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Seanad Éireann debate -
Wednesday, 19 Jul 2017

Vol. 253 No. 2

Summer Economic Statement 2017: Statements

I welcome the opportunity to discuss the summer economic statement agreed by Government and discussed in Dáil Éireann last week. The statement sets out the Government's economic and fiscal strategy over the short and medium term. This strategy revolves around six key pillars: ensuring sound and sustainable public finances; managing public expenditure to ensure maximum return on taxpayers' resources; targeted increases in public investment; reforming the tax system to ensure it is growth-friendly; ensuring inclusive growth and facilitating access to finance, especially for small and medium enterprises, SMEs.

On economic developments, the economic outlook in the statement is as set out in the stability programme update. Last Friday, the Central Statistics Office published the outturn data for 2016 and preliminary data for the first quarter of this year, which confirmed the Irish economy continues to perform strongly, with growth of 5.1% recorded last year, the highest in the EU for the third consecutive year. The latest data also provide clear evidence of continued momentum in the economy this year, with annual gross domestic product, GDP, growth of 6.1% recorded in the first quarter. The Department of Finance is forecasting GDP growth of 4.3% this year and 3.7% next year. From 2019 onwards, GDP is expected to grow broadly in line with the potential growth rate of the economy, with positive contributions from both exports and domestic demand. In this context, I should highlight that GDP is clearly overstated as a measure of living standards in the case of the Irish economy. Last week, the CSO published an alternative measure of the size of the economy, so-called modified gross national income, GNI*, which is estimated at €189.2 billion, far lower than the GDP figure of €275.6 billion. This new indicator will help us in our formulation of appropriate policies by giving us a better understanding of what is happening on the ground. It also confirms that economic expansion has been very strong in recent years.

Economic growth is a means to an end and not an end in itself. It enables us to pursue our goals of advancing social progress, promoting inclusivity and providing high quality public services. The labour market remains the best barometer of economic trends. Encouragingly, we have had 18 successive quarters of employment growth, representing an increase of over 230,000 jobs since the low point of the crisis. The latest data show that the pace of expansion in employment picked up to 3.5% year on year in the first quarter of 2017, representing the addition of almost 69,000 jobs. The number of people in employment has exceeded the 2 million mark since the second quarter of 2016 and is now at its highest level since the end of 2008. Crucially, the improvement in employment is more balanced than before, with increases in a number of sectors rather than being concentrated in construction, as happened previously. In parallel, the unemployment rate fell to 6.3% in June, down from a peak of over 15% in early 2012. The return to positive net migration last year for the first time since 2009 is another clear sign of the positive momentum in the labour market. This progress is expected to continue. The Department of Finance projects that an additional 55,000 jobs will be created this year, while the unemployment rate is expected to fall below 6% by year end. Over the medium term, employment growth is expected to remain robust and on this basis, by the end of this decade there will be more people at work in Ireland than ever before. In this context, it is important that the budgetary policy mistakes of the past are not repeated and that a counter-cyclical policy is pursued so as to not contribute to overheating the economy. The Government is acutely aware of this.

In terms of fiscal policy, recent developments show that the public finances are continuing to move in the right direction. Following a slightly disappointing performance in the first quarter of 2017, tax receipts in the second quarter have stabilised and have been much more robust, with cumulative receipts to the end of June coming in broadly in line with target at just 0.5% below profile. This represents a robust year-on-year increase of 4%. As a result of the strong performance in the second quarter, we are now well positioned to achieve the overall annual tax target of €50.6 billion for 2017, which would be the highest in the State’s history.

The pre-crisis period saw very large increases in expenditure. While these increases helped address key infrastructure deficits and provided the resources for significant improvements in public services and social supports, they were ultimately unsustainable. A very painful period of consolidation was required to repair the public finances. Over the last three years, budgetary policy on expenditure has focused on prudent and sustainable increases in expenditure, averaging 3% per annum, below nominal growth in the economy. These increases have allowed additional resources to be directed towards key Government priorities, including in health, housing, social protection and child care. Over the medium term, we will look to continue with moderate and sustainable growth in expenditure to deliver improvements in our public services and infrastructure on a prioritised basis. This approach will help ensure that we avoid the need for sharp fiscal retrenchments in the future, which can be highly disruptive and damaging to our social and economic fabric.

Turning to the fiscal outlook, a general government deficit of 0.4% of GDP is projected for this year - unchanged from budget 2017. In addition, it is important to point out that the fiscal objective is to balance the books, that is, to achieve a structural deficit of 0.5% of GDP. I am pleased to point out that we are on course to achieve this medium-term budgetary objective, MTO, next year, which is a remarkable achievement given where the public finances were almost a decade ago.

The mistakes of the past will not be repeated. Increases in public expenditure will be sustainably financed and not reliant on cyclical revenues. The fiscal rules are designed to ensure that fiscal policy enhances economic growth and macroeconomic stability and this is something which should be welcomed.

The Government recognises the emerging capacity constraints and is also cognisant of the need for budgetary policy not to contribute to overheating the economy. In this context, the limited resources that are available will be prioritised towards those areas where needs are greatest. In future, we need to focus on the fiscal stance and not just the fiscal space. In other words, we need to make sure that budgetary policy is appropriate in supporting sound macroeconomic conditions.

Ireland’s general government debt to GDP ratio, having peaked at just under 120% in 2012 and 2013, has fallen rapidly in recent years and is now estimated at 72.8% last year. This is below the euro area average and is set to reach the 60% of GDP target mandated by the Stability and Growth Pact in 2022. While the gross government debt ratio has fallen considerably in recent years, this arises from distortions in our GDP data. Last week the CSO published an alternative measure of the size of the Irish economy, the GNI*, which adjusts for these distortions. This new measure is used to scale our debt. The debt ratio was 106% last year. This is why it is important to focus on continuing to reduce public debt and that is why careful and sensible management of the public finances is needed. The Government will continue to reduce the debt-to-GDP ratio until the 60% target legal threshold is achieved and, thereafter, will work towards reducing the ratio to 55% of GDP ratio.

