Dáil Éireann Debate, Tuesday - 19 July 2016
215. Deputy Maurice Quinlivan asked the Minister for Finance if he will seek a derogation from the European Commission to borrow €1 billion outside the fiscal rules for the purpose of social housing, as recently requested by IBEC in its 2017 budget proposals; and if he will make a statement on the matter. [22657/16]
View answer216. Deputy Maurice Quinlivan asked the Minister for Finance the criteria for and availability of a derogation from the European Commission to borrow outside the fiscal rules for the purpose of social housing; and if he will make a statement on the matter. [22658/16]
View answer217. Deputy Maurice Quinlivan asked the Minister for Finance his views on the recent joint statement on Brexit, in which President Hollande, Chancellor Merkel and Prime Minister Renzi noted that Europe must strengthen areas where both economic and social priorities overlap (details supplied); if he will seek a derogation from the European Commission to borrow €1 billion outside of the fiscal rules for the purpose of social housing; and if he will make a statement on the matter. [22660/16]
View answerI propose to take Questions Nos. 215 to 217, inclusive, together.
I have noted the proposals from IBEC as well as the comments by President Hollande, Chancellor Merkel and Prime Minister Renzi.
The fiscal rules - formally known as the Stability and Growth Pact (SGP) - have direct application through a number of EU regulations. Changes to these regulations would have to follow the normal EU approach starting with a proposal from the Commission before consideration by Member States and the European Parliament. There is no facility under the Stability and Growth Pact to allow for a derogation to borrow outside the fiscal rules.
Having said that, it is important to note that there are existing provisions in the fiscal rules that are designed to promote public investment. For instance, within the expenditure benchmark pillar of the rules, public investment is granted favourable treatment - as a result of four-year capital smoothing, only one quarter of the increase in public investment must be funded in the first year from within the fiscal space. This provision means capital spending for housing and other purposes can be leveraged within the EU rules.
Moreover, in line with the European Commission approach, the Government adopted a slightly less stringent medium-term budgetary objective (MTO) of a structural deficit amounting to 0.5 per cent of GDP in the Summer Economic Statement (SES) which was published in June. As I have already communicated, this policy initiative will result in an additional €1½ billion in fiscal space becoming available under the EU rules once the MTO is reached. Taking account of this development and capital smoothing we will, as set out in the SES, be bringing forward proposals for an additional cumulative €4 billion in capital formation over the period 2017 - 2021.
It should also be noted that the fiscal rules provide for certain flexibilities, particularly with a view to encouraging public investment. Specifically the rules allow for temporary deviations from the required structural budgetary adjustment if spending on capital investment can be shown to qualify for either the investment clause or the structural reform clause. Both of these provisions are subject to strict conditions; and while Ireland has not yet been in a position to apply given where we are in the business cycle, the situation is kept under constant review.
I would point out that we are continually exploring how permitted flexibility within the existing framework can be optimised as well as seeking to improve the implementation of the SGP. For instance, a number of proposals from Ireland to improve the application of the fiscal rules were adopted by the Commission last year.
Finally, I wish to assure the Deputy that ending the Housing shortage and Homelessness is a priority for this Government. In this context, the Minister for Housing, Planning and Local Government will shortly set out the new Government Action Plan for Housing.
