Seanad debates

Thursday, 17 December 2009

Appropriation Bill 2009: Second Stage

 

Question proposed: "That the Bill be now read a Second Time."

12:00 pm

Photo of Martin ManserghMartin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
Link to this: Individually | In context

I am pleased to appear before the House to discuss public expenditure and in particular the background to the Appropriation Bill 2009 which gives statutory effect to voted expenditure for 2009. Before discussing expenditure in detail it would be useful to put it in context by reviewing briefly the performance of the public finances in 2009.

The initial Estimates for 2009 were set out by the Minister for Finance in his budget of October 2008. As the Minister indicated at the time, no one could have foreseen the speed with which the global and domestic downturn would gather pace. He pointed out that in the months leading up to that budget, the world financial system had been turned upside down. Household names in global finance had been rescued by governments and blue chip companies had either failed or been subsumed into other institutions. He also reminded the House that just two weeks before budget 2009, when the stability of our own banking sector came under threat, the Government had taken bold and decisive action by putting in place a guarantee arrangement to safeguard the financial system in Ireland. This was done to protect our economy and all who work in it.

This international credit crisis compounded and deepened the downturn in the domestic construction sector and led to a fall off in consumer confidence. The rapidity and severity of this downturn took even the most pessimistic of commentators by surprise. The result has been a sharp rise in unemployment and a steep decline in revenue with businesses experiencing the kind of economic difficulties not seen in this country for more than 20 years. In response to this situation, the budget for 2009 was brought forward by two months to 14 October 2008, in order to seize the initiative and provide political leadership in the face of a rapidly and dramatically changing economic context. At that time it was envisaged that GNP would contract by 1%, with GDP contracting by about 0.75%, that unemployment would rise, averaging 7.3% for the year as a whole, and inflation would ease to 2.5% on average for the year.

In framing that budget in October 2008, spending was concentrated on our schools, our health services and on the protection of the elderly and the most vulnerable and contained a social welfare package of over €500 million. Investment in our public services continued but in a time of scarcer resources the value for money principle became all the more imperative. The 2009 budgetary targets were as follows: an increase in gross voted spending of 1.8%; a current budget deficit of just over €4.7 billion; a capital budget deficit of just under €8.7 billion; a general Government deficit of just over €12 billion or 6.5% of GDP; and a debt to GDP ratio of 43%, with the intention of securing a progressive reduction in the deficit as a percentage of GDP in 2010 and 2011.

However, the global economic and financial crisis, together with the correction in the domestic property market, continued to have a significant impact on budgetary and economic developments in Ireland in early 2009. Tax receipts in particular were severely impacted by the contraction in economic activity. To underpin the sustainability of the Government finances, expenditure savings amounting to €2 billion in a full year were announced in February 2009. The most significant component of this package was the introduction of a pension-related pay deduction of an average of 7% from the earnings of all public servants.

The supplementary budget in April of this year continued the process of adjustment begun by these earlier savings measures with further expenditure adjustments of €886 million in gross current expenditure and €576 million in capital. A number of initiatives were also announced in the supplementary budget with the aim of reducing the cost of delivering services, including the introduction of a general moratorium on recruitment and promotion in the public service and the implementation of an incentivised early retirement scheme and career break schemes for most of the public service. These measures have resulted in a significant reduction in public service staff numbers in 2009, and this is developed and built upon by the Government's new multi-annual numbers control strategy.

In April's supplementary budget, the Minister for Finance outlined six steps that had to be taken to restore and renew this economy. First, the stabilisation of our public finances; second, the restoration of our damaged banking system; third, the regaining of competitiveness; fourth, the protection of jobs; fifth, the support and stimulation of economic confidence; and finally, the restoration of our reputation abroad.

The first and most urgent of these was the stabilisation of our public finances. It was vital to show that we could put our own house in order before we could expect those who have invested here and who might invest here in the future to have confidence in us. The supplementary budget in April 2009 forecast that €34.4 billion in tax revenue would be collected this year, a decline of over 15% on the receipts for 2008. This projection was revised in budget 2010, with approximately €32.6 billion now expected to be collected. This represents a decline of over 30% on the level of taxes received in 2007 and means that tax revenues are now back to 2003 levels. In contrast, current expenditure has increased by 70% over that period. This weakness in taxation receipts reinforces the need for expenditure reductions to stabilise the position in the public finances.