Once the major capital projects have been completed the Government will target a further reduction in the debt ratio to 45% of GDP. The Government will maintain a rainy day fund with our annual contribution of €500 million, beginning in 2019. This will be the year following our achievement of our medium-term objective. This is half the size of the contribution originally envisaged, reflecting the need to address emerging capacity constraints. Additional allocations, however, will only be made with due regard for the capacity of the economy to absorb the additional funding.

I shall now turn to the fiscal space. The summer economic statement sets out that net fiscal space over the period 2017 to 2021 is €11.2 billion. I want to emphasise that the net fiscal space is the amount that remains after providing for pre-committed policies. This means that overall public spending will be around €60 billion next year. It is important to note that the focus shifts towards the totality of expenditure and not just incremental changes. This is what the Taoiseach was referring to when he discussed the hidden fiscal space.

It is important that the fruits of the economic recovery are felt as widely as possible. Fairness matters to the Government. I believe we would all agree that a properly functioning housing market is integral to our economic and social well-being. With this in mind the Government is reviewing its housing strategy to address this. From my own perspective, the affordability matter will also be looked at in this review. While the latest economic data all point to an economy with considerable momentum, a continuation of robust growth cannot be taken for granted in light of the significant challenges facing the Irish economy. Principal among these challenges is the UK’s exit from the European Union, the uncertainty associated with the policy stance in the US and rising protectionist sentiment internationally.

With the magnitude of the external risks we face, we must bear in mind that domestically we also face a number of challenges. As a small and open economy, the best way to improve the resilience of the economy to weather inevitable economic shocks is to maintain an appropriate fiscal stance and pursue competitiveness oriented policies. That is what the summer economic statement sets out and what the Government will continue to do.

As this is the Minister of State's first time to be in the House while I have been present, as the Acting Chairman I want to take this opportunity to congratulate him on his elevation to Minister of State. It is long overdue. I know the Seanad is familiar territory to the Minister of State, Deputy D'Arcy. While he enjoyed his time here and was always balanced in his contributions, I have no doubt that he does not want to come back near us. I wish him a long and productive future in the Lower House.

For those who were not here during the last term, I want to put on the record that the Acting Chairman, Senator Diarmuid Wilson was a good friend to me during my time in the Seanad and it is something I will not forget. I appreciate his counsel, his friendship and his flexibility to me when I had a serious personal matter. It will not be forgotten.

I shall try to keep the spirit of bonhomie and goodwill going for the rest of the evening if possible. I will not be welcoming or congratulating the Minister of State this time because I have done that five or six times at this stage. He has been here more often since he became a Minister of State than he has been in a long time.

When he was a Senator.

I did not say that but if Senator O'Donnell wants to say it that is his own business. I would not be saying those kinds of things. I am delighted that a former Member of this House and a former member of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach is doing so well for himself. It is a good example and long may it continue. I congratulate the Minister of State again.

I thank the Minister of State, Deputy D'Arcy for his opening remarks on the summer economic statement for 2018, which estimates a fiscal space for next year of approximately €1.2 billion. After pre-committed measures for 2017 the remaining fiscal space is around €530 million and this is ignoring the new public service pay deal. Although it has yet to be finalised that pay deal is expected to cost approximately €180 million. This will leave a fairly tight restricted fiscal space. The Fianna Fáil confidence and supply agreement with the Government, and with Fine Gael in particular, clearly states that there should be no surprises when it comes to the budget - as is the case with any other issue.

With regard to budget 2018, the basis for Fianna Fáil support will be if the budget adheres to the traditions in that confidence and supply agreement. Chief among the conditions is the commitment to the 2:1 ratio in favour of investment in public services over the cutting of taxes. We reiterate that any changes to universal social charge, USC, must be primarily directed to the low and middle-income earners as stipulated in the confidence and supply agreement. There has been a lot of commentary from the Taoiseach and the Government on the future of the USC but it is blatantly clear that its removal, as promised by Fine Gael in the lead up to the last general election would be completely unsustainable given that it would leave a €4 billion black hole in the State's finances.

It must also be remembered that the modest changes to USC in last year's budget cost the State €335 million. Fianna Fáil would support any cut to USC as long as it is directed at low and middle-income earners and if it is fiscally sustainable.

Despite much commentary on the merger of USC with PRSI the Minister has confirmed that such a change would not be possible for the next budget and that such a change would likely have an impact on the State's finances and its impact must be properly evaluated. We await this evaluation from the tax strategy group. Any change must be sustainable and be directed at low and middle-income earners. These income levels relate to people who have yet to feel the full benefit of the economic recovery outlined in the figures contained in the summer economic statement. This puts substance on the term "a progressive budget".

It is because of the risks facing our economy that Fianna Fáil is committed to the establishment of a rainy day fund in 2019. This is also clearly stated in the confidence and supply agreement. The reason for this rainy day fund is to save for the inevitable downturn in the economy in the future and will assist in smoothing spending over that period. In last year's summer economic statement the Government had promised, on paper, the rainy day fund and consultation with the Oireachtas. This has not yet materialised and in recent weeks we have heard disconcerting remarks from the Taoiseach, Deputy Varadkar, on the rainy day fund. We are glad the Government has now committed to this rainy day fund.

