Seanad debates

Thursday, 23 November 2006

Estimates for Public Services 2007: Statements

 

11:00 am

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

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.

12:00 pm

Photo of John Paul PhelanJohn Paul Phelan (Fine Gael)
Link to this: Individually | In context

I welcome the Minister for Finance, Deputy Cowen, to the House to discuss the Estimates. It is fair to say they contain good news and the Minister outlined a number of areas which will see significant increases in expenditure. Much of what was announced in the Estimates is welcome. However, question marks hang over other key areas and I intend to raise as many of them as I can. At the end of his remarks the Minister referred to reform and value for money, and improvements have taken place in a number of areas. Nonetheless, while the new system of multi-annual capital envelopes, introduced by the Minister, is a step in the right direction, the Government is paying only lip service to reform. When a crisis arises an announcement is made, such as that last year on consultancies. The Minister referred to this matter in his speech. It arose from a specific problem with which the Government was faced and it was forced into action. The Government is still lagging behind in the area of genuine reform and value for taxpayers' money.

The Minister outlined increases in expenditure for the Department of Health and Children. It is the usual mantra of Government to outline significant funding increases that have taken place for that Department in the past ten years, yet the services provided are not improving by a commensurate amount. In many areas they are not improving at all. In his speech, the Minister said waiting lists for many operations are now down from years to months. In my area, however, there are waiting lists to get on the waiting lists for many routine procedures. These waiting lists can last for anything up to 12 months before a patient can get a consultation. The figures have been massaged. The huge increases we have seen in funding for the Department of Health and Children have not been reflected in the level of service people get from hospital facilities throughout the country.

Despite increases in the numbers employed in public services — which, by and large, is not something I would like to see — key positions still need to be increased. The Government has not kept up to speed in increasing the numbers of front-line medical staff, including doctors and public health nurses. The growth in such staff positions has not been commensurate with increased expenditure, while administrative posts seem to have absorbed much of the funding increases in recent years.

The Estimates include an increase of more than €1 billion in funding for the Department of Health and Children, most of which is taken up by salary increases arising from the benchmarking process, which has been discussed at length in this House. Nevertheless, we have not seen a significant improvement in hospital services.

The Minister also outlined increases in funding for transport, including a number of road projects. He referred to significant savings in journey times, which was rather amusing. There would be little use in pointing out that to people who, yesterday evening, were caught in four or five hour tailbacks in this city owing to a roadworks problem. I welcome the investment in road projects but it will come to nothing if roadworks are carried out only during the daytime, which is the case with the M50, rather than having a 24-hour work programme.

The Minister also outlined the Government's record on housing and the increase in funding for housing next year. The Government's record on social and affordable housing is abysmal. Housing is the biggest single disaster area for which the Government has been responsible in the past ten years. The average worker in Dublin cannot afford to buy an average house because prices have risen astronomically in the past decade. The paltry increase announced in the Estimates for social and affordable housing does not convince me of any renewed effort by the Government to ensure those on lower incomes will be better able to afford a house in future.

The Minister also outlined the Government's increase in funding for environmental issues. As far as I can see from the Estimates, however, the increase is a minor one, particularly for local authority sewerage facilities. Last year, the increase was of the order of 6% or 7% while this year it is lower than that, according to the Book of Estimates. That is certainly a step in the wrong direction if the Government is serious about environmental protection and the nitrates directive, in particular. Local authorities are among the biggest polluters in the country because many towns and villages often do not have any sewage treatment facilities. Sadly, the paltry increase announced in the Book of Estimates will not address that significant problem in the future.

The Minister referred to an increase in funding for education, with particular emphasis on special needs. There has been a significant rise in the numbers of special needs assistants in schools, for whom resource hours have been provided. However, the increased funding for the National Educational Psychological Service is paltry. Last year it was 2% while this year the figure is similar, although I am not sure of the exact figure. Large swathes of the country have very little coverage from that service. For a relatively small expenditure significant improvements could be made in the future development of children with special educational needs.

