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Government Expenditure

Dáil Éireann Debate, Thursday - 24 November 2016

Thursday, 24 November 2016

Ceisteanna (20)

Dara Calleary


20. Deputy Dara Calleary asked the Minister for Public Expenditure and Reform his Department's review of Government expenditure ceilings as set out in the ministerial brief; the progress made and timeframe involved; if he will make the results of the review available; and if he will make a statement on the matter. [36522/16]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte) (Ceist ar Public)

I am asking the Minister to outline his view of the review of Government expenditure ceilings that has been under way for some time, when the results will be available and whether there have been changes to the review in the past few weeks.

The mid-year expenditure report indicated that my Department would examine proposals for the options available for reinforcing the role of three-year expenditure ceilings in further restoring stability to Ireland's public finances and sustaining this stability in the medium-term period. This is particularly relevant in the light of the increased uncertainty and risks faced by the economy in the wake of the United Kingdom's decision on EU membership. Related to this, I announced in my Budget Statement that a spending review would be undertaken prior to budget 2018. I have consistently reiterated the need to consider the totality of spending when examining budget priorities. Spending reviews previously played an important role in our efforts to reverse unsustainable expenditure growth. The spending review is an integral part of the reformed public expenditure architecture, drawing on the lessons learned from previous spending reviews. The purpose of this review will be to ensure all expenditure will be examined when Government is deciding on its spending priorities. Better information and stronger evaluations should also guide and inform these decisions.

It is my intention, as we move to a different fiscal, economic and political context, to reflect on the design of budgetary reforms introduced in the crisis period. As such, the approach to setting medium-term ceilings remains under consideration and will continue to be examined in parallel to the spending review process that I aim to have completed by next year.

When the Minister made the commitment to review the expenditure ceilings in the mid-year statement, the context of Brexit was quite new to us. It is now becoming apparent how serious it is going to be. Various ESRI reports reflect this view, as does the change in UK budgetary policy announced by the new Chancellor yesterday. Does the Minister intend to inject a Brexit-proofing element into the spending review? Does he intend to use the ESRI's report on the potential impact of Brexit on Government expenditure? Following on from the discussion he had earlier with Deputy Thomas P. Broughan, what are the consequences of major changes in US policies on taxation and their potential impact on our revenues and expenditure?

The transmission mechanism for changes in the State will be what happens to our rate of economic growth. It has already been revised by the Minister for Finance and, as part of budget 2017, will be under continual review. The Minister will confirm the latest figures in his summer economic statement next year. He will give an indication of future rates of growth in the economy and the impact on expenditure, concluding with next year's expenditure report. In this way we will look at the effect on expenditure ceilings. We need to take care to recognise that it is still up to governments and policy makers to set their priorities each year and I have raised this issue with my Department. Expenditure ceilings are a very important part of how we plan future growth, but I do not believe they can be at the expense of the Minister for Finance, or any Minister of the day, having some latitude in how they spend, if only to respond to the issues the Deputy has raised. The key aspect is to meet the requirements imposed on us by the fiscal rules and the commitments we, as a state, have given on deficits and debt, the main components of how we look at the issue of budgetary discipline. In any given year, on budget day, a Government Minister should still have discretion in how he or she allocates funding and in terms of any new initiative he or she wishes to instigate, as long as it is inside an affordable budgetary framework.

The budget came out unscathed from the European Commission, but there was also a comment to the effect that, while across the European Union the medium-term target is 0.5%, there would be greater flexibility in 2017. This was severely criticised by the German Finance Minister, Wolfgang Schäuble, but will it give the Department more wriggle room in 2017?

The Minister for Finance will examine any determination or view from the Commission on future deficit or debt targets within the fiscal rules. He and I are committed to maintaining a sensible approach to the public finances and we have set our plans for next year. We are going to deliver on the deficit and on the employment targets to which we are committed. We will take account of any view from the Commission, but the approach of the Government will be to focus on balancing the books in 2018 and using resources that will be freed to address all of the challenges in the economy. As the Deputy appears to be a recent convert to the benefits of budgetary surpluses, I am sure he will be pleased when we reach that point.