In this regard, budget 2010 is the latest in a series of measures, which began in July 2008, designed to restore order to the public finances. During the past 18 months the Government has made budgetary adjustments with both taxation and expenditure measures designed to yield around €8 billion in 2009. In view of the substantial revenue raising measures undertaken in the budget and supplementary budget 2009, budget 2010 focused on the expenditure side of the account. An expenditure adjustment of €4 billion was set out, including cuts in public sector pay, social welfare and capital expenditure, as well as substantial reductions in programme expenditure. It is true some tax changes were made both upwards and downwards but the net impact of that exercise was a mere €17 million in comparison.

Budget 2010 is the latest step in the expenditure control programme begun in July 2008. In regard to the Exchequer paybill, budget 2010 introduced salary reductions averaging 6% across the public service with reductions of 15% for those at the most senior levels. In addition, long-run pension costs in the public service should fall following implementation of the budget 2010 announcement of a new pension scheme which will apply to all new public servants. In addition, the Special Group on Public Service Numbers and Expenditure Programmes, set up to examine the current expenditure programmes in each Department and to make recommendations for reducing public service numbers in order to ensure a return to sustainable public finances reported in July 2009. Its report made a series of recommendations for savings totalling €5.3 billion in a full year and entailing staff reductions of 17,300. These recommendations have been taken into consideration in formulating budget 2010 and will be further considered in the context of future budgets. In budget 2010 adjustments have been made across the board such that if unemployment related expenditure is excluded, overall Government spending has been reduced by more than 10% in the period 2008-10 in net terms.

The Government is also implementing a new, more rigorous approach to controlling public service numbers, to drive greater efficiency and productivity from the system of public administration. This will lead to significant additional savings on a multi-annual basis, making a contribution to the progressive lowering of our deficit. The new public service numbers policy draws upon the findings of the special group, and will facilitate a progressive reduction in staff numbers across the public service by end-2012. This is to be achieved while respecting Government commitments to maintain and improve teaching resources in primary and second level education.

Additionally, a review of the capital programme was carried out in advance of budget 2010 to ensure this investment programme focuses on the priorities that are most appropriate to the challenges we now face and which promote economic recovery. Government decisions on capital allocations for 2010 and subsequent years have been informed by this review, which it is intended to publish shortly. Capital expenditure, at an average of approximately 4% of GNP over the period 2009-14, remains at a high level and reductions in tender prices mean it is now possible to deliver capital projects more cheaply, enabling many of the goals of the National Development Plan 2007-2013 to be more readily achieved.

In conclusion, this Bill deals with expenditure during the course of 2009 - expenditure that has been managed and controlled in a responsible way by this Government over the course of the year. That process of responsible and prudent budgetary management will be continued into 2010, as set out in the recent budget. The decisions which the Government has had to take are not easy and are clearly not designed to court popularity but they are the right and responsible decisions. As a result of the decisive and consistent steps taken by the Government, we are now in a position to stabilise our national deficit in 2010, and to bring it back below the 3% ceiling by 2014.

The scale of future adjustments needed to restore order to the public finances will not now be as large as previously thought. For 2011, it is estimated that the necessary adjustments will be of the order of €3 billion, with €1 billion already identified and incorporated into the capital expenditure forecasts. Budget 2010 re-emphasised the Government's commitment to restoring stability to the public finances which will in turn help return the economy to a sustainable growth path. Sustainable growth is what will generate the additional resources we need to deliver further improvements in our schools, our hospitals and across the full spectrum of public services.

As the experience post-1987 showed, in which Senator MacSharry's father, the then Minister for Finance, was heavily involved with the support of the then leader of Fianna Fáil, expenditure reductions are a much more effective and less economically damaging way of dealing with a large deficit.

With regard to light at the end of the tunnel, I hope it will be a bright day at the solstice in Newgrange on Monday.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

I hope the Minister of State is right. If he is going there, I hope he enjoys the day. It is quite a special occasion to be at Newgrange for the winter solstice.