Approximately 250 children in the primary education sector suffer from Down's syndrome. Up to five or six years ago, those children were automatically entitled to resource hours. Under a change introduced by this Government, however, that automatic entitlement was removed. Resource hours must now come from the total allocation to schools attended by such children, which is a disgrace. We are talking about a small pool of children who could benefit from a significant investment to ensure adequate support at a crucial stage in their early development. That would have positive effects into the future, ensuring that when they grow up they will be able to live fully independent lives. When the Minister announces his budget in two weeks' time, I ask him to emphasise that area.

In his earlier remarks, the Minister referred to the guidelines for numbers employed in the public service. I fully agree with him that for key service areas, such as health and education, there is a need to increase frontline staff, including doctors, nurses, teachers and special needs assistants. The Minister also said this was being rebalanced by employment in local authorities. This matter was discussed on today's Order of Business. Many local authorities are suffering as a result of this embargo, particularly in the areas of planning and road development. The Minister should ensure the embargo is not applied in those areas in the future.

Local authority funding has received an airing in the past week or so. Last year, the Minister was rightly criticised in this House and elsewhere for the 4% increase proposed in the Book of Estimates for the local government fund. This year the increase, at 2%, is only half that. Whatever the final inflation figure is for 2006 it will be significantly more than 2%. In real terms, therefore, the Minister is announcing a decrease in the local government fund for next year. I hope all citizens of the State are aware local authorities will experience serious cutbacks in the services they provide, unless they increase revenues from their own sources, because the Government is cutting the local government fund.

There have been many discussions in this House on development charges, which are a real and verifiable form of stealth tax introduced by the Government. Unless there is a larger increase in the local government fund on budget day, local authorities will be forced to increase these charges which are the most unfair form of taxation in the country. Development charges may make some sense in urban areas where services such as connection to a sewer or water main are provided, but in rural areas, where one is lucky to have a pothole filled outside one's house and one may be compelled to pay €8,000 to €9,000 as a development charge, they are beyond the bounds of belief and unacceptable.

The Minister referred to pupil-teacher ratios. This is an area in which the Government made a strong commitment in the programme for Government, particularly regarding a reduction in the number of pupils relative to the number of teachers at primary level. However, no significant improvement has been made. Additional funding has been announced in the Estimates to deal with this issue and it remains to be seen what effect it will have. More than 70,000 primary school pupils in the country are still in classes of more than 30 students and this flies in the face of the commitment given by the Government in advance of the last election. I do not think the Minister's announcement in the Book of Estimates will see a major decrease in this number, although it may see a minor one.

I have often raised the issue of domestic violence and it has been discussed on numerous occasions by Senators from all sides. Last year I criticised the Government on its announcement of a 3% increase in funding for agencies dealing with domestic violence. This year the increase is 2% and I put it to the Minister that this is a pathetic figure, particularly given that violent crime against women, an example of which was seen at the weekend, is increasing dramatically.

I have questions concerning a number of other agencies and seek answers from the Minister. An 11% decrease in funding for the Office of the Director of Public Prosecutions consists mainly of administrative cuts, but there are cuts in other services also and perhaps whoever is responding could address this issue. Likewise, the Office of the Ombudsman sees a 5% decrease in funding. Again, the bulk is to come from administrative cuts, but other services will also be affected by such a significant measure.

The Minister mentioned a 10% increase in funding for the Department of Education and Science and an 11% increase in funding for the school building programme. There have been significant advances in this area over the past few years but, in real terms, inflation in the construction industry is running at 10% so the Minister's announcement on school building represents a 1% increase. I am trying to point out the real impact that these increases will have on schools being built and refurbished in the next year.

Under the Department of Community, Rural and Gaeltacht Affairs, the CLÁR programme sees a 12% to 15% decrease in funding. This programme was originally only available in the west but has been extended to parts of my own constituency in Kilkenny in the past 12 months and I am sure it is available in the Minister's constituency. Why has funding been cut so soon after the programme was extended?

