Michael Noonan (Limerick City, Fine Gael)

I am quite confident that we will meet our target of 8.6% on the deficit this year. Budgets are built not on real growth but on nominal growth, because it is nominal growth that generates tax. The nominal growth we built the budget on was 2.5%. Even with a growth rate of 0.7%, which is on the average and is where the Fiscal Council is coming in, the inflation rate as last measured by the CSO was 1.8%, so the nominal growth is still 2.5%, which is what the budget is based on. In addition, 2011 ended up better than expected and the outturn was below 10% against a target of 10.6%. Therefore, we are quite confident, with tax revenues well ahead for the first quarter. While there are some problems on the expenditure side, my colleague, the Minister, Deputy Howlin, is dealing with that and ensuring Departments stay within budget.

The Deputy can forget about mini-budgets and all that kind of stuff at this stage. A better line of attack would be that if growth rates go down, then activity in the economy slows down. This does not necessarily impinge on our budgetary targets but I would like to see greater activity in the economy. Our model is export-led growth, so we are very dependent on how the economies in our customer countries are performing. The mark-down is not due to anything that went wrong in Ireland. It is the consequence of things going wrong across Europe, in China and in the United States. However, we believe there will be a better second half to the year.

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