Tuesday, 4 November 2008
Dáil Eireann Debate
Deputy Enda Kenny: I understand the Exchequer figures, to which I do not yet have access, are to be released at 4.30 p.m. I am sure the Taoiseach is aware of them and that is probably why he might look a little glum today.
Deputy Enda Kenny: Three weeks ago at this time, the Minister for Finance was receiving a standing ovation for the budget he introduced. Three weeks later, the budget has unravelled like a ball of string. Having been received with a standing ovation by Government Members, it was received with a great deal of anger, shock and dismay by the most vulnerable in society around the country. The final nail in the coffin of budget 2009 is the report from the Directorate-General for Economic and Financial Affairs of the European Commission. The document singles out Ireland and effectively states the Taoiseach’s budget and projections are miles off course. How does he explain the difference of €5 billion in the projections of the Minister for Finance and the Government for 2010 and those of the Directorate-General for Economic and Financial Affairs of the European Commission, which is a participant in the legal process involved? Will he confirm that he stands over the figures in his budget?
The Taoiseach: Of course we stand over the figures in our budget. The Commission’s forecasts are pessimistic for the European Union as a whole. The report confirms that the euro area is already in recession. The outlook, therefore, across all the European Union for next year is similar.
The forecast for the Irish economy published by the Commission yesterday is broadly in line with that of the Department of Finance, which underpins the budget. The Commission is forecasting negative GDP growth of 1.5% this year and that the economy will contract by a further 1% next year. The Commission is also forecasting a fall in the rate of the harmonised index inflation figure in Ireland over the coming months, with further easing expected in 2009-10. These forecasts are broadly in line with those published on budget day. This easing in inflationary pressures is a welcome development at this time.
On the budgetary position, the Commission notes that our expected deficit of 5.5% of GDP this year largely reflects the very large tax shortfall. The Commission expects the deficit to widen next year to 6.75% of GDP and 7.2% in 2010 on a no-policy-change basis. That forecast does not take into account the commitment to restore the current budget to balance over the coming years, as included in our budgetary arithmetic.
The medium-term strategy underpinning the budget set out the clear intention of stabilising and restoring balance to the public finances as soon as possible by, among other steps, reducing and prioritising public expenditure and adjusting taxation levels to reflect the changed realities. The Commission’s analysis confirms our own stated position that tough decisions will continue to have to be taken over the coming years. The aim of our budget was to seek to stabilise the public finances. Over the next three years, our aim is to restore sustainability thereto.
The Commission shares our optimism in respect of a return to growth in 2010. It forecasts a growth rate of 2.4%, the third highest in the EU, for Ireland in that year. This must not be overlooked as we face these challenges with a strong position from our low ratio of debt to GDP. The answers to the Deputy’s questions are technical.
Deputy Enda Kenny: The Taoiseach stated the Government’s projected growth figures are broadly in line with those of the Commission, but he did not deal with the projections for the deficit. His projection for 2010 is 4.7% while the Commission’s is 7.2%, which amounts to a difference of €5 billion. Will he outline the policy changes, about which he spoke, that will bring Ireland’s economy into line with where it should be? If the Taoiseach stands over his figures for his budget of three weeks ago, why is the Minister for Finance running around solo saying we must have more cutbacks? He is quoted again today as saying we face further cutbacks. Obviously, he knows the Exchequer figures that will be published in ten minutes. The Taoiseach accepts that the figures given in his budget are right in respect of the deficit for 2010, but the economic directorate says there is a difference of €5 billion and the Minister for Finance says we will have further cutbacks. Is this evidence of a major split between the Taoiseach and the Minister for Finance? The Minister says we will have further cutbacks and the Taoiseach says this is not the case. Otherwise, the figures given in the budget three weeks ago are completely at variance with what the Commission directorate states. If that is the case, the Government is making it up as it goes along. We have no road map, no plan and no strategy to restore the economy to good health.
The Commission report singled out Ireland and said it was a particularly sharp issue for this country where the Government balance is projected to reach a deficit of 5.5% in 2008 and almost 7% in 2009. If that is the case, can I take it from the Taoiseach that we are to have another budget in the spring? Are we faced with a number of policy options that will require supplementary budgets or another budget before the scheduled one of 2009? This is important in the context of the creation and protection of jobs and for the management of our economy.
Will we have another budget in 2009? Is there a difference of opinion between the Taoiseach and his Minister for Finance? Why is the Minister talking about further cutbacks if the Taoiseach stands over the figures announced three weeks ago?