With regard to the Department of Agriculture and Food, the area of forestry has seen significant cutbacks in the past couple of budgets and, once again, the Book of Estimates sees a 3% decrease in this sector. Given the Government's pledges on greener energy sources and its commitment to alternative income sources for farmers, this makes no sense. It should increase funding in the area of forestry.

Continuing on matters agricultural, a 5% decrease in the farm assist programme is to be made available via the Department of Social and Family Affairs. The Government has been quite successful in driving off the land farmers who might have been able to avail of that fund, but I know a number of people in my own region who have benefitted from it. Perhaps an explanation for this decrease could be given later.

There have been some significant increases in funding under the heading of the Health Service Executive. The Minister referred to consultancy fees and ICT projects in his comments, but the €70 million increase in funding for information systems and related services may not sit well in this regard. Could this be the personnel, payroll and related systems, PPARS, fiasco all over again or is this a new version of it? Are we still throwing good money after bad as we did regarding PPARS over the past few years?

I have already mentioned the area of funding for local government and this is one of the areas where the Book of Estimates fails. A dramatic cut of 70% is to be made in funding for the Radiological Protection Institute of Ireland and there may be a reason for this. I hope whoever responds can provide an explanation.

The increase of 3% to 4% in the capital programme for the provision of sewage and water schemes throughout the country is a negative step in real terms, given inflation in that sector. I ask that this issue be considered on budget day.

There are welcome announcements regarding increases in funding for several Departments in the Book of Estimates and it would be churlish of me if I failed to acknowledge this. However, when one considers the greater scheme of things, specifically the corrosive effect of inflation, particularly in the construction industry, the announcements and increases are not all they may seem to be. In this regard I am yet to be convinced of the Government's commitment to significant systems reform in the public service. The Department of Health and Children receives the largest allocation every year and I see no obvious signs that the Government is serious about reforming systems there. Unless this is done there will be huge increases in funding into the future without a commensurate improvement in services provided.

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
Link to this: Individually | In context

I welcome the Minister to the House, thank him for the time he has given us at a pressing time of year and congratulate him on the Book of Estimates. How many Finance Ministers in Europe are in a position to continue to reduce the national debt, provide substantial relief in taxation and fund substantial increases in public services without any undue strain? I suggest very few of them are in this position, which is no doubt the reason the Financial Times decided the Minister was the most effective Minister for Finance in the eurozone.

The Estimates are only the first instalment in the budgetary process, which will be filled out later by the budget and Revised Book of Estimates. There are little quirks in the budgetary process, for instance, the outturn for this year will be somewhat less than what was provided for. For this reason, the figures people cite for the increase in expenditure this year over last year are probably at least one percentage point lower than the true figure. One must rememberthat these calculations are made on a moving scale.

Older Senators can only look back in wonder at the development of the country and public finances over the past 20 years. The particular contribution made by my party has been to establish and then provide a sound financial basis for the growth, investment and increase in employment that have taken place. We have not looked back since 1988 when Charles Haughey and Ray MacSharry reduced the Exchequer borrowing requirement, with the help of the tax amnesty, to 3% of GNP.

Senator Ryan implied yesterday that the rainbow Government had left the budget in surplus while subsequent Governments had failed to do so. Figures from the Department of Finance show there was never an Exchequer borrowing requirement surplus between 1995 and 1997. It is true, however, that retrospective calculation of the general government deficit produced a small surplus in 1997, that is, in one year out of three. In the past ten years there was a small deficit on the general government deficit in only one year, 2003, and two small deficits on the EBR. We have been managing comfortably with a large margin of safety and in a way that in most years has not significantly constrained capacity to do what needs to be done.

