Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I welcome the opportunity to discuss the spring economic statement which was agreed by the Government and unveiled last week by the Ministers for Finance and Public Expenditure and Reform. The spring economic statement sets out the progress made on economic and budgetary matters since the Government took office just over four years ago. I believe and think the people believe these achievements have been significant. Let us reflect for a few moments on the achievements made in the past few years.

Economic growth is now stellar. The economy grew by 4.8% last year, the fastest rate of growth in Europe. The current forecast is for a growth rate of 4% this year, which is likely to be near the top of the European growth league table again. Importantly, the recovery has been jobs rich. An additional 95,000 people are in work in Ireland since the low point in mid-2012. We can often get lost behind figures and data. However, that means that 95,000 people are now bringing home a pay cheque to the family who were not in a position to do so in mid-2012.

Unemployment has fallen by over five percentage points since its peak and is likely to dip below 10% in the coming months. The jobs lost during the crisis are being recovered in a very real way. By the end of 2018 the Department of Finance is expecting that all of the jobs lost during the economic crisis will have been replaced. The economic downturn meant that some of Ireland's best and brightest had to leave the country in order to find work. The recovery is set to reverse this trend, with a return to inward migration from 2017 onwards. We can now begin in earnest to ask our young people and the not so young who felt they needed to leave these shores to come home again.

The public finances have been put on a sustainable footing, with the deficit set to be well below the 3% target for this year. Debt levels, while still too high, are on a firm downward trajectory and set to move towards the European average in the next few years.

As a result of the huge sacrifices made by the people since the crisis, the Government is now in a position to implement another mildly expansionary budget this year and every year to 2020, if deemed appropriate. The spring economic statement sets out a strategy designed to put an end to the failed boom and bust model of the past. Instead, a continuation of sensible medium-term focused economic and budgetary policies will secure sustained and balanced growth in the remainder of this decade. The statement is just one part of a much broader reform of the budgetary framework. The next phase in the framework is the national economic dialogue when the Government and relevant stakeholders will discuss the most effective and equitable way to achieve our objectives. Discussions will be based on the imperative of fiscal responsibility and what is in the long-term best interests of the people. No longer can the economy be run in election cycles. The new structures will ensure policy-making will be consistent with broader societal and economic objectives.

Turning to the economic situation, I am greatly encouraged by the latest data which show that the recovery is gaining momentum, with the economy growing at the fastest rate in Europe. It grew by 4.8% in 2014 and is forecast to grow by 4% this year. As a result, real GDP is set to exceed its pre-crisis peak by end of the year. In the remainder of the decade our forecasts indicate the economy has the capacity to grow by around 3% to 3.75% per annum, with positive contributions from both exports and domestic demand. The economic recovery is perhaps most clearly evident in the labour market where we have now had nine successive quarters of employment growth, representing an increase of 95,000 jobs since the low-point of the crisis. Encouragingly, the latest data show that employment gains have been driven by increases in the numbers of full-time positions and that the recovery is broad based, with 11 of the 14 sectors of the economy seeing employment gains. As a result, the Government's highly ambitious employment target of 100,000 additional jobs in 2016 will be met one year early. These figures are testament to the continued success of the Government's An Action Plan for Jobs which will help to ensure there will be more people working in Ireland by 2020 than ever before in the history of the State.

The spring economic statement highlights the Government's continuing focus on job creation. It highlights sector-specific interventions, for example, in hospitality, tourism and construction. Sector-specific strategies also play a vital role in ensuring Ireland's continued competitiveness and attractiveness as a location for inward investment. For example, in my own area of sectoral responsibility last month the Government launched its new strategy for international financial services. The IFS 2020 strategy sets out an ambitious target to increase the number of people employed in Ireland's IFS sector by 30% in the coming five years, representing a net increase of 10,000 jobs.This is just one example of how Ireland's economic development will be driven in the future by sustainable growth in high value-added sectors of the economy.

Historically, there were fewer than 60 people employed in international financial services, IFS, companies in Ireland during the late 1980s. Today, there are more than 35,000 people directly employed in IFS companies, with thousands of more jobs indirectly supported. IFS is now a truly national sector of the economy, with significant numbers employed outside the IFSC, across Dublin city and county, and in numerous regional locations such as Cork, Galway, Limerick, Kerry, Waterford, Kilkenny, Louth and Donegal.

