Richard Bruton (Dublin North Central, Fine Gael)
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Question 40: To ask the Minister for Finance if he has revised his forecast for the budgetary deficit for 2011 in view of the recent developments; and the contingency planning that has commenced in his Department for this changed outlook. [17483/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Budget 2010 set out the forecasts for the general Government deficit for the period to 2014. The target for 2011 is for the general Government deficit to be 10% of GDP, which is an improvement over the planned deficit for this year of 11.5% of GDP. The most recently published fiscal data, the Exchequer returns for the first quarter, were broadly in line with expectations and demonstrate that the budgetary plan, as set out in budget 2010, is on track. Consequently, at this early stage of the year, there are no proposals to revise the targets.

The Exchequer deficit at the end of March 2010 was €3.9 billion compared to €3.7 billion at the end of March 2009. My Department published monthly targets for both tax revenue and net voted expenditure earlier this year. In regard to tax revenue performance, €7.2 billion in tax receipts was collected by the end of March. This was 15% below the same period in 2009 and was €266 million, or 3.5%, below target. A significant year-on-year decline is expected in the initial months of 2010, with tax revenues forecast to end the year 6% down on 2009. The overall tax revenue target for 2010 is just over €31 billion and, based on the information available so far this year, this target remains valid.

Total net voted expenditure at the end of March 2010 was €10.7 billion, representing a decline of some €1.1 billion or 9.2% on the same period in 2009. This significant year-on-year reduction reflects both the expenditure policy changes which the Government has implemented and also, to a lesser extent, timing issues. The Revised Estimates volume, published on 18 February, projected a 1.9% reduction in total net voted spending for 2010 as a whole.

In budget 2010, my Department estimated that the general Government deficit for 2009 would be 11.7% of GDP. The estimate for the headline deficit for 2009 has now been revised to 14.3% of GDP. The difference between these two estimates is 2.6% of GDP, of which 2.5% of GDP relates to the technical reclassification of the €4 billion transfer to Anglo Irish Bank made in 2009. It is important to note that on foot of this reclassification, no additional borrowing has taken place and the underlying position of a deficit of 11.8% of GDP for 2009 is broadly the same as that published in the budget last December. This technical reclassification has a once-off impact on the headline deficit. As such, it does not affect the Government's forecasts for the level of debt, or the forecasts for debt servicing costs, as the €4 billion had already been taken account of in the budgetary debt position. Furthermore, the fiscal consolidation plan as set out in the budget is not impacted by the reclassification.

Richard Bruton (Dublin North Central, Fine Gael)
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With regard to the impact of the promissory notes, which will come to perhaps €21 billion over the next ten years, adding €2 billion each year, will the Minister in order to meet the commitments he has made to the EU in respect of borrowing over the coming years have to find that €2 billion in further cuts in expenditure or further increases in taxation? Given that we have had 250,000 job losses in the course of this recession to date, does he still hold to the view that writing whatever cheque is necessary to keep the banks afloat and fiscal retrenchment is enough to confront the jobs crisis? Does he not agree with many who believe a real strategy for the jobs economy is critical and missing from his approach to date?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy raises two broad questions. First, our commitments under the Stability and Growth Pact remain unchanged as a result of this, and the reclassification which has already taken place does not affect in any way our Stability and Growth Pact obligations.

Deputy Bruton went on to ask what impact this will have on the accounting treatment of the recapitalisation of Anglo Irish Bank and of Irish Nationwide announced by the Government in March. The matter is complex and far from clear at this stage. Further information is required in terms of the ongoing consultation with the EU about the restructuring of the bank. The further recapitalisation of Anglo Irish Bank announced on 30 March has to be considered separately from the 2009 recapitalisation. The 2010 recapitalisation should be seen in the context of a restructuring plan for the bank currently being negotiated with the European Commission. The recapitalisation of €8.3 billion by issuing a promissory note has been recorded as increasing Ireland's general Government debt by that full amount in 2010 and, pending the agreement of the restructuring plan, it is appropriate not to include it in the deficit measurement until the matter can be reviewed on foot of any decision made by the European Commission on the plan.

I should stress that regardless of the eventual treatment in the general Government balance statistics, the reality is that in terms of the Exchequer borrowing requirement these payments will be made over the coming years, beginning in 2011, and will be reflected in the year such payments are made. They will not affect our obligations under the Stability and Growth Pact or the volume of reductions that may be necessary in Government expenditure.

Richard Bruton (Dublin North Central, Fine Gael)
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Is the Minister giving the House a categorical assurance that the EU has agreed that in order to meet the 3% deficit by 2014 the Minister will not have to find this €2 billion per year either from spending or taxation? Does he have an assurance on this, despite his claim that it is complex and difficult?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am not suggesting I have already obtained such assurance. I am saying to the Deputy that the target is perfectly attainable without taking these matters into account.

Richard Bruton (Dublin North Central, Fine Gael)
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We need clarity on this. Either we have to meet this €2 billion per year for the next ten years from taxation and from cuts in spending or we add it to the debt off-balance sheet and it does not affect the budgetary targets. Which is the Minister suggesting is the case?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It does not affect the budgetary targets.

Richard Bruton (Dublin North Central, Fine Gael)
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Has the EU has accepted that it will meet the requirements we have-----

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The EU has not even raised the issue with us.

Richard Bruton (Dublin North Central, Fine Gael)
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It is a huge issue and we need clarity at a very early date.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am giving the Deputy clarity now.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister is not giving clarity. He is just saying it is not in his thinking. We need assurances that the EU accepts his approach so we can frame realistic budgetary proposals. Has the Minister raised it with the Commission and is he seeking assurances?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We have not raised an issue with the Commission that has not even arisen yet in the treatment of the accounts. That is the crucial point.

Richard Bruton (Dublin North Central, Fine Gael)
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It is an obvious question.