Economic Outlook: Motion.

Wednesday, 20 February 2008

Seanad Éireann Debate
Vol. 188 No. 14

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Senator Liam Twomey: Information on Liam Twomey Zoom on Liam Twomey I move:

That Seanad Éireann, in light of the changing economic outlook of our economy, calls on the Government:

to accelerate the reforms of the sectors of our economy under its control and to dramatically improve the productivity and competitiveness of Government provided services;

to respect the role of the Oireachtas, as the legitimate forum of decision making for the people of Ireland, by fully informing the Oireachtas on the national pay talks in a timely fashion;

to ensure that vital infrastructure is delivered on time and gives value for money to the taxpayers of Ireland; and

to ensure that the necessary funding for all levels of the educational system, research and development, and IT development is provided so that we can deliver the knowledge-based society that Ireland must become in the future.

There is no doubt our economy is in good shape overall. It is no thanks to Government policy that it has remained in such good shape over recent years, but rather to the hard work and diligence of the people who have made great sacrifices over the past 15 years to deliver what has become known as the Celtic tiger. Things are changing, however, and the situation is no longer the same. We hear constantly in the media that if we do not take control of our economic problems, we will have to make difficult decisions later. We are already making them. In some respects Fianna Fáil has taken over the role of the Progressive Democrats and has become quite a tough right-wing part of Government.

The tough decisions being made now are ones that hurt the poor, the sick and the elderly. For example, the Health Service Executive is trying to deny operations to young sick children on the basis of costs. The Minister for Education and Science, Deputy Mary Hanafin, announced in the [1036]Dáil today that she intends to cut back on devolved grants to schools. She has already cut summer works projects and schools are now being asked to pay for their water. This is a dramatic change in society in a short time. The Government already is forcing the people to pay for its mistakes.

Let us look at this from the economic point of view. What do we expect from our economy? We want an efficient public sector and a competitive cost base, but there are problems in both these areas that are not being dealt with. Given that we rely heavily on foreign direct investment, we need an open and transparent democracy to prevent corruption which has a negative effect on how we are seen by people outside the country. We also need an infrastructure that allows our economy to change quickly and respond to growth, and a workforce with the necessary skills, training and education.

One area in which the Government is falling down particularly badly is in the provision of services under its control. Energy, transport and water charges have increased. It is not only water charges for schools that have increased. Water charges for businesses increase constantly. Rates and waste costs are also increasing and these costs are hitting businesses hard. Now that construction has decreased significantly, levies for county councils will decrease. The knock-on effect of this failure by Government to contain costs is that local authorities will have to increase their rates, water and, possibly, waste charges in the coming years. This is a result of the failure to deliver efficient local and Government services, despite the promises made so often.

The new buzz words are “the green agenda”. This agenda is no more than double taxing or a means of increasing taxes. The Green Party must wake up to what is happening in our economy and start bringing forward proposals that will benefit rather than damage the economy.

Competitiveness is a significant issue. It has been ignored by the Government but will creep up on it very quickly. Competitiveness in the private sector has increased by 46% in recent years but only by 7% in the public sector. The public sector has grown dramatically in recent years and makes up 20% of our economy. If we continue to have poor competitiveness and productivity in Government services and if significant costs continue to be involved, this will spell disaster for our economy in the next few years, especially if we cannot maintain the massive growth that has been very much driven by the private sector. If we do not keep up that level of growth, we will run into major problems. This is the warning the European Union tried to give the Government this morning. It needs to wake up to what will happen to our economy if it is not careful.

Infrastructure is incredibly important to the economy but we are not investing enough in transport, roads, rail and ports. Our broadband is [1037]a standing joke internationally. For a country that prides itself on being an open, fast-moving economy that is in touch with what is happening around the world, broadband roll-out has failed miserably and is a national disgrace.

The extent to which house owners have been screwed by the Government will become more apparent at the end of the year when we see the huge drop in income from the construction industry. What is happening in the construction industry is a lesson for the Minister for Finance, Deputy Cowen. Once builders realised they no longer could sell their houses at inflated costs, they slashed their prices. They tried first to use the usual gimmicks of new kitchens, cars and holiday vouchers, but when they realised these would not work, they slashed their costs and brought them back to 2005 price levels. In leaner times we need fewer gimmicks and more value for money.

The Government needs to wake up to the need for value for money in all the services for which Government is responsible. Ireland has been lauded on its low unemployment rate of just under 5% and I accept this is low by European standards. We must ask whether we are getting value for money from the retraining and reskilling of our workforce and from the education programmes for workers. There is concern that significant sums may be going to waste in this regard.

I was very disappointed by the Government’s efforts to dismantle the community employment schemes. These schemes are a social scheme and do not exist to provide an educated workforce. They have proved excellent where they have been set up and allowed to operate properly. If we consider many of the FÁS training schemes and courses, however, we must question the value for money obtained from those. While the Comptroller and Auditor General should examine this area, Ministers should stop deluding themselves and consider whether we get value for money with regard to training.

I have noticed there appears to be a significant number of people going on permanent or temporary illness related disability payments rather than saying they are unable to attend work. Has there been a significant increase in the cost of providing social welfare payments? If there is such a significant increase, this will have a knock-on effect in future years when there is less money and scope for the Government to spend money on these services. If there is an issue with why people cannot work, we need to investigate it more.

The Government must look at the cost of reskilling and retraining people for new jobs, especially people leaving the construction sector. Unfortunately, too many young men did not go on to college or to learn a trade or skill when they left school but went straight into the construction industry where they were well paid. They are the first to lose their jobs in the slowdown happening in the construction sector. Rather than the [1038]Government coming up with more harebrained ideas, which is what it has been doing in recent years, we must make sure we get good value for money from retraining these young men in order that they can continue to make a valuable contribution to our society.

We have heard a lot of talk recently, from the Taoiseach down, stating that the problems with our economy are a result of the challenging global climate. That can be described only as poppycock because the problems in our society can be sorted only out by us. Crying into our glasses and blaming what is happening in America and elsewhere is of no benefit to the people of this country. The problems in our economy are made by this Government and its policies and we want the Government to come up with innovative ideas to sort them out.

Last May, Fianna Fáil, through the Minister, Deputy Brian Cowen, said there was nothing to fear regarding the Irish economy because the party would ensure continued growth in our economy and the maintenance of a positive economic outlook. Unfortunately, we have seen with the Taoiseach’s amazing, technicolour rainbow Government, that the dazzle is going very quickly. Now we are told it is the global economy that is causing the mess, but it clearly is not. Many of these problems have been made at home and are a result of a failure to deliver on the good times. Broadband is a clear example in this regard, but the same poor value for money has happened in the areas of road and railway infrastructure. We have been talking about redeveloping our ports for the past ten years and the failure to do so could put us at a severe disadvantage in the next ten years. The Government is simply too slow in making vital decisions.

The backlash for the Government will probably come from the unsheltered section of our economy, where the concept of a job for life never existed. Many people do not yet realise how much of a raw deal they have got in the past and will get in the future, when the economic situation gets much more difficult. When people start losing their jobs, there will be grave problems because many of them are highly indebted. This is something for which we must make allowances.

In 1983, when this country was considered to be in a serious financial predicament, our debt was basically the debt of the State. The Government had done most of the borrowing. Today this country is still in as much debt as it was in 1983, but most of the debt is personal. The ordinary men and women in the street are now responsible for the debt. We must make allowances for that in the context of the future of the economy. We must ensure that people do not become bankrupt, lose their homes or suffer disadvantage in any way because of the enormous level of indebtedness. It is also important that we look after the people who are outside the Government’s responsibility. The Government is responsible for [1039]pensions and pay rates. The current pay talks should be discussed in detail in this House and not negotiated in private in Dublin Castle.

We have a responsibility to the people who have made the Celtic tiger what it is today. We must ensure they are not disadvantaged by any Government decisions made in the next two or three years, especially in the context of the cutbacks being made in the areas of health and education, as well as in terms of the way we deal with crime and the infrastructure in our economy.

Senator Paschal Donohoe: Information on Paschal Donohoe Zoom on Paschal Donohoe I am pleased to second the motion. I will elaborate on some of the points made by Senator Twomey and respond to the Government’s amendment to the motion.

I concur with the analysis offered by Senator Twomey regarding the origins of our economic success. In the past number of years, we have completely opened up our borders, society and economy to the global economy. This opening up process coincided with an economic miracle that was taking place. The entire global economy, primarily led by the United States of America, experienced one of its strongest periods ever, with global economic growth, low inflation, low unemployment and rising productivity. During that period, Ireland was in a very good position and was able to ride the crest of a wave. The opening up of our borders and society, to coincide with this global phenomenon, ensured we benefitted from it and our economy grew.

