Kieran O'Donnell (Limerick East, Fine Gael)
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Question 3: To ask the Minister for Finance if he is satisfied that the forecasts in the Budget Statement 2009 on which he has based his projections of taxation and borrowing are robust; and if he will make a statement on the matter. [39082/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Since budget day my Department has received the October data as regards tax revenue and expenditure, which are broadly in line with what was expected. The October Exchequer returns showed an Exchequer deficit at the end of October of just over €11 billion.

The Exchequer returns also showed that in the first ten months of the year, tax receipts fell approximately €4.3 billion short of expectations with all tax headings being behind profile. In the month of October, there was a tax shortfall on profile of €693 million. While tax receipts in October have continued the poor performance of recent months, they nonetheless are broadly in line with what was anticipated in formulating the recent budget forecast for the year as a whole. In this regard, my Department anticipates a further slippage in revenues of approximately €2.25 billion in November and December, reflecting the fact that November is a key month for tax collection. This will result in an annual shortfall of the order of €6.5 billion.

As for the forecasts for 2009, the budget was framed against the most challenging fiscal and economic position for some time. In 2008, my Department expects approximately €42.4 billion in tax revenue, followed by €42.8 billion in tax receipts in 2009. This equates to a forecast of just 1% growth in taxes after the introduction of approximately €2 billion worth of additional revenue raising measures in the budget. My Department does not believe that these forecasts are overly optimistic. In its view, they reflect the underlying poor economic conditions that obtain at present.

All forecasts, irrespective of the budgetary context, are subject to risks and are affected by developments in both the international and domestic economy. This is especially so in the current circumstances, where it is unclear to what extent the upheaval in global financial markets will have a further impact on economic activity in the world's advanced economies. In this context, macro-economic forecasts for a small globally integrated economy such as Ireland, which also is experiencing a significant housing market correction, are even more uncertain than normal. However, taking these risks on board, I believe the budget is based on a balanced set of forecasts from my Department.

Kieran O'Donnell (Limerick East, Fine Gael)
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The assumptions on which the Minister has based the budget do not correspond with the observations of several economic commentators, including some Government bodies such as FÁS and the ESRI. The Department is projecting a 1% increase in tax receipts However, although it projected an increase of 3% last year, a decrease of approximately 10% was experienced. Several economic commentators have predicted there will be a decrease in tax receipts of the order of 9%.

Brendan Howlin (Wexford, Labour)
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Is there a question?

Kieran O'Donnell (Limerick East, Fine Gael)
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This does not appear to be robust.

Second, the Minister should comment on the unemployment rate. Although the Government is predicting a rate of 7.3%, other economic commentators are predicting a rate of 8%. As the Government may have overestimated tax receipts by €5 billion, will the Minister introduce a supplementary budget as a matter of urgency, rather than introducing stealth taxes through the Departments that will provide no confidence to the market and will be highly unfair to the public? Will the Minister introduce a supplementary budget?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There is no question of the introduction of a supplementary budget because the tax burden has been increased in the budget that was announced this October for next year. An additional €2 billion in tax will be levied next year. Members will have an ample opportunity to examine the detailed financial provisions during the passage of the Finance Bill. Accordingly, an additional supplementary budget next year levying further taxation would in all probability inflict further damage on the economy. In the current position, as Deputy O'Donnell is well aware, the great majority of our tax items that rest on discretionary purchases, be they houses, goods, alcohol or cigarettes, are seriously down and increases in those taxes would not lead to any increased income for the State. The only option for the State in terms of further increases in taxation is increased taxation on income. Increases on income, above and beyond the levy proposed in the Finance Bill, would amount to a substantial disincentive to labour in the year ahead.

I have never suggested there should be a mini budget next year. There has been considerable speculation about it and there was an inaccurate report in The Irish Times on Tuesday,which I am pleased to note it corrected today. There is no question of a mini budget. Of course if there is a deterioration in the public finances I will bring appropriate proposals to Government to address that.

Kieran O'Donnell (Limerick East, Fine Gael)
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The Minister's figures do not add up. He believes he will have a fall in growth of 1% but various economic commentators indicate it will be 3%. How will the Minister meet the requirements of the European Commission in terms of general Government balance as a percentage of GDP? Economic commentators say that will be of the order of 8% or 9% and the Minister's figure is 5.5%. Does he not take seriously the warning from the European Commission? How can he not introduce a supplementary budget?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy would want to get his figures right first. The figure stated in the budget is 6.5%. In its economic assessment the Commission estimated it would be 6.7% for next year, which is not broadly out of line with those of the Government. There is a divergence of opinion between the Commission and the Government in regard to 2010 but I am satisfied that will be resolved in time as the Commission realises what measures we have adopted and their implications for 2010.

Kieran O'Donnell (Limerick East, Fine Gael)
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How can the Minister justify a 1% increase in tax receipts?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As I said on a number of occasions, forecasting is not an exact science. A range of organisations both in the public and private sectors produces forecasts at different frequencies during the year. When preparing an economic forecast a wide range of different variables has to be considered. All forecasts are subject to risks and are affected by developments in both the international and domestic economy. I am pleased the Commission is broadly in line with the Government's forecasts for next year and I am working very closely with it on the operation of the Stability and Growth Pact.

Kieran O'Donnell (Limerick East, Fine Gael)
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Does the Minister expect to have a 1% increase in taxes?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have had a number of constructive meetings with Commissioner Almunia, who has indicated also on the public record in this State that he is optimistic about the eventual outcome for the Irish economy.