Growing the numbers employed in IFS by 30% over five years is a highly ambitious but achievable target and one that the Government aims to achieve by implementing our new strategy in full. This strategy sets out a long-term vision for Ireland. To help realise the vision we have set five strategic priorities and 30 concrete actions and we are already getting on with the body of work of implementing these. I outline this to the House because IFS2020 is an example of how Government is focused on driving growth across all sectors of the economy. This strategy is matched by a number of other strategies in important areas of our economy, where we plan to continue to grow jobs and real economic growth in the coming years.

Putting the public finances on a sound and sustainable footing has been the main priority of this Government since taking office. Prudent management of the public finances is essential to support economic growth and ensure that there will be no return to the boom and bust model of the past. The people have suffered too much from that and have had enough. To that end, the Government set out a series of fiscal targets to bring down the deficit in a credible and controlled manner and, I am pleased to say, the Government has overachieved each and every year on this target. The deficit in this country fell from €15 billion in 2011 to €4.5 billion this year. The Department of Finance is now forecasting a deficit of 2.3% of GDP in 2015, with Ireland set to exit the excessive deficit procedure by the end of this year. This could not have been achieved without significant reductions in public expenditure. For instance, last year gross voted expenditure amounted to some €54 billion, a reduction of over €3.4 billion from 2011. During that period, current spending was reduced by over 4% and capital spending fell by 23%. These reductions had to be made at a time of increased demands on public services, particularly in the areas of social protection, health and education.

To ensure that expenditure was better managed and that these demands were met, the Government implemented a series of reforms. Reforms include the introduction of multi-annual expenditure ceilings, regular comprehensive reviews of public expenditure to make sure we are getting value for taxpayers' money, the publication of the updated public spending code, the implementation of performance budgeting initiatives, and the establishment of the Irish Government Economic and Evaluation Service.

The European Union fiscal rules will serve as a tool to help us responsibly manage our recovery. The key lesson that we have learnt is that increases in spending must be commensurate with increases in growth. We cannot be spending more than we are bringing in in growth. Public expenditure must be sustainable. We must use evidence-based decision making to ensure that our investment maximises value for money and growth in the longer term, while also, crucially, ensuring that we protect the vulnerable in society.

A new set of rules will apply from 2016 onwards, which will require us to make progress towards a balanced budget in structural terms. These rules are designed to ensure that fiscal policy enhances economic growth and macro-economic stability. As the Minister, Deputy Noonan explained last week, the Government has secured agreement from the European Commission to a change in the application of the rules. This is a really important development for our country. As a result, fiscal space of the order of €1.2 billion, and up to €1.5 billion, will be available for tax cuts and public expenditure increases in budget 2016. Our partners in government have also agreed that the fiscal space will be split evenly between tax reductions and investments in public services. That is a prudent approach at this time. Our forecasts indicate that a similar amount of space will be available in later years, while still ensuring the achievement of a budget surplus before the end of the decade. In other words, as a country, we can afford to reduce the burden of tax on work by in and around €640 million this coming budget, the budget after that and the budget after that one. This amounts to nearly €2 billion worth of tax cuts on work, while investing, at the same time, in crucial front-line public services.

Reducing the debt remains a key objective of this Government. Putting debt on a firm downward trajectory will enhance the resilience of the economy to shocks of any origin and help ensure a sustained recovery in the years ahead. It will also better position Ireland to manage demographic pressures over the coming years. The Government has already made significant advances in reducing the burden of debt through reducing the interest rate on the European loans provided under the programme, securing agreement to extend the maturity of the European loans, replacing the promissory notes with very long-dated Government bonds and replacing just over €18 billion of IMF loans with cheaper market-based funding.