On some specific points, one would get the impression from the public debate that the Estimates provide for increased expenditure across the board. I note the Minister set a good example in his own Department, no doubt for good, technical reasons. I am not suggesting the allocation for the Department amounts to a cutback but the current budget is 8% below last year. In some areas, the allocations have not been significantly increased. Critics in the other House said it was scandalous that various allocated moneys had not been spent, yet the Government is constantly lectured about the importance of achieving value for money. One should not spend unspent money at the end of the year unless there are pressing needs and priorities for doing so. The critique in this regard shows inconsistency.

The Estimates provide welcome increases, by and large across the board. I welcome, for example, the increase in the allocation for child care, which is badly needed. Child care facilities are being developed all over the country. I also welcome the increased budget for primary schools. Even small schools one visits have resource, special needs and ancillary needs teachers and experience difficulty finding space to accommodate them. Enlarging many primary schools to accommodate these staff is an important priority.

The Government's investment in road and public transport is making a considerable difference, specifically in my county. I am sure new motorway links across County Tipperary have contributed to four positive job announcements in the past four months. These links make the county more accessible and have made a palpable improvement. My constituency of Tipperary South, as with the Minister's constituency, is in a central position.

Public transport was discussed in the House yesterday. Previous Governments, not only the rainbow Government, did not generally invest Exchequer money in capital improvements in public transport. The Book of Estimates for 1997, produced by the then Minister for Finance, Deputy Quinn, featured a zero Exchequer input into public transport investment. Moreover, public transport was not mentioned in the 20 point election plan at that time. It is a bit much, therefore, to be criticised about alleged deficiencies.

A sum of €777 million will be invested in public transport next year. We can see the effects of badly needed improvements in the system. If one adds current expenditure to capital expenditure, the final figure of approximately €1 billion amounts to two thirds of the investment in roads in the national budget. The Luas, which I often use when in Dublin, no longer features in the Book of Estimates because this successful project became self-financing much earlier than anticipated.

Senator John Paul Phelan alleged that housing policy had been a disaster. If that is the case, it is a wonder so many houses are being built in practically every village. Somebody, somewhere must be buying, acquiring and living in the majority of these properties. A cooling off in house prices is needed and some of the measures in the pipeline will help to achieve this. As regards some of the suggestions on inflation made in the debate, if one wished to stimulate rip-roaring house price inflation, one would abolish stamp duty.

Photo of James BannonJames Bannon (Fine Gael)
Link to this: Individually | In context

What about the Progressive Democrats?

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
Link to this: Individually | In context

The Senator should allow me to say what I wish to say. Of the various proposals I have heard, I considered those of the Labour Party more sensible than most. Extreme care would be needed in any reform or adjustment of stamp duty to ensure one does not give further impetus to house price inflation.

Photo of James BannonJames Bannon (Fine Gael)
Link to this: Individually | In context

Is the PD proposal off the wall?

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
Link to this: Individually | In context

The one good thing about the discussion on this issue is that it has had a cooling off effect on the house market and house prices. That is good in many ways.

Photo of James BannonJames Bannon (Fine Gael)
Link to this: Individually | In context

Is Fianna Fáil about to shaft the Progressive Democrats?

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
Link to this: Individually | In context

I welcome the allocation to the Office of Public Works for flood relief, which has increased from €20 million to €32 million. This will be particularly helpful in Clonmel which has been prone to flooding. The OPW has shifted from the acquisition of sites to building, a sign of the progress being made with decentralisation.

This Government's support for sport has been outstanding. Of particular relevance to my county is the extension of the sports company scheme. Groups and communities involved in the arts have also welcomed the exceptional funding granted. At local level and in some of the national institutions, such as the National Concert Hall, there is a need for new or extended premises.

I draw the attention of Fine Gael to an article by its former leader, Dr. Garrett FitzGerald, in which he highlighted the enormous improvement in life expectancy that has taken place since 1997. That surely is the bottom line indicator of improvement in the health service.

It is not always publicised but it is implicit in the figures that the Minister, having previously served as Minister for Foreign Affairs, has lived up to and helped his colleague to live up to the commitment on development aid. It is important we stress that to his credit. There was not always the same commitment in the Department of Finance in the past to this area.

