Dáil Éireann Debate, Thursday - 28 June 2018
100. Deputy Pearse Doherty asked the Minister for Finance the effects of minimum compliance with the expenditure benchmark on the general Government balance and structural balance respectively as a percentage of GDP if the position of minimum compliance with the expenditure benchmark was taken, including the use of monies earmarked for a rainy day fund as spending, for the years 2019, 2020 and 2021. [28557/18]
View answerThe Government is committed to establishing the Rainy Day Fund as a fiscal buffer in the event of a major shock to the economy.
By spending the €900 million available as per minimum compliance with the expenditure benchmark, it would increase borrowing further by the amounts shown in the table below and would result in not achieving the Medium Term Objective (MTO) until 2021.
In this scenario, the estimates prepared by the European Commission, in its Spring Forecast, and my Department, in the Stability Programme Update 2018, both project a structural deficit of 0.4 per cent of GDP for next year.
Table 4 in the Summer Economic Statement sets out the minimum compliance with the expenditure benchmark. This does not include spending the allocations set aside for the rainy day fund.
This table is reproduced for the Deputy's convenience below:
|
|
2019 |
2020 |
2021 |
|
|
|
|
|
|
a. General Government Balance (SPU 2018) |
-0.1 |
0.3 |
0.4 |
|
b. Structural Balance (SPU 2018) |
-0.4 |
0.1 |
0.3 |
|
c. MTO |
-0.5 |
-0.5 |
-0.5 |
|
Targeting minimum compliance with expenditure benchmark: |
|
|
|
|
d. General Government Balance (minimum compliance) |
-0.4 |
-0.4 |
0.2 |
|
e. Structural Balance (minimum compliance) |
-0.7 |
-0.6 |
0.1 |
Note: The scenario above does not take into account the second round effects of any such measures
If an additional €500 million were to be spent this would, in the first instance, increase the general government deficit by another 0.2 per cent of GDP and have a corresponding impact on the structural position in each of the years 2019-2021. Under the structural balance pillar Ireland would not have achieved the required annual improvement. So we would be running a headline deficit of 0.6 at an advanced stage of the economic cycle - this would be economically reckless. Instead the Government will frame budgetary policy on the basis of what is right for the economy to ensure continued steady improvements in Irish employment and living standards.
