Speech by Paschal Donohoe TD, Minister for Public Expenditure and Reform, at the MacGill Summer School
Good evening everyone – it is always a pleasure to be here in Glenties but it is even more of a pleasure to be speaking here for the first time.
2016 has, so far, been a dramatic year.
At home, we had a general election that resulted in an unprecedentedly fragmented Dáil.
This was followed by the bizarre sight of many newly elected Deputies trying with all their might NOT to get into Government.
At the same time, those of us with an interest in getting things done hammered out a deal that many thought could never be made, delivering a new type of Government and a new understanding between Government Buildings and Leinster House.
Away from these shores, we saw an unusual primary election period and the promise of an unusual general election period in the United States.
There has been the horror of terrorism and violence, in Iraq and Afghanistan and closer to home, in Belgium and most recently in France.
And just last weekend, we saw the extraordinary events in Turkey.
All of these events lend themselves to a feeling- and existence- of uncertainty.
And it is this uncertainty which I want to focus on tonight.
The job of Government is to manage uncertainty and ensure that, as far as possible, our society and our economy are kept on track despite all the threats that developments here and abroad may pose.
This is certainly the case when it comes to Brexit – another of the dramatic events that has taken place this year.
THE NEW NATIONAL QUESTION
Brexit has made us think again of what it means to be Irish within the context of our membership of the EU.
The National Question, a subject you discussed here in some detail last night, has been a decisive theme of Irish public life.
A further and new National Question has developed. The previous Question asked where our national borders should be and government within those borders.
A new National Question asks how we interact with a globalised world and wider union – the European Union.
Of course, both these questions are intimately related.
Michael O’Sullivan framed this challenge in his book Ireland and the Global Question, published in 2006. He articulated the National Question as ‘a desire to maintain the sovereignty and independence of the nation in the face of powerful external forces’.
If Brexit is not a ‘powerful external force’, I do not know what is.
O’Sullivan went on to say that the decisive factor in maintaining our sovereignty and independence was ‘whether the State has a framework for dealing with the effects of globalisation on Irish society and social life?’
I believe we have that framework and we will use it to negotiate with a nearest neighbour, and with our partners in the European Union, in the years to come.
WHAT WE HAVE DONE TO PREPARE FOR BREXIT
It might be easy to forget but our greatest preparation for Brexit was our collective effort to fix our economy so we had the strength to face an uncertain future.
Could you imagine the immense difficulty we would have faced had the UK voted to leave the Union five years ago?
Imagine the collective national terror we would have faced had we been facing Brexit at a time when we ourselves were in a bailout programme, borrowing €18bn per year, as we were in 2010?
How ill prepared for Brexit would we have been if we had a national debt of 120% of our annual output, an unemployment rate of 15% and a flight of tens of thousands of our best and brightest to Australia and New Zealand in search of a better life?
The prudent economic and fiscal policies implemented over recent years have placed Ireland in a stronger position to weather this shock.
- Ireland's growth rate remains strong;
- Competitiveness has improved significantly;
- Employment has grown, and unemployment has fallen - to 7.8% in June;
- The Budget deficit has been reduced significantly – we are projecting it to fall to around three quarters of one per cent of GDP.
We are in a much stronger position to deal with the potential of this shock than we were with the crisis of 2008 and 2009.
We have reformed our public services, widened our tax base and reduced our debt.
Our country is back working again.
OUR ONGOING PLAN TO DEAL WITH BREXIT IN THE YEARS THAT LIE AHEAD
This is not to say that there is not a great a deal of uncertainty around many aspects of the impact of the UK decision.
It is for that very reason that when Minister Noonan and I published the Summer Economic Statement, we specifically made allowance for a Brexit and pointed out, on page 9 of that document as well as in our own remarks, that the impact on the Irish economy could be in the range of 0.5 to 1.2% of Irish GDP.
We also stated- and I am happy to repeat here again this evening- that we do not foresee any impact on our tax and spending plans for this year or next, but there may be an impact in the years after that.
This is why the Government has adopted a Contingency Framework, coordinated by the Department of the Taoiseach, to map out the key issues that will be most important to Ireland.
Priority issues identified in the framework include:
· UK-EU Negotiations,
· British-Irish Relations,
· Trade and investment,
· North-South Border Impacts,
…and other areas.
As outlined in the Framework, the impact on enterprise and trade in Border counties – such as the one we are in tonight – will also be monitored closely.
I say this not to suggest that we are just ticking the box of Brexit preparedness but rather to demonstrate that we, as a Government, are acutely aware of the risks that Brexit poses and are taking the steps to ensure we are shielded as much as is possible from its effects.
As An Taoiseach himself said last evening, the upcoming Budget in October will be shaped by, and address, the challenges resulting from Brexit, and to set out a national economic response.
The Budget will focus on:
· the need to further strengthen our competitiveness,
· projecting Ireland’s attractiveness to international investors seeking certainty and stability,
· protecting the strong recoveries in our tourism, agri-business and other sectors
…amongst other things.
A DIFFERENT, POST-CRASH CULTURE
Our preparedness for Brexit, however, is about more than just contingencies and plans. It also involves a root and branch change of the culture of Government spending.
