Dáil Éireann Debate, Wednesday - 10 November 2010
52 Deputy Jack Wall asked the Minister for Finance when he will set out the total fiscal adjustment necessary in each of the years 2011 to 2014, inclusive, in order to achieve the 3% of GDP deficit target by 2014; and if he will make a statement on the matter. [41644/10]
Amharc ar fhreagraAs the Deputy is aware, in recent weeks the Government has restated its commitment to achieving a general Government deficit of 3% of GDP by 2014. More recently, it has concluded that a total consolidation of €15 billion is necessary over the next four years in order to achieve the target. A significant front-loading of this adjustment has also been signalled and a consolidation package of €6 billion has been decided upon for 2011. In his recent visit, Commissioner Rehn noted that our assessment was appropriate and agreed that significant front-loading was required.
The four-year budgetary plan, which is being prepared, will be published later this month and will set out the budgetary and economic strategy for the period out to 2014. It will provide details of how the adjustment is to be made each year so that we achieve a general government deficit of 3% of GDP by the end of 2014. A crucial part of the plan will be enhancing Ireland's growth potential and making the necessary structural reforms will be key in this regard.
Last week, my Department published a technical information note on the economic and budgetary outlook in advance of the publication of the four-year budgetary plan. That note outlined the emerging economic and budgetary outlook in order to enhance transparency and inform the public ahead of the publication of the four-year plan later this month.
The note detailed the emerging economic and budgetary position for 2010 and provides an assessment of the economic and budgetary outlook for 2011 and for the medium term. The position was based on assumptions regarding the impact of a consolidation package of €15 billion over the next four years.
As I indicated, the Government has decided upon a consolidation package of €6 billion for next year. On a technical basis, the information note projected that this would result in a general government deficit in the range of 9.25% to 9.5% of GDP next year. The information note also provided an estimate of the deficits in later years, on the basis of the remainder of the total multi-annual package of €15 billion being indicatively assigned to each of the years. While decisions have yet to be announced regarding the breakdown of consolidation between expenditure and revenue, for the purposes of producing economic forecasts it was assumed that the bulk of the adjustment will take place on the expenditure side in 2011 with a ratio of expenditure to revenue measures weighted 2:1 applying over the course of the 2012 to 2014 period.
Additional information not given on the floor of the House.
However, the Government is still considering the design of the multi-annual consolidation schedule. Details on the composition of the adjustment for 2011 and the extent and composition of the measures over the remaining years of the forecast period will be announced in the four-year budgetary plan.
It is important to note that the targets that the four-year budgetary plan will set will be reviewed annually and action will be taken in the event of any departure from the path outlined towards achieving the target deficit of 3% of GDP by the end of 2014. In addition to setting out a multi-annual budgetary strategy, the four year plan will also outline a programme of structural reform, which will help to restore competitiveness and support economic growth.
The key purpose of the four-year budgetary plan is to demonstrate to all, both within and outside this country, that we are serious about dealing with the problems we face, that we are continuing to address them and that there is a credible route to prosperity and budgetary sustainability over the coming years. The four year budgetary plan will be published later this month and the budget for 2011, to be published on 7 December, will effect a significant element of the plan.
Will the Minister give the House a date for the publication of the four-year plan? As part of the sharing of information offered by the Minister to the Opposition I have asked the Minister and his officials on previous occasions if the Minister can provide the Opposition with the template for the four-year plan. He must know this by now. Despite requesting this information for the past three weeks, the Labour Party has not received it.
Has the Minister or Fianna Fáil any proposals for growth measures to counter-balance fiscal austerity? The Labour Party has published very detailed proposals which have been nationally and internationally assessed to provide for a strategic investment bank using a small proportion of the moneys in the National Pension Reserve Fund for infrastructure and for innovation and small and medium enterprises.
We cannot have a full debate on all these matters now and I am anxious to facilitate a number of Deputies.
In brief, the four-year plan will be published later this month. The precise date is a matter for the Government. With regard to a template for the four-year plan, I presume Deputy Burton is referring to a general outline of the plan. The Government will have to decide on the plan and it will then be published. In regard to growth measures, of course the four-year plan will be underpinned by credible growth measures.
