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Speech

Minister for Finance and Public Expenditure & Reform, Paschal Donohoe's Closing Address to the 2019 National Economic Dialogue

Published: 27 June 2019
From: Department of Finance and Minister for Finance Paschal Donohoe TD

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Thank you very much Alan, and good morning everybody again. Thank you all very much for joining us for the second day of the National Economic Dialogue, and for the second half of our morning's deliberations.

Before I go on and make a number of points myself, many of which will build on what Alan has said, I want to acknowledge all of the contributions that have been made, by all of you. The focus that you have put in representing your own interests, and the efforts that many of you made as well, to be aware of the broader common and public interest, that we are looking to make progress on, in terms of Budget 2020 and beyond.

Colleagues here and Contributors, have been quite concisely summarising different issues and points that they've looked to raise. I'm going to try and do the same myself. There's six different points that I want to touch on, that strike me as being relevant for the choices that I and the Oireachtas will be making, in the coming weeks and months. But also for the broader choices that we will have to make across the coming years.

The first matter that I want to touch on is the concept of Trade Offs. My opening point is to say that I believe the kind of Trade Offs that we are going to be engaged in the coming months and years, will actually be very different to some of the Trade Offs that we have grappled with in other meetings of the National Economic Dialogue. In recent years when we've been having these discussions, those Trade Offs have been around Trade Offs within our National Finances. That if we do one thing, we don't do another. That if we make one change in Tax, that sometimes means there's other changes that we can't make. My judgement is that across the coming months and years, we will have to deal with new Trade Offs that are developing within our economy.

There's two in particular that I want to highlight. The first one is what is happening within our employment market, and what that will mean for expenditure choices that we want to make. I've heard many speakers, across recent debates that I've participated in, and I've heard some of it today, in the same contribution make two points. The early part of their contribution tends to be around the battle for talent, or the fact that they, their company, their business, can't get enough people to work within it, or can't get the right people. And then simultaneously, within the same contribution, call for more expenditure and investment.

We are in an economy now, that most recently had an unemployment rate of 4.4%. A labour market that is bigger than it has been in recent years. And at the same time, we have plans from myself, to increase investment in our public capital. And many calls to increase that investment far higher, and even at a quicker pace. That will create Trade Offs that we need to reflect upon.

Could that be the stimulus to the kind of inflationary risk that Alan may have touched on? If we do decide to do that, how can we ensure that we have the people available within our economy, on the right kind of wages, in the right kind of standards in their workplace, to transform that higher investment into genuine economic and social output? And my view, as we move into 2020 and beyond, is that that will be an increasingly important issue for us to reflect on.

We have 2.1 million people at work in our economy. We have just under 100,000 fewer people working in Construction, than we did at an equivalent point in our economic cycle a decade ago. That will matter for choices that we have to go and make.

A second, and very relevant example of that Trade Off, is in relation to the debate on Carbon Taxation. Which is to make the point that if we decide to (a) make a move on Carbon Taxation, and (b) ensure that the revenue that comes from Carbon Taxation is recycled back to those who pay higher levels of Carbon Taxation, it therefore means that as a revenue stream that is not open to invest in many of the things that you have called for. That revenue stream can be spent once. Either as a dividend or an investment input. And again it's an example of the kind of Trade Offs that we will have to engage in.

I think engaging in those Trade Offs is very very valuable. The lack of debating these Trade Offs, reduces the quality of our public debate. Unicorns are abounding, elsewhere, when they discuss what they can and cannot do. And I think it's really important, in how we conduct and debate our affairs, that we see a debate about Trade Offs, as being something that is valuable, and not just about Budgetary Trade Offs, though of course they're Trade Offs that I am particularly focused in.

Which leads onto my second point, which is the debates that we have had, about the need for further investment and further expenditure, in different areas. Just to accompany those calls with two figures. In 2009, the level of current expenditure in our economy was at an all time high, at €55.7 billion. A decade later, that equivalent figure is now €59.3 billion. So as we are having debates and discussions regarding the need for increase and changes in Capital Expenditure, we do need to anchor that in the fact that that is against levels of Capital Expenditure, that for virtually all Government Departments, are now significantly ahead of a base that at different points, we had a debate regarding how could we afford that. Therefore as we move into what more we want to do, we need to keep that in mind, particularly as we look at the kind of opportunities, but also vulnerabilities that we need to be aware of.

Which leads into my third point, which is about the concept of Uncertainty. As we look at where we are, and this was encapsulated in the Summer Economic Statement. We face multiple different environments, that we have tried to summarise into two for next year. And as we have debated all of that, and even as I have debated all of that, I have described that uncertainty as a source of risk. I have done so, because I believe in many ways, it is a source of risk.

I have, however, been encouraged by the number of contributors across the last two days, who have also seen that uncertainty, as a source of opportunity. I think it's really important that as we are thinking about how we can deal with issues and risks, how we can make ourselves more resilient, for dealing with those issues and risks, that we're also aware of the opportunities that could be created for Ireland, amidst that period of increasing political and economic uncertainty, which could develop later on this year.

We have very relevant and recent lessons from that, in our National Economic History. In the period, as our country was emerging from great economic and political difficulty. In that time when the economic uncertainty outside of our shores, was immense, was at times dangerous. Even when that was happening, we managed to make changes and do things from a policy point of view, that actually helped our country move through that period of economic difficulty, with a speed that looked unlikely then. But it happened.