The Government would like us to believe that it has been leading the way when it comes to capital investment but unfortunately the evidence shows that nothing could be further from the truth. The Government has been hugely lacking in ambition and taking money from the rainy day fund in 2019 onwards and using it for capital investment can hardly be called radical thinking. The Government has neglected alternative sources of funding for capital expenditure and especially around the 10% rule on the use of public private partnerships. It has been indicated that this may be reviewed and such a review would be welcome to allow further investment in our economy in those areas that are needed such as education, health, transport and so on. There are projects that would be ideal for public private partnerships and could also be facilitated using the European Investment Bank.

The Ireland Strategic Investment Fund has around €3.6 billion invested in the international markets.

This funding needs to be reassigned at a quicker rate back to the domestic economy. Fine Gael is not thinking radically or ambitiously enough about capital expenditure. Senator Kieran O'Donnell will probably allude to the M20 because he manages to get it into every speech he delivers, so I will leave that to him. However, I know-----

It is obviously working.

I do listen to Senator O'Donnell when he is-----

Senator Horkan should not anticipate what any other Senator is going to say.

I do not need to anticipate what Senator O'Donnell is going to say because I already have a fair idea. I will be very surprised if he does not mention the M20 or Limerick, or both, in his contribution. That is not to say I do not listen to him; I always do, and it is usually of benefit to me to do so.

The confidence and supply agreement clearly stipulates adherence in full to domestic and EU fiscal rules. In 2016, Ireland fell short of the structural balance rule and only passed the expenditure benchmark because of a once-off conversion of the AIB preference shares. According to the Irish Fiscal Advisory Council, we are set to break both the structural balance rule and the expenditure benchmark rule in 2017. While sanctions are unlikely, we need to monitor this closely into the future. We cannot continually breach these rules and expect to get away with it.

Much work remains to be done on budgetary oversight. I congratulate my former constituency colleague in the Stillorgan electoral area, Deputy Josepha Madigan, on becoming the new Chairman of the Committee on Budgetary Oversight. In 2016, the fiscal space was revised upwards from €500 million to €1 billion and then, a week before the budget, up to €1.2 billion. It is very hard to formulate fiscally responsible policies based on figures that keep changing. There had been much speculation about the help-to-buy scheme instigated by a previous Minister for Housing, Planning, Community and Local Government. The current Minister has now suggested the scheme may be dropped. It is clear that house prices have risen significantly and eroded whatever benefit certain people may have derived from the help-to-buy scheme. In fact, it could be argued that the scheme has just put upward pressure on house prices.

Fianna Fáil has been clear that the independent impact assessment under way should have been carried out in advance of the introduction of the measure in the first place. At the time, the Minister made comments that were unhelpful, and there was enough confusion in the market without the Minister adding to it. First-time buyers are now wondering whether they should apply and whether the help-to-buy scheme will be continued, so the scheme needs to be examined. Prices are rising very significantly and I am not sure whether the measure, whatever its intention, has been of benefit to consumers generally.

In summary, budget 2017 was a move towards a more progressive budget. This was down to commitments that Fianna Fáil fought for and secured in the confidence and supply agreement, most notably the 2:1 ratio in favour of investment over tax cuts. We will continue to work with the Fine Gael Government and others in that Government to ensure that budget 2018 is yet more progressive than those seen in the past. I wish the Minister of State all the very best in his new role. We will be there to support him when he is being fiscally responsible.

I thank the Minister of State for being here. I always find it somewhat entertaining to hear Fianna Fáil commenting on how we need to have a responsible approach to economics. We need only look at Fianna Fáil's record to see the level of responsibility it showed. However, we are here to talk about the summer economic statement, so I will not go any further. People can read for themselves. Thank God we have the Internet now. It is very easy for people to google "Fianna Fáil", "economics" and "crash".

I will restrain myself. They can google other things as well.

Once upon a time, we used to have a spring economic statement. That was in the last couple of years of the disastrous Fine Gael-Labour Party Government, when it was trying to convince the people that everything was rosy. The House will remember "Keep the recovery going". The fact that we had to wait until the very last days of term for the statement this year shows how at sea this Government is - or perhaps it was seeking the advice of Fianna Fáil before publishing it.

Journalists and taxpayers looking for any sort of detailed plan or some scent of policy or vision are left bitterly disappointed. It is pretty clear there is no plan here, just a stalling exercise while the Government tries to come up with a new plan after the last one disintegrated so badly. Does the House remember the plan that presumably is never to be discussed? I refer to the plan to abolish the USC. That was the reckless, populist position Fine Gael ran away with during the election. Fianna Fáil was going to go 90% of the way to abolition. It was never going to happen and it never should have been suggested, and we know that now. However, have the so-called parties of the centre learned nothing? I heard Deputy Paschal Donohoe at the MacGill Summer School say the centre must hold at all costs to maintain and grow the country's economy, which I thought was quite amusing.

Now the great scramble for the new ideas begins, and this is probably where Senator Kieran O'Donnell will come in. There must be serious questions being asked in Fine Gael head office about all this. The challenge for Fine Gael is how to dress up a broken promise as something else or how to present a budget that addresses the challenges facing the country when our sovereignty is so limited by the rules to which we signed up to the effect that we can only have €350 million extra to spend.

I am sure the Minister of State wants to hear some positive suggestions. He will know that my party is unique in presenting a fully costed alternative budget full of choices. There are some very straightforward choices. By scrapping the help-to-buy scheme the Government will give itself an extra €40 million in spending power. Developers will be €40 million less well off but the damage done by the scheme will be ended. Betting duty remains very low; it does not even cover the horse and greyhound fund, which needs to be topped up from other moneys. These might not be universally popular choices, but our space is limited and choices need to be made.