During that time, however, we should have ensured that when the favourable economic environment changed, we would be still in a good position. We would then be able to ride the crest of less fortunate waves and ensure our society and workers would be protected against a slowing down of the global economic growth we have enjoyed. That this did not occur is why Fine Gael tabled this motion this evening.

If one looks at the United States of America and the United Kingdom, neither economy is technically in recession. Both economies are experiencing an economic slowdown but their Governments are working to correct this and to re-stimulate their economies. In Ireland however, we are already making cutbacks, even though we are only at the beginning of a change in the economic environment. We can see the first signs of change and potentially stormy weather in the global environment and already we are making cutbacks in HSE expenditure, summer works schemes, school building programmes and so forth. This is happening because the Government completely failed to lay the foundations for future growth. It failed to ensure that when things were not going so well in the wider world, we would be in a position to protect our economy and those working in it.

I wish to focus on public sector reform and the position of our education system, particularly with reference to lifelong learning and the need [1040]to upskill our workforce. On the latter point, I have heard much discussion in recent months on the need to upskill workers in our economy. FÁS published a report in 2007 on the skills status of our workforce. The centrepiece of that report was the fact that between 500,000 and 700,000 people’s skills would have to be completely upgraded in order to ensure they would be able to gain employment, become prosperous and contribute to the economy. It is almost a badge of pride for the Government that it managed to identify that such a large group of people needs retraining. However, it should have asked some years ago what it should do to ensure such people did not actually exist, that there were not hundreds of thousands of people within our economy in need of urgent retraining and upskilling. Now that the economic outlook has deteriorated, that enormous amount of work must be done.

That such retraining and upskilling has not taken place represents a lamentable failure on the part of the Government. The reasons for the need for such upskilling are several. In the past few years, many people entered the workforce who had not completed second level education. The last OECD report showed that 38% of our workforce did not have secondary education. To find ourselves, at the end of a period when there was enormous growth in Exchequer funds, coupled with an enormous increase in funding for education, in a position where four out of ten workers do not have a leaving certificate, is a disgrace. The Government and the economy will have to deal with the consequences of that in the coming years.

When one examines the other economies which are well set up to deal with the global economic downturn, one of the things they have in common is the fact that, for at least the last decade, they have invested in preschool education. Thus, when their students exit the education system, their minds will have been influenced at the earliest possible stage, ensuring they have the capacity to learn more skills and languages and be able to adapt to a very rigorous and demanding competitive environment. The fact that, after ten years of a Fianna Fáil led Government and many years of the Celtic tiger, we do not have a preschool system in place to ensure our workforce is equipped to deal with the challenges of a rapidly changing, competitive economic environment, is entirely the fault of the Government.

The issue of public service reform is mentioned in the amendment. Every time we get into a discussion such as this, there is a significant debate on the additional amounts being spent or people being employed. However, we must consider what we are getting in return. The Minister for Finance has made two efforts in this respect, both of which ended in complete failure. The expenditure review initiative scheme was announced in 2002-03 and considered large areas of capital and current expenditure to determine what value for money and outputs were being delivered, but [1041]none of the reports from the scheme have been published. The scheme’s replacement programme, the value for money scheme, produced 93 reports seeking to identify how millions of euro of taxpayers’ money was being spent and what was being achieved in return. Some 66 of the reports were due to be published by the end of 2007, of which only one third has been published.

Given that we will ask people working in the private sector and the non-sheltered economy to work harder and to make better decisions on how to spend their money, the Government’s singular failure to publish the reports, to follow through on any of the expenditure review initiatives it has discussed or to ensure that value for money and outputs are being delivered is a legacy, the consequences of which will become apparent in coming years. For this reason, the motion we are proposing is timely. If many of the amendment’s provisions had been carried out in the past decade, we would be better placed to deal with the challenges of a more threatening global environment.

Senator Marc MacSharry: Information on Marc MacSharry Zoom on Marc MacSharry I move amendment No. 1:

To delete all words after “Seanad Éireann” and substitute the following:

welcomes the Government’s firm commitment to position the economy for sustainable development over the years ahead, while adapting to the reality of more moderate growth in the future;

notes the progress to date on public sector reform and welcomes the Government’s strong commitment to progressing public sector reform;

notes the Government’s objective in entering talks on a second pay agreement under Towards 2016 of achieving a sustainable pay deal compatible with improving competitiveness and productivity and the Government’s intention of fully informing the Oireachtas as appropriate about progress in this regard;

commends the Government for the progress made in enhancing the delivery of infrastructure on time and on budget and the measures put in place by the Government to speed up the delivery of vital strategic infrastructure;

welcomes the Government’s firm commitment, as set out in the National Development Plan (2007-2013) and as underpinned by the provision in the Exchequer multi-annual capital envelope to spend an annual average of 6% of GNP on capital projects, to addressing infrastructure needs; and

[1042]welcomes the Government’s firm commitment to continued support for the development, enhancement and modernisation of Ireland’s education sector and Ireland’s Science, Technology and Innovation sector.

I welcome the opportunity to make a contribution to this debate, in respect of which we should express our gratitude to the Fine Gael group for using its Private Members’ time to deal with issues important to the economy. Given the current environment, it is imperative that we visit this subject on an ongoing basis so that the House can contribute its opinions to the Government through the Minister or Minister of State in attendance in a meaningful way.

Like many economies, the Irish economy is facing its most difficult environment for some time, with both domestic and external headwinds likely to restrain the pace of economic expansion in the short term. We all know this; it has been acknowledged on the other side of the House that we have come out of a period of unprecedented growth, the foundations of which were laid in the mid-1980s and from which we have reaped the benefits since. A series of challenges have presented themselves primarily due to external factors, particularly the credit crunch, the sub-prime issue in the United States, the dollar situation in terms of the competitiveness of our exports and a number of other matters.

While new housing output has been domestically forecasted to be approximately 55,000 — it could be less — compared to 80,000 last year, it is clear that the demand for housing remains strong. Rents are rising by approximately 11% per year. The output is likely to stabilise at equilibrium levels once confidence is restored. Speaking as a practising member of the auctioneering industry, there has been a significant increase in the number of inquiries since Christmas compared to the October-November period of last year. In itself, this is an indication of an element of confidence returning following the budgetary measures by the Minister for Finance and a growth in confidence in general terms.

The external environment is more challenging. For example, growth is set to moderate in our two major export economies, the UK and the US. The exchange rate has appreciated and, notwithstanding some improvements in recent weeks, conditions in the financial markets have not yet normalised. GNP and GDP growth of 2.8% and 3%, respectively, is expected this year. The fundamentals of the Irish economy remain strong, which will help to absorb the housing and external shocks in our medium-term prospects. We have a dynamic and well-educated labour force, as mentioned by Senator Donohoe, but we need to upskill and to keep this matter under review. With the level of ongoing and committed Government investment in education — the Minister of State will go into more detail — our [1043]markets are flexible and allow us to respond efficiently to adverse developments. We have a pro-business outward-looking society and our public finances remain sound, with one of the lowest levels of debt in the euro area. The tax burden on labour and capital is low.

Notwithstanding recent negative developments, there are substantial grounds for optimism. Domestic demand could not sustain overall GDP growth in the long term and we are witnessing a rebalancing towards more sustainable export-led growth. A renewed emphasis on improving competitiveness is required to ensure rebalancing is achieved efficiently. In this regard, the next phase of the partnership negotiations is critical and expectations must be in line with productivity growth. We cannot expect unreasonable increases above increases in productivity. I would appeal to the social partners when negotiations begin in April or May to be cognisant of this matter, which they will. They will also be mature and realistic in their expectations in light of our changed economic environment and the fact that we must be prudent in our outlook.

That the economy displayed considerable resilience in the global ICT shock in the early part of the decade is further ground for confidence in our ability to overcome challenges. The performance of service exports in recent years is encouraging, with double digit growth in the past five years. World Trade Organisation data show that Ireland is the fifth largest exporter of commercial services. We want the economy to go in the direction of high value-added tradeable services, which are high revenue, such as financial, business and computer services.

Fiscal policy plays a key role in terms of providing support for the economy. This year, current spending will rise by approximately 8% whereas revenue will increase by just 3.5%. The package of measures in the budget, on which we had a debate, is prudent while maintaining investment in our capital programmes, which I hope will support momentum in the economy and ensure that the infrastructure and foundation for the future are successful.