The Taoiseach: I have just explained to the Deputy that those figures from the Commission come up on a no policy change basis. That forecast does not take into account the commitment to restore the current budget to balance which was included in our budgetary arithmetic. That is the normal procedure; we outlined the three-year position in the multi-annual cycle budgets brought forward in the House for the past four or five years. The Commission does not do that; it is simply giving a no policy change position. The Government has outlined its position on that situation. There is no problem here regarding what the Commission is saying and what we are saying.
As regards Commissioner Almunia, he has acknowledged that it will take three to four years to rectify the fiscal position. We know also that he is optimistic about our prospects for recovery and growth in the medium term. I was a member of ECOFIN and saw many occasions where the excessive deficit procedure was invoked. It was invoked in our situation because of the sharp deterioration in our public finances where the deficit is clearly over 3%. These are the Stability and Growth Pact rules and the procedures are invoked and applied to our country when it happens just as they are applied to other countries when it happens in their part of the cycle. There is no need to indicate any fundamental difference here.
The Taoiseach: The Minister for Finance is pointing out very clearly, as he should, his determination to stick to the expenditure targets. He said that he is satisfied the expenditure targets set out by the Government will be met and that he is also satisfied that if further action is required, it will be taken until the next budget. That does not necessarily mean a mini-budget. The taxation measures in the budget will be set out in the Finance Bill. Obviously, if further expenditure control measures are required, they will be adopted. That is specifically what the Minister for Finance said, rather than Deputy Kenny’s paraphrasing of what he said.
The Taoiseach: We brought forward our 2009 budget. When we come forward with our 2010 budget, we will outline the policy changes that are required on the basis of how the economy performs in the coming year and similarly with the following years. The whole purpose of the budgetary cycle and what we are trying achieve is to get a sustainable position. The problem with Deputy Kenny’s party is that it talks about tiger budgetary fiscal situation and disagrees with every step taken to try to bring it about.
Deputy Eamon Gilmore: I wish to raise with the Taoiseach a particular set of decisions made in the budget relating to increases in a number of health charges. The charge for attending an accident and emergency department in a hospital was raised in the budget to €100, bringing it now to almost seven times what it cost in 1997, approximately €15. The charge for an overnight stay in a hospital has been raised to €75, three times what it cost in 1997. The threshold for the drug refund scheme has been increased to €100, over four times its cost in 1997. By any standards, these are very substantial increases in taxation on illness because the only people eligible to pay these taxes are those who are sick, who need to get into hospital or who need drugs.
I wish to raise in particular the impact of those charges on low-income families. I want the Taoiseach to consider the case of a working family, a couple with two children, with a family income of €25,000 per year. The Taoiseach’s Government considers this family to be too well-off to have a medical card so they would be liable to pay the accident and emergency charge if a family member had to go to hospital. What does that family do in the middle of the night if a child gets sick, they cannot get a doctor and they do not have the €100 to bring the child to the accident and emergency department? What would be the Taoiseach’s advice to that family?
The Taoiseach: Obviously, they would go to the accident and emergency department and have the child treated. That is what they would and will do. In respect of any charges that arise as a result, I am sure that would be dealt with in due course on the basis of ability to pay. That is what happens. As the Deputy says, where there is referral from the GP to the hospital, it is a different situation in respect of the charge. That charge is envisaged for situations when people arrive at accident and emergency without GP referral. People will continue to attend if a child’s requirements merit their attendance.
Deputy Eamon Gilmore: That answer shows how out of touch the Taoiseach is with the reality of people’s lives and the difficulties they have in making ends meet. I do not know if the Taoiseach is aware but where one turns up with a child at a hospital without money to pay the charge, the hospital refers the debt to debt collectors.
Deputy Eamon Gilmore: Solicitors send letters to the people concerned. Does the Taoiseach believe it is fair or reasonable that a family on that level of income, of €500 or less a week, should pay the charge? They have a sick child, cannot get a doctor and even if they could, the call out charge for a doctor would be of that order anyway.
The Taoiseach is right. They decide, as most parents would, faced with a sick child in the middle of the night, to get the care. They will bring the child to the hospital. The problem is where they will find the €100 to pay for it. On that level of income, that is a very severe charge. Is the Taoiseach suggesting that, if the hospital visit were to be on a Thursday night before pay day, that the family call around by the hospital on the way home from work on the Friday and pay €100 from the small wage they have? Is that how they will pay and is that a fair charge? This was one of the increases applied in the budget and it will impact on people on that level of income. Does the Taoiseach think this is fair?
On the increase in the drug refund scheme threshold, when Deputy Gilmore was in office we did not have such a scheme. At that time, one paid and waited for three months to get a refund. Working families waited for much more than £100 and were being taxed at 26% at the time. The Government has removed such families from the tax net.
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