Joan Burton (Dublin West, Labour)
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Question 84: To ask the Tánaiste and Minister for Finance his estimate of the deficit and outcome for 2007 in view of the reduction in receipts of certain taxes, including stamp duty, as disclosed by the Exchequer returns; the changes this may give rise to in respect of spending profiles as outlined by him in budget 2007; and if he will publish Revised Estimates for 2007. [23765/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Exchequer tax receipts to the end of September were €31.462 billion, which was €490 million or 1.5% below profile. Based on the results to the end of September it appears likely that tax receipts will be up to €1 billion or about 2% below the budget day target. This deficit is largely accounted for by lower than expected receipts for stamp duty, capital gains tax and VAT, which reflects the change in the residential property market as it returns to more normal levels of activity. Excise duties are also expected to be below target whereas income tax and corporation tax are expected to exceed targets. However, the expected shortfall in tax revenue will be offset to some extent by positive developments on other elements of the Exchequer account.

At the end of September voted current expenditure was broadly on target, while voted capital expenditure was 8% ahead of profile. It is expected that at the end of the year total voted expenditure will be on target. Based on the overall end of September position, an Exchequer deficit of up to €1 billion is projected for 2007 compared to a budget day forecast of €546 million. This week I will lay the pre-budget outlook containing the pre-budget Estimates before the House when I will update my economic and fiscal projections, including my tax forecasts, for the years ahead and outlining the estimated cost from 2008 to 2010 of maintaining public services at existing levels.

Joan Burton (Dublin West, Labour)
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Do the figures not indicate that the party is over? On budget day on 5 December the Minister will face a number of difficult choices, namely, whether to ditch some pre-election promises or to cut spending. According to his statement on the returns, his spending priority centres on productive potential. As this means something must give on the spending side, will it continue to be the health service, in respect of which we hear horror stories on a daily basis? Will the Minister indicate to the House his opinion on what will give on 5 December?

Brian Cowen (Laois-Offaly, Fianna Fail)
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This year we have not seen spending cuts. Year on year, there has been an increase in spending.

Damien English (Meath West, Fine Gael)
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Cuts in services.

Brian Cowen (Laois-Offaly, Fianna Fail)
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A criticism from the other side of the House, depending on which side of the debate one is on, is that too much is being spent. In the interests of good budgetary discipline, we are trying to ensure all voted expenditure will come in on target, which is the best way to maintain improvements in services year on year. To do otherwise would be to put the improvements at risk, which would be in no one's interests.

The programme for Government sets out clearly that we are working on the basis of a budgetary policy that seeks to maintain a broad budgetary balance. All spending commitments are made in this context because we must maintain improvements, keep unemployment at low levels, continue progress and achieve growth in the economy. Our budgetary stance as outlined is consistent with the discussions that took place.

Concerning productive potential, expanding the productive capacity of the economy is important because we must continue to identify areas that can sustain growth. This should be given priority and would be consistent with the national development programme in terms of the capital investment programme and the contribution it can make to offsetting next year's unexpected reduction in the residential property market's output compared to this and previous years' historic highs.

In previous budgets I ensured the general government balance was in surplus. I hope there will be a similar situation this year. By having room to manoeuvre in good times, one can deal with a situation as it arises. My pre-budget outlook will outline the updated opinions of the Department in respect of prospects for growth.

Joan Burton (Dublin West, Labour)
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The Minister referred to the NDP which stated the Government would keep growth in spending in line with estimated overall growth in the economy in GNP terms. Does he mean to keep to this commitment? On Thursday will he outline to the House the estimate for economic growth next year and revise the figure downwards, as the Exchequer figures appear to suggest?

According to the Department's figures, growth in current expenditure was between 11% and 13% due to Fianna Fáil's pre-election splurge. Even the best estimates for economic growth next year are approximately 5% or 5.5%. Will the Minister stick with the commitment outlined in the NDP, namely, that overall growth in expenditure will be determined by expected growth in GNP? In that case, with current spending outcomes running at between 11% and 14%, something has to give. Can he indicate what will give on budget day?

Brian Cowen (Laois-Offaly, Fianna Fail)
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As I already noted, I will outline on Thursday the pre-budget outlook in terms of our economic and budgetary forecasts for the next several years. It is clearly the case and it has been widely noted that a drag exists on growth because of the reduction that has occurred in the residential property market over the past number of months. That will be reflected in projections for next year and subsequent years.

In regard to the national development plan, I have always said it is important to maintain the capital programme because that is the way in which the productive capacity of the economy can be expanded. If one looks at the national development plan, one will see an indication of increased investment on the capital programme next year vis-À-vis this year because that is how we have set it out.

Joan Burton (Dublin West, Labour)
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My question concerned current spending.

Brian Cowen (Laois-Offaly, Fianna Fail)
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It is interesting that the Labour Party spokesperson on finance is saying that we are spending too much on public services when the critique before the election was that funding was inadequate.