This Bill, in many respects, is the end of year accounts detailing how much the Government spent and where the money was spent. I propose that a third Schedule be included in the Bill listing details of the Government's income for the year. We tend to focus on where money is spent and throughout this Bill there is reference to that, but a list detailing from where the Government obtained its income might be useful for people in making comparisons about from where the State gathers income and where it spends money. The Minister of State might comment on whether that information can be included in the Bill.

In the prebudget information we received from the Department of Finance one graph stood out dramatically. It is the one that plots Government income and expenditure since 2000. It shows that Government income and expenditure was increasing year on year and that there was a massive divergence in the past two years during which expenditure was still extremely high but revenue was extremely low. Having regard to that graph, I find it difficult to understand how the Minister of State can be so confident about the reductions the Government will make next year or the year after, given that the gap between income and expenditure is substantial. He spoke about stabilising the economy in the years ahead and said that by 2014 the budget will be within a projected 3% deficit. What amount of money is it projected the State will have borrowed by that period? If we are to borrow €20 billion next year and that amount in 2011, 2012 and 2013, we could end up borrowing another €100 billion before we reach the position that our public finances are stabilised. What are the projected Government borrowing figures for the next few years? Such figures will have a huge knock-on effect on the public services we can provide. We know already that for next year €2 billion of the €4 billion that will be saved will have to go towards paying interest on additional loans we have already managed to gather. We need to know these figures to have some idea of the position that will prevail in the next few years.

The Minister of State spoke about alterations to pensions. He said that all new entrants into the civil and public service will have a new pension scheme from the end of next year onwards. It will be more like the pension most people in the private sector have in that it will be a defined contributions pension rather than a defined benefit pension. What is the position of existing pensioners and that of potential pensioners who are existing members of the civil and public service? The Minister of State said that legislation would be introduced next year, but the Government needs to publish that legislation as a matter of urgency and perhaps even in draft form for us to have an idea of the Government's plans for those people. That issue is causing great concern for public and civil servants, especially those who have the option to retire in the next couple of years. The matter should be discussed now because it will have a significant effect. It is not necessary to delay the Appropriation Bill, as I will speak more about this matter when we discuss the next Bill. I refer to the efficiencies and changes to work practices the Minister hopes to achieve in the civil and public service. Benchmarking payments made to everyone in the public sector have effectively been taken back through the measures introduced in the past two budgets. A different attitude is apparent among the leadership of the public sector unions to the achievement of further efficiencies and changes to work practices. That will have a significant knock-on effect on the delivery and cost of services. Perhaps the Minister of State might comment on this.

Photo of Marc MacSharryMarc MacSharry (Fianna Fail)
Link to this: Individually | In context

I have no intention of holding up the House on the Appropriation Bill. I note that it was taken without debate in Dáil Éireann. Every year it is an appropriate and a necessary step in the budgetary process for the year ahead. Last night we had a debate on the economy and later today we will have a debate on the specifics of some of the budgetary measures. I commend the Bill to the House.

Photo of Michael McCarthyMichael McCarthy (Labour)
Link to this: Individually | In context

I was just about to write a few notes on the Bill. I have been asked to speak on behalf of my colleague, Senator Alex White. I welcome the Minister of State, Deputy Mansergh.

I wish to make a number of brief points on the Bill. First, I wish to discuss the education spend. We have heard much in recent times about the fact that X amount of money has not been spent by the Department of Education and Science. Certain interpretations can be projected, a nicer way of saying "spun", in ways that suit either the Government or the Opposition. Perhaps there are good reasons for this, but I would like the Minister of State to explain the underspend in a Department as significant as the Department of Education and Science. Significant issues arose in the past year or so in education. There are many hot issues, for example, the possible reintroduction of third level fees, the manner in which universities are funded and the Student Support Bill.

An ongoing issue needs to be addressed urgently, namely, the manner in which the Department is renting prefabricated buildings and sites for schools. In some cases it is renting brand new buildings that will never be used as schools. I often question the economics behind such a decision. I have raised consistently with the Minister a number of projects, not least Gaelscoil Chloch na Coillte in west Cork where the Department was renting prefabricated units and also a site. My argument is that in terms of the economics, surely it would be wiser and more provident to identify a site and build a school on it. I accept that would cost more money initially but in the longer term surely it would be a better investment than just spending dead money in the sense that the Department will never own the prefabricated buildings or sites. In that context, how can it happen that late in the year we discover that a significant portion of a budget is unspent? If there is a good reason for this? If so, I am interested in hearing it. I would be pleased if the Minister of State could shed some light on the issue.

