As the Minister for Finance recalled in his speech, yesterday was the 90th anniversary of the signing of the Anglo-Irish Treaty and the restoration of Ireland’s independence as a nation.
This time last year, Ireland lost her sovereignty and was forced to enter into a programme of financial support provided by the IMF and EU following a decade of greed, excess and misgovernment.
The task that falls to this new government is evident. It is to restore Ireland’s independence in the short–term and our prosperity in the long term. Ninety years since independence, this new government faces a challenge almost as daunting as that faced by our forbearers who founded this state and provided its first government. Some - one as recently as last night - shirk that challenge. We welcome it.
No government wants to raise taxes or reduce spending. It will not make us popular. We are not doing it because we believe that it will create jobs or stimulate the economy. We are doing it because we cannot afford to fund the State. We have a structural deficit of €12bn. This has nothing to do with banks, or bondholders or even the interest on our national debt. €12bn is the gap between what we take in taxes and other revenues on the one hand and what we spend on public services, pensions, welfare and infrastructure on the other. The IMF and our EU partners are making up the difference but they will not do so for ever and we will have to get by with reduced support in 2012. We have to wean ourselves off borrowing, not because the Troika say we have to but because it is in our best interests to do so before our debts overwhelm us. And that is what this Government intends to do.
The budget deficit fell to 10.1% of GDP in 2011 ahead of target and as a result of the measures in this budget will fall to 8.6% of GDP in 2012. Despite the fact that there were almost €6bn in adjustments in the 2011 budget, the harshest budget ever, the economy returned to growth. If any in this House still believes that you cannot have austerity and growth at the same time, this is their answer. But the only recovery that really matters is one in which employment increases and living standards rise. This is some way off.
A major newspaper today led with the following headline- ‘The Government had decisions to make but made the wrong ones’. That is their opinion. The decisions we made in Budget 2012 were the ones that flowed from the mandate given to us by the Irish people in the General Election. This is fact.
We said that we would continue the work of reducing the deficit through a combination of growth, taxes and reductions in spending and we are.
We said we would do it through a greater share of reductions in spending and a lesser share of tax increases. That is what we are doing. This Budget contains €1bn in new taxes and €2.2bn in current and capital spending reductions.
We said we would protect incomes by not increasing income tax, PRSI or the universal social charge. We have done better than that by removing the universal social charge from over 300,000 low income, part time and seasonal workers and by avoiding any reductions in basic rates of social welfare including jobseekers, pensions, carer’s and disability allowance for existing recipients.
We said we would increase mortgage interest relief for those hard-pressed first time buyers who bought a home between 2004 and 2008 when the property bubble peaked. We have been true to that promise.
It is worth recalling that the alternative 4 year plan put forward by Fianna Fail and the Greens and agreed with IMF and EU would have resulted in more than €800m in social welfare cuts rather than €475m announced this week and would also have resulted in an increase in income tax for almost everyone. The alternatives put forward by other parties envisage a world that does not exist. In government, we do not have that convenience. We have to deal with the World as we find it.
2012 Estimates
I will now turn to the detail of my Department’s Estimates for 2012.
My Department engaged with the Department of Public Expenditure and Reform in the Comprehensive Review of Expenditure undertaken this year. In accordance with that process, a detailed review was undertaken of all of the spending programmes falling within the responsibility of my Department.
The submissions made as part of that process which provides the backdrop against which the 2012 estimates were agreed have been published on that Department’s website.
Throughout this process I have recognised the need for my Department to deliver on its share of the required reduction in public expenditure. Ministers should not operate in silos and all ministers must see the bigger picture. Our role is not to act as a lobbyist on the behalf of the sectors which our Department covers, rather our responsibility is to do the best we can for the public in general.
Current expenditure
The current expenditure provision for my Department for 2012 is €786m; that is a reduction of €69m on the current year estimate. Following adjustments of the order of €5m for one-off items in the 2011 Estimate, the reduction of €64m represents a package of net expenditure cuts of €45m. This is because it is anticipated that some additional revenue will accrue from the Local Government Fund in the form of motor tax receipts which are shared between the Department of the Environment and my Department in a ratio of roughly 2:1. For this reason, I cannot say for certain, how great the cut in funding for the maintenance of regional and local roads will be, but it will be modest.
