Mr. Derek Moran:

I am grateful for the opportunity to appear before the committee with Mr. Watt and colleagues from the Department of Public Expenditure and Reform to discuss the issues set out in the invitation letter. I am joined by Mr. John McCarthy, chief economist, and Mr. John Palmer from the central budget office in the Department.

Our last official forecasts were in budget 2017 and our next official forecasts will be published next week in the draft stability programme update, or SPU. I understand the committee has already invited the Minister for Finance, Deputy Noonan, to discuss the draft SPU in more detail. In budget 2017, we forecast real GDP growth would be 4.2% in 2016 and 3.5% in 2017. Since then, the Central Statistics Office, CSO, has published quarter 3 and quarter 4 returns which showed that the second half of 2016 was much stronger than had been assumed. It is reasonable to expect the figure next week to improve to between 4% and 4.25% for this year. In fiscal terms, budget 2017 forecast an outturn general Government deficit of 0.9% of GDP for 2016. The forecast for 2017 was for a general Government deficit of 0.4% of GDP. With regard to these deficit forecasts, the excessive deficit procedure, or Maastricht, returns were submitted to EUROSTAT by the CSO on 31 March and are now subject to the standard clarification process. These figures are confidential but some matters already in the public domain give an indication of the likely direction for the outturn for 2016. For example, the general Government balance is adjusted each year for VAT accruals. VAT received in January and February as collected by businesses in November and December of the previous year is accrued back to the previous year, 2016. As we know that VAT for January and February this year is about €400 million more than for the same months in 2016, it is reasonable to expect that the general Government deficit for 2016 will be lower than the 0.9% forecast last October.

Looking at the first quarter of this year, taxes have come in at just under €11.5 billion, which is some €350 million, or nearly 3.5%, up on the first quarter of 2016. However, this is below profile by €280 million, or approximately 2.4%. Based on these figures, it is unlikely that we will be adjusting our revenue forecast for 2017 in the draft SPU. Indeed, we do not normally adjust forecasts on the basis of first quarter data. Revised forecasts for 2018 out to 2021 will also be included in the draft SPU. As I noted already, the Minister will be here to present these next week but it is anticipated that the macroeconomic and fiscal forecasts for the outer years will reflect increased levels of external uncertainty.

The Department has assisted the Select Committee on Arrangements for Budgetary Scrutiny and this committee since it has been set up. My officials have been available and responded to all requests for information or assistance received. This will continue as anything that increases knowledge of and the level of informed debate about fiscal and budgetary policy is to be welcomed. Obviously, engagement will be driven primarily by the annual budgetary calendar. We have offered to brief the committee each quarter on Exchequer returns, to provide members with a presentation on the results and to answer questions members may have. There will be other events involving the Minister and the Department such as the SPU, which the Minister will present to the committee next week, and the macroeconomic forecasts in advance of the budget which Mr. John McCarthy will present to the committee after the Irish fiscal Advisory Council, IFAC, has endorsed them.

I understand that there is progress with regard to the establishment of a parliamentary budget office. While there have been suggestions over the years that an independent budgetary office should be established, the Minister said in response to a parliamentary question in February 2015 that he was coming to the view that the proposal should be considered in depth. The focus at that time was on independent costings of alternative budgets from Opposition parties. Since then, the OECD has published its review and, based on this, the Oireachtas has decided to widen the remit. However, costings will remain a critical component. Both Departments have provided a costings service for election manifestos for many years and, more recently, for the annual budget.

The Department produces a huge amount of budget relevant information each year. Late last year, we circulated a list with links and also provided a copy of the publications to the committee secretariat. We will continue to forward the links to each publication to the secretariat as soon as they are available. Assimilating this information and having it to hand in a format that enables the Oireachtas to carry out its functions is a key challenge. A parliamentary budget office will potentially have a critical role to play in answering this challenge. We will continue to share all the information we can with the parliamentary budget office and the committee to facilitate this. A memorandum of understanding between the parliamentary budget office and the Department on the sharing of information and operational modalities will be important as the office is developed. I thank the committee for this invitation and my colleagues and I will do our best to address members' questions.