One tends to read banner headlines to the effect that X amount was not spent, but the question is why the money was not spent. What guidance or directives are issued to Ministers on spending? I could identify a number of projects that would eat into that budget. In effect, it could be spent in my area.

Photo of Dan BoyleDan Boyle (Green Party)
Link to this: Individually | In context

It is one of the features of the budget debate every year that the Seanad debates the Appropriation Bill, whereas the other House tends to take an attitude that it takes it as read. It is an important part of the budgetary process because it itemises Government spending by Department and the specific amounts intended to be spent. It is a useful exercise for Opposition Members, in particular, to ask questions about whether the money is being appropriately allocated and wisely spent. We have heard Senator McCarthy inquire about unspent moneys, how that was allowed to occur and the mechanisms in place to properly account for it. An issue has arisen because of a difficulty with capital spending on the schools building programme, whereby a significant amount of money has not been spent this year. I am pleased to see there is a significant roll-over of much of that unspent money to allow for delays in the planning process and ensure important pieces of infrastructure are put in place.

The Appropriation Bill contains a number of elements, one of which is the itemising of expenditure in each Department. The other is the formalising of the financial provisions voted on in Dáil Éireann but not in this House. The four provisions on which a vote was taken on 9 December are itemised.

I wish to ask one question that could perhaps be addressed in the course of the wider debate we will have in the House on how the Government's budgetary projections are being met or otherwise. Would the two Opposition parties care to explain why, in regard to one important element of budget 2010, namely, the agreement to introduce a carbon tax and the related financial provision to bring forward the transport fuel element from 10 December onwards, was treated differently by both parties in Dáil Éireann? In terms of where they stand on policy, we need to hear whether they agree with the concept of a carbon tax and why they took such a different approach in Dáil Éireann to it.

Photo of Michael McCarthyMichael McCarthy (Labour)
Link to this: Individually | In context

Senator Boyle should consult the Labour Party website where he will find the appropriate answer.

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

On a point of order, the one thing I learned on my first day in the House 22 years was that one could talk about every single aspect of the economy, except taxation, in the debate on the Appropriation Bill. Senator Boyle is out of order in referring to the carbon tax.

Photo of Michael McCarthyMichael McCarthy (Labour)
Link to this: Individually | In context

That is my view also.

Photo of Paddy BurkePaddy Burke (Fine Gael)
Link to this: Individually | In context

I call Senator Boyle.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

I disagree. I will break with precedent and urge Senator Boyle to continue.

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

I think the Senator will find I am correct.

Photo of Paddy BurkePaddy Burke (Fine Gael)
Link to this: Individually | In context

Senator Boyle should be allowed to speak, without interruption.

Photo of Dan BoyleDan Boyle (Green Party)
Link to this: Individually | In context

I would like to defer to my learned colleague, but the Appropriation Bill contains the four financial provisions from budget day.

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

It does not deal with taxation.

Photo of Dan BoyleDan Boyle (Green Party)
Link to this: Individually | In context

It mentions them specifically. The whole point of a Second Stage debate is to address the generalities of the issues raised in the Bill.

Photo of Paddy BurkePaddy Burke (Fine Gael)
Link to this: Individually | In context

I thought Senator Boyle was speaking on policy.

Photo of Dan BoyleDan Boyle (Green Party)
Link to this: Individually | In context

I am happy to raise that point. I am seeking a general explanation as to why the Fine Gael Party chose to vote against that provision and the Labour Party has chosen not to vote on it. I say to Senator O'Toole that is important in terms of providing clarity in this policy area because it goes beyond taxation.

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

It is not an unreasonable question, but it is the wrong time to ask it.

Photo of Michael McCarthyMichael McCarthy (Labour)
Link to this: Individually | In context

Surely it is out of order.

