STATEMENT BY BRIAN LENIHAN TD, MINISTER FOR FINANCE

Over the last decade and a half, this country has experienced an economic transformation that has been the envy of the world. That transformation has been achieved through the hard work and enterprise of our citizens guided and led by the sound economic policies of successive governments.

Contrary to some of the commentary of recent weeks, our remarkable economic progress has not been reversed overnight. Our economy continues to be strong and dynamic. We have a very low level of public debt; down from 53% of GDP in 1998 to 25% at the end of 2007, 14 % in net debt terms. We have very flexible markets. We have a low burden of taxation. And we have over two million at work.

All of this has been achieved while delivering budget surpluses in ten of the past eleven years. Our record speaks for itself: the public can be assured of the Government’s determination to build on the progress we have achieved and to foster the right conditions for sound growth in the years ahead.

The exchequer returns published by my Department last week confirm we are facing a shortfall of €3 billion in tax revenue this year.

Government expenditure is running at 11 per cent ahead of the same period for last year. And there are a number of spending pressures due mainly to higher unemployment.

If we do not act now, the financial situation facing us for 2009 will be more difficult and the action needed more urgent.

It has been suggested in some quarters that we ride out the present downturn by further large scale borrowing. We are not going down that road.

Our careful stewardship of the economy over the last eleven years has positioned us well to weather the current economic storm. The sensible measures that I am announcing here today will create the right fiscal conditions for economic growth while protecting the most vulnerable.

As the Taoiseach has said, we in Government are prepared to give a lead in the necessary strictures that must apply in difficult times. Accordingly the Government has decided that all of the pending increases for Ministerial and Parliamentary office-holders and for other senior public servants, recommended by the Review Body on Higher Remuneration in the Public Sector will not be implemented. The issue will be reviewed in September 2010 but without commitment at this stage to the outcome.

To meet current expenditure pressures, the following measures will be taken:

·        All Departments, State Agencies and Local Authorities – other than Health and Education - will be required to reduce their payroll bill by 3% by the end of 2009 through all appropriate measures identified by local management in the light of local circumstances. The parameters of this exception for the health and education sector are to be agreed by the Departments concerned with the Department of Finance.

• All expenditure by Departments and Agencies on Consultancies, Advertising and Public Relations will be significantly reduced for the remainder of this year and by at least 50% in 2009.

• Further savings in 2008 and in 2009 are to be secured by a range of measures including those identified as a result of the Budget day efficiency review initiated by my predecessor.

• All of the above efficiencies will apply equally to State Agencies. In addition, I have asked that these agencies be reviewed to examine whether they can share services, whether it would be appropriate to absorb some of their functions back into their parent Departments or whether some agencies should be amalgamated or abolished. The outcome of this will be considered by the Government in the Autumn.

• Capital investment will remain a top priority. Capital projects will be examined and prioritised to ensure that resources are targeted in the first instance at construction-related investment in core economic infrastructure that adds to productive capacity.

• The Government has also decided, in the light of the current Exchequer position, that further expenditure for the acquisition of accommodation for decentralisation will await detailed consideration of reports from the Decentralisation Implementation Group.

• Minister of State Martin Mansergh will head up a joint public procurement operation between OPW and the Department of Finance to drive a programme of reform and to produce a business plan for purchasing savings to be achieved by Departments and other public bodies in 2009. Minister Mansergh will report to me in the Autumn with specific proposals to target at least €50m savings in 2009 on this front.

• Given the projected revision to GNP and other factors, there will be savings in Overseas Development Assistance of some €45 million this year. The revised total contribution in 2008 will be over €200 per citizen, totalling around €900 million. Ireland will still be far ahead of almost all other developed nations in our rate of ODA.

In addition to these measures, the Department of Finance and the Department of Health and Children will draw up proposals for a targeted scheme to reduce surplus staff in the HSE as soon as possible. We will also consider extending this scheme on a selected basis to other public service agencies where staff surpluses are identified.

In respect of the Tribunals of Enquiry given that they have indicated their intention to conclude their public hearings this year, the costs of their operations will be reviewed by the relevant Ministers as part of the overall review of spending so that expenditure is minimized, both in the remainder of 2008 and residual costs arising in 2009.

The Government is determined to achieve the savings required. All Departments have been directed to stay within budget.

These measures are designed to minimise the effects on users of services in the areas of Health, Education and Social Welfare. They seek to protect the vulnerable. But they are the minimum we need to get back on track as soon as possible.

The savings are estimated to deliver €440 million in 2008 and €1,000 million in 2009. Even with these savings, the fiscal position in 2009 will be demanding and all spending will have to be rigorously controlled. In framing the 2009 Budget the Government is determined to maintain the right economic and fiscal conditions for sustainable growth.

Over the last eleven years, we have invested the fruits of our economic success in our schools, our roads, our public transport and our environmental infrastructure giving us the highest rate of public investment in Europe. We have dramatically increased the state pension, child benefit and the number of gardai, teachers, doctors and nurses serving our people. We stand by our choices.

Our priority now is to continue to manage the current situation sensibly. This will ensure we create the right environment to return to trend rate of economic growth which is generally agreed by leading economic commentators to be 4% .In doing this we can sustain the very real and tangible economic and social progress we have made. The measures I have outlined today will keep us on the path.