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Fiscal Data

Dáil Éireann Debate, Tuesday - 16 October 2018

Tuesday, 16 October 2018

Questions (169, 170, 171, 172)

Michael McGrath

Question:

169. Deputy Michael McGrath asked the Minister for Finance the available fiscal stance after annual contributions to the rainy day fund each year to 2023 gross, that is, before pre-committed expenditure and demographics and so on and net, that is, after pre-committed expenditure and demographics and so on, based solely on the expenditure benchmark ignoring the MTO; the projected general Government balance and the structural Government balance in each of the years based on the projections announced on budget day, in tabular form; and if he will make a statement on the matter. [42303/18]

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Michael McGrath

Question:

170. Deputy Michael McGrath asked the Minister for Finance the available fiscal stance after annual contributions to the rainy day fund each year to 2023, gross, that is, before pre-committed expenditure and demographics and so on, if Ireland were to run a structural balance of -0.5%, that is, adhere solely with the MTO; the projected general Government balance and the structural Government balance in each of the years based on the projections announced on budget day, in tabular form; and if he will make a statement on the matter. [42304/18]

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Michael McGrath

Question:

171. Deputy Michael McGrath asked the Minister for Finance the available fiscal stance after annual contributions to the rainy day fund each year to 2023, gross, that is, before pre-committed expenditure and demographics and so on, if Ireland were to run a structural balance of 0%, that is, adhere solely with the MTO; the projected general Government balance and the structural Government balance in each of the years based on the projections announced on budget day, in tabular form; and if he will make a statement on the matter. [42305/18]

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Michael McGrath

Question:

172. Deputy Michael McGrath asked the Minister for Finance the available fiscal stance after annual contributions to the rainy day fund each year to 2023, gross, that is, before pre-committed expenditure and demographics and so on, if Ireland were to run a structural balance of 0.5%, that is, adhere solely with the MTO; the projected general Government balance and the structural Government balance in each of the years based on the projections announced on budget day, in tabular form; and if he will make a statement on the matter. [42306/18]

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Written answers

I propose to take Questions Nos. 169 to 172, inclusive, together.

At present, the fiscal rules - both the structural balance rule and, especially, the expenditure benchmark rule - are not well-suited to guide budgetary policy, given our position in the economic cycle. I highlighted this in the Summer Economic Statement and I note that the Irish Fiscal Advisory Council, in its pre-Budget statement, also highlighted this issue.

Essentially, the problem boils down to the fact that full allocation of 'fiscal space' would lead to a repeat of pro-cyclical budgetary policies that would threaten the living standards of Irish people. Pro-cyclical budgetary policies should be avoided; this is especially true when we are facing serious issues such as the exit of the UK from the European Union (and a non-negligible possibility of a 'disorderly' exit).

With this in mind, the more important framework for guiding fiscal policy is 'fiscal stance' - what is right for the economy at a particular point in time, so as to support sustainable, incremental improvements in public services and living standards.

The correct 'fiscal stance' can only be ascertained once account is taken of the position in the economic cycle. If the economy is operating at full capacity, then it would be incorrect to adopt an expansionary budgetary policy. On the other hand, if there is spare capacity in the economy, then it may be appropriate to use tax and expenditure policy to help absorb the spare capacity.

Given the many issues facing the economy and the heightened level of uncertainty (such as what form the UK's exit from the EU will take), it is only possible to assess the appropriate fiscal stance on a year-to-year basis at present.

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