Photo of Paddy BurkePaddy Burke (Fine Gael)
Link to this: Individually | In context

Senator Boyle should be allowed to speak without interruption, please.

Photo of Dan BoyleDan Boyle (Green Party)
Link to this: Individually | In context

I did not hear the Chair rule on it.

Photo of Paddy BurkePaddy Burke (Fine Gael)
Link to this: Individually | In context

Senator Boyle should be allowed to speak without interruption.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

What is the Chair's opinion?

Photo of Dan BoyleDan Boyle (Green Party)
Link to this: Individually | In context

I am not seeking extra-constitutional power for this House, nor am I asking that we reverse the financial provisions decided on in the other House. I have made the point that the Bill contains these provisions and commented on how they have been responded to by other parties represented in this House.

I welcome the overall expenditure provided for in the Bill. In the middle of very difficult financial times where we are still borrowing significant sums of money, in excess of €20 billion, we are allocating approximately €53 billion to meet the cost of running the State. When we take into account the €4 billion adjustment we have had to make in budget 2010, the reality is we are raising approximately €32 billion by taxation and borrowing approximately €20 billion.

The political debate we have been having has been on the smallest scale of the moneys we are currently spending in the State. What is important about the Appropriation Bill which we have the opportunity to discuss in the House and which perhaps the other House does not take as seriously as it should is what is happening with the vast bulk of money being allocated and how is it being spent. I would like to see this House develop that competence even more, even though we are restricted in our constitutional role from doing so to a greater extent.

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

In fairness to the Senator, there is a reference to the Consolidation of Taxes Bill in the Appropriation Bill. It is a fair question to ask of Fine Gael and the Labour Party. I support the carbon tax, as it is essential. The approach the Government has taken is progressive. There are aspects of it over which I am not exactly exultant. However, it was necessary. I would have thought all the parties represented on the Oireachtas Joint Committee on Climate Change would share that view.

I welcome the Minister of State, Deputy Mansergh. I am aware the Minister for Finance is indisposed and I wish him well and a speedy return to full health. I have no doubt there is a huge level of responsibility on the Minister of State.

What frightened me after the budget was that when a question was put to the Taoiseach about the optimistic view of the Government on the economy, he more or less said it was as it was given to him by the Minister for Finance, which was fair enough. A day later the Minister for Finance was asked the same question on "Today with Pat Kenny" and he said it was as his officials advised him. Is somebody passing the buck all the way down?

While most people focus on section A of the Budget Statement, I tend to take much more interest in section C. I thought the figures in it were extraordinary. I use my words wisely; I am not saying they were right or wrong. I recall that the prognosis from the Department of Finance was that the debt-GNP ratio will tip barely above 80% and will then begin to drop. That is certainly much better than we have been hearing. More important, I recall that the highest point the budget deficit will reach will not be the 14%, 15% or 16% put about in international media and in the Irish media until last week but approximately 11.7%. The difference between our budget deficit being 11.7% rather than up around 15% means that we are mainstream. The only other two countries up around the 15% mark are the UK and Greece. As far as I know, Germany is close to double digits. I believe it is 9%, 10% or marginally more than that. It is important to recognise that.

The other issue in section C of the Budget Statement related to growth. I noticed that on this occasion, the Department of Finance chose to illustrate it in a diagrammatical format. It also illustrated the indications, prognosis and forecasts of other groups. I recall that the diagram showed the forecast of growth for this year, next year and the year after from the Central Bank of Ireland, the EU, the Department of Finance and the ESRI. The most significant thing was that the most pessimistic outlook in the diagram came from the Department of Finance, which is always criticised for being overly optimistic. In fairness to the Department, it is an interesting point which has not been made. In that diagram, there was a consolidated or an agreed line. If it pans out in that way, it shows something very close to a symmetrical recession - in other words, this economy will come out of recession very rapidly, although not as quickly as it went into it.

I am sure the Minister of State will correct me if I am wrong but I believe it has been acknowledged that while the European economy will increase by approximately 1.5% this year - we will be in negative territory this year - it will only increase by less than 2% next year. This is a European prognosis. The Irish economy might increase by more than that. The Department of Finance and the Minister's forecast is that we will be in negative territory for the next four to six months but by mid-year, they expect GNP to begin to grow. I do not want to get stuck into figures but I would like to hear the basis for all of that. I do not expect a half an hour speech but would like to hear an instinctive response from the Minister of State.

