Dáil Éireann Debate, Thursday - 29 September 2016
23. Deputy David Cullinane asked the Minister for Finance the reason his Department is ready to oversee a reduction in Government income as a percentage of gross domestic product, as shown by the summer economic statement figures, given the serious issues facing public infrastructure. [19805/16]
Amharc ar fhreagraIn the Summer Economic Statement, estimates of tax revenues and appropriations-in-aid show a projected nominal increase of €13.1 billion from 2016 to 2021. When expressed as a percentage of GDP, there is a small decline to 24.4% from 25.9%. These forecasts take account of €2.54 billion of fiscal space allocated to proposed tax reductions to be implemented over this period.
It is worth noting that forecast tax revenues from 2016 to 2021 remain relatively flat as a share of GDP, whereas the forecast for appropriations-in-aid drops by over 1% of GDP over the same period.
Almost 80% of the current appropriations-in-aid for 2016 relate to the Social Insurance Fund and the National Training Fund. The Social Insurance Fund is funded by PRSI receipts. With both funds in surplus, the gross expenditure and appropriations-in-aid for the funds are assumed to net off in arriving at the Exchequer Balance. Additional revenue forecast for both funds for the period to 2021 is then reflected in the General Government Balance. If the surplus receipts in these funds were included in the forecast of receipts in table 3 of the Summer Economic Statement, the overall estimate of appropriations-in-aid, as a percentage of GDP, would have reduced only slightly from 2016 to 2021.
The allocation of fiscal space in the Summer Economic Statement is consistent with the Programme for Partnership Government (PfPG) which outlines a split of at least two-to-one in favour of expenditure. This reflects the priority the Government attaches to re-growing public expenditure in a sustainable way while also addressing the need to reward work and support enterprise and employment.
In the PfPG, there is a commitment to ask the Oireachtas to continue to phase out the USC as part of a wider medium-term income tax reform plan that keeps the tax base broad, reduces excessive tax rates for middle income earners, and limits the benefit for high earners. Reductions will be introduced on a fair basis with an emphasis on low and middle income earners.
In terms of public infrastructure, the Government is conscious of the need to increase capital expenditure in order to boost the supply of critical infrastructure. The public capital plan, published in September 2015, provided for €42 billion of capital investment out to 2021 and the PfPG contained a commitment not only to protect this level of investment, but to increase it by a further €4 billion.
The level of capital expenditure provided for in the Summer Economic Statement allows for an additional €5.14 billion over the 2017 to 2021 period in excess of the additional €4 billion commitment given in the Programme. This emphasises the importance the Government places on continued investment in the public infrastructure.
In summary, therefore, the Government is prioritising infrastructural investment in order to support and broaden the economic recovery.
