Dáil Éireann Debate, Thursday - 12 November 2015
72. Deputy Eric Byrne asked the Minister for Finance the impact for Ireland’s economy generally, and in terms of reducing Ireland’s debt-to-gross-domestic-product ratio, and the Government’s deficit, if public expenditure had been increased in budget 2016 by €12.8 billion and taxes had been raised by €16.4 billion instead of the measures adopted in budget 2016; and if he will make a statement on the matter. [39827/15]
View answer73. Deputy Eric Byrne asked the Minister for Finance the impact for Ireland’s economy generally, and in terms of reducing Ireland’s debt-to-gross-domestic-product ratio, and the Government’s deficit, if public expenditure had been increased in budget 2016 by €8.7 billion and taxes had been raised by €8.8 billion instead of the measures adopted in budget 2016; and if he will make a statement on the matter. [39828/15]
View answerI propose to take Questions Nos. 72 and 73 together.
The general government deficit and debt figures for 2016, as per Budget 2016, are currently projected to be -€2.8 billion (-1.2% of GDP) and €207.1 billion (92.8% of GDP) respectively. The Deputy is asking what would be the impact should alternative levels of revenue and expenditure be introduced rather than the measures announced per Budget 2016. In order to assess the potential implications my Department has used data based on the no policy change figures published in the White Paper on Estimates of Receipts and Expenditure for the year ending 31 December 2016. The resultant impact on a purely iterative/accounting basis of the proposed alternative measures submitted by the Deputy in this Parliamentary Question are outlined in the table below.
|
- |
Option 1 |
Option 2 |
|
- |
2016 |
2016 |
|
White Paper 2016 General government balance (% of GDP) |
-0.8% |
-0.8% |
|
White Paper 2016 General government balance (€m) |
-1,858 |
-1,858 |
|
Proposed additional Expenditure (€m) |
-12,800 |
-8,700 |
|
Proposed additional Revenue (taxation) (€m) |
16,400 |
8,800 |
|
Projected General government balance (€m) |
1,742 |
-1,758 |
|
White Paper 2016 GDP (€m) |
222,514 |
222,514 |
|
Projected General government balance (% of GDP) |
0.8% |
-0.8% |
|
Difference in balance compared to Budget 2016 |
2.0% |
0.5% |
|
Estimated GG Debt based on White Paper (€bn) |
206.2 |
206.2 |
|
Projected GG Debt based on Options 1 & 2 (€bn) |
202.6 |
206.1 |
Source: Department of Finance
From this table it is apparent that option 1 would improve the general government balance (GGB) in 2016 compared to Budget 2016 by 2.0% of GDP while option 2 would improve the GGB by 0.5% of GDP. Assuming that the improvement to the balance did in fact arise as indicated, there would, all other things being equal, be a reduction in the borrowing requirements for the year leading to a comparable decrease in overall general government debt. Under option 1, no borrowing would be required to fund the Exchequer, and, assuming the surplus is used to repay debt, projected debt levels would be reduced by €4.5 billion compared to the Budget 2016 forecast. Under option 2, there would be a reduction in the deficit of approximately €1 billion compared to Budget 2016, thus reducing the projected debt by a similar amount. The nominal debt for 2016 under option 1 would then be circa €202.6 billion and approximately €206.1 billion for option 2 compared with €207.1 billion forecast in Budget 2016. Based on the GDP levels in the White Paper, the debt levels would represent an improvement on the Budget 2016 forecasts of the order of 2.0% of GDP and 0.5% of GDP respectively.
It should be noted that the Gross Domestic Product presented in the table is the same as that utilised in the White Paper and consequently does not take into account the potentially numerous second round economic effects that would arise from the alternative expenditure and revenue aggregates proposed by the Deputy in his two questions. Forecasting the overall impact on GDP, which could be significantly negative, would be a major task, which my Department is not in a position to carry out. For instance, much would depend on the precise composition of the revenue and expenditure measures, and these have not been clarified.