I strongly supported the Government on the issue of the credit guarantee, the NAMA project and the special purpose vehicle which took the operational aspects of NAMA away from mainstream NAMA, and I saw nothing wrong with that. What I liked about those three things was that they were progressive, creative and imaginative. As I said at the time, it was not that I believed the Fine Gael proposal had no chance of working. I am a great believer in the view that there is more than one right way to deal with a problem but I believed the Government proposal was more complete, it was in power and the correct thing to do was to support it.

Since then, there has been a total lack of creativity. One issue raised in the House all the time is protection or support for people with mortgage difficulties, and Senator MacSharry has raised it time and again. The Government talks a great deal about that. The other issue is the lack of credit about which the Government talks a great deal as well. People have been misled on that second issue.

The Government will not force the banks to give out credit. It goes against banking policy. It will happen eventually but only organically. This is not a new problem. After the depression in the 1930s, the United States set up a new bank, the Export-Import Bank, to do precisely what we have been talking about, namely, making credit available to support exporting, manufacturing, and so on. The Export-Import Bank, or exim bank as it is called, in the United States produces various financial debt and bond instruments which allow various guarantees. For instance, Boeing is in financial trouble. It has just produced a new airliner and has advanced orders for 800 but, in many cases, its solid good customers do not have the money to buy them. Foreign banks can get money through bonding from the Export-Import Bank, bonding which is either guaranteed by the state or, in this case, by Boeing. It is just a new debt instrument. It is no different from the bonds our Government sells on the European market, except it is done in a different way and in the private sector. It also allows private sector money to be invested in creating credit.

This is important because, according to Senator Doherty, there is a statement on the finfacts.ie website to the effect that €50 billion Irish money has been invested in America in the past six months, although I have not seen the figures. That means there is money here which could be invested in safe debt instruments and bonds instruments which would support exporting. Not only would it support companies exporting but it would support companies which must buy raw material provided that raw material is used to produce stuff which is solely for export. We need a bit more creativity from the Department in dealing with these issues.

I hope the forecast and prognosis in the Budget Statement are correct because it would mean a very optimistic future. I wish the Minister of State well and I support the Bill.

Photo of Martin ManserghMartin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
Link to this: Individually | In context

I thank Senators for contributing very constructively to this debate. As has been stated, the Appropriation Bill is about expenditure, although there is a cross-reference to the financial resolutions passed in the Dáil so, to that extent, Senator Boyle was within his rights, in particular as one of the resolutions referred to the carbon tax.

With very few exceptions, it is not the policy of the Government to tie particular revenue streams to particular expenditure programmes. Senator Twomey is quite right in talking about how expenditure expanded since 2000 to approximately 2008. It was a period in which it seemed we could square the financial circle and it was possible to do everything. We could reduce debt, put money aside into the NTMA, reduce taxes or increase reliefs, increase welfare payments and fund large capital expenditure programmes. In the other House I also referred to the fact that it was the golden era of public service unions, when numbers, pay and conditions all dramatically improved, especially at the middle and upper reaches, not excluding Members of both Houses of the Oireachtas.

We are obviously in a different position now and that is the reason for the measures outlined since July 2008. Senator Twomey asked about projected borrowing, and one of the budget tables shows this is to peak in 2012 at 83.9% of GNP. He also raised the issue of pensions and a distinction must clearly be made between the conditions of new entrants into the public service and existing members. In his budget speech, the Minister stated:

As part of the reform of public service pension arrangements, I will review the current arrangements and consider linking pensions to increases in the cost of living. Pending that review I do not intend to apply the pay cuts I have already outlined to existing public service pensioners.

Senator McCarthy concentrated exclusively on education. I have much sympathy with the ongoing argument that where possible, rather than renting at some cost prefabricated buildings, money should be devolved. There is a devolved grant scheme to schools where they can take charge of accommodation. It particularly applies to small schemes. We have a multi-annual capital programme but we should not get too hung up on what is spent on the capital side in a particular year. If money is not spent, it can normally be carried over to the next year and added to that allocation.

