Vol. 414 No. 6
10 Mr. McGrath asked the Minister for Finance when the national debt will be reduced to 60 per cent of GNP on the basis of (a) a balanced budget in 1993 (b) no increases in expenditure, in real terms, after 1993 and (3) a real growth rate of 3 per cent from 1992 onwards.
The debt-GNP ratio depends upon (i) the development of nominal GNP and (ii) the development of the debt itself, again in nominal terms. The Deputy has not set out all the assumptions which are necessary to show what development of these two items he may have in mind.
If the Deputy wishes to put down a question which sets out specific assumptions on both matters, beginning from end-1990, I will be happy to respond.
(Limerick East): There are enough assumptions in the text of the question to allow any civil servant not engaged in nit picking to come up with an answer. What is the Minister's view of the necessary assumptions which should be underpinning the economy to have a debt-GNP ratio of 60 per cent by the time a single currency comes in, somewhere between 1996 and 1999?
In fairness to the people who were working on it, there are a lot of assumptions. On reading the file I discovered that the Deputy had made a previous attempt to extract this information. A question was tabled in the name of Deputy Taylor-Quinn. There is a number of aspects to be taken into account. During the discussions last week I was conscious of when we might get to Stage 3 of European Monetary Union, whether it be in 1996 or 1999. Examinations carried out within the Department are based on different assumptions and I do not agree totally with any of them. I argued in the discussions last week that to get to 60 per cent at the start of Stage 3 would be difficult in the context of the arithmetic of any of the assumptions on the table.
Would the Minister not agree that the question put down by Deputy Paul McGrath give three fixed values to variables in an equation and that the Department of Finance must have the ability to feed that information into the economic model available to them and to arrive at a time output of three, five or ten years? The assumptions are very clear — a balanced budget in 1993, no real increases in expenditure and an average of 3 per cent growth in GNP from 1992. That fed into the system must give a time output.
One would need to take a view of budget developments post-1993. The question mentions a balanced budget in 1993 but says nothing about subsequent years.
The Minister is being disingenuous.
One would also need to specify for a period stretching more than ten years ahead the inflation rate, the interest rate and the national debt.
It does not suit the Minister to be disingenuous.
I read the question and argued it out with the advisers. There is a number of factors which does not allow them to feed the figure into a model.
The Minister has chosen to avoid it.
No.
(Limerick East): The use of the expressions “real terms” and “real growth” allows for the inflation factor. I put it to the Minister that a balanced budget in 1993 and no increase in expenditure in real terms subsequently gives the base figure for the national debt and that a real growth rate of 3 per cent on average makes certain assumptions about interest rates. The only assumption which I have not included is the Government policy on the sale of State assets. That assumption can affect the magnitude of the debt. Is that not the reason the Minister is dodging the question? He does not want to give a categoric statement on the sale of the century which has to occur for the debt-GNP ratio to come anywhere near 60 per cent by 1996-7.
I read the Deputys' comments in a statement recently. I can answer each point if necessary, but I must look at what forms the models. There may be fluctuations in the exchange rates of the currencies which affect out debt. There is a number of items.
The Minister has two draft answers. He chose the non-answer.
We are signatories to the chapter on monetary union and a single currency. The Minister must have had some answer to that question since that is the basis of our signing the chapter on monetary union.
I want to point out to the Deputy — at least one other Member of the House also read both the Luxembourg draft and the other drafts incorrectly — that in signing the chapter on economic and monetary union we are not commiting ourselves to reaching a 60 per cent GDP-debt ratio by 1996. We signed on the basis that we would work towards achieving a 60 per cent GDP-debt ratio.
That is like draining the Shannon.
Deputy Garland, for a final question on this subject.
I do not think Deputy Quinn would like us to commit ourselves to achieving a 60 per cent GDP-debt ratio within five years.
Deputy Roger Garland has been called. A brief question, Deputy.
May I put it to the Minister that this is merely obfuscation on his part? The reality is that we must reach the 60 per cent GDP-debt ratio quite quickly. Would he agree that this will result in draconian budgets for a number of years with consequent hardship being imposed on the poor, unemployed, sick and so forth?
The Deputy cannot read that into it. I want to again correct what the Deputy has said. It is not a question of reaching a 60 per cent debt-GDP ratio by 1996 or 1999, which is probably the date this will occur.
Question No. 11.
Nevertheless it will put budgetary restrictions on this country for a number of years ahead.
