Wednesday, 16 May 2018

Ceisteanna (4)

Pearse Doherty


4. Deputy Pearse Doherty asked the Minister for Finance the resources available to him in budget 2019 based on known data; the way in which it has changed from the €3.2 billion cited in the summer economic statement 2017; his plans to use these resources to build a sustainable economy; and if he will make a statement on the matter. [21510/18]

Amharc ar fhreagra

Oral answers (6 contributions) (Ceist ar Finance)

I want to focus on the parameters for budget 2019. The most important discussion to be made is how we can use the scope provided by the proceeds of labour to deal with the big issues and challenges we face, including the health crisis, the housing crisis and the cost of living crisis. To do this we need to know what the parameters are. Last year in the summer economic statement it was indicated that €3.2 billion - the fiscal space - would be available in budget 2019. We have been trying to elicit information on how much of that figure has been committed. In a response to a question last night the Minister informed me that €1.8 billion had been pre-committed. It amounts to €1.4 billion when account is taken of the smoothing effect of the expenditure benchmark. Will the Minister confirm that these figures are correct as of today? We understand the figures will be updated in the summer economic statement, but it means that we are looking at an amount of at least €1.8 billion being available in the budget, leaving aside the rainy day fund.

The 2018 summer economic statement will update the parameters for budget 2019 taking into account the publication by the European Commission of the important inputs in its spring economic forecast. The forecasts will take account of all policy changes announced since budget 2018. I am not in a position to comment on the resources that will be available in budget 2019 ahead of the statement. The 2018 stability programme update provides for an increase of €2.8 billion in voted expenditure, including pre-committed expenditure of €2.6 billion next year.  The pre-committed expenditure was composed of €1.5 billion for the national development plan, €400 million to provide for the public sector pay agreement, €400 million to provide for demographics and €300 million to provide for the carryover costs next year of measures introduced in the budget for this year.

Providing for these costs means a deficit of 0.1% of gross domestic product is projected for next year. The available parameters will become clearer in the next number of weeks. The Commission has now published its spring forecasts which are an important input. It is hugely important that we ensure that the policy the next budget implements recognises the fact that we have an economy for which the prospect of full employment is within reach and which continues to make steady progress on many of the matters on which Deputy Doherty has touched.

I do not want to use my priority question month on month just to try to elicit simple information. We have the legal parameters under the fiscal rules which we know is the fiscal space. That was identified as €3.2 billion. Government decisions on whether to use all of the fiscal space are a separate matter and I am not asking the Minister about policy choices at this point in time. I am just looking at what is legally permissible. The summer economic statement spelled out clearly that €3.2 billion was the amount of money available for budget 2019. We are mindful that this could change and that the summer economic statement could increase or, indeed, decrease that sum. According to the data we have as of today, €3.2 billion is available. An impression has been given by the Minister, deliberately in my view, to dampen expectations in the run up to the budget. That impression is that most, if not all, of this money has already been committed. The Minister has provided replies to me through both the Department of Finance and the Department of Public Expenditure and Reform, which are aligned, that of the €3.2 billion of fiscal space, €1.4 billion was pre-committed. That means there is €1.8 billion available for discretionary spending in budget 2019. That is what is legally allowed according to the current data, albeit we are mindful such data may change in the summer economic statement. Can the Minister confirm that is case? Are we looking at fiscal space identified last year of €3.2 billion, of which €1.4 billion has been committed in the interim, leaving us with a discretionary amount of €1.8 billion, which may change in future?

I have answered all the questions put to me on the matter in written format. I have answered the question the Deputy put to me in writing and which was made available to my Department in advance of questions in the Dáil. To answer directly the question the Deputy has subsequently put to me, he is correct. If one looks at the amount of last year's fiscal space which was pre-committed, the figure is €1.4 billion, which means there is €1.8 billion for expenditure. That means that for total budget day packages, which is to say decisions made on expenditure, taxation and a rainy day fund, the balance available on the basis of last year's figures is fiscal space of €1.8 billion. However, I emphasise that this is on the basis of last year's figures. As to my intentions for the approaching budget, I want to be very clear. It is my objective that budget 2019 will be the same as budgets 2017 and 2018. I want a budget which makes steady and affordable progress on the issues our country faces, whether they be the huge issues within our society or the economic challenges we have to confront.

I thank the Minister for that clarity. We all need to know what are the figures. Can he also clarify that the €1.8 billion based on last year's figures, which may increase or decrease when we see the summer economic statement, already takes into account the €500 million the Government intends to put into a rainy day fund? While that is a policy proposal with which I do not agree at this point in time, we can get into more detail about that when the legislation comes forward. Will the €1.8 billion be maintained and not reduced as a result of the €500 million for the rainy day fund?

I ask the Minister to inform the House on the Government's policy, which is very unclear but which is in agreement with its partners in Fianna Fáil, as to a one third to two thirds breakdown having regard to tax cuts. Is that one third of the discretionary amount, namely the €1.8 billion which may be available based on last year's figures? As such, will it be €600 million on taxation and €1.2 billion on expenditure with reference to last year's figures?

The first question put to me was on a decision in relation to the rainy day fund. It is my view that we need to set up a rainy day fund and I have already indicated my belief that the appropriate deposit in its first year would be €500 million. That figure comes from the €1.8 billion. That is the answer to the first question.

On the second question, the convention I have had with Fianna Fáil to date and which I expect will be maintained with Deputy Michael McGrath for next year is that a one third to two thirds ratio applies to budget day announcements. I am committed to implementing that.