Richard Bruton (Dublin North Central, Fine Gael)
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Question 85: To ask the Tánaiste and Minister for Finance the extent of the deterioration in the public finances since budget 2007 was presented; and the implications for Government policy ambitions. [23771/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Exchequer account recorded a deficit of €3.1 billion in the first nine months of the year compared to a deficit of €136 million in the same period last year.

While the Exchequer balance at the end of September had worsened in comparison to the same period in 2006, this was not unexpected. The budget day forecast was for an Exchequer deficit of €546 million in 2007 compared to a surplus of almost €2.3 billion last year. The extent of the deficit so far this year is somewhat more than anticipated and is due largely to tax revenues being €490 million below profile and expenditure being €274 million above profile at this stage.

As indicated at the end of September's Exchequer returns, there is likely to be a shortfall in overall tax revenues this year of up to €1 billion reflecting developments in taxes such as those relating to the property market. While this will be offset to some extent by positive developments on other elements of the Exchequer account, an Exchequer deficit of up to €1 billion rather than the budgeted deficit of €546 million now seems likely.

While taxes are likely to be below profile this year, it must be remembered that we still expect to collect more than €48 billion in overall tax revenue this year, which is an increase of approximately 5.5% on last year's very strong performance. This significant level of tax revenue enables the Government to continue to provide for improved day-to-day public services, as well as contributing towards the cost of the roll-out of the national development plan.

It should be noted that the public finances remain in good health generally. On the European measure, a general Government surplus is likely to be recorded again this year, the tenth year in the past 11 that this has been the case. This is an impressive performance by any standards. The debt-to-GDP ratio is likely to remain at the second lowest in the euro area, in line with the Government's long-term priorities.

Later this week, I will publish my pre-budget outlook which will set out in more detail the emerging revenue and fiscal position that we face. This will be an important step in the delivery of a unified budget.

Richard Bruton (Dublin North Central, Fine Gael)
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I wish to probe the issue in regard to housing as the cause of the fall in receipts. The Tánaiste predicted during the weekend that approximately 65,000 houses will be built, which represents a drop of almost 30,000 from the peak. Does his Department concur with the analysis that the impact on revenue of such a fall would be €1 billion for every 10,000 houses, or €3 billion? Are we facing a €3 billion shortfall in next year's revenue, compared to this time last year? That shortfall does not even take into account stamp duty, which pertains to second-hand sales.

In its manifesto, the Government set out spending commitments for 2008 of €2 billion to cover issues such as indexing, taxes and reducing PRSI, as well as 4,000 new teachers and 2,000 gardaí on a phased basis. Is the Government now in a situation where it will have to postpone those commitments or will it proceed with them?

Brian Cowen (Laois-Offaly, Fianna Fail)
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With regard to the programme for Government, it involves a five-year term. The programme for Government was based on the assumption of being able to achieve an average annual growth rate of 4.5%. We may not achieve that rate next year but the programme should be considered over the five-year period. This is all predicated on maintaining an overall budgetary policy of broad budgetary balance which is important in sustaining existing improvements, quite apart from making the right choices regarding other elements one might wish to introduce consistent with having a responsible budgetary policy.

On housing output, based on demographics one would expect that a sustainable level of housing output, once the adjustment that is under way has been made, will be between 60,000 and 70,000 per year. The question of when this adjustment will be completed is still being examined. The measure of housing output mentioned by the Deputy is broadly correct. The shortfall in stamp duty at the moment is around €400 million but one should remember that excise duties and capital taxes comprise around 15% of total tax revenue while the big four taxes constitute at least 84%. This is the context for this matter.

Richard Bruton (Dublin North Central, Fine Gael)
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I am sure the Minister is aware that while he says the shortfall in stamp duty is €400 million all of this occurred in the past four months. This is an indication of a rapid deterioration in stamp duty. The Minister has accepted the €1 billion per 10,000 new starts and this suggests there may be tax difficulties next year. Does he anticipate revising the manifesto commitments in some respects so that we would have a more realistic view of what the Government now believes can be achieved with the revenue that is likely to be available?

Brian Cowen (Laois-Offaly, Fianna Fail)
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We are in the first six months of a new administration. Certainly, there will not be the added buoyancy in tax revenues that applied in the past and an adjustment is taking place in the residential housing market that must be completed to allow for a soft landing. The sustainable level of housing output, based on demographics, demand and so on, is reckoned to be between 60,000 and 70,000 per year. We must examine, therefore, the manner in which this adjustment can take place in a way that does not militate against the continuing health of the property market. This is something we can do based on the economic fundamentals that exist because it is clear that we cannot consider a continuing housing output of 90,000 per year, as was the record set last year.

Our projections in the last budget for the performance of the economy this year allowed for housing output to be eased to a level of around 70,000 to 75,000, rather than the output level of 60,000 to 65,000 that is expected now.