John Gerard Hanafin (Fianna Fail)

I welcome the Minister of State to the House. The debate on the Appropriation Bill gives us an opportunity to consider what we sought in the budget and in many cases it has delivered on target. Our economy is still in an expansionary trend but the difference is that it is expanding at a lower rate. The economy is fairly strong. We have had economic growth of 4.75% in 2007. It is expected to be at 3% in 2008, that is, a cumulative 3%. We are still advancing as an economy and those of us who sought increases in the budget for those less well off are more then pleased with it. In that regard I commend the Appropriation Bill. There was a €900 million increase in the spend on social welfare. The total package is now just short of €17 billion and there have been real increases all round. There was a €14 increase in contributory pensions. Payment to qualified adults will increase by up to €27. There has been a €190 million improvement in child income support. The respite care grant has increased and personal rates increased by €12 per week. The fuel season is to be extended by one week and the widowed parents grant increases from €2,000 to €6,000. Those increases are being made in a time of decreasing growth.

The budget was a positive one. Even in terms of the small amount of borrowing, the wish list included a request that the borrowing would be for productive purposes and in that regard it was fully met by the Minister who, at a time of changes in the economy, when the construction industry is slowing down, rightly included a significant spend on the capital side, including the national development plan, which is essential for our infrastructure.

Regarding the part of the Bill that affects so many people, social welfare, retired and older people have benefited significantly. Carers, children, people of working age and people with disabilities have benefited also. We have also seen grants towards the improvement of services, all of which will come on stream in January and April. From a social welfare perspective the budget met exactly what was necessary and appropriate.

The rate of increase in public expenditure had to moderate to take account of the resources available yet the Minister still provided €53 billion, which is a net increase of over €1.7 billion. More than €8.6 billion has been provided for investment on the capital side and investment in a sustainable future is the Government's priority.

The importance of the national development plan, and the amount of expenditure in that plan, is particularly appropriate at a time when there has been a change in the economy and the construction industry, for which the Minister made very good provision in terms of the decrease in the rate of tax on the purchase of a house. He also increased the allowances. He had the capacity to do that and it has been used effectively in the past. In other words, if the construction industry continues to decelerate the Minister could give relief at the top marginal rate on all the moneys borrowed, which would be a significant help. I am glad to note the Minister has taken appropriate action in that regard. Governments in the past have reacted to economic slowdowns by stalling capital investments. This budget has scored by spending €8.6 billion on capital projects. The prospects in 2008 are more modest than what we have become accustomed to, reflecting both international trends and domestic developments. Gross domestic product will increase by 3% in real terms, 24,000 new jobs will be created, inflation will ease and the harmonised index of consumer prices will average 2.4%. This latter figure must be considered in light of the significant increases in social welfare. Social welfare recipients will have a real increase again next year.

The economic outlook, while reasonably impressive, means it is more important than ever we retain our flexibility, act responsibly and continue to raise productivity. By doing so, it will protect and enhance our competitiveness and employment levels. Responsible management of the public finances has been the prime driver of our economic success. The national debt stands at 25% of GDP, one of the smallest in the developed world. With the national debt so low, it is appropriate for the Minister for Finance to borrow 0.9% of GDP to fund capital projects. This productive expenditure will more than repay the amount borrowed.

Growth in total spending is at 8.6% which will maintain the provision of services and invest in the future. Other figures indicative of this are gross capital spending growth of 8.2% and capital spending growth of 12%. A general deficit of 9.9% of GDP is fully consistent with EU obligations.

The World Bank ranks Ireland eighth out of 178 economies worldwide for ease of doing business, the top 5% of world economies. In its recently published report on global competitiveness ranking, the World Economic Forum positioned Ireland 22 out of 131 countries, the top 20% of competitive economies.

These figures underline our solid reputation as a flexible, competitive and technologically orientated economy in which it is worthwhile to invest. What holds for foreign investors is equally true for the environment in which indigenous firms will grow. This is an unambiguously competitive advantage for our economy.

Nevertheless, the broad enterprise sector, exporters in particular, is facing some immediate challenges, for the most part driven by external events in currency, financial and commodities markets. The external value of the euro, flexibility and availability of credit and the unique and unprecedented cost of oil energy are important costs components over which companies in Ireland have no control.

We look forward to the future, having taken account of the current economic situation. It could easily change. That the world economic slowdown is having an effect on the price of oil will assist our economy. Ireland has positioned itself very well to withstand the turbulence in these markets. Our financial markets are in good health and have not involved themselves in the unrestricted and unregulated lending that has gone on in other countries, which was imprudent at the least. The budget was prudent and thoughtful. The figures and sums outlined in the Appropriation Bill are appropriate for the economy at this time.