There have been major increases in agriculture to fund agreements under social partnership on REPS, the suckler cow premium and other grants. I noticed some disagreement in the Labour Party on defence. Senator Ryan and the Peace and Neutrality Alliance consider it a good thing that we are not spending too much on defence but Deputy Costello criticised the size of the increase for the equipment budget. Perhaps the party needs further internal debate on the matter.

We all welcome the money being provided for the Departments of Enterprise, Trade and Employment and Education and Science for innovation and research. It is important we fund this area.

Points have been made about the small amounts of money for local authorities but this entirely ignores the authorities' own resources and the increased money for community programmes such as CLÁR and RAPID.

Photo of James BannonJames Bannon (Fine Gael)
Link to this: Individually | In context

And the stealth taxes.

Photo of Martin ManserghMartin Mansergh (Fianna Fail)
Link to this: Individually | In context

Fianna Fáil councillors in south Tipperary tell me that there is much more money available than was the case previously.

The Government has been criticised for not reducing numbers in the public service, as was temporarily decided in 2002 and 2003. If one wants the services, however, one needs the numbers. During yesterday's debate on inflation, I quoted the National Competitiveness Council which stated that in terms of productivity we were well served by the public service.

Derek McDowell (Labour)
Link to this: Individually | In context

The projections made by the Department of Finance in October suggest that we will enjoy economic growth of between 4% and 5% of GNP and GDP for each of the next three years. On the face of it, that is a rosy scenario that we all welcome. There are, however, worrying trends and fault lines in the economy we must be aware of and, as far as we can, address.

The most striking feature is our extraordinary dependence on construction. The sector now employs about 15% of the total workforce and a good deal more if we include people involved in services directly or indirectly linked to construction. This sector, however, is notoriously volatile. In 2001 and 2002 we experienced a rapid slowdown in the sector as a result of certain fiscal measures taken by the then Minister for Finance, Charlie McCreevy. It is clear that developers and builders have the capacity to slow production quickly and I am cynical about their willingness to do so to put pressure on the Government to introduce measures they want and not introduce other measures they do not want.

Things can change quickly in this sector, which leaves us exposed. The Tánaiste said a few months ago that the Government scarcely needs the revenues it gets from stamp duty. If we had anything like the slowdown in the sector we experienced in 2001, the Minister for Finance would quickly find we need that money very badly.

I intended to contribute to the debate on inflation last night but unfortunately I was at a committee meeting. In reflecting on the matter, however, it occurred to me that the most striking factor in the whole debate is that the inflation rate should be far higher than it is given the amount of money in circulation, credit borrowing, low interest rates and the SSIAs maturing. Our rate of inflation should be many percentage points higher and we must look carefully at the reasons it is not. There are factors at play that are worrying.

The most obvious factor in terms of goods is that our manufacturing sector is virtually dead. We simply do not produce the goods so most of the extra money we have is spent on imported goods and that is why it is not feeding through in terms of inflation. We no longer even attempt to compete with low-cost economies elsewhere to produce manufactured goods. We relied heavily on manufactured goods 30 years ago compared with the current economic profile. There has been a revolutionary economic change that will not be reversed. An entire sector that used to sustain us is dying, as reflected in the ongoing job losses in that sector. It is also increasingly being reflected in our trade deficit for manufactured goods.

The rate of inflation for services is much higher, almost 8% this year, although we could expect it to be even higher. It is not higher for one striking reason: the availability of relatively cheap foreign labour. The services sector has become highly dependent on such labour. If the girl washing hair in the hairdresser's were not from eastern Europe or China, the chances are the hair cut would cost a lot more. Having that pool of cheap labour available has kept inflation in the services sector at a tolerable level.

I make this point because it presents obvious social challenges. We have an obligation to ensure immigrants are not exploited and that minimum wage and related labour legislation is enforced adequately. I am not convinced this is so. We also have a responsibility to our own people with regard to securing future employment, particularly for those people with low skill sets. Our primary responsibility to those people is to ensure they upgrade their skills and are retained in training.

