Tax revenues and government spending
Kenny questioned whether unexpectedly high tax revenues would be used to improve public services rather than fund an election-year spending push, and challenged the Government’s record on value for money. The Taoiseach pointed to the surplus, low debt and economic growth, defending the Government’s spending and policies.
This is the Taoiseach's last day in the Dáil for this session. He has quelled a mini-revolt on the backbenches and survived an abortive leadership challenge within the Progressive Democrats last week. The Government this year has collected €40 million more in taxes than was forecast in last year's budget. On that basis, it is projected that the Government will have collected €2 billion more in taxes this year than was forecast.
The worrying aspect is that the gap between what the Government says it will take in taxes and what it takes is growing. The gap was €100 million in 2003, €650 million in 2004, €1,800 million in 2005 and is heading for more than €2 billion this year. It is difficult to believe, therefore, what the Government says.
The Taoiseach, the Minister for Arts, Sport and Tourism and other Ministers are probably deciding what they must do to get back into office after the next election. That makes me wary of the possibility of a big budget bribe later this year. Given that the Government will probably have more that €2 billion more than was forecast, that becomes likely. In the year before the 2002 election, public spending increased by 40%. There was a different Minister for Finance. We were told we should party and forget about the hangover. However, that hangover consisted of stealth taxes and charges, budget cuts, services slashed and an inability to provide proper services with the people's money. The cost of living soared, competitiveness fell and jobs were lost in manufacturing.
In view of the Taoiseach's comments in recent days, can I take it there will be no big budgetary bribe this year?
Comment on this
Can I take it that the Government will concentrate on attempting to provide the best level of quality services for the public with the public's money and that it will not do as it did prior to the 2002 election and increase public spending with a view to buying votes in an attempt to get back into Government? If that were to happen, and given the Government's record over the past nine years, it would be the worst Government that money can buy.
Comment on this
The Taoiseach without interruption. The Chair suggests to the leaders and whips of the parties that, before the autumn, they discuss how they will ensure that any Member of the House who is called by the Chair is heard without interruption.
Comment on this
If not, the Chair will deal with it. It cannot be allowed to continue. The Taoiseach without interruption.
Comment on this
I agree with Deputy Kenny and congratulate the Minister for Finance on an outstanding result in the six month figures. By any standard, these are good figures. They consistently follow what this Government has been doing in soundly managing the economy through excellent fiscal policies. Yesterday's figures show that an Exchequer surplus of €880 million was recorded in the second quarter of 2006. That compares to an Exchequer deficit of €594 million for the second quarter of last year. The budget deficit is at a far lower rate than we expected.
Due to the success of the economy, the great inward investment and the strength across the pharmaceutical, ICT and construction industries, tax yield is about €1 billion ahead of target. Tax receipts to the end of June are approximately 5.3% above the profile. I doubt that Deputy Kenny was questioning the figures or those who prepared them but obviously it is hard for people to compare the strength of the economy when it is growing at a rate so many percentage points higher than anywhere else in the European Union and in the world economy. People in the United States, Japan, Australia, Canada and the rest of Europe can see that we are outperforming them. The three tax heads, income tax, VAT and excise, are almost exactly on target and corporation tax and capital taxes are well ahead of target. Overall, it looks as if taxes for the year will come in €1.75 billion ahead of target.
Overall net voted spending to the end of June has increased by 9%, it is behind the target set for this stage. Deputy Kenny is talking about next year but this year we are spending less than our forecasts and prudently keeping with the targets.
Comment on this
That is against a debt to GDP ratio of under 20%, the second lowest in Europe and one of the lowest in the OECD countries. If that is netted against the €16 billion we have saved in the National Pensions Reserve Fund, which the Deputy supports, we have one of the lowest ratios of all.
If taxes come in as we think likely and expenditure comes in on target and there are no surprises, we will end 2006 €1.75 billion better off than expected because of the management of the economy. Instead of the expected borrowing of €3 billion, we will only need to borrow €1 billion. In six months the Minister for Finance and those working with him have improved our situation by 65%. That is good and let us hope we can continue to do that in the remainder of the year.
Comment on this
I asked if we can assume there will be no attempt to have a big budget bribe later in the year. Everyone recognises the strength of the economy.
Comment on this
Everyone recognises the strength of the consumer boom and the construction industry. It is not, however, the amount of money that is taken in that is the priority, it is how it is spent and the value for money in services.
The Taoiseach and the Government, in spite of the strong economy which every one supports and which the alternative Government, when it assumes office next year, will expand and develop, have presided over chaos in accident and emergency units, with 20,000 people on waiting lists and MRSA rampant in hospitals. Crime rates are rising and detection rates falling, with 29 murders this year alone and violent gun crime out of control on the streets. There is no effective road safety strategy and prices are rising faster than the rest of Europe. The economy is hugely dependent on personal debt in consumer spending and the construction sector. Agricultural and marine incomes have been wiped out. Class sizes are growing. There are 100,000 pupils in classes of more than 30 and completely inadequate educational facilities for thousands of others.
That is what this Government has delivered with the taxes it has collected in the last nine years. While no one doubts the strength of the economy or will do anything to harm it, the Government's inability to accept responsibility for any action has resulted in an inferior level of service for the people who, when they pay for a service, expect one of the highest quality. Look at the transport delays and difficulties for commuters every day on the roads. Those are all down to bad, weak Government and an inability to accept responsibility for anything.
Comment on this
There is a strong economy because this Government has worked with the people to make it so. There are 600,000 more people working.
Comment on this
The population has increased by 14% so 2 million people are on the road every day and that creates difficulties. We prefer that there are more people on the roads. We export €150 billion of goods that cannot get from Ireland to other countries without transport.
Comment on this
We have built up huge industries across a range of areas and have high growth.
I am glad to see Deputy Kenny acknowledging the strength of the economy. Most of his party opposes our policies and votes against them and our budget strategy but we are building record numbers of homes and spending enormous amounts on transport. The Luas project, which the Opposition tried to laugh off, is now in profit, carrying more than 22 million passengers per year, the rail programme is moving on, our new strategy for science and technology has been announced and more resources are being invested in health, education and welfare to help the less well-off in society. We are building hospitals throughout the country, hundreds of additional first and second level schools and funding programmes through Science Foundation Ireland. That is where the money is going.
If I were in opposition I would be upset about that too.
Comment on this
We will continue doing that. It is uncomfortable for the Opposition to have to look at a country doing so well and know that it played no part in that for 25 years. The danger for the country is that perhaps it would play a part in it because we want to stay where we are and keep on going strong.
Comment on this
I have called Deputy Rabbitte and I ask Deputy James Breen to afford him the courtesy of being heard.