Thursday, 26 September 2019

Ceisteanna (9)

Barry Cowen


9. Deputy Barry Cowen asked the Minister for Finance his views on the assessment from the Irish Fiscal Advisory Council that expenditure in 2018 breached the expenditure benchmark for that year; the margin in 2019 between expected expenditure and the amount permitted under the expenditure benchmark; the potential consequences if the expenditure benchmark in 2019 is breached; and if he will make a statement on the matter. [25803/19]

Amharc ar fhreagra

Freagraí ó Béal (4 píosaí cainte) (Ceist ar Finance)

This question has been transferred from the Department of Public Expenditure and Reform. I am taking it on behalf of Deputy Cowen. It seeks the Minister's views on the assessment of the Irish Fiscal Advisory Council that expenditure in 2018 breached the expenditure benchmark for that year. The question also seeks the margin between expected expenditure and the amount permitted under the benchmark for 2019 and the consequences of any breach.

In the light of the complexities of European fiscal rules, the Irish Fiscal Advisory Council has adopted a principles-based approach to its assessment of compliance. While it is based on the EU framework, the approach incorporates a number of adjustments to make it more relevant in an Irish context.

The council has assessed that the medium-term budgetary objective, MTO, was achieved in 2018. Furthermore, the achievement of the MTO was not due to windfall revenues. Once the MTO is achieved, the expenditure benchmark does not formally apply.

The council's report states the net expenditure growth rate limit for 2018 was exceeded by one percentage point. The report notes that "compliant" and "significant deviation" were not applicable, reflecting the achievement of the MTO.

The European Commission is responsible for assessing compliance with EU fiscal rules and its ex post assessment of 2018 judged that the breach of the expenditure benchmark was not significant. Put another way, the Commission's overall assessment of 2018 is one of broad compliance.

Assessment of 2019 is currently on an ex ante basis. The council has stated net expenditure growth is forecast to be below the expenditure benchmark limit. This is in line with the Commission's assessment of the stability programme update, SPU, that the expenditure benchmark has been complied with. The Deputy might be aware that there is a debate on the operation of fiscal rules developing between the European Commission, Eurogroup and ECOFIN. We had an informal ministerial meeting a number of weeks ago, at which a presentation was made by the European Fiscal Board on the operation of fiscal rules. It raised a number of issues, particularly about the rules' complexity and whether changes to them could play a role in supporting future investment in renewable technologies.

From what I understand the Minister said, the European Commission did record a breach of the expenditure limit but not one that was significant enough to warrant further action. Will the Minister confirm that the Commission is still using the commonly agreed methodology for measuring expenditure by comparison with the benchmark, whereas the Irish Fiscal Advisory Council has adopted what it calls a "principles-based approach"? Do potential overruns in certain departmental Votes which would require further Supplementary Estimates in 2019 put us at risk of breaching the expenditure limit for 2019?

The answer to the last question is "Yes". I will be studying very closely the September expenditure figures that will be available early next week. Our position at the end of August showed that total Government expenditure was slightly below profile. For the Department of Health it was a bit above profile but far less so than it would have been this time a year ago. If Supplementary Estimates are required, something that will become clear to me when I see the September figures, I cannot say at this point whether they will be significant, but they will be lower than those required last year.