Notwithstanding the various matters the Minister of State will mention in respect of the amendment — pay in the next round of partnership talks, the national development plan and our investment in education — I wish to make a number of points regarding the effects of talking down one’s economy. I have been greatly bothered by this and the contributions of people with an economist’s education but who could not quite hack it as economists and, subsequently, turned to the media. At the beginning of the week, we expected a report from the European Commission on the state of Ireland’s economy. RTE’s news coverage of the report on the euro growth and stability programmes of Ireland, Greece and Spain stated: “The essential message is that Ireland is on a transition to lower growth and that [1044]there has been a deterioration in public finances”. The report did not state this. Instead, it stated: “Ireland is facing challenges in its transition to a period of lower but more sustainable economic growth” and the “economy is slowing down, but the growth prospects remain good and well above the euro area and EU averages”. In the past 18 months, it has been grossly irresponsible of many sectors in the media to contribute in this way to the slow-down of the economy. The fact remains there will be growth of between 2% and 3% in our economy this year and this would be the envy of most economies in the eurozone and the US. They would love to be in such a situation.

Mr. Stuart Draper, an economist, attacked the media some months ago, making the point that instead of always focusing on the negative, greater responsibility is needed. Despite the changed economic environment and the associated challenges we have a good product. Since the mid-1980s Fianna Fáil-led Governments, and the country as a whole, have excelled in rising to challenges and showing the ability to adapt, improvise and overcome. I believe this Government, with the Taoiseach, Deputy Bertie Ahern, at the helm and under the stewardship of the Minister for Finance, Deputy Brian Cowen, will rise to the challenges of today. Prudence, with the support of modest borrowing, is important with regard to our capital programme and all aspects of our infrastructure. I believe we will continue to progress as we have in the past two decades.

Senator Shane Ross: Information on Shane Peter Nathaniel Ross Zoom on Shane Peter Nathaniel Ross I have supported the Government’s economic policy in almost every debate for some years. Not only have I spoken in favour of its policy, I have voted with the Government in this House, although I acknowledge that this is not of great significance. After a long period of support for what has happened under various Ministers for Finance I am now beginning to change my mind. Much of what Senator MacSharry said was true. This has been a difficult time for Fine Gael and the Labour Party to be in Opposition on an issue such as the economy because it has been an unprecedented success and criticising its management is politically foolish, although they indulged in this from time to time with no profit.

I think this motion is timely because while the Government side of the House is correct that the management of the economy has been strong, deft and beneficial to the country, what was said today was smug and very aspirational. An extraordinary complacency has sunk into the body politic, those running the economy, the Department of Finance and others. They feel that somehow, because we were successful when times were good, our economic success will extend for another five or ten years. I do not feel this is the case. I think we are running into trouble and are refusing to recognise this.

The indications are that those who judge us with the kind of clinical independence we ought [1045]to respect are casting a negative verdict on us. Senator MacSharry rightly referred to the European Commission in this regard, and the International Monetary Fund, IMF, cast a similar verdict, as did European analysts.

The Irish stock market was one of the worst performing stock markets in the world last year and, while this might not be accurate as a final judgment of the Irish economy, it indicates a change of opinion about it. The Irish stock market is down about 40% from its highest point and, while this does not necessarily indicate that those selling Irish stocks are right, although there are many of them, it is foreigners who are selling these stocks. Foreigners take an objective view of the economy and they do not like what they see here anymore. They believe the game is up and the good times are over and, to some extent, this is a verdict on the Irish Government’s economic policy. This may not be altogether accurate because the world is going through economic problems, as Senator MacSharry pointed out, but foreign investors are indicating that things here have worsened and the economy has become vulnerable. They do not feel the Government is on top of what is going on.

I am concerned by what the international community has seen happen to the property market, one of the pillars of the economy, which has more or less collapsed, despite the anaesthetic words of spin doctors and soothsayers. I am also concerned about multinational companies in Ireland and Senator Donohoe will be familiar with this topic.

There was a debate in this House recently on broadband and the Broadband Infrastructure Bill went on the Order Paper today, but the Government’s complacency on the issue says it all. Ministers have said we should not worry about broadband because multinationals are still coming to Ireland but this merely means they have not quite rumbled us yet. We are sitting on our laurels and are happy with what has happened in the past 15 years. We are not keeping up with what is happening to this generation. If we do not realise we are falling behind with regard to broadband and other areas, and the Fine Gael motion mentioned infrastructure, the economy has serious problems.

The Government is depending greatly on social partnership and we must be careful of this. It tells us not to worry in the hope that talks on the issue go well, but social partnership does not matter much anymore. It is a nice charade that involves the trade unions and employers. Once an agreement is reached we are told the economy is fine because a pay agreement has been reached. This is a cosmetic exercise that does not represent the truth as only employees who are members of trade unions and employers who are members of the Irish Business and Employers Confederation, IBEC, are bound by it. Some of the most important and vibrant parts of this economy are members of neither and will have no truck with social partnership. Ryanair, the most successful company of its generation in the Irish economy, [1046]refuses to join IBEC and believes social partnership to be nonsense. I recently asked the head of a multinational what would happen if trade unions started recruiting in his company and he said it would leave Ireland overnight to return to America.

It is convenient to place great credence in social partnership because, without doubt, a deal will be done — a deal is always done — because it suits all those involved to create a charade that the economy is healthy. This will not matter much because it is not the real economy anymore. Those who depend on social partnership — conservatives and people with vested interests — are talking about the old economy. IBEC and the Irish Congress of Trade Unions, ICTU, share the same interests. They each want to pose as counsellors for the economy when the economy exists elsewhere.

I warn against the sort of complacency the Government has shown today. I point out to the Government that multinationals are probably the most important prop to the economy and no major multinational has located here in the past year. Can the Minister of State address this? Strong and worrying signals are coming from the multinational sector but they can be addressed if we create the necessary infrastructure and do not fudge the issue.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle I sense a huge dichotomy between the motion presented to us this evening by Fine Gael and the opening contributions of its members. On the surface I cannot disagree with the wording of the motion as I want to see an acceleration of the reform of sectors of our economy. I want the role of the Oireachtas to be respected. I want to ensure vital infrastructure is delivered and the funding required in all levels of the education system and for research and development and IT development is provided.

Senator Twomey’s opening contribution was nothing short of a rant. It is nonsense to argue that everything that is economically negative is the fault of the Government. The argument is particularly hard to take from the Fine Gael Party, which covers itself in a veneer of economic competence but has, in opposition, proposed some of the most insane economic policies to feature in political debate. For example, during the general election campaign before last, it proposed compensation for taxi drivers and Eircom shareholders. The joint platform agreed between the Fine Gael and Labour parties prior to the previous general election was predicated on levels of economic growth that were not achievable given the knowledge available at the time. If those parties had found themselves in Government, they would have spent most of their time in office renouncing the programme for Government they presented to the population at the general election. That is an economic fact.

I am the spokesperson for the party which produced the most prudent economic platform at the [1047]previous general election, one which anticipated that the rate of economic growth would slow down. However, electoral politics dictated that Fine Gael and the Labour Party were just as likely to work on the basis of bogus economic figures as any other party. The former party’s attempt to present current economic conditions in the most negative terms possible must be challenged.

Senator Liam Twomey: Information on Liam Twomey Zoom on Liam Twomey The figures used by Fine Gael were provided by the Department of Finance and accepted by the Government.

An Cathaoirleach: Information on Pat Moylan Zoom on Pat Moylan Please allow Senator Boyle to continue without interruption.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle I am referring to the rate of economic growth used by the Fine Gael Party, not whether two sides of the balance sheet added up.

Senator Liam Twomey: Information on Liam Twomey Zoom on Liam Twomey The Senator knows exactly what I am talking about. He should not manipulate the figures to suit himself.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle The Fine Gael Party produced an exaggerated rate of economic growth, which it was not possible to achieve, either then or now. We are not in a national or international recession, nor is the economy stagnation. The worst thing to happen to the economy, still one of the best performers in Europe, is that the rate of economic growth has slowed.

Valid criticisms can be made of the way in which resources are apportioned in our economy and the transfer of decision making responsibility from the Government to external agencies. The health service is an obvious example of the latter trend. Questions should be asked about the decisions by agencies to cut various services despite receiving increased allocations every year. The argument made by Fine Gael amounts to nothing more than name calling and hand waving.

Senator Paschal Donohoe: Information on Paschal Donohoe Zoom on Paschal Donohoe It is not name calling. Who is ranting now?

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer Senator Boyle has not made a single proposal. He has done nothing but rant.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle I am a few decibels short of my ranting voice.

Senator Paschal Donohoe: Information on Paschal Donohoe Zoom on Paschal Donohoe His contribution so far has been derisory.

