Dáil Éireann Debate, Thursday - 5 November 2015
98. Deputy Michael McGrath asked the Minister for Finance his views on the warning from the Governor of the Central Bank of Ireland that potentially temporary increases in Government revenue are being used to fund permanent increases in expenditure; and if he will make a statement on the matter. [38779/15]
View answerGovernor Honohan, as is normal practice, provided me with his insights and advice on the Irish economy in advance of Budget 2016. He rightly highlighted some of the key risks facing the economy, including any potential for mismanagement of the public finances and using once off revenues to underpin long term expenditure commitments. I am, of course, conscious of these issues.
I would make the point that Budget 2016 represented the first Budget framed under the preventive arm of the Stability and Growth Pact. The preventive arm is designed to prevent the boom bust cycles of the past from recurring.
For example, fiscal space estimated under the expenditure benchmark was derived with reference to the potential growth rates of the economy. This means that temporary or cyclical increases in revenue have no bearing on the fiscal space used to frame budgetary policy.
Similarly, with regard to the minimum annual improvement in the structural balance, the estimate of the structural balance excludes the impact of cyclical revenues. This will help ensure that expenditure commitments are based off a sustainable revenue base.
Further, one-off proceeds from asset sales, such as the State's shareholding in the banking sector, cannot be used to finance day-to-day expenditure. The statistical treatment of such revenues is such that they will primarily be directed towards reducing Ireland's elevated debt level. This will help underpin Ireland's fiscal sustainability over the medium term.
In summary, Ireland has been down this road before with ruinous consequences for the country and I will not facilitate permanent expenditure increases on the back of temporary revenues. The new fiscal framework will help ensure that this is the case.