Of course, the biggest choice of all is what to do with the little fiscal space we have. For my party, the answer is clear: spend it, invest it and do not waste it on tax cuts that benefit the wealthiest most of all. We have no problem saying we do not favour net tax cuts. We cannot afford them. We need an honest debate about tax. There is too much focus on the marginal rate, as if we can just compare marginal rates across the EU and fool ourselves into thinking we have high tax burdens. A recent EU report laid out the facts:

The overall personal income tax burden in Ireland, as a percentage of GDP, is generally considered relatively low compared to other EU countries, in part due to low contributions to the social security system. A recent OECD report shows that the effective average tax rate for a single earner at the average wage is the second lowest rate among those EU members who are members of the OECD ... and well below the OECD average. While it rises sharply with income, particularly in the case of childless single earners, it remains below the EU21-OECD average across all income levels and different family types.

These are the facts. Some influential groups would have us believe that the average Irish worker is somehow more burdened by tax than his or her fellow workers across Europe. This is simply not true. What those arguing for more and more tax cuts are arguing for is American-style low tax rates. However, they never have the courage to tell us that this also means American-style public services. For too long in this country they have got away with pretending their tax-cutting agenda can somehow work alongside European-style public services.

There are positives in this statement. The net debt ratio is falling even outside the distortion of last year's growth. The economy is growing, unemployment is falling and bond yields remain low. On a macro level, things have worked out in our favour without a doubt. However, let us consider some of the figures. There were 357 people on hospital trolleys or crammed into wards earlier last week, 2,777 children in emergency accommodation in May 2017 and 91,600 households on local authority housing waiting lists. There were 484,346 people on hospital waiting lists, 51,698 of whom were waiting for over 18 months. The fact is that our economy and our society face massive challenges, from Brexit to US tax plans, but the most immediate threat comes from politicians and political parties that have learned nothing and are leading us down the road to ruin again. The whole story of an economy or a society is told not just through economic statistics.

The so-called rainy day fund issue is a red herring. This is not an issue for October's budget. It suits Fine Gael and Fianna Fáil to make it one but this is just theatre. It is raining. This year, it is pouring down for thousands of families that are homeless. It is lashing rain for those who have been waiting years for important medical treatment.

It is insulting to talk about a rainy day fund while people are being soaked. It is also deeply dishonest. It is not a rainy day fund. If the worst repeats itself and there is a sudden economic downturn, the fund cannot somehow be thrown onto the fire. The rules would still apply. As we know, they are badly designed, but one of the worst features is that when things go badly, they make them worse. If things go south, having a rainy day fund will be of no help. It is not a rainy day fund but merely a way of taking money out of the economy.

The summer economic statement is a statement of confusion which shows that the Government has no idea what it is doing. It is a big idea that has proved completely unworkable and the Government has been falling around looking for a plan. We are stuck in the ideological straitjacket of the fiscal rules, compounded by the right-wing ideological stance of Fianna Fáil and Fine Gael. The Minister has one advantage. Nobody expects him to present a coherent budget with any vision or strategy. The Government has set the bar so low that we can only hope some sense will prevail. The idea of tax cuts should be thrown out; the help-to-buy scheme should be abandoned and extra revenue should be raised in a sustainable way to make the long-term investment necessary. That is what is needed, but no one is holding his or her breath. In rural Ireland we are certainly not holding ours. The investment required in rural Ireland in broadband and infrastructure provision is not going to be made owing to the fiscal space available. When people hear us talk about a rainy day fund, they find it extremely difficult when they cannot access basic services in rural Ireland.

I wish the Minister of State well, but I find the summer economic statement disappointing. There are huge challenges ahead.

I welcome the Minister of State at the Department of Finance, Deputy Michael D'Arcy, back to the House. He is certainly putting in the work this week in terms of time and quality.

I am bemused by some of the debates that take place in this House. I was a Member of the Lower House in September 2008 when the crash occurred. I remember the panic on the night of the guarantee of the Fianna Fáil Government, after which the economy and the finances collapsed. We could not borrow on the open market to the extent that the troika, the moneylenders, had to come in. Unemployment fell through the floor and public investment in all areas virtually disappeared. Within a relatively short time we are virtually at full employment again and seeking to run a balanced budget which anyone running a home wants to do. It is all very well to talk about spending here and there, but, ultimately, if one cannot pay, it is a problem. We could not pay our way from 2008 in managing the public finances. What has increased significantly, however, is the national debt which is now approximately €200 billion which is unsustainable in the long term. Therefore, we have to bring it down. In any economy there is a need for full employment in order to have a balanced budget and investment and from which the taxes flow that enable the Government to provide public services. Public services cannot be provided unless people are paying income tax, corporation tax and the other taxes related to employment. They allow the Government to deal with those who are less well off via social welfare and other payments. That is where fairness comes in.

I always find Sinn Féin's position slightly amusing. It speaks about what should not be done, but it never states what it would do. It does not talk about the wealth tax or the extra income tax rates it would bring in. It is all very well to be the hurler on the ditch, but the party has seven MPs who were elected to represent the citizens of the North at Westminster. However, they are not doing so. That is an abdication of responsibility. The party is, effectively, drawing the Queen's shilling but doing nothing for it. It cannot have it both ways. Everything is choreographed and everybody goes along with the message. These are my views which are borne out by what I have seen.

We have come out of a winter of discontent which began in September 2008. I take from the summer economic statement that we want to have a balanced budget by the end of 2018, that we want to put an extra €500 million into capital projects and €500 million, rather than €1 billion, into a rainy day fund. I agree with this. Our long-term focus has to be on investing in capital infrastructure projects. For me, that is the key. Senator Gerry Horkan has helpfully reminded me of the M20 project.

I do not believe the Senator needed to be reminded of it.

There are other major projects in rural Ireland also, covering rail services and every other strategic interest. They include investment in hospitals. We need an extra 90 beds at University Hospital Limerick, for which funds should be made available.

