Brendan Howlin (Wexford, Labour) | Oireachtas source

I am delighted to be back in the Seanad. I suppose it is extremely timely that we are having this discussion in advance of the budget that will be presented to the Oireachtas two weeks from now.

I will begin by setting out the broad fiscal context in which we find ourselves in the run-up to budget 2016. Based on the fiscal forecasts in the spring economic statement, Ireland is set to exit the excessive deficit procedure at the end of this year with a general Government deficit of 2.3% of GDP. This development, like our exit from the EU-IMF programme in 2013, represents another milestone along the path to a full and sustainable recovery for our economy. It also means that beginning in 2016, we will be subject to the preventive arm of the Stability and Growth Pact. I know these things can be fiendishly complicated for people. Specifically, we will be subject to compliance with what is known as the expenditure benchmark. This will set a limit on fiscal space for next year by applying a defined growth rate to the expected 2015 expenditure out-turn. As we outlined in the spring economic statement in April, based on current estimates a budgetary package of between €1.2 billion and €1.5 billion is envisaged for next year's budget. This will deliver compliance with the expenditure benchmark, which is legally binding on us. This is a prudent amount, given the level of general Government debt the country has.Based on this package being split evenly between tax and expenditure, this will allow for expenditure increases of approximately €750 million next year.

It was outlined in the spring economic statement that the Government had decided to host a national economic dialogue in Dublin Castle before the summer. As we go forward under the new European fiscal rules, it is important that all sectors of our society share informed discussions about the options and choices we face. The national economic dialogue was not a return to the old social partnership model, but it was unapologetically an attempt to have a shared social and economic perspective on the challenges we face. The dialogue, which took place on 16 and 17 July, was structured around plenary sessions chaired by an independent moderator and smaller break-out sessions on specific themes. Arrangements were made to show the plenary sessions on television and the Internet. This genuine and robust dialogue examined the realistic options open to the Government within the available fiscal space. The event was well attended by members of the Opposition; Members of this House; representatives of community, voluntary and environmental groups; business interests, trade unions, research institutions, the academic community and the diaspora.

The national economic dialogue facilitated an open and inclusive exchange on the competing economic and social priorities that were facing the Government as it prepared for budget 2016. It was informed by the macroeconomic and fiscal parameters, including the EU budgetary framework, which were set out in the spring economic statement. I am pleased to say that the discussions were cognisant of the pressures we face as a people and the need for informed decisions on the reallocation of resources to meet the priorities out there of which everyone in this House is aware. I do not doubt that the open and informed discussions at the dialogue helped to broaden everyone’s understanding of the issues we face. I refer to issues such as how best to provide incomes and health care for older people, the appropriate models to deliver quality education and child care and how best to address the housing issue.

At the time of the spring economic statement, I announced the beginning of discussions with trade unions on the issue of public sector pay. We needed to prepare an orderly unwinding of the emergency provisions governing the cuts in public sector pay which had taken place. As the economy recovers, pay levels in the public sector stay can be restored in a manner that ensures they remain sustainable. People need to recall the important point that reductions in public service pay are determined under law by the Financial Emergency Measures in the Public Interest Acts. The operation of those emergency measures is conditional on there being a financial emergency, certified by me each year. I do that in July of each year. It has been my view that the only prudential course of action available to the Government is to seek an orderly wind-down of these measures over time. Our legal advice is clear that this is what we must do. Practically, if we were not to do so, we would expose the State to the risk of a successful court challenge to the legislation. This would be a hammer blow to the State's public finances, for which the suite of measures in the Acts in question generates some €2.2 billion annually.

I am proud of how we managed the industrial relations challenge we faced during the recession. We maintained our commitment to collective and inclusive bargaining. We maintained our commitment to doing so through negotiation. I was delighted to announce the Lansdowne Road agreement in May of this year. I firmly believe it strikes the right balance between the legitimate aspirations of public servants - nurses, gardaí, civil servants and local authority workers, etc. - for pay recovery and the need to sustain our improved public finances. As Senators will know, the agreement was ratified in the past couple of weeks by the public services committee of the Irish Congress of Trade Unions. The agreement will target lower and middle income public servants without risking the sustainability of the public finances. The agreement, which has been accepted by vote by most of the public sector, has been made possible by the improvement in our economic circumstances and the delivery of real and tangible reform of their work practices by public servants. If we are on a path to restore public service pay, we are obliged to unwind the public service pension reduction too. We have targeted less well-off pensioners for relief in the first instance. The cost of these two measures - beginning the unwinding of the pay reductions and the pension reductions - will be €297 million next year. Obviously, this must come out of the €750 million that is allocated on the expenditure side.