Our local and regional roads have benefited from an additional €60m which was re-allocated from within my own Department’s vote as part of the Jobs Initiative earlier this year. People driving around the country in recent weeks will have seen much of this work being done.
It will however not be possible to avoid making some expenditure cuts. It is therefore proposed to discontinue grants under the Local Improvements Scheme achieving a saving of €5 million. While I am aware of the importance of this scheme to rural communities and in assisting local development projects on private roads, the maintenance and improvement of these roads is, in the first instance a matter for the relevant landowner. Given that there are insufficient funds to maintain public roads it is not appropriate to assist with any works on private roads. The Community Involvement Scheme in respect of small mainly rural public roads will however be maintained.
The Department’s grants are not and never were intended to provide for the full funding of regional and local roads. Local authorities have other revenue sources to assist with the funding of such works.
The €45m in savings will be achieved in a number of ways:
Roads and Public Transport
There will be an 8% reduction in subsidies for the CIE group saving €21m in 2011. This will result in an increase in fares to be determined by the NTA, the transport regulator in the coming weeks. I have indicated to CIE that a further reduction in subsidies of roughly €32m will occur between now and 2015. I have asked the CIE companies to develop business plans to achieve these savings and to concentrate on reductions in cost and the achievement of enhanced efficiencies ahead of any further fare increases or reductions in services. This will be difficult as such savings will have to be on top of the significant savings and efficiencies delivered by the CIE companies in recent years;
A similar reduction of 8% will be applied to rural transport saving €850,000;
Maintenance of the National Road and Motorway network will be reduced by 1% saving €633,000;
€6.5m will be saved in reduced operational payments for PPP roads;
€3.5m will be saved from efficiencies and greater use of IT for Vehicle and Driver Licensing;
The allocation for the Road Safety Authority (RSA) will be reduced by €4.5m or 20%. This will not result in an overall reduction in the RSA’s budget as the agency has benefited from an increase in revenues from NCT tests and will take on the role of providing the new plastic card driving licence by 2013. It is anticipated that the RSA will become self-funding in the longer term;
Another €3m is saved from reductions to the administrative budgets of the NRA, RPA, Railway Safety Commission, MBRS. These will be of the order of 7-10%; and
Funding for the Green Schools programme will be maintained at €1.9m. Notwithstanding recent concerns about the misuse of some funds, the programme is a success and it is intended to maintain funding at this level through to 2015.
Minister Kelly will expand on some of the above in his speech.
Civil Aviation
€5.3m will be saved in reductions to operating subsidies paid to regional airports. This reflects savings made from decisions I made earlier in the area to cease funding for Sligo and Galway airports from the end of 2011. Funding for Ireland West Airport Knock, Waterford, Donegal and Kerry will remain but must be constrained as funding will be reduced by at least another €1m to €9m per annum in 2014.
Maritime
I intend to maintain funding for the Coast Guard at €3.4m per annum through to 2015 in view of the essential role played by the Coast Guard in terms of search and rescue services at sea and inland. This is separate from the provision made for the SAR helicopter contract which will rise from €27.9m in 2011 to €33.4m in 2012, €53.3m in 2013 and €58.9m in 2014 and 2015.
Similarly funding for the Royal National Lifeboats (RNLI), Mountain Rescue, Weather Buoys and the Marine Casualty Investigation Board will be maintained at current levels through to 2015, all things going to plan.
The IRCG responds to 2,000 incidents annually, peaking in the late summer. Of the average 3,500 persons assisted, it is considered that 160 of those would have perished but for Coast Guard intervention. Although it is impossible to put a price on the value of an individual’s life, based on expenditure for the IRCG for 2011, this would equal €200,000 per person saved.
The statistics show that the use of our waters have become more popular with the public, with pleasure craft incidents increasing to 600 per year and a corresponding increase in the number of helicopters, lifeboats and coastal rescue units tasked. This increase is in line with trends in other countries.
The IRCG makes maximum use of voluntary services with 900 Coast Guard volunteers, 2,000 RNLI, 300 community rescue boats and 500 mountain and cave rescue volunteers providing a service on call day and night to respond to emergencies at sea, on our cliffs or on our coast. That service would be unaffordable if carried out by full time staff, and is admired by other States.
Sports
Funding for the Irish Sports Council will be reduced by 5% from €46.8m to €44.5m in 2012 with a further reduction to €42.1m in 2013 and to €40m approximately in 2014 and 2015. Minister Ring will expand on this further in his contribution. Funding for the National Sports Campus will be maintained at €1.5m per annum.
