Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The stability programme update, SPU, published in April forecast a deficit of 4.8% of GDP for this year. However, the Deputy should be aware that there have been a number of important changes since April, most notably the performance of taxes and the impact of the European system of national and regional accounts, ESA 2010 statistical reclassification.  Cumulative tax revenue was up some €971 million or 4.1% on profile by the end of August. This, coupled with continued expenditure restraint, means that we will over-perform on the 4.8% of GDP forecast by a comfortable margin. The next official forecast of the 2014 deficit will be contained in the White Paper on Receipts and Expenditure which will be published at midnight on Friday, 10 October. 

Changes in European statistical standards have led to the upward revision of the level of GDP in Ireland going back a number of years. These were first presented by the CSO in July 2014 and budget 2015 will be the first publication based on the new standard. Overall, GDP in 2013 was revised up by the CSO by €10.7 billion or 6.5%, from €164.1 billion to €174.8 billion. The bulk of the upward revision, some €7 billion, relates to the inclusion of research and development as capital formation. However, other revisions mainly relating to revised estimates for exports and the inclusion of illicit activity have added about €3.7 billion. These revisions have had a small positive impact on growth rates in previous years.

Turning to budget 2015, the Government's overarching fiscal policy continues to be the delivery of a deficit below 3% of GDP.

While there are still moving parts, it is expected that this target will be achieved with a broadly neutral budget.

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The budgetary arithmetic will include the impact of measures already introduced, although it is estimated that there will be a very limited revenue carryover into 2015 as a result of budget 2014 measures.  However, it should be noted that the pension levy of 0.6 percentage points is not included in the budgetary arithmetic for 2015.  I also make the point that the moneys raised from water charges will be received by Irish Water which, as a commercial semi-State company, will not be a part of general government. As such, these receipts do not count as general Government revenue and, accordingly, will not impact on the deficit. 

With regard to achieving a deficit of 2% of GDP, I would normally be able to advise the Deputy that an improvement in the deficit of 1% of GDP equates to a specific nominal change.  However, owing to timing factors relating to the submission of macroeconomic forecasts to the IFAC for endorsement and the significant impact of the ESA 2010 GDP uplift, I am not able to provide a definitive figure at this time.  At SPU time, an improvement in the deficit of 1% of GDP equated to an improvement in the nominal deficit of €1.75 billion.  The quantum of consolidation necessary to deliver this improvement would be dependent on the composition of consolidation measures and their impact on economic growth.

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