Micheál Martin
Question:41. Deputy Micheál Martin asked the Minister for Finance the position regarding the fiscal council; and if he will make a statement on the matter. [36510/14]
View answerThursday, 2 October 2014
Questions (41)
Written answers
The Irish Fiscal Advisory Council was established on a statutory basis on the 31 December 2012 under the Fiscal Responsibility Act 2012. The Act sets out the Council's functions, which can only be amended through primary legislation.
In that context, Regulation (EU) 473/2013 introduced a requirement that draft budgets and the stability programme update must be based on macroeconomic forecasts that are produced or endorsed by an independent body. This endorsement function has been set out in an amendment to the Fiscal Responsibility Act 2012 and has been assigned to the Fiscal Council.
Since its establishment, the Council has published six Fiscal Assessment Reports, all of which can be found on the Fiscal Council's website. I respond to these reports, usually in my next fiscal policy publication. However, given the gap between the last Fiscal Assessment Report in June 2014 and the publication of the Budget in October, I responded to the Council in writing on 22 July 2014. My response can be found on the websites of the Council and my own Department. The establishment of the Council has strengthened the fiscal governance of the country and its reports have widened and deepened the debate on fiscal policy.
The Fiscal Council have also published a number of other papers, including a Pre-Budget paper on 22 September. This laid out the Council's recommendation that, despite the Exchequer returns, the benefits flowing from the switch over to ESA 2010 and the improved economic environment, consolidation of the order of €2 billion should take place in Budget 2015.
The Council maintain their consolidation recommendation for a number of reasons -
- in order to break the boom and bust pattern and show commitment to a new fiscal policy stance
- to return to sustainable medium-term economic growth and put debt on a strong downward path, and
- to comfortably secure compliance with the 3% general government deficit target
The Council also recommends against any cuts in the Government's revenue-raising capacity, due to the considerable challenges it feels the Government faces in maintaining tight expenditure control.
I note the views expressed by the Fiscal Council in the update of their fiscal stance, and their suggestions with regard to consolidation in Budget 2015. I agree wholeheartedly with the Council's view that we need to break the pattern of boom and bust economics and said so on many occassions. The Government has implemented a number of measures as part of a new fiscal framework to prevent the cyclical pressures of the past from driving fiscal policy, including multi-annual ministerial expenditure ceilings and greater fiscal transparency.
We are required to deliver a deficit of no more than 2.9% of GDP in 2015, we will do what is needed to achieve this target. It looks likely that we can achieve our target without any further expenditure cuts or tax increases. This Government's track record is there for all to see. Each year we have continued to either meet or exceeded our deficit targets. The economy has returned to growth and jobs are being created. The objective of the upcoming Budget is both to broaden, deepen and secure this recovery.We will continue to be prudent and take the necessary steps to deliver metium-term growth and put our debt levels on a downward path.
With regard to the longer term outlook, the forthcoming Budget will show a multi-annual path towards a more balanced budgetary position. This timeframe reflects the Government's desire to provide certainty to Irish people over the medium term.
Finally, I agree with the Fiscal Council that taking account of demographic and other challenges, maintaining tight expenditure control will be tough. However, taking tough decisions is the role of Government and something that we have shown a proven track record over recent years. The hard decisions of recent years have paid off and I am confident that we are best placed to drive the recovery forward into the future.