Over 80% of voted current public expenditure in Ireland is allocated to three areas. It is a striking fact that over 80% of money is spent on health, education and social protection. That would not be the norm everywhere. This current expenditure supports vital services across the State, with more than 2.2 million social welfare and pension payments being processed each week, 3 million visits being made to outpatient hospital facilities each year and over 56,000 teachers providing education for more than 860,000 primary and post-primary students. Ireland’s demographics compare favourably to those of many other countries. We have a growing population and the highest birth rate in the European Union. While this is welcome, it can present its own challenges. By 2021, an additional 57,000 students will need to be provided for in our primary and secondary schools, with 20,000 additional third level enrolments also projected over this period.A well-educated workforce is one of the economy's strongest attributes and we need to ensure our public finances can support this trend into the future. While we currently enjoy favourable demographics over many other European partners, we will be facing pressures sooner rather than later. Relative to a decade ago, an extra 200,000 citizens will be over the age of 65 by 2021. That will account for a quarter of our population by 2060. Pressures in all areas, such as health and State pension schemes alone are estimated to cost an initial €400 million per annum. This is simply the cost of standing still. Our commitment to our citizens in these areas requires that we consider these trends into the future and make plans accordingly. Undoubtedly, we have lived through a number of difficult years. Public service pay has had to be cut, expenditure pressures arising from increased unemployment rendered the fiscal adjustment difficult but I am proud that we have turned the corner now. I am proud too that we have done so with our social protection system largely intact, a system that continues to impact forcibly on the disadvantaged in our country. This year, gross current expenditure across the social protection, health and education sectors will amount to more than €40 billion, 81% of total current expenditure.

Let me touch on progress on each of these critical areas. On social welfare, despite increasing demand across many social welfare schemes we have maintained primary social welfare rates, such as pensions, disability payments and jobseeker's payments. This has ensured that Ireland's system of social transfers remains among the most effective in Europe in reducing the risk of poverty rate. Significant investment in and reform of Ireland's system of labour market activation has resulted in a comprehensive response to the unemployment crisis which the Government inherited. Through Pathways to Work, the unemployed have been given the opportunity to upskill and rejoin the labour market.

The education sector has faced increasing demands. Between 2011 and 2015, primary school numbers have increased by more than 35,000, secondary school numbers have increased by more than 21,000 and third level numbers increased by more than 8,000. Our continued investment in the education sector has seen the pupil-teacher ratio remain broadly maintained since the Government came into office. The Government has protected the funding allocations to DEIS which prioritises the educational needs of children and young people from disadvantaged areas. Budget 2015 provided for an additional 1,700 new posts to be created during the course of this year but we have gone beyond that. By the end of the year, we will have an additional 900 mainstream teachers, 570 more resource teachers compared to 2014 and approximately 830 extra special needs assistant posts will be in place this year, reflecting our prioritisation of special education needs.

In the health area, the provision of medical cards and GP visit cards has increased from 1.3 million in 2007 to 1.9 million last year. We are forecasting another increase of 200,000 in card beneficiaries during the course of 2015. Staffing levels in health last year increased by 2,331 or 2%. That is something many people do not know. In the first two quarters of this year, there has been a further increase of another 2,000 staff. The increase in staff has been concentrated in the hospital sector. That is an increase of 4,500 staff in just over 18 months. In the acute sector, €30 million has been provided to manage additional pressures. This funding will provide transitional care in the form of step down facilities and extra home help hours. Overall, this funding will ensure a reduction in the number of delayed discharges alleviating, I hope, the pressure in some of the largest hospitals and ensuring people are treated in the most appropriate health care setting.

An extra €44 million has been allocated to support the successful fair deal scheme which has seen waiting times fall to four weeks or less. We will maintain them at this level. Some €35 million has been provided in 2014 and 2015 for enhancement of mental health services. The challenge in next year's budget is to build on that progress, to seek to improve services and to seek new and different ways of doing things.

Sometimes when I listen to the broadcast media I note that each change we made is portrayed as a cut or a step backwards. One would think that 2008 was a perfect world but even then too many of our citizens were facing difficulties. What this Government has done well, through Pathways to Work and An Action Plan for Jobs, is to restore the importance of employment as the cornerstone of our anti-poverty strategy. To ensure that the lessons of the crisis are not forgotten and our public finances are deployed efficiently in service of our citizens, we have implemented a programme of reforms to improve the State's budgetary architecture.

Budget planning is now made on a multiannual basis to ensure the budget process is consistent with aggregate fiscal objectives. This provides clarity to the public and decision makers regarding the parameters under which expenditure policy is operating. Additional reforms include: regular comprehensive reviews of public expenditure; the publication of updated public spending codes; the implementation of the performance budgeting initiative; and the establishment of the Irish Government economic and evaluation service. We brought a greater level of transparency and efficiency to the allocation and spending of public money. None of these reforms is in and of itself a game changer. While they have yet to imbed themselves fully in the public mind they represent a fundamental improvement in the way we do public business. These reforms will remain key components of the architecture of our budgetary process in the years head.

The Government was elected on one key task, namely, to restore the public finances and the Irish economy to health. It pays not to be complacent about these matters but the improvement is available for all to see and the lessons of the noughties must still be learned. The prudent and sustainable management of the public finances is the first task facing any government of any political hue. Ireland's public finances must be kept on a sustainable path with revenues able to support the level of spending envisaged. The challenge will remain to prioritise and design Government interventions within that framework. Fiscal choices are increasing and there will be continued modest increases in resources in the coming years. However, there is a wide range, as members will be aware, of competing demands for that available money. It is, therefore, important that we make good choices about raising and allocating resources.

On 13 October we will present budget 2016 to the Oireachtas. This will strike a balance between what is fair and appropriate while ensuring that our economic and social recovery is sustained and strengthened.