In the budget we need to look at those in receipt of the old age pension and other social welfare payment which I believe should be raised. We speak about the amalgamation of USC and PRSI, but that does not take away from the fact that we should be looking at reducing what is being charged. If someone is earning €32,800 a year which works out as €600 a week, he or she will pay at a rate of 49% on every euro earned above that figure, which is punishing for the ordinary working man and woman I represent.

No party has a monopoly of the people it represents. It is my view that I am here to represent everyone. I take exception to the polarisation of politics and someone saying he or she is left-wing and thus has to vote for a left-wing party. In Fine Gael we look to ensure the self-employed can provide jobs and taxes in order that we can look after the less well-off. I want to be able to create an environment in which every unemployed person can find a job. I do not want to see long-term unemployment but positions being created for people. Our system is imperfect. For a long time it has been structured in such a way as to discourage people from moving from long-term unemployment into employment. We need to look at the structural changes needed, which I know are being looked at.

One issue which came up during our debate yesterday on the Financial Services and Pensions Ombudsman Bill 2017 was that of life policies, in which I know the Minister of State has an interest. There are insurance companies which sold policies to people on the basis that there would be a capital sum to pay their taxes on their death. The people concerned now find that they have contributed far more than the value of their policy. One man who is 93 years old has put €20,000 more into the policy than it is actually worth. That issue needs to be looked at and I hope it will be.

There are challenges to be dealt with in the forthcoming budget. We have to reduce the burden on the squeezed middle and families. We have to look at ways to provide for an increase in different areas. We have to make progress on capital projects. The M20 project is very important in Munster, but it is also about having a balanced budget.

That is not about polarisation, it is about looking after all sections of society. I abhor this polarisation of the political domain being done by parties at the moment. Sinn Féin is doing it, so is Solidarity, and I take grave exception to it because I am there to represent all.

I welcome the Minister of State to the House. It is not about polarisation. When we look at the Summer Economic Statement we need to be clear of the facts and which indicators we choose to prioritise and focus on. I had urged one thing of the previous Minister for Finance, which I had hoped to see more of in this economic statement, and I hope we will in the next. Among the things the Government has focused on in taking stock and in considering key economic and fiscal developments a few things are manifestly missing. These are crucial if we are to be serious about staking financial and fiscal stock. One is the environment. The entire Summer Economic Statement fails to refer to the environment, or the potentially huge externalities and costs associated with it. It does not refer to it as an area where we need to look to for indicators for where we are going. We know that we are moving towards environmental considerations being a huge part of our budget due to impositions from Europe, but there is no reference to it in our taking stock or in our broader indicators of success. That needs to be part of our economic statements. I am not talking about the detail of policy, but the key indicators as to whether we are developing a sustainable economy, with sustainability as a key concern, which we have heard that it is.

The indicators of our labour market refer to levels of employment, but what we do not see are indicators and marker points regarding the quality of employment. There may be good information on that but it is not in the report and it should be. My colleagues spoke about the ordinary working man, but in Ireland the median income is €28,500, so the ordinary working man and the average person is not on the higher marginal tax rate, he is on the standard rate and some two thirds of the population are below that higher marginal rate. That is the statistical fact. For the ordinary working woman, the figures are much lower again. The latest figures available are from 2014, we are awaiting figures from the CSO and I hope they will have improved, but then 50% of women were earning €20,000 or less. That is what the figures were in 2014. In 2015, over 16% of Irish workers were in material deprivation, compared to less than 5% in 2007. If we are restoring and bringing employment back to pre-crash levels, we need to bring the quality of employment back and ensure that we do not have workers who are in deprivation. I welcome the fact that a JLC was recently agreed, but it is real concern in the hospitality industry which will be of concern to the Minister of State, who will be lobbied heavily on the VAT rate. The hospitality industry has still not fully engaged with the JLC process but we must ensure that the investment that the State has effectively made through this ongoing tax incentive is distributed to the wider economy through its workers.

These are indicators which must be considered to ensure that economic development is genuinely sustainable and balanced. One crucial area which is missing here, and in the statement of the budgetary process, is the commitment to equality and gender proofing of the budget. The commitment is in the programme for partnership Government. I have met with officials in the Department of Public Expenditure and Reform who are looking at this area and developing it. I am not suggesting that nothing is happening, because I know that there are officials in the Department who are looking at this area, but they deserve to see equality and gender equality indicators included as part of this statement. It is imperative that we move forward on that and I would appreciate it if the Minister of State could elaborate on how the Departments of Public Expenditure and Reform, and Finance plan to work across all Departments to ensure that the commitment to equality and gender-proofing is achieved and how this fits in to the budgetary process, including whether an equality statement will be produced to accompany the budget, as is the case in Scotland.

A crucial aspect of equality and gender proofing is that it is not merely about expenditure but also tax. There is a real concern in Ireland over the problem of income inequality, which has been recognised by the OECD and others. The share of gross income going to the top 1% of earners in Ireland has increased from 34% in 2011 to 39% this year. Imagine a household. It would not make sense that if so much of its income went to one person, and that where there was such an imbalance we would not ask more of that person. We need to look at this if we are genuine in our concern about this imbalance. The Minister for Finance has spoken of balance and if he is genuine he needs to look at this imbalance. For 39% of gross income to go to 1% of the population is a grave imbalance and a serious concern. Over half of the increase in total income over the last five years has gone to the top 10% of earners with the bottom 50%, that half of the population earning below €28,500, receiving just 6% of the increase.

We need a recovery, but it must be one that is balanced and that reaches out across society. We know that is what makes it sustainable. IMF research conducted in over 100 countries over at 30 year period shows that when the income of the bottom 10% is increased, GDP growth and national development rises; when the income of the top 10% is increased, development slows in the medium term. This is research that the IMF has produced. We know this is good policy. It is not a question of whether one is on the left or right, it is a question of good economics and recognising that even the IMF and the OECD, bodies which previously advised certain approaches be taken, have now changed their views. They all say we need to invest in equality if we want a sustainable future.