And the qualities and decisions that we touched on across that period, about the quality of our Institutions, about trying to make sensible decisions, in the long run. About looking at the things in our society, that really matter to an economy doing well. They are qualities and choices that we made then, that I also believe we are capable of making now, to help us respond back and take advantage of, some of the opportunities that I think could emerge, across the coming years.

But in order to do that, and this is my fourth point. We have to have foundations upon which we can build that kind of progress. And this is why the parameters that have been laid down in the Summer Economic Statement, are really important for the kind of decisions that we are going to make. In order to ensure that we are in a position, where our finances are either very strong from a surplus point of view, or very resilient in responding back to difficulty, the work that we have done, and of course I want to acknowledge there are things that have sometimes went in a way we didn't plan for. There are difficulties, of course, that you are all aware of. But in its totality, the progress that we have made, in ordering our affairs, is going to be really important for the challenges that we will now deal with. And what we have laid out, in the Summer Economic Statement, in particularly our approach in relation to our Budgetary stance, is the approach that I am going to work very hard, and am determined to deliver, both within Government, and within the Oireachtas, across the coming period.

But it does come with an added layer of challenge. And that added layer of challenge is, is if we look at where we are from a surplus point of view, this year. And it's never an accident that an economy as developed as Ireland's, moves into a surplus, particularly after a period of time that we have gone through. But it is accurate to say, that some of that surplus, in fact a large part of the surplus that we are looking to deliver across this year, has been delivered by developments in what has happened in Corporation Tax.

Some of you have advocated managing a surplus from the point of view of how we managed demand within our economy. But of course what happens in Corporation Tax, and the changes within it, are a consequence of demand in other economies. And are a consequence of Global structural change, as opposed to how we manage demand, domestically.

And that is why I believe it's really important, that if we get the opportunity to do it next year, if the external environment has the prospect of being stable, that we move to having a higher surplus next year. Both to manage the resilience of our national finances, but also to ensure that it is and could be a response back, to some of the other things that might happen in our economy, next year.

And then as we look as to what that could be, I want to talk about the value of progress. I want to acknowledge what Deputy Barry Cowen said earlier on, in his contribution, about the value of political stability. It really matters at the moment. That has been delivered here in Ireland, by decisions that have been made by another Party, by Fianna Fáil, in conjunction with what this Government has looked to do. He referred to electoral risk, and electoral temptations as well. They exist for us too. But of course what both parties, and what I'm guided by, is trying to make sure we can shepherd ourselves through the kind of challenge that we are currently grappling with.

But as we do that, it is really important that if we believe a case can be made for progress, that we do that. Because within a democracy, and I think we can see the consequences of this elsewhere, at the moment, if all we can point to, is continually the difficulties that we have, and the possibility of not making progress, it does invite other choices, that can create even greater harm.

What I'm encouraged by, is if I heard some of the contributions that have been made, particularly, for example, that came from the Vincentian Partnership, that came from Organisations that are dealing with the great risk and challenge of poverty within our economy and within our society. They acknowledge progress that has been made. But were equally demanding in saying more progress needs to happen.

If I heard the debate that has happened in relation to Climate Change. There was recognition of progress in some areas, but equally demanding that more needs to be achieved, and more needs to be delivered. And I do believe this kind of Forum, is valuable in trying to acknowledge both. I think trying to acknowledge both, is really really important for the kind of public debate that we are having, and may have now, particularly in the second half of this year.

That leads onto my last and concluding point, which is a point of optimism. Which is as we look at the challenges that are there, and as we look at the difficulties that we may need to deal with, it is my strong view, that small open societies, are better able to respond back to those challenges, than sometimes bigger countries and bigger economies can. That Ireland has shown its ability to do that, in response to other challenges. And that the qualities that our economy has, of openness, of a focus on Trade, and the quality that our society has, and the value that we place on community, the value we place on social cohesion, the value that we place on intangible elements of our economy, from that of intellectual property to very intangible things like our appreciation for sport, like heritage, like art. All of those are the qualities that I believe will allow us, and will help us navigate our way through what is coming up, and what we need to deal with.

Whether that be the domestic challenges of the progress that we need to make on Homelessness, the progress that we need to make on our housing market. Whether it be the external challenges that speaker after speaker has touched on. I do believe that the nature of our economy and society, and the kind of debate that we have, should give us cautious optimism, for our ability to make continued progress.

Coming out of the debate that we've had here, the different points that have been raised, they will inform the decisions that the Government will make later on in the year. I hope they informed the kind of debate that we will have within our Oireachtas. And, the nature of Trade Offs, both economically, politically and socially, will continue to be really important. But it will be particularly important in the second half of this year, and in 2020, as we grapple with challenges that many have touched on. But also, I believe, take advantage of opportunities, and deliver things for our citizens and for our society, as we have shown our ability to do, over recent years.

Thank you for coming along. As I said earlier on, these Dialogues, and the impact they have, are valuable. And I look forward to meeting you all again, across September, and continuing to reflect on what we need to do better, but also I hope continuing to reflect on where we're making progress.

So thank you for coming along, and thank you for your input and contribution.

ENDS

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