An Cathaoirleach: Information on Pat Moylan Zoom on Pat Moylan I ask Senators not to engage in debate across the floor.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle If my words are so offensive to the Senators opposite, the truth must hurt.

[1048]Senator Paschal Donohoe: Information on Paschal Donohoe Zoom on Paschal Donohoe We will not take this.

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer Senator Boyle changed his colours and was found out a long time ago.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle Since 1982, the Fine Gael Party has been found wanting in seeking the confidence of the electorate.

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer The Green Party took office to try to save itself.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle The reason it has been found wanting is that it has not been honest economically.

In the current international economic climate we are still projecting an annual economic growth rate of 2.7% this year, which is well above the European average and double that of most of our competitors. I am confident we will not have a repeat of our experience of the 1980s because the economic growth achieved in the past decade has placed us in a better position to withstand——

Senator Paschal Donohoe: Information on Paschal Donohoe Zoom on Paschal Donohoe Why does the European Commission not agree?

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle Did the Senator not hear Senator MacSharry’s contribution? The EU said exactly what I said.

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer Did it refer to zero growth?

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle The EU referred to lower rates of growth. The Fine Gael Party can complain when it is in Government and achieves economic growth every year. If one does not have economic growth, one does not have the additional resources to meet needs.

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer The Senator should read the report.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle I read it avidly. Senator Buttimer might do the same when he understands economics.

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer The Senator should not be patronising. That is a typical remark and he is wrong.

An Cathaoirleach: Information on Pat Moylan Zoom on Pat Moylan One speaker has possession and other Senators will have an opportunity to speak. I ask Senators to allow Senator Boyle to continue without interruption, please.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle My confidence is based on the fact that the structure of the economy has changed and our relationships with trading partners are much different. For instance, when we joined the European Economic Community we conducted 50% of our trade with the United [1049]Kingdom, our main trading partner. This figure has reduced to 14% and our main trading partner is now the United States, with which we conduct 15% of our trade. Our trading relations are more diverse, not only in terms of the number of countries with which we trade but also in terms of the types of goods and services in which we trade. It is also more secure as a result of adequate investment over the years.

This change is not the sole responsibility of any Government or political party. Structural decisions made over the years on education and taxation policy have boosted economic growth. The Single European Act created the Single Market in Europe and encouraged many multinational companies to establish in Ireland. The benefit of some of these factors is beginning to dissipate and the manufacturing sector is experiencing difficulties as companies move to locations with a lower cost base. Problems also arise regarding energy use in the economy.

In his contribution, which I described, perhaps in unparliamentary language, as a rant, Senator Twomey referred to the Green Party, of which I am the finance spokesperson. Our proposals to restructure the taxation system will not add one cent to the tax burden and will be to our advantage in creating a more competitive, resilient economy in future.

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer I welcome the Minister of State at the Department of Finance, Deputy Noel Ahern, to the House. While I did not intend to have a slagging match with Senator Boyle, he continually trots out the line that newer Members of the House do not understand economics. This is not the case.

The figures produced by my party show that the Exchequer balance of €2.3 billion in 2006 has become a deficit. When one sees overcrowding in our hospitals, the lack of balanced regional development and chaos in the education system, one questions the Government’s economic programme and the country’s competitiveness.

I will take no lectures from Senator Boyle about my party’s role in government.

Senator Dan Boyle: Information on Dan Boyle Zoom on Dan Boyle He will give them though.

An Cathaoirleach: Information on Pat Moylan Zoom on Pat Moylan Allow Senator Buttimer to continue without interruption, please.

Senator Jerry Buttimer: Information on Jerry Buttimer Zoom on Jerry Buttimer He should not tell us we do not understand economics. We do understand them and I welcome this debate on the economy. Yesterday, the European Commission’s annual report on the economy under the Stability and Growth Pact referred to several macroeconomic and price competitive challenges facing Ireland and noted the noticeable deterioration in the budgetary position. In January the live register revealed a sharp increase in unemployment to approximately 4.8%. Ireland has slipped 17 points on the world competitiveness [1050]ranking. What proposals does the Government have to meet these challenges? It does not appear to have any meaningful, concrete solutions to the problems facing us.

Just last weekend, the Minister for Transport, Deputy Noel Dempsey, withdrew his plans to introduce competition on the Dublin bus market. Commuters will be left stranded between the aspiration of the Minister for the Environment, Heritage and Local Government to reduce car dependency and car transport and the Minister for Transport’s inability to offer an alternative to static traffic on the M50. We have seen no plans and Senator Ross made a contribution on this. We see overflowing Luas and train carriages. People spend almost 20 hours per week travelling to and from work which is an inordinate amount of time and an unhealthy mark of our economy.

We speak about infrastructural development. Rail transport along the western corridor from Navan has long been promised but we have had procrastination and no delivery. My constituency of Cork South-Central has no National Roads Authority project under construction. We will not have an N28 upgrade, a Bandon Road flyover or a Sarsfield Road flyover. In a failure to tackle growing traffic congestion, no new buses will be provided to our gateway city.

For balanced regional development we need development which is sustainable and delivers infrastructure on time. We do not have this. In his remarks, Senator MacSharry blamed outside influences. Perhaps he is correct. What are we doing as a nation when the Government promotes decentralisation but does not provide the infrastructure for it? Undoubtedly we are facing a worsening budgetary climate. What hope do we have of rectifying this?

The Minister for Finance did not have the answers at the meetings of the Committee on Finance and the Public Service this week. We have no record of delivery of infrastructure on time or on budget. We speak about promoting e-technology and communications infrastructure but we have had a dilution of the commitment on broadband as laid out in the programme for Government. Greater access to broadband was to be a plank of Government. However, only 15.4% of people have access to it.

The Fine Gael spokesperson on communications, energy and natural resources, Deputy Simon Coveney, called for the implementation of a ten-point plan. If we are serious about a knowledge economy, the communications infrastructure should be upgraded to higher speed fibre-optic cable. Anyone involved in industry, education and communications will state the importance of this. Priority must be given to the connection of schools and education institutions to next generation networks which have sufficient bandwidth to carry data, images, voice, television and video. It is important we commit to this.

Senator Donohoe spoke about upskilling. Many people are in dire need of upskilling. In my [1051]former job as a director of adult education I met people seeking to be retrained, educated and upskilled. The importance of the work of FÁS cannot be understated. Many community education providers who are supposed to be self-financing and therefore left alone are struggling. We need serious examination of how we provide for upskilling and retraining people.

  6 o’clock

Yesterday and this morning, we discussed the image of the House and the questioning of its relevance. I recommend that the Seanad actively seeks to be included and regularly updated on social partnership, the national pay talks and economic matters such as that which we are discussing this evening. This would mean we could employ ourselves as a legitimate forum for debate in parallel with the social pay talks. I ask the Minister of State to consider this.

I commend the motion to the House. It is important we debate this matter because this is the legitimate forum for it. I thank Senator Twomey for proposing the motion.

Minister of State at the Department of Finance (Deputy Noel Ahern): Information on Noel Ahern Zoom on Noel Ahern I am pleased to speak in favour of the Government’s counter-motion. In particular, I wish to restate the Government’s firm commitment to position the economy for sustainable development during the years ahead while adapting to the reality of more moderate growth in the future. I also wish to put firmly before the House the Government’s strong commitment to progressive public sector reform and to confirm the Government’s objective in entering talks on a second pay agreement under Towards 2016 to achieve a sustainable pay deal compatible with improving competitiveness and productivity. It is also the Government’s intention to inform the Oireachtas fully as appropriate about progress in this regard.

I record the Government’s progress in enhancing the delivery of infrastructure on time and on budget and the measures put in place by the Government to speed up the delivery of vital strategic infrastructure. I repeat the Government’s firm commitment, as set out in the national development plan and as underpinned by the provision in the Exchequer multi-annual capital envelope, to spend an annual average of 6% of gross national product on capital projects to address infrastructure needs. I reiterate the Government’s firm commitment to continued support for the development, enhancement and modernisation of Ireland’s education sector and Ireland’s science, technology and innovation sector.

While the economy is facing into its most difficult and challenging period for some time, with domestic and external factors likely to restrain short-term growth prospects, it is important to put this lower economic growth into context. GDP expanded at an annual average rate of 6.5% [1052]over the period from 1997 to 2007. This has facilitated a substantial improvement in living standards, as evidenced by the fact that income per capita is now among the highest in the EU. The number of people working in Ireland today has increased by more than 700,000 since 1997. Unemployment has fallen from more than 10% in 1997 to approximately 4.5% last year, which as Senators stated is among the lowest in the EU.