The Senator has a minute left.

I have gone through only some details, I had more to say on taxation, but we need to look at tax expenditure. I am tired of being told that we are not suggesting things. I am explicitly suggesting to the Minister of State that he examine the 126 separate tax expenditures, including private pension tax relief which research has shown to disproportionately benefit those on top incomes and does not fulfil our pension agenda. The troika memorandum of understanding asked us to change it and no solid argument has been put forward for maintaining it. It is a tax relief which must be looked at. Let us examine all our tax expenditures and ask if they meet all criteria, and even if they are good, ask if they are better than an investment in social infrastructure. What are the benefits for society in the investment in further strengthening our childcare infrastructure versus a tax relief going to very few? We need to weigh these up and put them on the table when the Government is making its evaluations and considerations.

Finally, the Oireachtas Joint Committee on Social Protection, of which I am a member, has put forward concrete proposals regarding lone parents and pension equality in Ireland. These are both direct equality and gender equality issues. As part of the gender and equality proofing which the Government has committed to, I urge it to take action on those two issues.

I welcome the Minister of State to the House and wish him every success in his new role in the Department of Finance. I also thank him for his help and advice to me during his term here in the Seanad between 2011 and 2016, which I very much appreciated.

I listened to Senator Conway-Walsh speak about the lack of vision. We set out a clear vision in 2011 which was about bringing down unemployment. We brought that down from 15.1% down to 6.3%. There was a clear vision with clear targets which we exceeded. There are over 225,000 people working now who were not working in 2012. We had a net outflow of people from the country.

People were leaving because the jobs were not here. There will be a net inflow into the country this year. This is because people see this country as a good country in which to live and work. I recently spoke to someone from Poland who is working in Ireland. While the cost of living in their own country is far lower, the wages they would receive would also be far lower to the extent that it would be quite difficult for them to live in their own country on the kind of earnings they would get.

We face a number of major challenges but we have a clear vision about where we are going. Areas we need to work harder on include housing, health and infrastructure development. In looking at infrastructure, some of my priorities would be the Cork-Limerick road. I know Senator Kieran O'Donnell would refer to it as the Limerick-Cork road but to me, it is the Cork-Limerick road. It is very important. The north ring road on the northern side of Cork city is another area where infrastructure that is hugely lacking needs to be put in place. If we are talking about development outside Dublin, we need to focus on places on places like Galway, Limerick, Cork, Waterford and other major centres outside Dublin. To do that, we need infrastructure.

An issue relating to Cork on which I must focus involves hospital facilities. I have already outlined here the need for capital expenditure in that area in Cork. There has been a population increase of 130,000 people over the past 30 years between city and county. This is nearly the same figure as the entire population of Kerry. Not one additional hospital bed has been opened during those 30 years. We need to prioritise that. It is not just about Cork. It is also about making sure some of the medical services are developed outside Dublin. Sub-specialisation is now taking in place in health services. We need to make sure it is not all focused in Dublin. We need a centre of excellence for Munster where major areas of health can be developed as well. That is very important in respect of infrastructure. In respect of the capital programme, we need to make sure we are putting it into something like a new hospital facility because even if we start in the morning, it will still take a minimum of five years to get it there. We need to start dealing with that issue.

I have spoken about the positive side but one thing I am bit concerned about is the fact the figures relating to health in the summer economic statement are distorted. We have gone from 97,003 people working in the health service to more than 108,000. The statement says that 10,000 or 90% are front-line staff. That is not true. I have identified that more than 2,000 additional people are working in administration and management in the HSE in the past two years. I had to extract that figure. Trying to get the information was like pulling teeth. The HSE tried to camouflage the figures. The number of directors has gone from 201 to 289. Those are the most senior positions in the HSE. That is an increase of 43.5%. If we look at the number of doctors, which is in the statement, we can see that it has gone up 1,436, but that was to deal with the working time directive. We need to look seriously at this issue. Services have been improved but we have a lot more work to do and we must not let it run like a rudderless ship, which it seems to be in some areas. It is a major issue that we now need to tackle in addition to infrastructure development and hospital care. The last hospital built in this country was built in 1998. We need to prioritise that area and I ask the Minister of State to take that on board. I also ask him to look at the figures in the summer economic statement. They are a bit distorted and we should take that on board.

I join other colleagues in welcoming the Minister of State to the House. I had the pleasure of hearing him discuss a Commencement matter yesterday so he is no stranger to this House. I congratulate him on his achievement in becoming Minister of State. The summer economic statement is a very important statement for the House itself. It gives a good indication of where this State is going and how we are developing. In many ways, it is like a roadmap. Other Senators said we needed a roadmap when we had grave issues in 2008 and 2009. We evolved and changed. We had to because we were literally in a very dark place. We have come out of that dark place. Unemployment has dropped to 6.3%, which is an amazing figure and something we must be proud of. The number of people in employment has increased to more than two million.

However, we have problems we need to look at, and how we address them will be key to the development of this nation. We are proposing a new national planning framework in 2040, which is a very important document that will provide a roadmap for the next 20 years or more. We need funding to deliver it but we also need people to deliver it. One of the key issues we face is the lack of people to fill vacancies. We have spoken about the labour market. Unfortunately, the skilled tradesmen who are required to ensure we can build our way out of this housing crisis are not there. Ensuring we have enough skilled labour to keep the economy going will be the challenge of the next decade. It is amazing how the unemployment rate can go from 16.2% to 6.3% and we are approaching the 4% rate that is considered to be full employment. How we deal with it will be a challenge for the nation.

