Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I am pleased to be here to discuss the summer economic statement. I thank Senators for their contributions which have been very constructive. The summer economic statement demonstrates that Ireland is moving further along the road to recovery. We have put the public finances on a sustainable footing and restored our competitiveness and are making significant progress in bringing the economy back to full employment. Before addressing some of the points made by Senators, I would like to reflect for a few minutes on how far we have come in the past few years.

The recovery is now well established. The CSO figures published this week suggest the economy grew by 26% last year. However, as pointed out by Senators, this figure is heavily distorted by the impact of multinational activity. Data from the CSO for net national income suggest the economy grew by a more plausible figure of 6.5% in 2015. This is, arguably, a more reasonable figure which is proximate to actual activity levels within the State. The current forecast is for a growth rate of around 5% this year, which is likely to be at the top of the growth table for the third consecutive year. This more plausible outlook is the basis on which we will undertake future policy decisions.

The expansion in economic activity, initially led by the exporting sectors, has become more sustained, with domestic factors now also driving growth. This is important as the domestic sector is employment and tax rich. Importantly, the recovery has been jobs rich. There are now an additional 155,000 people in work in Ireland since the launch of the Government’s Action Plan for Jobs initiative in early 2012. Encouragingly, the employment figure is set to exceed the 2 million mark this year for the first time since 2008. The level of unemployment has fallen by almost 160,000 since the peak. As a result, the unemployment rate was 7.8% in June. We have stabilised the public finances. Figures set out in the summer economic statement project an underlying deficit of 0.9% this year, a decrease on the peak of 11.5% in 2009.

The debt-to-GDP ratio has fallen from a peak of over 120% in 2012 to 94% last year and is projected to decline to 88% in 2016, bringing it below the euro area average. Irish sovereign debt is now rated investment grade by all of the main credit rating agencies. The yield on ten-year Irish Government bonds is now trading at below 1%, well below the figure of 14% seen in 2011. The economic and fiscal strategy set out in the summer economic statement will build on these achievements and help to deliver a solid and sustained recovery in the years ahead. As Senator Joe O'Reilly said, these are just numbers and there is a lot more behind them which I will address. Of particular note is the Government's plan to establish a rainy day fund. After achieving our medium term objective in 2018, from 2019 onwards €1 billion will be remitted to the fund each year. This could be utilised to support activity and employment should the economic situation deteriorate. This would act as a counter-cyclical instrument to help smooth out the business cycle and act as a fiscal support to the economy.

I would like to address some off the points made by Senators. Housing was mentioned as a necessary point of investment as we look to the years ahead. The action plan for housing and homelessness will be announced shortly. I look forward to discussing the financial elements of the plan at the relevant time. In so far as infrastructural investment is concerned, an additional €5 billion in capital investment spending was committed to in the programme for Government. This is in tandem with the existing capital plan which will be reviewed next year. The European Investment Fund or, as it has been referred to in some quarters, "the Juncker fund", has been leveraged by the State to invest in primary care centres around the country. There are future opportunities in other areas also in that regard.

In so far as the economic indicators are concerned, we do not just look at one figure when calculating plans. Policy is never made on the back of one figure. Senator Alice-Mary Higgins pointed out that we should be looking at other figures such as that for the gender pay gap. That is important. The equality proofing of plans to assess the potential impact is necessary. It is proposed that proofing form part of the programme of work of the new Budget Oversight Committee and office in the context of its review of Government figures. I look forward to engaging in debates on these matters at the appropriate time.

The tax base has and does help to redistribute wealth and income across the State and it does so proportionately. People work hard. Their work is important and it is important that that work be fairly rewarded and that people do not feel penalised by the taxation system. The entry point to the marginal rate of tax is too low. Those on the average industrial wage are paying at the marginal rate of tax which does not happen anywhere else in the industrial world. We have to look at this if people are to be fairly rewarded for the work they do. Taxation policy has been focused on for the lower paid for the past five years and this will continue during the term of the Government.

In regard to plans put in place post-Brexit, share-based remuneration might be a necessary tax option or tool to help to attract more business and people. We have to be competitive in this space if we are to make gains in creating employment and attracting investment which are reflected in taxation levels which can be utilised by the Exchequer in the appropriate ways. I use the word "might" because this idea has not yet been fully examined. I take on board Senator Alice-Mary Higgins's points in so far as potentially there may be a negative impact further down the line. We will look at this, as we look at all plans for taxation, as well as other issues that may arise following the Brexit decision.