At budget time, GDP growth of 3% was projected for 2008, a lower growth rate than in recent years, due primarily to lower new housing output this year. However, once new housing output returns to more sustainable levels, growth is expected to pick up in 2009 and 2010. This owes much to the fact that the underlying fundamentals of the economy remain strong, facilitated by appropriate economic, budgetary and social policies as well as the fostering of a business-friendly and pro-enterprise culture.

We are now seeing a re-balancing of growth away from domestic demand, new housing construction in particular, towards more sustainable, export-led growth. A renewed emphasis on enhancing competitiveness is required to ensure this re-balancing is achieved in a smooth manner. Improving our productivity is vital and it is good to hear Members on both sides of the House speaking on it.

It is important to note the key role played by fiscal policy in terms of supporting the economy. Current spending will rise by approximately 8% this year while revenues will grow by only 3.5%. Despite this, only a modest deficit is in prospect. Capital spending will rise by approximately 12% as full implementation of the national development plan is given priority. This will help boost the productive capacity of the economy and lay the foundations for future growth.

General Government surpluses in ten of the past 11 years are solid testimony to the Government’s sound management of the economy. We also have one of the lowest levels of public debt in the EU, which is important in terms of dealing with future pressures on the public finances, especially those stemming from the ageing of the population.

Recent years have seen significant improvements in the overall quality of the public service. These include better financial management, more professional human resources management, regulatory reforms, e-Government initiatives and a sharper focus on service delivery.

A major challenge for the public sector over the next ten years will be to sustain recent progress and build on it. The moment is opportune to review our public services to see if they are ready for the challenge. With this in mind, the Government asked the OECD to carry out a review of the public service. It will benchmark the public service in Ireland against other comparable countries and to identify appropriate measures to compare the productivity and effectiveness of the Irish system against comparable [1053]international best practice. It will make recommendations on future directions for public service reform which will support the Government’s drive for delivery of world-class services within existing resources. It is hoped the OECD will deliver some clear messages to guide us.

The efficiency review announced by the Tánaiste and Minister for Finance in the Budget Statement is a practical demonstration of the Government’s commitment to improving the delivery of public services and achieving value for money. The review requires Departments to come forward with specific proposals to maximise administrative savings in their area. Such proposals should not jeopardise the maintenance of front-line services. In short, it should yield administrative cost savings which will help meet overall Government priorities.

A large element of the costs of public service is pay provision. It is important we get value from what we pay to staff to deliver such services. Public service pay must develop in a manner consistent with competitiveness, price stability and budgetary policy. The public service should be in a position to attract and retain its fair share of good quality staff at all levels. It should neither lead the market nor trail it.

Pay developments must reflect the more challenging economic and competitiveness scenario we face and be more directly linked to changes in productivity. It is crucial wage expectations are kept in line with the rapidly changing economic environment in which we are operating. Over recent years, wage increases have exceeded productivity growth with a resulting loss in competitiveness. Regaining market share will require an approach to wage determination which takes greater account of productivity developments as well as labour cost developments in our major trading partners. We are favoured with a dedicated public service that many other countries would wish to have. The Government appreciates and values this commitment. We need to build a wages policy that develops public services.

Members will appreciate that, as is the case with any negotiations and especially with pay negotiations, there is a need to retain a level of confidentiality regarding developments in the proceedings. However, the Oireachtas will be kept informed, as appropriate, of progress made.

As regards the overall framework agreement, Towards 2016 provides for a formal review during 2008. This will provide an opportunity to take stock of outcomes achieved for the overall goals and to consider any opportunities arising to refocus and reprioritise. The Taoiseach announced the commencement of the review process at last week’s plenary meeting with the social partners. This review process will be separate to the pay discussions.

Investment is the key to future growth and prosperity. We are in a position, fortunately, to deliver the quality and range of infrastructural services our people deserve and which for a long [1054]time we could not afford. The bulk of capital projects are being delivered on or below budget and, in some instances, ahead of schedule. Two key Government initiatives, the value for money effort and the Planning and Development (Strategic Infrastructure) Act 2006, are specifically designed to help the delivery of infrastructure in a cost-effective and timely manner.

The Government has put in place a firm framework for achieving value for money in infrastructure delivery. Measures include better appraisal of all capital projects; full cost benefit analysis for all projects more than €30 million; a central evaluation unit to verify compliance with best practice requirements; a clearer focus on what we get for this investment; and a more strategic approach to procurement and the use of public private partnerships to deliver value for money.

We must strive to ensure the delivery of infrastructure on time and on budget. This is crucial to the further development of our economy and the enhancement of our quality of life. The Government recognises the importance of having in place a dynamic means of meeting our infrastructure deficit which also safeguards the traditional central principles of our planning system and ultimately delivers investment ahead of demand. The Planning and Development (Strategic Infrastructure) Act provides this means and has introduced major changes to the way large infrastructure projects of national importance are handled. Some of the most important infrastructural developments in the history of the State will go through this new streamlined process. Some are already being dealt with by the board. More than 75 requests for pre-application consultations have been received and six full strategic infrastructure applications are on the board’s books.

The Act provides an enhanced service for all stakeholders, infrastructure providers, State bodies and the public by enabling the planning code to meet efficiently with the demands of a modern State. We are confident it will help ensure continued economic development takes place in a sustainable manner. The new process is designed to be robust and transparent while delivering the right decisions within reasonable and defined timeframes.

The national development plan, NDP, plays a significant role in our strategy. It sets out a comprehensive investment framework of the Government’s investment priorities over seven years in the areas of economic and social infrastructure, human resources, social inclusion and enterprise, science and innovation. NDP investment in infrastructure will be crucial for enhancing our economic competitiveness and delivering a better quality of life. It is an ambitious investment programme on a scale not before seen in the State. It is a priority for the Government and its commitment to its implementation is underpinned by the Exchequer capital envelope published with the budget in December. Over the next five years [1055]total Exchequer capital expenditure will average 6% of gross national product, twice the rate of other EU member states. The NDP will transform the State and secure our future growth.

Like the NDP, developing the education system is at the heart of strategic growth policies with great strides already made. In the past three years, more than €2 billion has been invested in educational infrastructure. Much-needed progress has been made in improving the existing stock of school buildings. A sum of €4.5 billion has been provided for the schools building and modernisation programme under the NDP. The priority for educational expenditure in 2008 is to provide additional new accommodation to cater for the 13,000 additional children who will seek a school place this year while also facilitating school modernisation and expansion in primary and post-primary schools in other areas. There will also be a large increase in third level capital expenditure.

A comprehensive new information and communications technology strategy is being finalised by the Department of Education and Science. Its aim will be to develop an e-learning culture in schools to ensure ICT usage is embedded in teaching and learning across the curriculum.

Supporting the education of children from disadvantaged communities will be a key objective of the delivering equality of opportunity in schools, DEIS, initiative. The initiative is addressing the educational needs of children and young people from disadvantaged communities from preschool to upper second level education, from three year olds to 18 year olds. This initiative is motivated by a desire to ensure no one is left behind, that every child gets the supports he or she needs to reach his or her potential and that a culture of high expectations is at the centre of our actions locally and nationally.

Up to €900 million will be spent this year on education for students with special needs, double the amount in 2004. More than 19,000 staff in our schools work solely with children with special needs, including approximately 10,000 special needs assistants compared with just 300 in 1997. More than 7,800 resource and learning support teachers are in place compared with 2,000 in 1998. More than 1,100 other teachers support children in our special schools, while hundreds more work in special classes.

Advanced research and development and the availability of highly qualified people is crucial to the success of Ireland’s economy. The Strategy for Science, Technology and Innovation 2006-2013, SSTI, was launched in June 2006. This builds on key Government investment over recent years, such as the programme for research in third level institutions, PRTLI, and the [1056]creation of Science Foundation Ireland, SFI, which have been successful in developing our research capability. The implementation of the strategy forms a central plank of the NDP and will involve expenditure of €8.2 billion over the period of the plan, €3.2 billion of which will be allocated to the higher education sector. The SSTI relies on the development of a higher education system of the best international quality with advanced infrastructure and skilled researchers. The strategy also addresses the vital international and all-island dimensions of research and innovation.

Without high level research we cannot hope to be a success in the future. This is why we have consistently prioritised research and development policy during our time in office. The Government is committed to leading the delivery of a knowledge-based economy in Ireland. The world university rankings recently published by the prestigious Times Higher Education supplement shows that universities in this country are reaping the benefit of the increased investment from the PRTLI, SFI and other funding sources. Trinity College has moved up to 53rd place, while UCD has broken into the elite 200 for the first time at 177th place. Meanwhile, UCC and DCU have risen more than 100 places, entering the top 300. Progress is not confined to the SFI or schemes funded by the Department of Education and Science. IDA Ireland and Enterprise Ireland are actively encouraging companies located in this country to undertake research and development activities in Ireland.

