Dáil Éireann Debate, Tuesday - 26 September 2017
96. Deputy Róisín Shortall asked the Minister for Finance his views on the assertion made by an organisation (details supplied) in its recent pre-budget submission that the Government could increase the level of available fiscal space in the coming years while still meeting its targets under European fiscal rules. [40748/17]
View answerI am aware of the proposal referred to by the Deputy.
The analysis proposes that fiscal space estimates for the next number of years incorporate the extraordinary 26 per cent GDP growth figure recorded in 2015.
My Department has advised that this approach is inappropriate and risks repeating the pro-cyclical mistakes of the past. I agree with this advice - the 26 per cent growth rate was due to one-off factors which could easily be reversed. For instance, intellectual property can be moved off-shore as quickly and as easily as it was moved on-shore. If this happened, we would be left with a large gap, once again, in the public finances.
In the last Budget, my Department highlighted that it would adjust the fiscal space calculations to take this into account. This approach has been supported by the Irish Fiscal Advisory Council. Moreover, the European Commission has formally stated that it will ignore the 26 per cent growth rate when it (the Commission) assess Ireland’s compliance with the rules.
I would also point out that our public debt ratio is very high - on a per capita basis, we have one of the highest debt ratios in the developed world.
Finally, I want to stress that the economy is approaching full employment and it is imperative not to overheat the economy by adopting inappropriate budgetary policies. It is the fiscal stance that is more important than fiscal space.
In summary, I want to assure the Deputy that the Government will not jeopardise future living standards by adopting inappropriate policies.