The Estimates published last week provide for an 8.1% increase in spending next year, a figure with which I have no great quibble. The figure could have been higher and I suspect it will be so by budget day. Nominal growth next year is likely to be approximately 8%, so we are speaking about marking time or roughly standing still in terms of percentage national output being spent on services.

We should stand back from the issue and ask what we want the budgetary process to do. For me, it is about supporting people who depend on the State, specifically through the social welfare and otherwise, improving infrastructure, and improving services. None of these can be done without spending money, and improved services will not be attained, by and large, without spending more.

I am not one who thinks an increase of 8% is terrible, but I would rather wonder if we could afford or sustain a 10% increase into the future. Any objective consideration of this year's figures suggests we could sustain increases of 10% or 11%, and I suspect we will end up with those. There is no need to make apologies for that, and we need to use these valuable years of economic growth to improve services and infrastructure.

I wish to speak about capital spending. We have not been ambitious enough with our spending on infrastructure in the past ten years. Since 1994 we have had 12 years or so of sustained growth, which has not happened in one country in the post-war period aside from the 1960s period in Germany or Japan. If we were to wake up tomorrow to find the boom over, what would we have achieved? To take transport as an example, it is remarkable that during those 12 years we managed to build only approximately 155 kilometres of motorway. The system on the five or six motorway routes chosen is still only half-built in that time.

Senator Mansergh may be correct in stating there was little provision made in the 1990s for public transport. We are still using, more or less, the same rolling stock in our railways. Although we have spent money on making the network safe, we have hardly improved it. The number of buses on the streets of Dublin is approximately the same, and although we have threatened to do so, we have not extended routes to Navanetc.

After 12 years of an economic growth of an unprecedented kind, we still have not achieved very much in many areas, and progress has been too slow. Part of that has been a deliberate decision of Government, which has decided to restrict capital spending to approximately 5% of GNP year on year. I have always felt that figure to be too low.

This is connected to the argument by members of the ESRI that if we spend more we get less value for money, and that may be correct. However, it ignores the political and social imperative to get work done that we have not been able to do before now. From an economist's perspective it may be reasonable to say we should delay social progress and infrastructural construction for another three, four or five years, but what would happen if we woke up some bright day in 2010 to find we no longer had the resources?

We should spend our resources on work we should have done ten years ago and get as much as we can. We can put in place systems to ensure we get value for money and so on. If we can get the work done at 5% more of a cost than if we had delayed it, we should carry on and do it now anyway.

During the course of his contribution the Minister mentioned value for money. Yesterday I again read his speech to the Institute of Chartered Accountants in Ireland, as well as his contribution on budget day last year, when he set out the improvements in process he intended to make. As with Senator John Paul Phelan, I am still deeply sceptical as to whether there is a real commitment to do this, and the publication of the three-year review in October did not add much beyond what we would have got in the economic review and outlook normally published in August.

Time will tell on the output statements. It is a pity they are coming two or three months before the general election, as we will not have enough time for assessment. It is certainly a good idea, but time will tell if it is effective. The bottom line is that processes used by this House and, more importantly, the other House, to evaluate the expenditure of public money are wholly inadequate. The only effective system is post facto, facilitated by the Comptroller and Auditor General and which the Committee of Public Accounts subsequently uses. The daily review of value for money, performed by the Houses and committees, does not work, and I see no great commitment from this Government to improve that.

In 2002, the Government came back to power with relatively few firm commitments, but I remember some. It committed to 200,000 additional medical cards, 14,000 gardaí before the next election and reducing class sizes in order that no child would be in a class of more than 29 by the next election. As of now it has failed miserably on all of them. Interestingly, we are getting a last blast of sudden public expenditure in one or two of those areas, with money suddenly being spent on the Garda and reducing class size.

