Brendan Howlin (Wexford, Labour) | Oireachtas source

The Government established the Irish Fiscal Advisory Council to provide an independent assessment of the fiscal stance in each budget and stability programme as part of the new medium-term budget framework. Given the Government's priority to ensure the ongoing sustainability of the public finances, I welcome the independent perspective provided by IFAC. As this House is aware, we have undergone a significant period of fiscal retrenchment and the fiscal adjustment has enabled us to return sustainability to the public finances, created jobs and created the conditions to support a return to economic growth. On the spending side, gross voted expenditure was reduced from its peak of just over €63 billion in 2009 to €54 billion in 2014. During that period, current spending was reduced by nearly 10% and capital spending was reduced by half.

The spring economic statement in April outlined that fiscal space of the order of €1.2 billion to €1.5 billion is expected to be available for budget 2016. Fiscal projections in the statement and the stability programme update are based on a technical assumption of a budgetary package of between €1.2 billion and €1.5 billion in 2016, split evenly between expenditure and tax reductions. IFAC noted that giving information about the level of indicative fiscal space for the forthcoming budget was a welcome development in terms of fiscal transparency. The post-2016 forecasts in the stability programme update and the spring economic statement reflect a no policy change scenario. As highlighted by IFAC, a consequence is that the forecasts show a decline over the medium term in the overall ratio of spending to GDP and do not include provision for increases in areas such as pay bill, welfare or capital. However, the no policy change scenario would involve a structural adjustment considerably higher than is required under the Stability and Growth Pact, and, as stated clearly in the spring statement, it is the Government's firm intention to make only the minimum adjustment required under the pact rules in these years. This means that additional fiscal space will be available and the Government will decide on it case by case. It will be a matter for the Government to decide at budget time.

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