Has the Minister or anybody within his Department or the other Departments conducted an analysis on the impact of the reductions to be announced on budget day?
A brief question, please, Deputy.
I wish to clarify my question.
We do not need clarity on the question.
It seems to be the case that the Department has not conducted any analysis into the micromanagement of these reductions. While there might be a cost saving now there could be a potential massive cost for the State in the future.
In the course of every Estimates process every Government does a very detailed economic assessment of the impact of particular measures. There are political choices to be made. For example, were we to abolish entirely our overseas aid budget, it would have no effect on the Irish economy but it would be a very retrograde step, in my view. This is an example of an area of expenditure where there is no return to the domestic economy but there is an important international moral obligation shared, I hope, by all of us in this House. In making a detailed assessment——
Which is, in fact, a return.
——of what is appropriate in connection with particular reductions in expenditure, of course in the Estimates process the Government has regard to the relevant economic impacts. I noted that Commissioner Rehn, when asked yesterday for his personal opinion and based on his experience in Finland, made the point that education and innovation are of particular importance to an economy like ours when we are engaged in a fiscal correction.
I apologise for missing the first part of Question Time as I was attending a committee. Had the Minister taken the opportunity to ask Commissioner Rehn if he will extend the 2014 deadline for bringing the deficit within 3% of GDP within the Stability and Growth Pact? Has the Commissioner given the Minister an undertaking that this is not achievable within that date, as is the majority view here?
No, Commissioner Rehn did not suggest that at all. He suggested that his assessment was that the €15 million overall target was appropriate and that the most important issue of all was the front-loading of the €6 billion correction. He communicated that opinion in the Irish broadcast media, as I understand.
Did the Minister ask him about the date? Did he ask him to extend the 2014 deadline?
There was no discussion about the date because the figure of 2014 was in fact agreed in 2009 when Ireland was given a long period — the longest period of any member state — to correct its deficit, in recognition of the fact that our difficulties were——
They were different figures then.
The figures on the fiscal deficit were not all that different in 2009.
I call Deputy Brian Hayes.
I ask if I may give way to Deputy D'Arcy.
I would rather the Deputy did not do so, in as much as I am trying to facilitate other Deputies and Deputy D'Arcy has only asked a supplementary question.
An act of generosity should be recognised.
I will allow Deputy D'Arcy very briefly.
I am surprised at the Minister's response. When I put that question to the Secretary General of a Department at a meeting of the Committee of Public Accounts and to the Minister's officials from the Department of Finance, they said no in-depth long-term analysis had been done on reductions.
What does the Minister mean by his reference to later in the month with regard to the publication of the four-year plan? We were given to understand previously by him and by his officials that it would be published in the middle of the month, which is next week. Since then the Donegal by-election has been announced. The Labour Party put serious proposals to Commissioner Rehn yesterday for investment in infrastructure such as public transport and roads, in school building and development. This is what the Finns did when their banking system crashed. We also made proposals about innovation in small and medium enterprises. Is there any hope that the Government has any belief in the future of the country and that it intends to invest anything in it? Is there any investment strategy to offset fiscal austerity?
The Government has great faith in this country and its capacities and in the future of this country. I certainly have faith that we can overcome our difficulties and resolve them. Our underlying economic performance has been very strong throughout this recession. For example, our exports on a year-on-year basis increased by 6% this year. There is tremendous resilience in our labour force. I acknowledge we have real difficulties in the banking sector and in our public finances and we are addressing them. With regard to the Labour Party proposals for investment and the Fine Gael proposals on the adjustment, I would be delighted to receive a copy of these proposals and have them assessed by my Department.
As to the date for the announcement of the four-year plan, I indicated at an earlier stage that we intend to publish it in mid-November.
Then Donegal happened.
If I may finish, it has been delayed until later November. The Deputy is incorrect; it is not contingent on the date for the Donegal by-election. It will be later this month. It has never been suggested by either the Government or myself that the Donegal by-election has anything to do with this because that is not the case. The Government is finalising the Estimates process for the budget and when this is completed, the Government will consider the plan. As Deputy D'Arcy pointed out, the economic impact of both the plan and the budget is of crucial importance and the Government must take the utmost care in drawing up the plan.