I have given a fully comprehensive review of all that is being done to keep us ahead of the curve. Senators will agree the Government is making good progress on the key issues that face Ireland as we strive to enhance the national competitiveness and productivity on which our living standards and quality of life depend. We are pursuing economic and fiscal policies that will continue to promote sustainable economic growth as they have done over the last ten years. We will continue to pursue the critical public service reform agenda. We will strive for a pay agreement that enhances our economic environment. We will continue to secure the best value for money in infrastructure investment while promoting the speedy delivery of critical infrastructure provided for in the national development plan. We have demonstrated our ongoing commitment to supporting the education sector and promoting the science, innovation and technology sector. Taken together, these measures should help ensure our continuing economic success, which is the basis for the improved living standards and better quality of life we all want.

Senator Feargal Quinn: Information on Fergal Quinn Zoom on Fergal Quinn I welcome the Minister of State although I am not sure I entirely wel[1057]come all his words. I am pleased this debate is taking place because it is an important issue. I have had a very interesting few months. One of the opportunities I had was to visit a country called Panama, of which I had never heard, other than in the context of the canal, until I went there last month. The reason I was invited, as was the former Prime Minister of Estonia, a country I also had a chance to visit recently, and the former Minister for Finance of New Zealand, was that those in Panama admired and wanted to learn from countries of a similar size which had done well in the past ten years.

I was very impressed at what I learned and at the enthusiasm and ambition of the Panamanians and what they intend to achieve. To take one example which illustrates the competitiveness of the marketplace in which Ireland is competing, the Panamanians, who wish to deregulate as much as possible, decided to aim to be one of the best countries in which to set up new businesses. They looked around the world and saw that Ireland was quite good at this with a period of nine or ten days required to set up a business. Our Companies Registration Office has done a very good job in this area. However, the best country in the world in this respect is Singapore, where it is intended to reduce the time it takes to open a new business from seven days to three days. Panama, in view of the competition it is up against, introduced a system under which it takes 20 minutes on the Internet to set up a company. This system may not be exactly the same as ours, but I mention it because it gives us some idea of the competitiveness of the marketplace for countries such as Ireland.

We were so with it 15 or 20 years ago that we managed to create the Celtic Tiger. However, today there is a degree of complacency, as referred to by Senator Ross, which can certainly be seen in the Government amendment and in the Minister of State’s speech. I welcome this debate because it is high time we replaced complacency with action. The changed economic situation demands an appropriate response. We can no longer get away with blatant mismanagement of the economy for electoral purposes which has been a disgraceful feature of past years.

When I was in Panama one of the questions I was asked was how I saw the future of Ireland. I said that what we had done in the past would not work in the future and that we must re-invent ourselves. I did not get the sense that we were doing so in the Minister of State’s words tonight. The future will not be like the past and what we more or less got away with in previous years will no longer suffice as policy for the much tougher conditions we will face in the next few years. On past performance, it is likely the Government will adopt an attitude of denial, especially with regard to its own responsibility for the situation in which [1058]we find ourselves today. I could forgive that attitude of denial if, at the same time, the Government recognised the need for radical change in its approach to managing the economy. Unfortunately, if the debate so far is anything to go by, I do not see any sign of it.

In today’s conditions, the issue of competitiveness has begun to bite. I and others have been talking about our eroding competitiveness for many years but the reality of what has been happening has been masked by the artificial and unsustainable growth provided by the construction industry bubble in recent years. During those crazy years — we can tell they were crazy by the number of cranes that were around — we forgot about exports. We forgot that ultimately the only real wealth we create is that which we earn abroad. Now that our home-grown bubble has burst and we are forced to rely once again on exports, we are beginning to realise just how uncompetitive we have let this country become. People may have grown tired of hearing this message but they have never needed to hear and pay attention to it as much as they do now. The area of competitiveness, which was mentioned by the Minister of State in the Government amendment, must be much higher on the agenda.

In the new world into which we are moving, we cannot ever again rely to the extent we did in the past on overseas companies to provide the lion’s share of our growth. We must still work hard to attract foreign direct investment, as mentioned by the Minister of State, and to make Ireland a hospitable and rewarding place for high value-added activities. However, in the future foreign direct investment will be no more than the icing on the cake. For the cake itself, we must rely increasingly on indigenous, Irish-owned companies. We need a quantum leap in the level of support we provide to these companies. We need to extend our vision with regard to these companies and we must help them also to extend their vision. In terms of State support, the hero of the future will be Enterprise Ireland rather than IDA Ireland, although the latter will continue to do valuable work and must still be supported.

As the motion suggests, we must recognise the crucial importance of education in preparing Ireland for the future. I was interested to hear the figures the Minister of State gave the House, but here again there is complacency that will cost us dearly if we do not rid ourselves of it. As we have greatly increased our investment in education in recent years, we are inclined to regard this as a problem we have addressed and which is now behind us. Nothing could be further from the truth. What we have invested up to now has solely been in a process of catching up. We still have not caught up with the rest of the world, however, let alone invested enough to take a position of leadership in the knowledge society of [1059]which the Minister of State spoke and which looms ever nearer each time we discuss this subject.

It was interesting to hear where we are in terms of higher education and that Trinity College is among the top 100 universities while UCD is in the top 200 and others are in the top 300, but we have a long way to go. We go on a lot about the national development plan, but what we must do is to revisit that plan in the light of what we now know and make the required adjustments. In a nutshell, we need to spend less on roads and more on education. Only by shifting the entire thrust of our infrastructural investment away from bricks and mortar and towards the development of brain cells can we do the right thing in terms of the future of our economy, society and country.

The Minister spoke about pay and how it was important to get value for the money we pay staff to deliver such services. He said that over recent years wage increases have exceeded productivity growth with a resulting loss in competitiveness. I do not heard sounds of that being solved. Four and a half years ago, the Government promised to bring in a structure that would ensure State employees did not hold the country to ransom.

I was very concerned about what happened last week at Shannon Airport, which called out to us only six or eight months ago and evoked such sympathy. What does it do? It allows a small number of State employees who earn very large sums of money to close the airport. I understand that these people, who say they do not want to work overtime, get 37 days leave per year and, including pensions, earn something like €140,000 per year. They said they not willing to wait to solve this and that they were going to close down the airport. The airports are closing down. We are in a competitive marketplace and cannot afford to do this. The Government has promised to take action to avoid that. Regardless of whatever it is going to do, it promised it four and a half years ago and we have not solved it yet. We must avoid the complacency I detect in the counter-motion.

Senator John Hanafin: Information on John Gerard Hanafin Zoom on John Gerard Hanafin I second the amendment outlined by Senator MacSharry. In recent years we have seen higher interest rates, higher oil prices, a depreciation of the dollar and sterling, the opening of the economies of China and India, the subsequent loss of manufacturing jobs to those countries and a slowing of growth in our trading partners. Despite all this, the only thing we have seen is a decrease in the growth of this economy.

We have a remarkably robust and well-managed economy. We are looking at 3% growth at the moment. I was delighted to hear Senator Quinn say he was asked to go to Panama to [1060]explain how a small country that is probably similar in size and population to Panama and Estonia has managed to develop. While it is always good to welcome proposals about how things can be done better, there is no doubt that in only two decades, we have escaped an invidious legacy of involuntary emigration, joblessness, inflation and high taxation while effectively doubling to considerably in excess of two million the number of people engaged in productive employment.

This transformation has delivered the standing we now enjoy as a dynamic, prosperous and high participation economy at the very vanguard of the globalisation era. Ireland is a location possessed of unrivalled attractiveness to investors and workers alike and a success story which continues to unfold as both a model for others and the envy of our international peers.

The doomsayers among journalists who said that things could go wrong were right because things can go wrong. Notwithstanding that, our economy has brushed off every challenge and has shown itself to be remarkably robust in an economic downturn. It is a well-managed economy at that.

It is clear that success brings with it new challenges and opportunities but success also equips us with the capacity and resolve to meet these new challenges and opportunities most effectively. Investment is essential to help us meet emerging challenges. The economy is very strong with gross domestic product and gross national product growth rates that are among the best in the world. The Government recognises that to remain competitive, we should increase the added value of our economic output. To achieve this, we need to focus on high technology industries which are driven by significant investment in research and development. The medical device industry is clearly one of these sectors in which future technological development can be exploited.

