Dáil Éireann Debate, Thursday - 29 September 2016
20. Deputy David Cullinane asked the Minister for Finance the discussion he has had with European partners with regard to a possible loosening of the fiscal rules in cases of public capital investment. [19806/16]
Amharc ar fhreagra26. Deputy Imelda Munster asked the Minister for Finance his plans to seek greater flexibility in the fiscal rules for expenditure on capital investment and to achieve change at an EU level so that these rules no longer constrain the State from investing in essential infrastructure and public services; and if he will make a statement on the matter. [27531/16]
Amharc ar fhreagraI propose to take Questions Nos. 20 and 26 together.
The fiscal rules - formally known as the Stability and Growth Pact (SGP) - have direct application through a number of EU regulations. Changes to these regulations would have to follow the normal EU approach starting with a proposal from the Commission before consideration by Member States and the European Parliament.
Having said that, it is important to note that there are existing provisions in the fiscal rules that are designed to promote public investment. For instance, within the expenditure benchmark pillar of the rules, public investment is granted favourable treatment - as a result of four-year capital smoothing, only one quarter of the increase in public investment must be funded in the first year from within the fiscal space. This provision means capital spending for housing and other purposes can be leveraged within the EU rules.
It should also be noted that there are also certain more explicit flexibility provisions within the rules, particularly with a view to encouraging public investment. These take the form of what is known as the investment clause and structural reform clause. Specifically, these provisions allow for temporary deviations from the required structural budgetary adjustment if spending on capital investment can be shown to qualify for either the investment clause or the structural reform clause. Both of these provisions are subject to strict conditions; and while Ireland has not yet been in a position to apply given where we are in the business cycle, the situation is kept under constant review by my officials.
The Government is very conscious of the need to boost the supply of critical infrastructure. Investment in public infrastructure is vital for the medium and long-term competitiveness of the economy as well as for underpinning social cohesion through the provision of vital services to people in the form of schools, public transport, housing, etc. The public capital plan provides for €42 billion of capital investment over the 2016-2021 period and the Government remains committed to this. Further to this the Government set out in the SES proposals an additional cumulative €5.1 billion in capital spending over the period 2017-2021. This additional capital spending is aimed at addressing infrastructural bottlenecks, particularly regional infrastructural shortages.
In addition, the Government has been exploring the objective to create 'off-balance' mechanisms that bring investment into social housing which is additional to the funding being provided directly by the State. There is ongoing engagement with a broad array of domestic actors and European authorities to explore achievable solutions.
Finally, I would point out that we are still running a deficit and our public debt remains high by international standards. The answer, therefore, is not simply about spending more; it is about getting more from each euro of taxpayers' money that is spent.