The impact of the banking and economic collapse on the people of Ireland cannot be overstated.
Lessons have been learned and there is now a new culture of public spending. Now and in the future, we will ruthlessly pursue value for money with reforming zeal.
Money will only follow the services and the projects that are worthy of funding.
Spending at the level we did in 2007 caused many of our problems. To this end, I have a principle – ‘Do not speak of the peak’.
Instead, we will spend sensibly and invest widely.
Our public sector may grow, but it will only do so with a laser like focus on improving those service for those who use them and rely upon them.
We have learned the lessons of the last crash to meet the challenges that Brexit may pose, so that our people do not suffer again.
SMALL COUNTRIES, BIG RISKS
In discussing Brexit, I note that while our economic, social and political links with the outside world have made life immeasurably better for our people, it also brings risk.
The German sociologist Ulrich Beck has written of the ‘might’ society; what might happen if a crisis strikes or what might happen if the financial markets collapse?
The not-knowing, he suggests, leads to an uncertainty, a collective anxiety that can undermine our efforts to make life better.
However, this is not to say that small countries need be a victim of this uncertainty.
Indeed, the opposite may be the case as proven by the strong long-run economic performance of the small nations that cluster at the top of most measurements of globalisation.
The ‘Success of Small Countries’, a recent report published by the Credit Suisse Research Institute is an example of this argument.
That report measured things like governance, human development and economic volatility of different countries and created a ‘Country Strength Index’.
It may interest you to know that thirteen of the top twenty leading countries in this index were small states – countries like Switzerland, Singapore, Hong Kong, Denmark, New Zealand and Ireland.
In their consideration of the factors underlying this performance, the report’s authors spoke about ‘intangible infrastructure’ which they defined as ‘the set of factors that develop human capability and permit the easy and efficient growth of business activity’.
They were talking about issues like the quality of education, the development of business supports and the openness to technology in each country- not tangible infrastructure like road and bridges, but vital nonetheless to a country’s economic future.
And Ireland scored very highly in them.
This is all so positive and these are the areas where our size, our flexibility and ability to diversify are of huge help for the future.
Above all, this tempers the argument that all that lies ahead is gloomy and we cannot shape our own destiny.
THE REFORM AGENDA FOR 2016
Building on this, I would like to talk briefly about two specific measures that my Cabinet colleagues and I decided upon at our Cabinet meeting this morning and are designed to promote stability and continuity.
They are examples of the development of an ‘intangible infrastructures’ response to a rapidly changing world.
The first is the establishment, as promised in the Programme for a Partnership Government, of a Public Service Pay Commission.
The Commission will operate within the confines of the Lansdowne Road Agreement and will provide an initial report to Government by the middle of next year on public service remuneration.
The Pay Commission will be charged with:
· providing an objective analysis on the appropriate pay levels for identifiable groups within the public sector;
· comparing pay rates in the public service with private sector rates;
· and comparing public service rates with their equivalents in other countries particularly where internationally traded skillsets are required, having due regard to differences in living costs.
Work will start on establishing the Commission over the summer and I hope to see it begin its task in the Autumn of this year.
Another decision made at Cabinet today was to agree the principle of a new Labour Employer Economic Forum, or LEEF.
This will act as a formal structure for dialogue between representatives of employers and unions to discuss economic and social policies insofar as they affect employment and the workplace.
The idea came from the success of the National Economic Dialogue and I believe it will allow for the Government to better formulate policy in a post referendum, pre-Brexit environment.
It will meet to exchange views on issues of concern affecting the economy, employment and the workplace and some areas it will consider might be competitiveness, sustainable job creation, labour market supports and widening occupational pension coverage.
The aim, as for the National Economic Dialogue, would not be to reach agreement but to develop shared understanding and some level of consensus on key policies affecting employment and the workplace.
This is not Social Partnership. The Labour Employer Economic Forum will not discuss or determine wage levels or wage increases within the public or private sector.
Matters relating to the minimum wage are for the Low Wage Commission.
Matters relating to public service pay are for the Lansdowne Road Agreement.
The Workplace Relations Commission and the Labour Court will remain the key dispute settling industrial relations institutions within a voluntary system of industrial relations.
It is, however, a way for the Government to be inclusive and informed and the plot a course for the future.
I want to conclude by commending all involved with the organisation and delivery of this week’s sessions – the diverse level of topics and viewpoints has provided invaluable insight into the policy challenges facing the nation.
We are having this debate against a backdrop of a political trend in Europe and the world towards populist parties and politicians who use incendiary language and blame other people for all our problems.
Those on the far right blame immigrants. Those on the far left blame ‘elites’.
Both blame Europe.
Both these narratives spread fear, increase the disconnect between governments and citizens and lead to the type of result we saw in the UK recently.
Undoubtedly those of us in the political centre must redouble our efforts to heal our fractured county and ensure that everyone feels that they are a full part of the society in which they live.
Our work, however, is not helped by those on the extremes of both left and right who seek only to disrupt and not to present the electorate with answers to their problems.
In this atmosphere, to be politically moderate is to be politically brave.
Moderation must discover a steely core. The time for this is now.