When we came to Government, we were told by our predecessors that we could not change one full stop in the IMF-EU bailout programme. This is proof that we did it and continue to do it and, as a result, the cost of servicing that debt has continued to fall with interest rates on ten year Irish Government bonds now at effectively historic lows. The debt-to-GDP ratio will continue to decline as the recovery continues and is expected to fall to 100% of GDP by the end of 2016, converging towards the EU average in the years ahead. Of course, our net debt position, which takes account of the cash the NTMA is holding and other assets, is much lower. We have improved the cashflow for this country over the next decade by about €40 billion as a result of the successful negotiations that this Government has undertaken with its international partners.

As my colleague, the Minister for Public Expenditure and Reform, Deputy Howlin, set out last week, our improved fiscal position means that we will look to increase gross voted current expenditure by an additional €600 million to €750 million for 2016. This will allow us to manage demographic pressures and to make crucial investments in key public services. This is something I am sure Senators on all sides of this House will welcome.

Ireland's general population has increased by nearly half a million in the past decade. We have the highest percentage of people aged under 15 in the European Union. Life expectancy has also risen and now almost 13% of our population are over 65 years of age. By 2021, this will have increased by close to 40% from a decade earlier. While positive, these changes present challenges for our public services in terms of looking after our young people and giving our older people dignity in their older years.

In the health area, demographic changes will cost an estimated €200 million per year over the coming years. The cost of paying for the two main State pension schemes alone is projected to increase by €200 million per year out to 2026. This Government is committed to maintaining the State pension. In education, the number of school children is set to increase every year over the next six years. By 2021, we will need an extra 3,500 teachers at primary and secondary level to provide education to an additional 50,000 pupils. These are quite astonishing numbers. The number of third level students is also projected to increase by 20,000 in the same period. As a country and as a Government, we need to plan to ensure our public finances can meet these demographic challenges.

Thanks to the hard won economic recovery, we are now in a position to increase investment in our infrastructure. We will do this in a strategic way by ensuring maximum value for money and focusing on future needs. The new capital plan, which will be published by Government in June, will identify priority areas for investment in key areas that will increase our capacity for growth and our ability to respond to social needs.

We believe that that the quality of our education system is a key determinant of future living standards. In the lifetime of this Government, over 150 new schools will have been built. We are providing higher education programmes and services for almost 164,000 full-time students at third level and 270,000 places on further education and training programmes. We will continue to ensure the continual development of our workforce to allow our citizens to be at the forefront of new technology and the creation of high value jobs.

I think everyone would acknowledge, and rightly so, that we now have a considerably more efficient and productive public service. I pay tribute to all of our public servants and civil servants. These are our teachers, nurses, gardaí, people working at the front line day in, day out, who have had to continue to reform and, in many cases, to do more with less. They have done so with great dignity and great dedication. Public service reform has allowed us to provide additional resources to front-line services, including nurses, gardaí and teachers. The Minister for Public Expenditure and Reform, Deputy Howlin, described this as the reform dividend.

Last week Deputy Howlin announced his intention to commence discussions with the trade unions on the issue of public service pay. All public servants have had their pay reduced significantly. These reductions were made on the basis of financial emergency legislation. As the economy recovers, we need to ensure that remuneration and the cost of the public service more generally are managed to ensure that they remain sustainable. We need to acknowledge that by working together with our public service unions we managed to negotiate public sector pay agreements in very difficult times. Now, as a country, when we are in a better time, we need to continue that process of constructive engagement and dialogue in order to plan for the future. The hard-won gains of the last four years must not be put at risk by the tax and spend policies of the Opposition. As the Minister, Deputy Noonan, explained last week, lower taxes on income will support more jobs. That is what this Government began to do in the last budget, it is what we will do in the next Government and it is what the Opposition voted against. Higher taxes will cost thousands upon thousands of jobs. The Government will continue to support job creation through a reduction in income tax and USC in the next budget and in future budgets if re-elected. It is vital that the prudent and sustainable pro-growth budgetary policies of this Government are continued to secure a lasting improvement in living standards.

We cannot repeat the mistakes of previous governments. Renewed prosperity must be on the basis of responsible government and strategic investment in the productive capacity of our people. The Irish people deserve no less. We must learn the lessons of the past decade and not repeat the mistakes that brought us to ruin. The spring economic statement outlines a roadmap for us to follow. We owe this to the Irish people. I look forward to the debate.