Brendan Howlin (Wexford, Labour) | Oireachtas source

As outlined in the spring economic statement, SES, Ireland is on track to reduce the general Government deficit to 2.3% of GDP this year. This will enable us to exit the excessive deficit procedure, EDP, at the end of the year. After we exit the EDP, we will enter the preventive arm of the Stability and Growth Pact, SGP, which will require that we make sustained progress towards achieving the medium-term budgetary objective, MTO. In Ireland's case, the MTO is to achieve a balanced budget in structural terms. Our progress towards achieving the MTO will be judged against two fundamental pillars, namely, compliance with the expenditure benchmark and making the minimum structural adjustment of greater than 0.5% of GDP every year.

Ireland has fully supported the EU fiscal governance reforms, given that we understand all too well the consequences of irresponsible management of public resources. We also understand, however, that the rules need to be applied in a sensible manner. Following interventions by Ireland, changes have been agreed on the technical application of the rules.

The SES outlined that fiscal space of approximately €1.2 billion to €1.5 billion will be available for budget 2016. The fiscal forecasts contained in the SES are based on a technical assumption of a budgetary package of €1.2 billion in 2016, split evenly between expenditure and tax. This provides the opportunity to reduce the tax burden for low and middle income earners, encourage further economic growth and increase investment in public services.

The fiscal forecasts included in the SES post-2016 have been compiled on a "no policy change" basis, with provision made for a €300 million increase in gross expenditure to offset demographic pressures. While policy changes must be made, the only issue being taken into account beyond next year is the unavoidable demographic pressures in areas such as social protection, health and education.

The SES assumes that after 2017, the voted capital expenditure allocations are left unchanged in nominal terms. This is a technical assumption. These amounts will be finalised by the Government in the coming weeks and announced in the capital review next month.

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