork commuter services next year and the provision of 160 new buses for Bus Éireann in addition to the provision of 100 new buses for Dublin Bus recently agreed.

The capital provision of €1.3 billion for housing will fund the Government commitments under the Towards 2016 partnership agreement regarding planned increases in social housing output with a target of 27,000 social housing starts over the next three years and 17,000 affordable housing starts over the same period.

The huge progress made in recent years in the provision of environmental services has facilitated record levels of housing construction output and commercial development. A total of €427 million will be provided next year to ensure further progress in this area will help remaining schemes achieve full compliance, for example, under the EU urban waste water treatment directive.

Education will see a capital spend next year of more than €707 million, which is an increase of 11%. It will enable approximately 80 new school building projects to be progressed during the year, together with approximately 160 large-scale refurbishment or extension projects, and more than 1,000 smaller-scale projects, which represents unprecedented investment at that level.

The capital provision for health will be more than €657 million, which will fund a range of important capital services, primarily the building and equipping of hospitals and health facilities generally.

With regard to our commitments under social partnership in the area of agriculture, provision is made for a large increase of 49% in the capital provision for agriculture next year to more than €275 million. A particular focus is to assist the farming sector to restructure, modernise and comply with environmental requirements. Key features include more than €81 million for the farm waste management scheme which will help farmers meet the requirements of nitrates directive and a 55% increase in installation aid rates, bringing the maximum payment rate to €15,000 to advance farm restructuring and modernisation.

On the current spending side, the estimate for next year is €47 billion or a 7.4% increase on the 2006 forecast outturn. That compares with a 12.6% on the capital side which strikes the right balance. More than €2.4 billion or some 75% of the additional €3.2 billion is being allocated to the three priority areas of health, education and social welfare.

The current spending allocation for health next year is almost €14 billion, which is an increase of €1.4 billion or 11.3% on the outturn of €12.5 billion last year. The pre-budget provision for health will fund service improvements, including €75 million to commission and open in 2007 eight new units in acute hospitals, a further €40 million is being provided on top of the substantial increase last year to meet a commitment to expand services for the elderly, and an expansion of primary care teams and of education and training for health professionals.

A further €130 million is being allocated for the Office of the Minister for Children to cover four early child care payments next year as compared with the three paid in 2006. An extra €120 million is being allocated to deal with additional costs in the drugs payments scheme. A total of €360 million is being provided for the long-stay charges repayment scheme next year.

With regard to social and family affairs, the pre-budget allocation for social welfare is almost €14 billion. Social welfare is central to our policies on social inclusion and makes a major difference to the lives of many people in our society. Almost 970,000 people receive a welfare payment of one type or another each week. Under the Government, allowing for the cost of living, pensions and lowest social welfare rates have increased by 45% to 55% in real terms since we took office.

Almost €8 billion is being allocated for day to day spending on education next year to make major provision for the education of more than 940,000 young people. This is an increase of €563 million over the forecast outturn for this year or an increase of 7.7%. Some €2.64 billion will be provided in 2007 for current spending on primary school level, €2.74 billion for post-primary level and €1.8 billion for third level. This will meet the cost of service improvements in a number of key areas, including 800 additional teachers next year. It will bring to approximately 1,900 the number of new teachers provided since 2005 to reduce class sizes and help tackle problems of disability and disadvantage. More than 1,400 extra special needs assistants, who significantly improve the experience of education for people with special needs, will be provided. A 13% increase in capitation grants for schools has been widely welcomed. An extra €20 million will be provided for school buses to bring the total allocation for school transport to €165 million. At third level, I will increase the strategic innovation fund announced in last year's budget by €45 million, bringing it to a total of €60 million next year.

The justice group of Votes received an increase of 9%, bringing the total 2007 provision to €2.4 billion. The main element is €971 million in respect of Garda pay and providing funding for the increase in Garda numbers to meet the programme for Government commitment of a force of 14,000. Approximately €150 million of the justice provision is for capital, including a provision to modernise further the information technology and communications equipment available to gardaí, which is fundamental and critical to their efforts to deal with crime.

The provision of €1.4 billion in current expenditure for agriculture and food is the first year's funding for the seven-year package of rural development measures recently negotiated by the Minister for Agriculture and Food, Deputy Coughlan, as part of Towards 2016. Again, the strategic focus is modernisation and environmental requirements. Enhancements and increases will be made in grant rates, including a 17% increase in rates for the rural environment protection scheme with a 2007 provision of €328 million, an 8% increase in compensatory allowances in disadvantaged areas payments with a 2007 provision of €257 million, and an enhanced early retirement scheme with an increased maximum payment rate of €15,000, which amounts to a 10% increase.

Looking to other areas of Estimates which may be of note for Senators, the commitment for overseas development aid of €814 million in 2007 meets our interim target of reaching 0.5% of gross national product, GNP, by 2007. This represents an increase of €139 million or 21% on this year's allocation of €675 million. Ireland's contribution rate of 0.5% compares favourably with current average figures of 0.3% in OECD countries and 0.43% in the EU for 2006.

