Dáil Éireann Debate, Tuesday - 29 September 2015
122. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the permissible fiscal space under the expenditure benchmark available to him in budget 2016, and for the remainder of 2015, as part of the Government's budget 2016 announcements; if these figures take into account the need for increased spending due to demographic changes and inflation in 2016; and if he will make a statement on the matter. [33185/15]
Amharc ar fhreagraMy question follows on from Deputy Michael McGrath's and amplifies the need for a better process for having more information available in respect of the budget. The Minister referred to staying within the fiscal space of 1.5%, which applies to the expenditure benchmark in budget 2016. However, he has strongly indicated that there is scope to introduce Supplementary Estimates to deal with the buoyancy in taxation and the additional receipts that have come in. Because expenditure in the next three months does not count as part of the expenditure benchmark rule, we could spend a couple of hundred million euro on education, health and social welfare - for example, restoring the Christmas bonus or putting child benefit back in place - and it would not count in relation to the fiscal space.
Can the Minister confirm this and does he have any intention of following that line, which would be a way of avoiding the constraints the expenditure benchmark has placed on the Government?
I thank the Deputy for his question and his elaboration on it. As indicated in the spring economic statement, fiscal space of €1.2 million to €1.5 billion will be available for new expenditure or revenue measures in budget 2016. This estimate of fiscal space was designed to ensure compliance with the fiscal rules that Ireland is now subject to under the preventive arm of the Stability and Growth Pact, in particular the expenditure benchmark pillar. This quantum of fiscal space formed the basis for discussion at the national economic dialogue held in July at which there was a broad consensus that budgetary demands would have to be met from this package. The exact size of the fiscal space will be finalised in the coming weeks taking into account various inputs, such as the projected inflation rate - GDP deflator - any discretionary tax measures and other elements of general government expenditure outside of central Government. Inflation is taken into account in the calculation of fiscal space through the incorporation of the GDP deflator in the expenditure benchmark. It should also be noted that the fiscal space will have to accommodate all Government priorities, including additional expenditure arising from demographic pressures.
A budgetary package of between €1.2 million and €1.5 billion will provide for increases in key expenditure areas and reduce the high tax burden on the squeezed middle. I reiterate the importance of delivering a budget which is consistent with the pre-announced fiscal space. The quantum is appropriate from an economic and fiscal policy perspective, a view which is shared by the Irish Fiscal Advisory Council, as stated in its recent pre-budget statement. This will give further confidence to the markets that the Government remains committed to sensible and prudent fiscal policy.
With regard to 2015, the stability programme update published in April forecast a deficit of 2.3% of GDP. Notwithstanding emerging pressures on expenditure, given the performance of revenue through the first eight months of the year, I am confident that we will at least achieve, if not better, this target. Importantly, it is now increasingly likely that the debt ratio will fall below 100% of GDP at the end of the year.
In response to the issues raised by the Deputy when he introduced his question, the figure of 2.3% is one that I will achieve. It was in the spring statement. If a lot of extra tax accrues up to the end of September, I am still bound by the figure of 2.3%. Of course, if Government Departments overspend - and we know that the Department of Health is already ahead of budget allocation - that must be met. The point I was making to Deputy Michael McGrath is that I believe there will be sufficient taxes above profile to meet issues that arise on the expenditure side. Some Departments are below their level of expenditure so there is a possibility of diverting expenditure budget funds to the areas in which overruns have occurred from those where there has been an underspend.
I want to dig a bit deeper into this. I hear the Minister loud and clear in terms of the 2.3% deficit target. The issue arises as to whether there might be space for additional expenditure to be made in 2015 in circumstances where that target could still be met. Is there any space to spend or have supplementary welfare budgets beyond the overruns in the Department at this point that would allow the Minister to reach the 2.3% target and spend money on social welfare? It is a way of circumventing the expenditure benchmark rules. Otherwise, it would not be done and it would be announced in the budget and would take effect in 2016. It has been signalled by Government that the intention is to introduce a number of supplementary budgets that would allow for measures such as restoring the Christmas bonus or increasing child benefit but that would not be included in the fiscal space in terms of expenditure of €750 million.
Is there space in that regard?
I have a question on the White Paper on expenditure and receipts. It comes out at midnight the Friday before the budget. I do not believe that it could not be brought forward or that information like that could not be provided with all the caveats closer to budget day to have a better informed debate, particularly from the Opposition parties and other interested parties outside the House.
I thank the Deputy.
If we are talking about genuine reform, we should not repeat that in future years.
The additional tax above profile at the end of eight months, at the end of August, was €1.4 billion but a big chunk of that is needed to get the deficit down to 2.3%. Our requirement under the rules was to get the deficit below 3% and we budgeted for 2.7%. As it is well below that, it consumes much of the extra tax. I will know better on Friday and I will make a full statement then on where we are at the end of nine months. The trend of additional tax over profile coming in seems to be continuing in September. Based on the final figures that we will have on Wednesday, we can guesstimate our forecast, if one wants to use that word, of how it might end up at the end.
If there is a decision in government, obviously one has to cover overruns in Departments and that is through the Supplementary Estimate process with which the Deputy is familiar. If anything new is proposed, it would have to be in 2015 and it would have to be once-off because if there is a carryover into the following year - it affects the figures.
I thank the Minister.
The White Paper comes out at the end because the figures keep changing. If I were to commit to the Deputy to publish the White Paper this week, he would have inaccurate information. People need to have it down to the very end before they have full accurate information. However, there are many other sources of information and the Deputy can have a fairly good estimate of where it is. I will give him as much information as I can in my statement on Friday.
I appreciate that.
I wish to discuss the once-off expenditure measures. Let us consider the hypothetical example of restoring the Christmas bonus. Am I not correct in saying the expenditure benchmark will be measured against the expenditure of 2015? If there is an expenditure increase in the Department of Social Protection, that would be the baseline against which one will be measured in 2016 and it would allow the Minister to circumvent the expenditure benchmark rules.
The Minister told Deputy Michael McGrath that the carry-forward in taxation is not included in the €750 million of taxation measures he will propose. On expenditure and how we comply with the rules, given the demographic pressures and the €300 million that is needed just to stand still in terms of policy, is that part of the €750 million that is earmarked for expenditure and in relation to the restoration of pay coming from the unwinding of the financial emergency measures in the public interest legislation or does that all need to be accommodated within that budget to meet the rules by which we must abide?
The demographic pressures for 2016 are included in the base. The pay agreement and unwinding the financial emergency measures in the public interest legislation are included, but will have to be taken out of the expenditure side, the €750 million.
Both.
However, projecting forward to subsequent years, I cannot vouch for the accuracy of the forecasting of demographic pressures in 2017, 2018 and 2019. Money is included but its accuracy is a matter of best judgment on that basis.
