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Fiscal Policy

Dáil Éireann Debate, Thursday - 11 June 2015

Thursday, 11 June 2015

Ceisteanna (87, 90)

Michael McGrath

Ceist:

87. Deputy Michael McGrath asked the Minister for Finance if projections for the deficit for 2017 and subsequent years in the Spring Economic Statement and the Stability Programme Update 2015 are based on anticipated neutral budgets post-2016, or if they incorporate promised tax and expenditure measures of up to €1.5 billion per annum; and if he will make a statement on the matter. [22922/15]

Amharc ar fhreagra

Michael McGrath

Ceist:

90. Deputy Michael McGrath asked the Minister for Finance the projected deficit in 2016, 2017 and 2018 on a no-policy-change basis and, separately, based on policies envisaged by the Government; and if he will make a statement on the matter. [22926/15]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I propose to take Questions Nos. 87 and 90 together.

As stated in the Stability Programme Update (SPU) and the Spring Economic Statement (SES), the 2016 forecast reflects a budgetary package of €1.2 billion, evenly split between revenue and expenditure measures.  If this €1.2 billion package was not implemented, this would improve the general government deficit ratio, on a straight line basis, by about 0.6% of GDP, from 1.7% of GDP to 1.1% of GDP. The impact of this on outer years is broadly the same. It should be noted that this does not take estimates of second round economic effects into account.  All things being equal, the projected straight line improvement in the deficit of 0.6% of GDP would be reduced somewhat.

The post-2016 forecasts in the SPU and SES reflect a no-policy change scenario other than an increase in expenditure of €300m per annum for demographic pressures and indexation of the income tax system at an estimated cost of €300m in a full year. 

As outlined in the SES, initial estimates produced by my Department at that time suggest that there would be sufficient fiscal space to implement a budget along the lines planned for 2016 in each year from 2017 onwards, whilst complying with the rules and still achieve our MTO over the forecast horizon.

However, while Government has stated elsewhere its intention to reduce the marginal rate of tax and new expenditure priorities, the production of fiscal forecasts reflecting policy beyond 2016 requires specific decisions on the allocation of fiscal space for each year.  Options include whether it should go wholly to expenditure (current/capital) or tax cuts or a combination of these and the iterative nature of forecasting over a four year period means that the range of potential fiscal projections is significant.

When Government has fully considered the appropriate use of the available fiscal space, it will set out its proposals.

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