I welcome that the first stem cell clinic, which is an adult stem cell clinic, opened recently in Germany. It is interesting because it no longer involves research. It is an actual clinic where people can go to receive treatment. This is a very important development and I see a role for Ireland in this. A few years ago, I called for Ireland to engage more in this area because it is the future. It involves the effective use of adult stem cells which is where the proven successes have arisen to date. This country still has an opportunity to develop in this area.

The Government is committed to the development of Ireland as a world-leading knowledge economy founded on research, development, innovation and a highly developed skills base. It is delivering substantial investment in cutting-edge research, development and innovation and has put in place a number of key structures and [1061]strategies to drive our development in this area, including Science Foundation Ireland and the programme for research in third level institutions.

With the launch of the Strategy for Science, Technology and Innovation 2006-2013, the Government reiterated its commitment to the creation of a knowledge-based economy. The goal of this ambitious strategy is to position Ireland as a key player in research on the world stage. The strategy envisages significant increases in public expenditure on research and development over the next eight years. During this period, we will double the number of PhD graduates in Ireland; develop a targeted and focused programme of research activity across a range of key sectors of the economy, building on our proven expertise in information and communications technology, pharmaceuticals and biotechnology; enhance arrangements for the capture, protection and exploitation of intellectual property; further develop the opportunities for collaboration between industry and academia; and create a dynamic environment in which to attract, produce and retain world-class researchers and research projects. The clearly stated aim of the Government’s strategy is that by 2013, Ireland will be renowned internationally for the excellence of its research. We will be at the forefront in generating and using new knowledge for economic and social progress within an innovation-driven culture.

It is part of what we are discussing today. It is important to mention that this Government consistently ensures the less well-off have benefited from its achievements. This was made clear by the recent budget where, again, concern was given primarily to those who are less well-off. In an economic debate, it is good to restate that.

The Government is also conscious that strategic management initiatives are essential for better quality public service delivery. Excellent public service delivery is essential on social grounds because of the importance of the service provided by the Civil Service and the public service. It is also essential for economic reasons because of the important contribution of the work of the Civil Service and public service to national competitiveness and sustainable development. The cost of the Civil Service and public service, the extent and cost of Government programmes and the combined effects of these on the economy, particularly its competitiveness, require that financial management systems be comprehensive and effective and ensure that value for money is achieved.

The principles underpinning the Government's approach are to ensure every organisation has efficient flows of financial information, vertically and horizontally, so that decision making is enhanced by the availability of up-to-date, accurate and comprehensive financial information; assist managers by providing quality financial [1062]systems and giving them sufficient flexibility in the management of resources allocated to them; provide incentives for management to achieve greater efficiency in the management of their resources; ensure financial responsibility is delegated as close as possible to the point of delivery of service so that empowerment is not just a buzz word but a reality; and ensure a balanced focus on the relationship between the outputs and the inputs required to achieve them.

The new national development plan will see a deployment of resources in supporting the productive capacity of our enterprise sector, equipping it to compete effectively in an increasingly knowledge intensive and interconnected global economy. At a point in our national development where our future prosperity has never been more dependent on unlocking the talents of each citizen, the Government is reinforcing the emphasis on skills and training to ensure adaptability to the accelerated change we face.

There is no doubt value for money is a hallmark of this Government. The ambitious plan is to ensure the national infrastructure in terms of time and costs is significant value for money. In this regard, it is a top priority during the lifetime of this Government to ensure we get value for money in respect of the moneys we spend. We are achieving this by all recognised standards.

This Government has been more than just a manager of an economy. It has been flexible and innovative. I refer in particular to the financial services sector. During 2007, the moneys under management in the Irish Financial Services Centre exceeded €1 trillion for the first time. It provides a significant income for the Government, which heretofore went to other countries, as it manages funds in this country and of other countries.

This Government is getting international recognition from people who are internationally respected. The country has become a location The Economist has described as being the best place to live and work in the world. Instead of listening to the Jonahs, we should consider the fact that despite the difficulties, we have thrown every burden off our shoulders and continued to grow and develop.

Senator Eugene Regan: Information on Eugene Regan Zoom on Eugene Regan I thank the Minister of State for his contribution on the amendment. It is unfortunate the motion tabled by Fine Gael, all of which was positive and pinpointed some of the key areas that must be addressed, should be met with a rebuttal without any real engagement in the Chamber on the issues raised in the motion.

In an article in a recent publication, Ireland’s Economic Success: Reasons and Prospects,by Paul Sweeney, the Taoiseach states that the Celtic tiger was in gestation for quite some time prior to its emergence. The fact is that it was in ges[1063]tation and it did emerge prior to Deputy Bertie Ahern becoming Taoiseach. In 1997, when the Fine Gael-Labour Government left office, it had the first budget surplus in the history of the State, inflation was very much under control, Government borrowing was in line with the requirements of our membership of the European Monetary Union and growth rates and export performance were very impressive. It was in those difficult times during the gestation period of the Celtic tiger that difficult political decisions were made. The difficulty now is that a complacency and a smugness has set in about the success of the Celtic tiger and we get carried away in the belief that this Government created it. We do not look forward; we look back.

The Minister of State said it is important to put the current lower economic growth into context and revert back to the growth rates we have had in the past ten years. We revert back to the Government expenditure and fiscal policy of the past ten years but that is not what we are talking about today. We are talking about adopting an economic policy which will sustain growth into the future. The Minister of State said:

Current spending will rise by approximately 8% this year while revenues will grow by only 3.5%. Despite this, only a modest deficit is in prospect.

We are aware of the figures. That is a shocking admission and the complacency of the conclusion highlights the problem we face because there has been a complete reversal in the state of the Government’s finances. For the first time we have a rising national debt and despite all the painful decisions and processes of the 1980s and 1990s, we are not concerned about that. There is a smugness about the success of the past ten years and a lack of realisation that action is required.

Senators Twomey and Donohoe touched on many of the issues that speak to the motion but I want to raise the issue concerning the social partnership agreements and the manner in which the State’s public policy input takes place without regard to the Oireachtas. In the context of the Lisbon treaty and previous treaties which had to be adopted by referendum, the continual claim is that there is a democratic deficit in Europe. In that regard it is clear that the democratic deficit is in Ireland, something that was recognised during the Nice treaty debate, and measures were put in place for the scrutiny of EU legislation by the Oireachtas. That commitment was not fulfilled but that is a separate issue.

We also have a democratic deficit domestically where we adopt legislation in the Oireachtas and delegate to Ministers an extensive area to legislate without the Oireachtas taking responsibility for adopting legislation setting out the policies [1064]and principles by which any statutory instrument by a Minister should be adopted.

The third area I believe there is a democratic deficit is in the manner in which the social partnership agreements are conducted by the Government. Given the extensive nature of those agreements that do not concern simply pay and employment conditions but go into wider fields of taxation, social policy and general economic policy, it is imperative, if that process is to have legitimacy, that there is engagement by the Oireachtas. More particularly, apart from the issue of legitimacy there is the issue of effectiveness and if the Government enters into that process without setting out any objectives in terms of what it hopes to achieve in the social partnership agreements, that is a fatal flaw in its approach. It is incumbent on the Government to set out its objectives for the Oireachtas but the only reason I can surmise that is not done is that if those objectives are set out, the Government can be judged on its success or failure in those negotiations.

In the past the Government has entered into commitments that were a serious constraint on Government policy. We saw that in the area of testing for driving licences where, by reason of the nature of the agreement, the Government considered it was not possible to outsource that testing process. Those are important issues and if there was a greater input by the Oireachtas, they could be teased out more effectively and the public policy input into the social partnership agreements would be more transparent and effective.

Deputy Enda Kenny suggested in a recent Dáil statement that the situation could be addressed by each new round of partnership being proceeded by a motion outlining the key challenges to be addressed and making the processes of partnership more transparent and subject to engagement with the appropriate Oireachtas committee. That is the mechanism by which this issue could be addressed.

Setting out those objectives by the Government is of particular importance. We are aware now that we are in a very difficult economic situation. That has been confirmed by the European Commission report on the Irish economy and the Government’s stability programme. Government finances have gone from a €2.3 billion surplus in 2006 to a projected deficit of €4.9 billion this year. Our competitiveness has fallen in the rankings, as has our share of export markets.

In 1950, Seán Lemass opposed the establishment of the Industrial Development Authority on the basis that the Minister for Industry and Commerce under that Bill was endeavouring to pass over his functions in respect of industrial development from his Department to this new body. We [1065]have come a long way since then but we should not abdicate our responsibility for industrial development and outsource it. Perhaps the Minister of State would address that issue.

