Wednesday, 16 May 2018

Ceisteanna (5)

Michael McGrath


5. Deputy Michael McGrath asked the Minister for Finance if demographics have been included in the calculations for gross fiscal space or net fiscal space; if investment in the rainy day fund is after the calculation of net fiscal space; the final figure for carry-over to 2019 from budget 2018; the precise impact the public service pay deal has on the net fiscal space for 2019; and if he will make a statement on the matter. [21452/18]

Amharc ar fhreagra

Oral answers (23 contributions) (Ceist ar Finance)

My question is in a similar vein to Deputy Doherty's and the Minister has provided some clarity in their exchange on the last question. We should not have to put down priority questions in order to elicit this information. The Minister was before the Budgetary Oversight Committee on 18 April and committed to coming back to the committee with answers to some of those outstanding questions. Can the Minister clarify something for me in relation to demographic costs? We were told last year that the net fiscal space at that time had already factored in demographic costs of €500 million. Is the Minister saying now that the Department has identified an additional €400 million of demographic costs for 2019 of which it was not aware this time last year?

Table 3 on page 22 of the summer economic statement 2017 sets out an indicative amount of €3.2 billion based on the parameters available at that time in respect of the estimate of net fiscal space for 2019. In arriving at the net amount, the fiscal space impact of certain pre-committed voted expenditure was deducted from gross fiscal space. The nominal amounts relating to these pre-commitments were set out in Table 1.3 on page 9 of the mid-year expenditure report with €400 million for demographics. Table 4 in the summer economic statement set out an indicative allocation of net fiscal space between expenditure and taxation measures and the rainy day fund. The rainy day fund is shown in the row entitled "d. contingency reserve/rainy day fund".

In relation to current expenditure, there are pre-commitments that arose from the summer economic statement of €700 million that would need to be funded from the current expenditure fiscal space amount or from savings and reprioritisations. There is a cost of €400 million arising in 2019 from the public services stability agreement. This amount was not included as pre-committed expenditure in the summer economic statement or the mid-year expenditure report as the agreement at that stage was subject to ratification by the membership of the public service unions. In addition and as outlined in the expenditure report 2018, there was a cost estimated at that time of €200 million in respect of the carry-over impact of certain measures that would need to be met from the available resources for 2019 or from savings or reprioritisation. The current estimate of the carry-over impact into 2019 is €300 million. I have already detailed the capital commitments and will not use up our time by repeating those.

One should not need to be Sherlock Holmes to piece together these numbers. These are historic figures and our questions are about what was included and already provided for in the fiscal space last year. The Minister appears to be saying that the amount of money required for demographics has doubled for next year. He says €400 million was already provided for and taken into account in the estimate of fiscal space which he provided last year for 2019. He tells us now that an extra €400 million is required for demographics for 2019. In circumstances in which I must be able to have confidence in these numbers, that is an extraordinary change and one the Minister must explain. While last year's summer economic statement said the figures did not include the extension of the Lansdowne Road agreement, there were replies to other parliamentary questions which said those figures had been taken into account. The numbers keep changing.

It is hard to have confidence in what the Minister is saying. He must spell out the components. Is he telling us there is an extra €400 million for demographics and €400 million for public sector pay that were not taken into account? We understand that the €300 million carryover would not have been taken into account. Then the Minister must apply three quarters of the extra capital expenditure and take that from the fiscal space as well. Is that essentially what the Minister is saying?

I am happy to supply a table to the Deputy which lays all of this out. I have supplied it previously in a number of replies to parliamentary questions. The €400 million figure for demographics is unchanged. That is taking account of the move from gross fiscal space to net fiscal space.

The Minister is saying there is another €400 million.

No, and I will provide a table to show that. I will also outline to the Committee on Budgetary Oversight, in a further note if necessary, the difference between the net fiscal space of last year, which is going to change again, and the carryover costs we have from last year's budget in respect of capital and current expenditure. It is very clear.

It is not. The €3.2 billion last year was after demographics.

More broadly, when we put together the summer economic statement, I will not be using the concept of fiscal space as a key way of putting our budget together.

That is a different debate.

No, it is part of it.

That is the Minister's decision.

I will lay out in the summer economic statement the figures that I am required to provide. Before we make decisions about how to spend resources, however, we must be clear that we have those resources in the first place. We must raise the taxes to provide them and we must ensure that by spending the resources we are making proper use of them. I wish to be clear about the demographics. That €400 million is accounted for in moving from gross fiscal space to net fiscal space. It is the same €400 million that was outlined in the stability programme update of this year.

It should not be reducing the €3.2 billion if that is correct.

It is not. I have answered that question. The difference between moving from the gross fiscal space of €3.6 billion to the net fiscal space of €3.2 billion takes account of demographics. It is very clear. We have precommitted expenditure next year of the figure I have outlined and we have to find the money to pay for it.

We need a table showing the components of the €1.8 billion.

When we put the economic statement together, we will be explaining what resources we have available for budget 2019 but making crystal clear that we must ensure that it is correct to spend those resources.

It would be helpful if the Minister could take us from the €3.2 billion to the €1.8 billion and outline the key elements of that. He clearly has that information.

For clarity, because this will go on for months, there is €1.8 billion of precommitted expenditure since the summer economic statement. What are the components? The Minister said that €700 million is commitments since then, €400 million is the public service agreement and €300 million is carryover, but that does not add up to €1.8 billion.

I know this is important but I have been too flexible on the time. The Minister can give a brief response.

I am happy to answer all the questions. The difference between the figure of €3.6 billion for last year in moving to the figure of €3.2 billion takes account of €400 million in demographics-----

-----which I have just explained. In addition, we have public capital plan commitments and Irish Water commitments which will take up fiscal space of €300 million. That takes us to the €3.2 billion figure. In addition to that, we have further expenditure commitments that were made after last year's summer economic statement. They consist of €700 million of fiscal space that has two different components - the need to take account of the public service stability agreement, which was not ratified at the time of last year's summer economic statement, and the carryover commitments of budget 2018 measures, which is €300 million. That accounts for the €700 million. On top of that we have additional capital commitments of fiscal space which are €600 million. That takes account of capital grants of €200 million and gross fixed allocation capital formation of €400 million. That is €600 million. All of that added together accounts for the €1.4 billion I gave in reply to Deputy Doherty, which then leads to a balance of €1.8 billion.