Dáil Éireann Debate, Tuesday - 2 December 2014
175. Deputy Michael McGrath asked the Minister for Finance his views on the Fiscal Council report which highlighted the lack of planning for the public finances beyond 2015; and if he will make a statement on the matter. [45883/14]
View answerI note the views expressed by the Fiscal Council in their update of their fiscal stance, and welcome their assessment that targeting a deficit of 2.7% of GDP could be considered conducive to prudent economic and budgetary management.
With regard to the Council's assertion that Budget 2015 represents a 'missed opportunity' and further consolidation should have been implemented, our overarching fiscal goal has always been to reach a deficit below 3% of GDP in 2015. On the basis of Budget forecasts, this will be achieved. While further consolidation would have improved the headline deficit figure, I have a number of other issues to consider such as social cohesion and the need to safeguard the ongoing economic recovery.
I agree wholeheartedly with the Council's view that we need to break the pattern of boom and bust economics evident in the past. The fiscal framework, which this Government has put in place, will provide a valuable structure to guide fiscal policy over the coming years. However, there are a number of technical and timing issues relating to EU implementation of fiscal rules which need to be resolved. For example, the expenditure benchmark links growth in expenditure to the potential growth rate of the economy. The updated Commission projections on potential growth, on which assessment with the benchmark would be based, were not available in advance of the Budget. As these estimates can display significant revisions, there was no solid basis to forecast assessed expenditure in the outer years. This limitation was specifically highlighted in the budgetary documentation. A fuller assessment will be contained in the SPU in April. With regard to the revenue forecasts not reflecting Government's intention to reduce the tax burden in coming years, I would strongly make the point that this is the correct approach to take. What is reflected in the budgetary arithmetic is what is being legislated for in the coming year. Budgets cannot be framed on the basis of general policy principles such as that to reduce the level of income tax in the future. These decisions will be taken on an annual basis taking account of the economic and fiscal situation at the time.