Senator Boyle referred to differences with regard to the carbon tax. I do not speak from a party political perspective when I say it is healthy when, from time to time, Opposition parties not in government take different views on a subject but do not engage in what one might call mindless opposition. To be fair, very few Opposition parties engage in mindless opposition. There are many pieces of legislation including, as far as I know, this Bill, which are not opposed by Opposition parties. Intelligent opposition is always selective.

I agree with Senator O'Toole that there is a significant difference between a general borrowing deficit of 11.6% or 11.7% and 15% or 16%, which is really in the danger zone. One of our important achievements has been to stabilise the deficit, and also to have a strategy to bring it down over a period of years. That is very important for confidence both at home and abroad. Under any circumstances, we will have to borrow very substantial sums of money, with the borrowing requirement next year at €18.7 billion. If foreign lenders have confidence in what we are doing, as this year has shown, there should not be a particular difficulty in doing that. As the experience of another partner country has shown, if foreign lenders do not have confidence, a country can face very serious difficulties.

Senator O'Toole is correct in stating that downward growth will continue to the middle of next year and is then projected to begin turning around. This year it will be on a much lower base. Even a small element of growth would stabilise the size of the economy. It is not immense good news in an abstract way but stabilisation is the first objective, with recovery the next one. This is partly in the context of the legislation we will discuss this afternoon, as well as wider developments.

We have already experienced a sharp improvement in our competitiveness as incomes and costs have been lowered. In a sense, that is what we must do as members of the eurozone. I will repeat what I have said before; we have taken pay cuts before which were disguised by inflation and devaluation. We are now part of a strong currency zone and these aspects cannot be disguised any more. It will clearly still take some time until we adjust to the new world we are in as members of the eurozone. It is not all negative.

As I am sure Senator O'Toole is aware, the budget contained certain measures prolonging mortgage interest relief to secure mortgage holders. My feedback is at least as far as they went, they were, broadly speaking, welcomed by people. President Obama only earlier this week took the banks in America to task over their lending activities and Senator O'Toole pointed out some of the real difficulties. We want lending to take place to viable businesses which are able to go forward and survive; we do not want businesses to fail merely for the lack of some carry-over finance. It is difficult to press and persuade banks to put money into businesses that have, unfortunately and tragically, ceased to be viable. That is the difficulty and dilemma.

Before concluding I wish to make some brief reference to some of the infrastructural investment being undertaken in 2009. We have targeted investment in support of sustainable employment. In February, €150 million was redirected to areas that are both labour intensive and of high economic value. Of this, €75 million was allocated to sustainable energy schemes, including €50 million for the home energy saving scheme, and €75 million to the school building programme. A large proportion of expenditure - €289 million - was allocated to fund science, technology and innovation to support investment in the smart economy. We also provided support for enterprise and sustainable employment creation through the wider investment programmes of bodies such as Enterprise Ireland and IDA Ireland and €50 million through the enterprise stabilisation fund.

This has been a year of great achievement for transport infrastructure investment with €2.4 billion in capital funding spent on transport projects and programmes. There are many projects in the pipeline. The main projects include the opening of a rail line between Midleton and Cork to provide a commuter rail service and the opening of the Luas extension to the docklands in Dublin. Seven national roads projects were completed during the year and we look forward to the completion of the motorway network next year.

A total of €500 million was made available for water services infrastructure in 2009, which reflects the priority the Government attaches to preserving and protecting our water resources as a key element of environmental policy. Certain lapses have underlined the importance of meeting national and EU standards for drinking water and wastewater treatment and we must put in place the critical infrastructure to support industrial, commercial and other development. Assessments recently completed by local authorities will inform the next water services investment programme.

Capital invested in primary and post primary school buildings in 2009 is expected to exceed €525 million, with €200 million being spent in the higher education sector.

In my own area, the increased number of flood events has underlined the importance of the OPW's role in flood relief, which has increased following its acquisition of responsibility for coastal protection. We have discussed the subject at length. There is a great deal happening and scarcely a day passes without a meeting of the head of the engineering division in the OPW and myself to discuss different schemes, difficulties and assessments in many areas. The allocation of funding has been increased.

Question put and agreed to.