There is no possibility, of course, of meeting the commitments come election day, but it will no doubt be argued the Government is on the way. After five years and given the relatively paltry number of commitments made, it is not good enough to say a last-minute effort is being made to make a dent in the commitments. The commitment on the medical card issue seems to have been entirely abandoned.

Many of the provisions of the 2001 health strategy have been similarly abandoned. The most striking of these was a commitment to provide 3,000 additional acute hospital beds, and the number provided is still languishing at about 500 or 600, five years on. There appears to be no mention or commitment to increasing the number of acute hospital beds.

It is an essential part of any health strategy to increase the number of beds. There appears to be a reluctance from Government to commit to do it in particular areas because of local political considerations, but the nettle should have been grasped some time ago, and it certainly should be grasped now.

I am glad we are back on track with overseas development aid, which others have mentioned, but I am somewhat worried about the way we spend it. The overall increase is 16%, which is very welcome, and €811 million is a significant commitment. We are spending an increasing percentage of this simply by writing cheques to international organisations, be they UNESCO, the Red Cross etc. We seem incapable of increasing our amount of bilateral aid, and a certain amount of this goes in direct budgetary assistance to specific governments. I would prefer, as would others in this House, bilateral assistance to manage and finance projects on the ground rather than to simply write cheques for Irish taxpayers' money to others. I would be interested in any comments the Minister might make in that regard.

Overall, I have no great quibble with 8% or 10% of an increase in spending, and if anything it is less ambitious than it perhaps should be. This relatively generous set of Estimates would not be enough to meet the relatively small number of key commitments made by this Government five years ago.

John Minihan (Progressive Democrats)
Link to this: Individually | In context

I welcome the Minister of State to the House. The Progressive Democrats believe economic policies can be an instrument of social justice, and I have stated as much before. Contrary to suggestions from some quarters, we do not decouple the economy and society. Our central political economic philosophy is the belief a strong and dynamic economy can deliver for all society, particularly those who are vulnerable.

Our parties policies have helped deliver the economic growth and increased tax revenues, which has led to more resources for social provision. That has allowed substantial real increases in social welfare payments, health and education. The 2007 gross pre-budget Estimates are further evidence of the correctness and the application of the Progressive Democrats ethos.

The Minister and the Government are to be complimented for striking the appropriate balance between making necessary provision for our public services and ensuring maintenance of a prudent and sustainable budgetary position. Delivering economic growth is just one side of the coin. We must utilise the added revenue generated to improve public services for our people. We have delivered the growth, which is demonstrated by an annual average growth rate of more than 7% in GDP terms between 1997 and 2005. The debt to GDP ratio will be approximately 25.5% of GDP in 2006, the second lowest in the euro area. The unemployment rate of approximately 4.25% is one of the lowest in the European Union, where the average unemployment rate of 8% is nearly double the rate in Ireland. The level of employment this year exceeded 2 million for the first time in the history of the State.

We continue to deliver the resources for public services. The Estimates provide for expenditure of just over €54 billion; €46.7 billion on current spending and €7.6 billion on capital spending. This is an increase of just over €4 billion, or 8.1% on 2006. It amounts to an additional €6,700 to be expended on public services for every man, woman and child in the country than in 1997.

Senator Mansergh referred to stamp duty. The Progressive Democrats started the debate and I have made my contribution in this area. Regardless of the differing views that people may have, we can all agree that there is now cross-party political support and public support for reform in this area. When all the submissions are made I am confident the Government will make its decision in this regard as to what is in the best interests of the economy.

The Tánaiste and Minister for Justice, Equality and Law Reform, Deputy McDowell, and the Minister for Health and Children, Deputy Harney, continue to demonstrate dedication and prudence in their departmental Estimates. The total public spending on health provided in the Abridged Estimates Volume published today amounts to €14 billion gross current plus €657 million gross capital. In real terms this means that eight new hospital units are to open in 2007; priority will be given to older people in the Estimates and in the budget; the spread of BreastCheck is on target for 2007 while the Government is again providing for a substantial annual increase in public spending on health of over €1.1 billion. This amounts to more than €3,300 per person. It represents a quarter of Government current spending and more than the entire income tax take from 1.4 million income tax payers.