Raising our performance level in science, technology and innovation is essential to our future competitiveness and continued prosperity. It will be central to our economic development agenda in coming years under the national development plan. Therefore, the Government will allocate more than €750 million in capital and current expenditure for implementation next year of the strategy for science, technology and innovation. This is an additional €66.4 million or 15% over this year's allocation.

We announced a number of child care measures in last year's budget, including a new five-year national child care investment programme designed to create an extra 50,000 child care places by 2010. At least 5,000 of these places will be for schoolgoing children before and after school hours and 10,000 will be pre-school education places aimed at three to four year olds. The child care provision for next year is €142 million, an increase of €48 million or more than 50% on this year to allow further significant progress to be made towards the achievement of these targets.

In my first budget I announced a multi-annual investment programme for specific high priority disability support services designed to improve the quality of life for disabled persons, especially in the key areas of health, education and training and access. To provide for further delivery on this commitment, next year's Estimates include provision for expenditure of €3.6 billion on disability specific services compared with an estimated €3.3 billion this year. This is an increase of 10%.

The gross provision for 2007 to fund public service pay and pensions is approximately €18 billion of the €47 billion total, an increase of €1.2 billion or 7%. This represents 38% of the total gross public expenditure provision for next year. The pay terms of the Towards 2016 social partnership agreement account for approximately €750 million of this.

The 2007 pay and pensions bill of €18 billion is a significant commitment of resources. Of this amount, approximately €14.9 billion or 83% is in respect of the frontline services of health, education and security. The Government has permitted increases in the number of staff in these areas in recent years and I make no apology for this. The fact is these are labour intensive services and if we wish to get maximum benefit from enhanced capital expenditure in the areas of health and education, we must staff the resultant new or enhanced facilities adequately. The Civil Service, local authorities the non-commercial State sponsored bodies provide us with a balance in overall numbers. We keep a close ceiling on those areas to compensate for staff entering the priority areas of health and education.

The taxpayer is entitled to full value for money in respect of this significant outlay. Accordingly, payment of the pay increases under Towards 2016 will be dependent in the case of each sector, organisation and grade on independent verification of co-operation with flexibility and ongoing change, including co-operation with satisfactory implementation of the agenda for modernisation set out in the agreement. To date, the verification process has brought about real efficiencies and improvements in public services. An example is the introduction of systems such as the online motor tax system which enables people to pay their car tax on-line. In June 2006, the Revenue on-line service reported processing 3.5 million returns and 7.8 million customer information requests.

In response to public demand, health facilities have longer opening hours with earlier starts and later finishes from 8 a.m. to 6 p.m. or 8 p.m. in a range of outpatient facilities such as dedicated outpatient diabetes, physiotherapy and cancer clinics, radiography departments, weekly late night dental clinics and antenatal classes in a growing number of locations. Having attended a Cabinet sub-committee on health yesterday, I am glad to report that D DOC for north Dublin will see a much improved primary care provision out of hours and at weekends. Revised work processes in the Department of Social and Family Affairs have reduced, among others, the average processing time for disability benefit from approximately eight days in November 2003 to five days in January 2006.

More generally, I accorded particular priority to the issue of value for money since becoming Minister for Finance and have introduced a number of initiatives designed to ensure more effective and efficient allocation and management of resources by Government, Ministers, Departments and agencies, better value for money for the taxpayer and greater accountability to the Oireachtas and the public. We now have in place a value for money framework which includes the rolling multi-annual capital envelopes for public capital investment, revised guidelines for the appraisal and management of capital expenditure, public private partnerships to procure suitable projects and reforms to public procurement, including moving to more fixed-price contracts.

In October 2005 I announced additional value for money measures on procurement, ICT projects and consultancies which include individual accountability for major projects, peer review of ICT projects and reporting of project outcomes against budgets and timeframes. Approximately 90 value for money reviews with an indicative coverage of between 10% and 15% of Department and office budgets will be carried out in the period 2006 to 2008 under new arrangements for value for money policy reviews which are in place of the expenditure review initiative. A central expenditure evaluation unit in my Department promotes best practice on appraisal and evaluation generally and compliance by Departments and agencies with the enhanced value for money requirements. Reform of the Estimates and budgetary process was announced in the 2006 budget. Under the Government's Estimates reforms, from 2007 Ministers will submit to the Dáil an annual output statement in tandem with their Estimates which will enable the relevant committees, in considering the Estimates, to have a better picture of what outputs are achieved at programme level for the funding for which approval is being sought.

The Government's 2007 Estimates are fiscally sustainable, economically appropriate and politically responsible. Maintaining stability has been the cornerstone of our economic success. Stable sensible policies have enabled us to generate the resources necessary to tackle poverty and social inequalities and improve public services. On budget day I will provide for a social welfare package and some additional expenditure on health. The Government will publish the National Development Plan 2007-2013 in January which I co-ordinate on behalf of the Government. It will set out our seven-year investment programme for sustainable social and economic development over the medium term. I commend the Government's pre-budget 2007 Estimates to the Seanad.