Dáil Éireann Debate, Tuesday - 29 September 2015
273. Deputy Mick Wallace asked the Minister for Finance if he will reconsider the envisaged tax cuts pledged for budget 2016, given that, according to data from the International Monetary Fund's fiscal monitor, Government expenditure is already one of the lowest in the European Union; if he has concerns about the implications of this proposed tax reduction; and if he will make a statement on the matter. [33285/15]
View answer274. Deputy Mick Wallace asked the Minister for Finance if he is satisfied that his recent pledge of a cut of at least 1% to the universal social charge is a prudent decision for the upcoming budget; if he will reconsider this measure with a view to investing the tax collected in the public services; and if he will make a statement on the matter. [33286/15]
View answerI propose to take Questions Nos. 273 and 274 together.
The Deputy is correct that Ireland's general government expenditure at 39% of GDP in 2014 is lower than the EU-28 average of 46.2%.
While fiscal capacity determines expenditure capacity and GDP is generally taken as the appropriate indicator of fiscal capacity, in view of the exceptional gap between GDP and Gross National Product (GNP) in Ireland, the Irish Fiscal Advisory Council (IFAC) have argued that a more appropriate measure of Irish fiscal capacity is a hybrid measure taking GNP plus 40 per cent of the gap between GDP and GNP. Calculated on this basis, general government expenditure rises to 44.4%. This is marginally below the EU average identified above and in the middle of the distribution of values for all EU countries.
In terms of allocating the fiscal space available between expenditure and revenue, a careful balance must be struck between accommodating current expenditure pressures and encouraging growth in the economy over the medium term to ensure that the economy will be in a position to support future demographic pressures as they arise.
I believe that the right balance can be achieved by allocating the available resources equally between expenditure on public services and tax measures to encourage economic growth. As part of the tax package, I intend to continue to make it more attractive to return to work, to stay in work and to ensure that work rewards individuals adequately. I plan to reduce the tax burden on low and middle income earners in the upcoming budget and subsequent budgets, subject to having the required fiscal space.