We have seen an injection of €500 million into capital projects. There are many areas that many Senators have spoken about, but the rural side of things can never be forgotten. Yes, we need huge infrastructural investment in hospitals and schools, but if we are to rebalance Ireland, infrastructural projects in rural towns and villages must be prioritised. I am talking about areas like Bandon which is a thriving town that is gateway to west Cork but which needs a relief road in order that it can develop. Projects like that need to be prioritised in plans. If we do not prioritise areas like Bandon, we will not have the development we want in rural Ireland because if we open up Bandon, we open up west Cork. When we look at plans, particularly the national planning framework or the review that has been proposed, we need to ensure these are prioritised. They are very important. The initial statement by the Minister of State is very positive and I wish him well. I hope he will deliver on the promise that we can have better rural development.

I welcome the Minister of State to the House, congratulate him on his appointment and wish him well in his new role. I know he will carry on his duties with excellence. I am delighted he has been made Minister of State and I wish him and his family every success. He is following in the footsteps of his father, which is another great honour.

Fine Gael has a vision for our country of reducing unemployment and ensuring it is the best small country in the world in which to do business. It is one in which we are a fair and compassionate society with a thriving economy that is inclusive of all parts and all peoples and where we can ensure the fruits of a growing economy are spread equitably and fairly among all sides. This summer economic statement is very important because it is about ensuring we protect and sustain our economic growth which is important to our people and which is about ensuring there is a balance between a reduction in taxation and an improvement in services. While we have challenges in housing, health and infrastructure, that is why we have the action plans for education and jobs, Rebuilding Ireland and multi-annual funding for the construction and provision of social housing.

Many of my colleagues mentioned infrastructure and as a person from Cork city, I find it very important that Senators Colm Burke and Kieran O'Donnell stated that the Cork to Limerick motorway, the M20, should be prioritised and expedited. As we speak, the vision of the Fine Gael Party in Government, the new and refurbished Páirc Uí Chaoimh, has been reopened and there is a celebration with the first match being played there tonight. It is a tribute not just of the men and women of Cumann Lúthcleas Gael but of the last Government, which was willing to invest in a stadium that could be part of a rugby world cup bid and the vital infrastructure of the sports capital for our country. I pay tribute to the former Taoiseach, Deputy Enda Kenny, and the former Tánaiste, former Deputy Eamon Gilmore, on their vision in support of that facility. Tonight, in my city of Cork, we are celebrating the opening of a new stadium. I have not heard anybody complimenting it but, of course, we were told we have no vision in Fine Gael.

Senator Burke also correctly stated the need to invest in the provision of hospital facilities. I know we have the national children's hospital coming on stream but Senator Burke is right. We have not invested in new health facilities but we need to do so. In particular, in Cork city there is a crying need for the opening of a new and modern hospital. The former Ministers - Senator Reilly and the current Taoiseach, Deputy Varadkar - saw a project chaired by Mr. Michael O'Flynn and we have seen an analysis that indicates a need for investment in a new health care facility in Cork city. Equally, the convention centre will be important for Cork and the Minister for Finance, Deputy Donohoe, has given capital funding for that. That will be another ask of the Government.

My final point on infrastructure refers to the M28 and the lack of understanding from An Bord Pleanála. This is not linked to the economic statement but there has been a lack of meaningful engagement from An Bord Pleanála with the residents of Rochestown and the lower harbour, who wish to have their views taken on board. We are all for that infrastructure but the process must be done in a meaningful way.

The ship of State has been turned around with courage and leadership, both from the Irish people and us in the Fine Gael Party. We cannot allow the polarisation of our country to take hold. The centre must hold in politics. That means responsible, meaningful and tangible results must come from the Government in looking to balance the budget while investing in capital infrastructure along with the rainy day fund. We must ensure jobs are maintained and we protect ourselves from extreme views, which offer very little other than high tax and high spending. Nothing else comes from them. My question to those on the other side of the House who purport to be people of fairness and equality is whether they want to see a wealth tax, an increase in corporation or income tax or do they want to see the people we spoke of tonight - the risk takers, the entrepreneurs, the public servant or private worker not on big money - staying in employment. We must continue to take responsible actions on behalf of our people. I commend the Minister of State on his speech and on the summer economic statement. I look forward to this autumn's budget, where we will see the fruits of this statement come to the homes of so many people who require an increase in home care packages in the disability area, for example. The disability inclusion strategy was launched this week. With investment in better economic times we must prioritise those who need our help most.

I also wish the Minister of State well in his new position and hope he has every success.

I will do the best I can to address the matters raised. I know everything is not perfect but by God we have come a long way since the banking crisis and troika came to town to take over the nation's finances. I wish other Deputies and Senators would take the opportunity to say that as far too often we speak of negatives and what is wrong. Many problems have been remedied or are in the process of being remedied.

I served on the finance committee with Senator Conway-Walsh and I consider her to be somebody of intelligence and ability. I find it disappointing she trots out the same Sinn Féin stuff that comes from so many others. She states the marginal tax rate is not a big issue but she should make no mistake that it is. The higher tax rate comes in at €33,800. That can be put into context. This is one of the few jurisdictions anywhere that a person hits the higher tax rate before reaching the average industrial wage. I meet representatives of companies seeking to relocate here and their first issue is not the percentage rate of marginal tax but rather how quickly our jurisdiction hits it. We are the third or fourth earliest of the OECD countries in hitting the marginal rate. I want people to be able to earn more and pay less tax. They can then spend money how they see fit. That will generate more income and lead to more employment. It is the real benefit to the economy.

