Vol. 439 No. 7
13 Mr. Cullen asked the Minister for Finance the estimated debt to GNP ratio in 1996 on current medium-term forecasts of economic growth if the current level of general Government deficit was maintained at its 1994 budget percentage through to 1996.
My Department is currently preparing a post-budget medium-term economic projection which will cover the period to 1996. The intention is that this projection will underpin the Convergence Programme which, in keeping with decisions taken at the European Council, Ireland will send to Brussels later this year. The programme, which will be laid before the House will deal with the question raised by the Deputy.
The question deserves a response based on a fully up-to-date assessment of medium-term economic prospects. A quantified reply at this juncture would have to rely on assessments made some time ago. I trust that the Deputy will bear with me while the full implications for the medium-term of such recent developments as the 1994 budget, the proposed arrangements to follow the Programme for Economic and Social Progress and the most recent forecasts for growth and inflation in our trading partners are being incorporated into our assessment.
I understand the Minister's wish to give an up-to-date assessment, but will he agree that a medium term target, agreed by the social partners and the Government, is set out in the Programme for Competitiveness and Work? Surely this target is underpinned by some view of the medium term growth in the Irish economy. Will the Minister outline the figures which underpin the target of a debt-GNP ratio of a minimum of 95 per cent by 1996 as contained in the programme? This is a matter of public policy, it has already been agreed by the Government and social partners. Presumably, unlike the property tax, this target is not based on random estimates.
The target in the Programme for Competitiveness and Work was based on the outturn data for 1993 — we were working on this data prior to Christmas. As the Deputy is aware, the OECD, the European Union and most of our main competitors, issued different data for 1995. It is probably not too difficult to guess the level for 1994, but it is difficult to predict the level for 1995 as a number of factors have changed substantially. However, I am already on record as saying that I hope we achieve the target set for 1996. I would like to think we could surpass that target in the medium term.
Tomorrow we will debate the Programme for Competitiveness and Work in which the Government gives a commitment that by 1996 the debt-GNP ratio will be 95 per cent. Will the Minister confirm that the Government has abandoned any real progressive efforts to reduce the national debt and retain tighter control on the public finances? Some economic commentators have forecast that the outturn for this year will be approximately 97-98 per cent. The achievement of such modest progress between now and 1996 in such benign circumstances, low interest rates and substantial growth, really means that the Government has lost any commitment to substantially reduce the level of debt and, subsequently, taxation arising out of debt servicing costs.
I am sure the Deputy will appreciate that the target in the programme is one which will at least be reached, based on international developments but I hope we will reduce the level before that. This must be done having regard to the criteria. The programme states that fiscal policy will be conducted to continue reducing the national debt to GNP ratio, with a minimum target of bringing that ratio down to around 95 per cent by 1996.
It is a very modest target.
Not too many years ago it was over 120 per cent.
What will it be by the end of the year?
I will give the Deputy that information as soon as the new data is worked out.
As soon as the Community Support Framework is worked out.
The Minister without interruption, please.
That also has an influence on the criteria.
I thought so.
I would not like Deputy Yates to think that we are no longer committed to the Maastricht guidelines. I want to see us moving towards the level of 60 per cent; I hope we do not reach the position where this trend has to be reversed. Apart from devaluation which naturally broke that trend, the level of debt-GNP ratio has dropped by approximately 3 per cent each year. I think the figure for this year is 103 per cent, which gives a figure of approximately 100 per cent for 1994, but I hope it will be even better.
If the Minister does not have the information I require perhaps he will provide it later. I accept his point about the need to revise the medium term estimates in the light of current information. The Minister referred to data available up to the end of 1993. Will he give a reply to Deputy Cullen's question on the basis of that data because the nature of the target depends partly on the size of the debt and partly on the level of GNP? In view of the forecast changes in the level of GNP, was the target for 1993 a soft or hard one? The only way we will know is to ascertain what it would have been prior to the adjustments to GNP and which should help the Minister to achieve his target much more easily than in the absence of significant growth in GNP.
The figure for 1993 is approximately 103 per cent. I could make an assessment but I do not want to do so off the cuff. I have been looking at the figures for a number of months and much of the data used to arrive at the target contained in the Programme for Competitiveness and Work was based on the assessment carried out by us last summer. Nothing happened between summer and Christmas to change the position for 1993 but things have changed substantially in the international——
Will the Minister give the data up to the time available, which would at least answer the question?
I can give some data in this regard. Technically speaking, stabilisation of the debt-GNP ratio is achieved when the level of borrowing each year is reduced in relative terms. No more than the amount added to gross national product, the level of our nominal GNP will depend very much on what happens in the coming years. This is the basis on which I would like to base updated data. If I did this last year I would have been looking at figures of 0.5 per cent for 1993, 0.25 per cent for 1994, 0.75 per cent for 1995 and 1 per cent for 1996. I would despair if I thought that was still the European Union position. I think the figures have been changed substantially. If I can continue to control the EBR, as I did in recent years and as successive Governments have done since 1988, we should achieve a level of 95 per cent by 1996.
The Minister acknowledges that the level of allocations under the Community Support Framework will have an influence in determining the assessment to which he is referring. Is he presuming that will be clear by April and that the normal six months deadline will apply, or is it his intention to apply for an extension if agreement is not reached by the relevant date in April?
For the purposes of an assessment we are well aware of the position. The figure agreed in October is the one that must be taken into account. We do not know what will happen in 1996 on review and it is pointless trying to make an assessment of that because I could not stand over the figures. As I said in the House recently I must work on the basis of the £7 billion figure which we have achieved. For me to guess the 1996 figure at this stage or try to assess the GNP ratio over the medium term would be a pointless exercise. I will work from the figure that is already known which is in excess of £7 billion.
Can I take it that it is not the intention of the Minister for Finance to seek an extension of the time when the plan might be agreed?
In trying to conclude the Community Support Framework?
Yes.
I will do all I can to finalise the Community Support Framework and the operational programmes as quickly as possible because if that was not done a number of programmes would face funding difficulties during the summer, particularly RDF projects. As Minister for Finance I am anxious to see this matter concluded. The Minister of State and I are well aware that that conclusion is based on the agreements reached last year. We may not like the agreements that were reached last October, which we will fight on another day, but as far as we are concerned the figure is known now.
