Tuesday, 2 July 2019

Questions (222)

Michael McGrath

Question:

222. Deputy Michael McGrath asked the Minister for Public Expenditure and Reform his views on the commentary by the Irish Fiscal Advisory Council on page 74 of its fiscal assessment that the expenditure forecasts for 2020-2023 are not credible and that the technical assumptions used imply an implausible slowdown in expenditure; his views on whether the observation is correct regarding expenditure forecasts; if he is of the view that the observation is correct, his reason for that view; and if he will make a statement on the matter. [27953/19]

View answer

Written answers (Question to Public)

The Summer Economic Statement (SES) 2016 outlined annual average current expenditure increases of 2½ per cent for the period 2017 to 2021. The fiscal projections in Budget 2019 were extended out to 2023, with a technical assumption being applied of an annual increase in current expenditure of 2 ½ per cent for both 2022 and 2023. The Stability Programme Update, published in April this year, followed the same approach in respect of current expenditure growth.

In setting out expenditure projections, a consideration that needs to be taken into account is the risk that such projections create increased expectations in relation to available expenditure and become a floor for budgetary discussions. In addition, at Budget time each year, it is also possible to increase the growth rate in expenditure by deciding to allocate additional resources for spending increases by either introducing revenue raising measures and/or redistributing resources allocated for taxation measures.

Taking into account the analysis of our current expenditure projections offered by the Irish Fiscal Advisory Council, and my experience of managing current expenditure, I have decided in the Summer Economic Statement, published last week, to increase the rate of current expenditure growth post 2020 to 3 ¼ per cent. Taking into account projected capital expenditure growth, this allows for an annual increase in gross total expenditure of c. 3 ½ per cent over the period 2021 to 2024. This is an appropriate level of growth, given the uncertainties arising in the external environment and the current position in the economic cycle.