The big change between the 2007 Administration and the 2011 Administration was the inability to keep making cuts. For the 2011 Government, others were in charge and it had no choices. The reality must be dealt with. I read today a definition of an ideologue; when ideology comes into conflict with reality, an ideologue will always choose ideology rather than reality. We have been getting people back into work and everything is based on that. There are 2 million people working in the State and I have never heard Sinn Féin stating that is quite an achievement in a short spell. I have never heard Sinn Féin state that 36% of the people working in this State pay zero tax. I support the idea that people in low pay would pay low taxes. Many of those people are part-time workers and can only work part-time.

As a point of information, people of course pay VAT so nobody in this State pays zero tax.

There is no such thing as a point of information.

I want to clarify it. There are people in the State who pay no tax.

They pay VAT. Everybody pays VAT.

I cannot allow such an interruption.

If somebody has not worked and receives a payment from the State, the State receives that money back. The individual does not earn the money to pay the VAT. It is the State's money. It is the tax taken from somebody else that is used to keep people out of poverty, and I absolutely and fully support that. The reality is some people pay no tax in the State. I will put it on the record. We have figures from the Irish Tax Institute. The quantity of tax from somebody earning €35,000 - barely on the marginal rate - is 12.5 times the tax of somebody paid €18,000, although that person only earns twice as much. We can push up those figures a little more. Workers on €75,000 will pay 51 times the quantity of tax of somebody on €18,000. There is a line that gets around this jurisdiction that people who are working and paying higher rates of tax are paying practically nothing but they are paying a huge quantity. In the State, 10% of people working earn over €100,000 and they pay 52% on everything over €33,800. They pay a lot of tax.

We have taken 400,000 people from the universal social charge net. When the Fine Gael-Labour Government came to power, the universal social charge came into effect at €3,000 but the threshold is now €13,000. We have done everything we can to reduce the burden of taxation on the lower-paid.

Now, however, we need to allow people who are in the middle range of taxation to earn more money, pay less tax and choose to spend it as they see fit.

A couple of other points are important. Senator Conway-Walsh and her colleague in the Lower House referred to the 1,000 people in emergency accommodation. This is not the 1980s when they would have been banged into a little mobile home at the back of a plot. They are in houses. That may not be perfect, but we are doing our best to try to deal with the issue. These are the results of what happens when a nation goes bankrupt and a government of the people elected by the people no longer has the choice to do what it sees fit.

People have heard me describing it as the lost decade. Senator Kieran O'Donnell referred to September 2008, which was when the banking emergency happened. We are now discussing budget 2018. We have lost a decade. We are trying to catch up, but one does not catch up overnight. What we have done in repairing the finances and balancing the budget has been remarkable. It is as remarkable as the people who stayed and worked in Ireland during that decade and paid very high taxes. It is those people who should be commended.

Regarding the 91,000 people on the housing list, Senator Conway-Walsh did not mention that they were in houses. They might not be in local authority housing, but they are in rented housing and significant moneys go towards what was the rental accommodation scheme and is now the HAP scheme. These citizens are in houses. As a teenager, I canvassed and knocked on doors in my county. I remember the mobile homes and little caravans out the back. I do not want to return to those days. We are a long way from them.

In terms of rural Ireland, Senator Kieran O'Donnell raised the proposed M20. I will call it "M20" instead of naming a city first. I could end up in trouble between the Senators from Limerick and Cork. That project is important. The capital programme will be reviewed and announced in November after the budget.

Senator Buttimer's point about Páirc Uí Chaoimh was also important. Not everywhere will get a large company like Northern Trust in Limerick or Pramerica in Letterkenny. These companies employ 1,300 or 1,400 people, which makes them magnificent employers. There are other ways of improving the regionality of an area. For example, an area can have a Páirc Uí Chaoimh, Lansdowne Road or convention centre. As anyone who has heard me speak about the capital programme knows, I agree that not everything has to be in Dublin.

I saw an interesting CSO statistic. Approximately 60% of the population live within 20 km of the sea, which is remarkable. Most of our urban areas are on the coast. The larger urban areas - Drogheda, Bray, Wexford, Waterford, Limerick and Galway - are all on the coast. We must link up our cities better. When I am encouraging a company to invest in Ireland, the first issue that it raises is the standard of our roads, not towards Dublin, but between the other cities - from Waterford to Cork and from Cork to Limerick. Limerick to Galway is pretty much there, but what of from Galway to Sligo? If we really are serious about rural Ireland, we must reduce these deficits. That is to be announced in the capital programme. A great deal of work is under way in that regard and we are improving in many respects.

Regarding the labour market, I am pleased that a large percentage of the 230,000 jobs are full time rather than zero-hour contracts. There is a pretence that these are only poor jobs, but they are not. There is more gender equality in the sector for which I have responsibility - financial services - than in many others. I am dealing with female CFOs, CEOs and so on, which is good. I would like to pursue this matter.

As to lone parents, the elderly and the social protection budget, let me revert to 2011 when the income tax take was €11.5 billion and the social protection budget was €20 billion. Practically no jurisdiction paid out twice as much in social protection than it brought in in income taxes. People should not ignore that.

I wish to touch on a final point. The national debt is €200 billion. As I have told Senator Conway-Walsh previously, approximately €30 billion of that debt is bank related and €45 billion is the pre-crisis national debt. The remainder comprises the deficits that we ran for a decade as a result of the nation being bankrupt and the collapse in our income and cyclical taxes. We have now put ourselves into a space in which we can balance the 2018 budget. Subsequently, we will be able to invest further in health, education and those other sectors that are important for the State's correct development.

It is critical that we not decry the considerable good work that we have done. This is a political Chamber, as is the Lower House, but when we have done a great deal well, we should not be afraid to say so.

When is it proposed to sit again?

At 10.30 a.m. tomorrow.

The Seanad adjourned at 8.50 p.m. until 10.30 a.m. on Thursday, 20 July 2017.
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