Tourism
The budget for Fáilte Ireland will be reduced by 5% to €59.4m saving just over €3.1m with a further reduction to €56.3m planned for 2013 and €53.2m in 2014. However, a special allocation for ‘The Gathering’ will be made later in the year which will mean that overall funding for tourism will only be reduced slightly in 2012 and 2013.
The Tourism Marketing Fund will be reduced by 5% or €2m to €39.3m. Tourism Ireland’s administrative budget will be reduced by €500k or 3%.
Capital expenditure
Investment in capital infrastructure will be scaled back significantly over the next five years. The Five Year Capital Investment Plan represented an overall cut of 18% (€1,045m) on the National Recovery Plan (NRP) allocations published in November 2010.
Specifically, capital expenditure confirmed today for my Department in 2012 will fall by €267m to €1,231m. Cuts of this magnitude necessitate that some very good and worthwhile projects had to be curtailed or postponed; not because these projects did not have merit but because we could not afford them.
My aim has been to get maximum return for the taxpayer from the considerable investment in transport, tourism and sport still planned. In making these decisions, my first priority has been to ensure that investment made to date is protected and that safety standards maintained.
This accounts for the bulk of the available funding provided in 2012 and beyond. Where possible funds have also been provided for a limited number of projects which offer the best return in terms of their contribution to economic recovery and job creation.
Funding for National Road Restoration and Improvements will fall from €680m in 2011 to €605m in 2012 and to €278m in 2013, €288m in 2014 and €253m in 2015. As I have stated many times in the House and in the media, there will only be sufficient funds for roads already under construction or which are out to tender, as well as for the restoration of existing roads.
While some very minor safety and on-line improvements might be affordable, there will be no money for major, new, multi-million euro projects during the term of this government with the exception, hopefully, of the N11/Newlands and Gort to Tuam PPPs depending on private capital market conditions.
With regard to capital funding for Regional and Local Roads, the budget provided will fall from €330m in 2011 to €280m in 2012 saving €50m on the capital side. Funding will fall to €255m in 2013 and €240m in 2012. Again, the bulk of this (about 85%) will be required for road restoration. A small number of already planned strategic regional road projects can still be progressed.
In addition, the NRA will end the practice of paying €5,000 per acre ‘Goodwill’ payments to landowners. This will result in significant savings when large scale land acquisition commences again. For example, when the suspended Cork/Limerick M20 project proceeds to land acquisition stage, this decision to end goodwill payments will result in savings of c€4m. The goodwill payments will remain in place for those projects for which the "Notice to Treat" has already been served.
Funding for Smarter Travel and Carbon Reduction Measures shall be €65m between now and 2015 with €17.4m provided in 2012, down from €21.8m in 2011.
With regard to public transport, funding provided to the NTA for capital projects in the greater Dublin area will fall from €216m in 2011 to €116m in 2012 reflecting the decision to suspend Metro North and other rail projects. €111m will be provided for the Railway Safety and Minor Capital Programme, a reduction of €27m. Roughly €16m will be provided annually for public transport projects in the regional cities through to 2016.
In particular, funding will be provided for key existing public transport programmes such as railway safety, bus fleet replacement for PSO routes, traffic management programmes including QBC upgrades, as well as to facilitate advancement of Luas BXD.
Funding will also be provided for the completion and operation of the Integrated Ticketing project in the Greater Dublin Area and for traffic management projects including QBCs in the regional cities.
The envelope for capital funding for regional airports shall be limited and only necessary and safety works can be funded.
€36m is provided for the Coast Guard between 2012 and 2016, with €10m provided in 2012 thus allowing the Killybegs Coast Guard station to proceed in the first half on 2012 and the Doolin Coast Guard station thereafter. €2m is being provided to the Commissioners for Irish Lights in 2012 and an envelope of €8.3m through to 2016.
Expenditure on regional harbours has concentrated on essential remedial works, pending transfer. Nine out of a total of 13 harbours have now transferred to Local Authorities including the transfer of Tralee Fenit in October this year. Agreement has also been reached to transfer three of the four remaining harbours (Kinsale, Baltimore, and Arklow) in early 2012.