Senator Fiona O’Malley: Information on Fiona O'Malley Zoom on Fiona O'Malley I hope I please Senator Regan by engaging fully with the motion and counter-motion before the House. Regarding Exchequer returns, the difference is that investment made now is wise and will produce a good return for the country. Anyone would agree that one invests to produce growth. This has been part of the success of this country. This is why certain decisions were taken in respect of the national development plan.

Senator Regan referred to smugness on the part of the Government because of ten years of economic success. I think it is pride that we all experience as we travel abroad. I know this from my experience in Ukraine where people try to find out how we did it. We are a beacon to many countries and everyone who has played a part, not just the Government, can be proud of it. I reject the notion of smugness.

I refer to competitiveness in Government provided services, especially public services. A good example of that was Spencer Dock train station, the first publicly developed train station opening ahead of time and within budget. This was a direct response to competitiveness from other elements of the transport sector. Transport 21 gave €34 billion to the transport sector. Iarnród Éireann proved what could be done when there was money available and it wanted some of it. The company had to demonstrate it was capable of providing a service within a budget and on time. It has made us all proud by demonstrating how positive public services can be when faced with a competitive element.

The amendment to the motion notes the progress to date on public sector reform and welcomes the Government’s strong commitment to progressing public sector reform. Mitt Romney made a point in his speech on so-called Super Tuesday which means, as far as the Government is concerned, that it would be wise to retain its strategy section before it enters partnership talks. He said: “Can you imagine what happens to an economy where the best opportunities are for bureaucrats?” We must be cognisant of this because that is the case. That is how we got the result of the second benchmarking report. We cannot afford to lose sight of this.

Senators Ross and Quinn mentioned complacency, a concern I share. We are entering different times and must know our public services can cope with adaptability. From the point of view of the Progressive Democrats, a party that believes in competition in services, we are not in favour of privatisation for its own sake. In some areas, such as health care, funding will be pro[1066]vided largely by the State. The application of some private enterprise will deliver good results. In the long term, this will protect the public service industry. The inability of the public sector unions to accept change is the greatest threat towards privatisation. The groups that decry privatisation are the ones who drive the exasperated Government down the privatisation road. Reform of the public sector is the greatest protection of our public services.

I heard on the news that IMPACT has called an all-out strike at the airports. As an island nation we must be careful with these matters. Senator Ross outlined what is wrong with social partnership. We must look at this critically because we need to decide what we need from the process.

Senator Regan criticised the Government for not explaining what it sought from the partnership process. It is perfectly clear and is written in the amendment to the motion. The Government’s objective in entering talks is to achieve a sustainable pay deal, compatible with improving competitiveness and productivity. The amendment also refers to the Government’s intention to inform the Oireachtas fully as the appropriate forum to address this. We must be careful because, as a result of social partnership, we are not used to strikes. I would hate to think we might revert to them. We need cool heads and to play our part in a partnership deal that works. We do not need one for the sake of having one. We need one that will work for the workers.

I listened with interest to the call by Senator Alex White for a debate on the tax regime, which would be useful. As feared, Senator White reversed his party’s position in the election. It is disingenuous to fight an election knowing that people like tax cuts and then, six months later, to decide to abandon the proposal. I welcome such a debate.

Senator Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty I listened with interest and wondered if it was 1 April when I heard comments that privatisation is good for public services.

Senator Fiona O’Malley: Information on Fiona O'Malley Zoom on Fiona O'Malley I will give Senator Doherty the proof of it.

Senator Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty The slowdown of the economy is no surprise. It has not been helped by our dependence on the US economy which has been on a downward slide since the sub-prime crisis broke. Neither has it been helped by the failure of the Government to intervene as the competitiveness of the Irish economy has been eroded. Our ranking in terms of global competitiveness has fallen since 2000. There are numerous reasons for this, including increases in consumption and investment rather than strong [1067]export growth; the slowdown in Irish productivity growth, particularly in the high-tech sector; the contribution of net exports to economic growth being small or negative in recent years; and the high reliance on the construction sector for employment.

Since 2000, 65% of jobs have been created in public services or the construction industry. In the same period, the agriculture and manufacturing sectors have lost jobs. It is crucial the Government acts to improve competitiveness. How successful it will be in doing this depends on key decisions in areas such as regulation, finance, social capital and physical and knowledge infrastructure. Ireland’s physical infrastructure, North and South, remains a source of acute competitive disadvantage. During the boom years successive Governments failed to introduce the infrastructure needed to attract foreign direct investment and enhance domestic business and ordinary people’s lives.

Our cities are congested and public transport infrastructure is inadequate. We pay the highest rates for broadband which is the slowest in Europe. House prices have pushed workers further into the commuter belts around the major cities, adding to personal debt and traffic congestion problems. In transport, energy and information and communications technology, Ireland’s infrastructure lags well behind that of comparable countries in the OECD.

Furthermore, there is still a knowledge deficit, particularly with regard to pre-primary education where Ireland is well below the European average. A number of years ago Sinn Féin proposed the introduction of free preschooling as a means of solving the child care crisis and beginning the process of lifelong learning from an early age. We must deal also with the fact that many children do not complete secondary school. In addition, illiteracy levels are outrageously high for a first world country. At third and fourth level, we must examine why none of Ireland’s institutions is ranked among the best in the world. To enter the ranks at number 250 is not good enough. I agree with Senator Quinn that we must do better. The use of ICT in Irish education remains poor. The statistics on the number of computers in classrooms that do not work are proof of that.

Our approach to research and development is a concern. While belated strides have been made in this regard, current employment in and expenditure on research and development in higher education and enterprise remain well below leading comparable countries. Sinn Féin seeks an all-Ireland research and development strategy co-ordinated through the enterprise development agencies, central and local government, business, trade unions and educational institutions, including a programme of assistance to small and [1068]medium enterprises and new businesses to develop new research and development business plans.

The rising cost base is undeniable. However, several contributing factors can be remedied by appropriate, progressive Government intervention. The three largest sources of spending in Ireland are housing, child care and health. The need for wage increases in such conditions is genuine but the Government through its policies can reduce the cost burden of housing, health care and child care on ordinary workers. That would have a positive impact on wage inflation. For the reasons I have outlined, I support the motion.

Senator Liam Twomey: Information on Liam Twomey Zoom on Liam Twomey No one in this Chamber or in the media is trying to talk this country into recession. The Taoiseach stated not long ago that people who talked down the construction industry were unpatriotic. However, often people simply are trying to have a reasoned debate without the use of spin. The sector of our economy that is not sheltered is suffering owing to a loss of competitiveness that has been fuelled by an increased cost base and lack of productivity in some services on which it depends.

  7 o’clock

I run a business and, like other business people, I know what it means to be fleeced by Government costs. Rates, waste and water charges are increasing while there is a raft of large additional charges, including VAT. That affects everyone who provides jobs. It will have a knock-on effect on the economy when people begin losing jobs. The Government did not take control of this cost base and that is the nub of the issue. Each day I deal with many areas of the public sector. Many people are making a significant effort to keep things working and running on time in so far as they can. There are also many problems in that sector, however, and I have been aware of them for more than a decade. Some of them have improved but some have worsened in recent years. Again, it is a failure on the part of the Government to recognise these well-known problems and tackle them.

The chickens have started to come home to roost and that is damaging our economy. Government speakers who recite lists in their contributions as if everything in the garden is rosy are acting like the Taoiseach did some months ago when he told us we were unpatriotic and talking down the economy. We are not talking it down but urging the Government to do something about it before people are back on the dole queues and the emigration boats. Our growth rate of 3% is not keeping pace with public spending growth of 8% and the erosion of the cost base. That is what we must confront when we talk about broadband, the lack of road infrastructure and basic things such as how people get to work. [1069] People are forced to commute in cars and find their commuting times lengthening. They are experiencing great difficulties at present and Members of the House waffling about how much the Government can spend will not help matters.

Senator O’Malley made an unbelievable statement when she said the public sector unions are [1070]driving the Government down the privatisation route. If any explanation is needed for how the Progressive Democrats became redundant rather than radical at the previous general election, that statement says it all.

Amendment put.

[1069]The Seanad divided: Tá, 27; Níl, 19.

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[1069]Tellers: Tá, Senators Diarmuid Wilson and Déirdre de Búrca; Níl, Senators Maurice Cummins and John Paul Phelan.

[1069]Amendment declared carried.

Motion, as amended, put and declared carried.

An Cathaoirleach: Information on Pat Moylan Zoom on Pat Moylan When is it proposed to sit again?

Senator Donie Cassidy: Information on Donie Cassidy Zoom on Donie Cassidy Tomorrow at 10.30 a.m.

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