As regards the content of the summer economic statement and future statements, this is a new and welcome process and we will learn and improve as we progress. The national economic dialogue that took place this year following publication of the summer economic statement was the second such dialogue. We had learned from and improved on the first dialogue. The announcement yesterday of the mid-term review and expenditure ceilings and baselines for next year also constitutes a new process. That documentation and information had not previously been published in the budgetary cycle. We are now making them available publicly because we want to have an open and progressive debate, with inputs feeding into improving the process next year. We will do this. I agree with Senator Gerald Nash that we should embrace this new process.

A number of Senators spoke about the rainy day fund, the purpose of which is to make quasi and counter-cyclical interventions, as required, to smooth out the natural ebb and flow of the economic cycle. It is when things are not going well that such a fund is deployed. The hope is it will not be required. It is, however, prudent to provide for such a fund in case it might be needed. Any suggestion that it might be employed as an electoral slush fund is nonsense. As the Minister for Finance, Deputy Michael Noonan, said earlier today in this House, a paper on how the fund will be structured and deployed will be published. There will be consultation with both Houses on how best to leverage it. A fund is often put in place in the hope it will not be used. However, if there was a risk of cuts having to be made to services and spending commitments, the fund would be deployed, such that the cuts would not have to be made. The scope of such a fund and how it would operate will be discussed with everybody, following which a conclusion will be arrived at and brought before both Houses.

Senator Maria Byrne spoke about the challenges we were facing and how they required full Government attention. They actually require the full attention of each and every one of us. In the post-Brexit world we face huge challenges and opportunities. We have to take an approach that will support and bring into line all pillars and agents acting on behalf of and within the State. That is the approach we intend to take.

There is some flexibility on the fiscal rules on a country by country basism but the key aspect is the rules are an important break on imprudent decision-making which we saw in the past to our cost.

On Brexit and budget 2017, we do not yet know what the impact will be on GDP in the United Kingdom of the Brexit decision; therefore, we do not yet know what the impact will be on Ireland, although some figures have been produced for possible or potential impacts, but we have not yet seen them. The factors which feed into plans for budget 2017 are robust. While the summer economic statement takes into account the possible impacts of Brexit on the Irish economy, we do not foresee an impact on the overall fiscal plans for next year.

Of course, there will be some opportunities post-Brexit and it would be remiss of the Taoiseach not to try to ensure the country capitalised on them. That will require a response from business, the Government and all stakeholders in working together. Senator Reilly and other Members made some budget suggestions. They are welcome and noted. Senator Reilly talked about how we cannot simply focus on the numbers, and he is right. I was pleased that the theme of the national economic dialogue was centred on growth towards a just society. The numbers are important because they mean something, but it is time we focused on what they mean and on what they could potentially mean. Let us suppose €850 million is allocated for public spending. That is spending on the public good, on teachers, hospitals and gardaí. We have to talk about why we deploy the money in that way, why these are the priorities of Government and what this means for people who are at the other end of the impacts made with that money.

Senator Reilly referred to job increases. One outcome of the increases is that people are working, getting a salary and having the economic freedom to make decisions and live their lives in the way they choose. It is important that people have this economic freedom and that they believe they have a meaningful stake in our recovery and our society.

Reference was made to the census figures. We can grow the regions. In fact, we can use financial services to do this. I have already taken the opportunity to see the type of work being done in the financial services and payments sector in places like Letterkenny and Kilorglin, and it is impressive. There is more we can do in that sector. Infrastructural investment will unlock huge parts of the country outside our urban centres. This is something we are looking to at the moment.

Reference was made to Irish Water. The suspension of household water charges creates a pull or draw on other resources in the State, and that is something we have to take cognisance of.

The economic and fiscal outlook is encouraging, but it is important to acknowledge the numerous sources of uncertainty at present. Ireland has a small open economy and it is important that we are cognisant of the risks. The potential economic impact for Ireland resulting from the vote by the United Kingdom to leave the European Union is of particular note. The best way of addressing the risks is through prudent management of the public finances and competitiveness-oriented policies as well as through open and transparent debate and informed decision-making. This is what the Government will continue to do. We have moved further along the path of recovery and we must stay on that path.