Many of the regional harbours have no resources to carry out necessary works and requests for funding are normally far greater than the budget allocation. My Department will continue to provide much needed funding for essential works at these harbours for a two year transitional period totalling €6 million in 2012, €6 million in 2013 with a reduction to €1 million in 2014, and a cessation of funding by 2015.
With regard to Sport, €21m is being provided in 2012 and an envelope of €64m through to 2016 for funding for sports facilities. As previously announced, this will facilitate the reactivation of the Sport Capital programme formerly associated with the National Lottery.
€16m is being provided for the National Sports Campus through to 2016 allowing for Sports HQ and infrastructure works to proceed in 2012.
In tourism, there is a €77m envelope for funding of tourism product development between 2012 and 2016. That is, the upgrading of existing attractions and the part funding of new ones. It should be noted that the vast majority of this is committed already.
Other Parties’ Contributions
During the past number of weeks, I have taken time to review the budgetary proposals of Sinn Féin and Fianna Fáil. The ULA’s economic and budgetary fairy tale does not deserve the respect of detailed consideration. Neither the Sinn Féin nor Fianna Fáil proposals delve to any great extent into current spending under the Department of Transport, Tourism and Sport, but they do give us much to ponder in relation to capital expenditure.
If we start first with Sinn Féin’s contribution I note that they implicitly accept the Government’s decision to defer funding for Metro North, Dart Underground, the Navan Railway Line, the Western Rail Corridor as their proposals do not provide any additional funding in 2012 or in their 3 Year Capital Investment Programme for such projects.
This latter decision is particularly stark when you consider that Sinn Féin’s 3 Year Capital Investment Programme involves an additional €7bn in capital spending. However none of this will go towards projects under the remit of this Department. Certainly, if the current Government had an additional €7bn for capital projects over the next 3 years, there would be additional spending on key transport projects.
If we now turn to Fianna Fáil’s contribution, it must be acknowledged that they are at least consistent. Fianna Fáil in opposition is engaged in the same game of smoke and mirrors as Fianna Fáil in Government. Within their proposals they make great play of an addition €250m in 2012 for Capital Spending. However, there is no detail of how this additional capital expenditure would be allocated. Would it go on 3rd Level Education Facilities, Hospitals, Road or Rail?
This failure to provide detail is a device to allow Fianna Fáil TDs and Senators to go around the country and suggest that if they were still in power, project X, Y or Z would be going ahead. This is the old politics of raising expectations and stringing people along.
I took the decision that because we could not afford to bring projects to construction it was better to be honest and upfront about it, rather than string people along by spending millions on planning and design for projects which we don’t have the funds to construct.
I won't play that game. Unfortunately Fianna Fáil still want to. When they were in power they spent more than €200m planning projects such as Metro North, the M20 and Dart Underground but they delivered none of them.
I won’t repeat their mistakes and seek to mislead people by telling them that their projects are ‘alive’ by spending a few million here and a few million there on planning. Rather I have stopped work on those projects which have been deferred because there is no prospect of funding their construction in the foreseeable future.
Conclusion
Cathaoirleach, after 90 years of statehood, Ireland is once again in peril. But the new government has brought political stability, a strength missing in so many other countries, and has a plan to repair our public finances and rebuild our economy. But we cannot do it alone.
This budget is based on 1.3% GDP growth in 2012. This can only be achieved if Europe does not go back into recession and the future of the Euro is secured. If Europe goes back deep into recession or the Euro fails, Budget 2012 will rapidly become a sideshow.
The European Union has been one of the great successes of the 20th Century and has assured both peace and prosperity in Europe. The Euro is our currency and we want to keep it.
However the construction of the Euro was flawed. Among the most flawed institutions is the European Central Bank whose narrow mandate is limited to price stability. It does not have the power to act as a lender of last resort for the sovereign in the way that other central banks like the Bank of England or Federal Reserve do. Moreover, small nation states are expected to provide deposit guarantees for banks as big as the state itself. No mechanism exists for fiscal transfers to lend money to States that are in trouble and rather than having a European Monetary Fund to support States that need it, some European leaders now look to the United States, China and even Brazil to bail us out. This is despite the fact that Europe is the wealthiest continent in the world and has sufficient resources to solve its own problems if it acts together.
This is not the Europe of Adenauer, Monnet, Schuman, Delors or Kohl. Those leaders would have seized the opportunity of this crisis to bring Europe closer together. The solution to our problems is more Europe, not less. Fusion not fission. Solidarity not self-interest.