The spending increases in health since 1997 have always been well above the rate of inflation, in fact, double or treble the rate of inflation and well above the increases provided in the 1990s. Each year, health has always received high priority from the Government and that is the case again this year. These increases and the total we have reached are made possible only by the strength of the economy and the sound economic policies of the Government.

It is worth focusing on service improvements achieved since 1997 with the overall level of funding. The total patient admissions to hospitals are up by more than 300,000 to over 1 million. Waiting times for operations have been dramatically reduced from years to months. No longer do 75% of children and adults wait for more than a year for heart operations. There are nearly 40,000 more cancer patient hospital admissions. More people are being treated and surviving cancer. Infant mortality has fallen by one third. BreastCheck is in place and will provide a service for all women in the country in the spring of next year. There was no breast cancer screening programme in 1997. Preparations are under way for cervical screening.

There are more than 3,000 home care packages for older people, where there were none in 1997. There are approximately 1,500 additional acute hospital beds in use. We are providing 1,700 more residential places and nearly 3,000 more day places for care, as one part of the first ever multi-annual programme for services for people with disabilities. Recognition has to be given to people at the front line who are delivering these service improvements. Their contribution and the reforms being introduced are all helping to bring about a first-class health service delivered to the people where most needed.

In the area of justice, the Government has again shown its commitment. We welcome the fact that the allocation for the justice and equality sector, current and capital, has risen by 9%. The gross allocation for justice is up by €181million to €2.4 billion. Allocation for the Garda Vote is up by €135.3 million to €1.445 billion, an increase of 10%. The Justice Vote has risen dramatically. Youth justice is to receive €16.3 million and there will be an extra €17.6 million for the Courts Service. Capital allocation for the Vote Group is up by €26 million. The resources are being given to the areas targeted. This means successful anti-crime strategies and operations such as Operation Anvil will be continued and intensified on a nationwide basis. The year 2007 will see more than 275 fully trained gardaí graduating from Templemore every quarter and 1,100 in total over the year. This will allow the Garda Commissioner to focus on providing a highly visible policing presence throughout the country.

Despite what the Opposition says, the Government's commitment with regard to Garda numbers has been met. The Tánaiste has asked the Commissioner to devote significant resources to policing RAPID programme areas where residents experience persistent vandalism, intimidation and other forms of anti-social behaviour. Funding for the IT infrastructure, which is a key support for successful policing and crime fighting, is up by €3 million to €38.4 million. The national digital radio will be rolled out to significant areas of the State next year. Expenditure this year on Garda vehicles will be more than double that of last year and will result in the purchase this year of 1,200 vehicles, more than half of the entire Garda fleet. This progress will be continued in 2007. The Garda traffic corps strength will reach over 1,000 next year, a doubling of its strength since 2005 and progressing towards the target of 1,200 by 2008.

The Government continues to provide record resources for anti-crime strategies. The publication of today's Estimates, which show an increase of 10% on this year's budget, serve to underline the Tánaiste's commitment in this respect. The additional overtime allocation will yield almost 3 million extra man hours of policing by uniformed and special units throughout the State. This significant increase in funding and the continuing increase in the strength of the force, will enhance the capacity of the Garda Síochána to combat crime, focusing on the policing priorities for 2007.

As the Minister for Finance, Deputy Cowen has stated, the 2007 Estimates are fiscally sustainable, economically appropriate and politically responsible. The maintenance of stability has been the cornerstone of our economic success. Stable and sensible policies have enabled us to generate the resources necessary to tackle poverty and social inequalities and to improve public services. The budget 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. This will set out the seven-year investment programme and financial framework for sustainable social and economic development over the medium term. The Progressive Democrats are pleased to have played an integral part in the Estimates, budget and NDP processes. I commend the Minister and the Government on their continuing determination and prudence in this area.