Senators:

Committee and Remaining Stages.

Sections 1 and 2 agreed to.

SECTION 3.

Question proposed: "That section 3 stand part of the Bill".

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

The section refers to the reduction in excise duty on alcohol. The Minister wants publicans to reduce the cost of alcohol immediately. Is it correct that if they do not pass on the reduction immediately, he will revoke this measure?

Photo of Martin ManserghMartin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
Link to this: Individually | In context

I understood the Minister to have urged publicans to pass on the reduction in duty. He did not threaten to reimpose the duty immediately but if after a period, the reduction appears not to have been passed on, he reserves the right to restore the status quo.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

Does the Minister support a refund of excise duty to wholesalers, considering they had paid excise duty at the previous rate? Publicans will reduce the price. Does the Minister of State support a refund for wholesalers? This is a significant industry and a number of jobs will be put at risk if wholesalers are expected to carry an overdraft to pay the excise duty on behalf of the State. I presume the Department of Finance and the Revenue Commissioners would fully support a refund.

Photo of Martin ManserghMartin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
Link to this: Individually | In context

I am always amazed at the way Opposition Deputies and Senators try to lead me on to dangerous ground. I am familiar with the problem in my constituency. A wholesaler visited me last Saturday with the problem raised by the Senator but there are no plans for a rebate.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

This is a difficult issue and I had hoped we could pass the Bill without a division but the Minister of State should clarify this for wholesalers.

Separately, I refer to the carbon tax. County Wexford has significant industries and a major hospital but they have no access to natural gas. However, they will be hit with a carbon tax, which will mean they will be unable to compete with companies in Dublin and Cork which have access. The Government is placing an additional burden on significant industries in County Wexford. No allowance has been made for the fact that they cannot use natural gas as an alternative. Bord Gáis does not supply the county even though the company in a report about the energy requirement of County Wexford to justify bringing natural gas there highlighted that in Wexford town a few companies such as Nutrena, Celtic Linen, Wexford Creameries and the hospital on their own use twice the energy Bord Gáis set as its threshold to supply the county. This has not been mentioned.

Photo of Paddy BurkePaddy Burke (Fine Gael)
Link to this: Individually | In context

The Senator is straying from the section.

Photo of Martin ManserghMartin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
Link to this: Individually | In context

While I accept the problems outlined by the Senator, it is not possible to differentiate geographically in the imposition of taxes but perhaps the situation will provide an incentive for the development of new lines of supply to the county.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

We at least need Government support to ensure Bord Gáis moves in that direction because the company has shown no interest in providing natural gas to Wexford town. It will build a pipeline to the power generating station near New Ross but that is as far as the company will go.

Photo of Martin ManserghMartin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
Link to this: Individually | In context

Bord Gáis is gradually extending its network nationwide. A few towns in County Tipperary - Cahir and Cashel - are being added to the network and there have been developments in the west and north west. It may just be a question of time.

Photo of Liam TwomeyLiam Twomey (Fine Gael)
Link to this: Individually | In context

Time is something industries in Wexford do not have. The carbon tax will be introduced on 1 January.

Photo of Marc MacSharryMarc MacSharry (Fianna Fail)
Link to this: Individually | In context

We are straying from the section. The Bill was passed without debate in the Dáil and we will have a wider debate on the economy when the next Bill is taken. We would all like natural gas. Under the Gas Acts, Bord Gáis has a commercial mandate and the company chooses to extend its network on that basis. The Senator is seeking a ministerial announcement. However, I recall the chairman of Sligo Chamber of Commerce securing a commitment from a former Minister of State, Mr. Joe Jacob, regarding the supply of natural gas to Sligo but sadly, it has not happened yet. Government subvention will be needed to extend the network throughout the country. I hope that with budgetary measures such as those we are passing today more finance will be available to allow the Government provide a subvention for Bord Gáis which has to operate with a commercial mandate to extend the gas network to the entire country. I look forward to this and would like to see it included in the Bill, if possible.

Question put and declared carried.

Section 4 agreed to.

Schedule 1 agreed to.

Schedule 2 agreed to.

Title agreed to.

Bill reported without recommendation, received for final consideration and ordered to be returned to the Dáil.