Michael Noonan (Limerick East, Fine Gael)
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Question 1: To ask the Minister for Finance the discussions he has had with the Governor of the Central bank regarding the Governor's comments, that a budgetary adjustment of greater than €3billion may be required to calm the bond markets; if he sees merit in the Governor's opinion; and if he will make a statement on the matter. [34222/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am aware of the suggestion made by the Governor of the Central Bank, Professor Patrick Honohan, both in an address on 20 September last and in his comments earlier today, that reprogramming of the budgetary profile over the coming years will be necessary. To ensure that sustainability is restored to the public finances, the Government set out in budget 2010 a multi-annual fiscal consolidation framework to reduce the general Government deficit to less than 3% of GDP by the end of 2014.

Significant action has already been taken in regard both to expenditure and taxation in order to restore sustainability to the public finances. Between July 2008 and the supplementary budget in April 2009, adjustments designed to yield approximately 5% of GDP in 2009 were introduced. Budget 2010 delivered a further adjustment, mainly on the expenditure side, of €4 billion or 2.5% of GDP. Therefore, the cumulative correction to date has been 7.5% of GDP.

The most recent Exchequer returns covering the period to the end of August show that the Government's actions are having a positive effect, with the overall Exchequer position broadly in line with expectations. The target of raising €20 billion from the bond markets in 2010 has now been achieved and, taking account of the funding already completed this year, cash balances, retail debt and longer-term funding carried over from last year, Ireland is funded through to the middle of next year.

I stress once again that the Government remains fully committed to meeting the target of having a deficit below 3% of GDP by the end of 2014. As I said in my statement on banking this morning, it is important that we have a credible path to show how we propose to meet this commitment. Work is under way on a four-year budgetary plan that will set out the annual measures required to restore order to the public finances and bring our deficit below 3% of GDP by the end of 2014.

I expect the Governor of the Central Bank will shortly forward to me his usual pre-budget outlook, and this, along with the most up-to-date economic and fiscal data, will be taken into account in the Government's deliberations in the run-up to the publication of the new four-year budgetary plan in early November.

Michael Noonan (Limerick East, Fine Gael)
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What target is the Minister aiming at for the budget on 7 December? His adjustment target of €3 billion is well known and he seems to have already achieved €1 billion of that through cuts in capital expenditure. What adjustments, either in tax or current expenditure, does he envisage in order to achieve the new target he implied this morning? Will he indicate what that target is?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As I stated, work is under way on the four-year budgetary plan which will set out the annual measures required to restore order to the public finances and ensure we meet the commitment we have given to reduce the general Government deficit to below 3% of GDP by the end of 2014. My Department will continue to assess the most up-to-date economic and fiscal data and their implications for the fiscal consolidation process in the coming years as we prepare the four-year plan. An adjustment above €3 billion will be required next year, but it would be premature for me to go into the details about the extent of the additional consolidation required. But additional consolidation will be required.

The Exchequer returns for late September are outstanding and there are other data that tend to be assembled on a quarterly basis which are also of value to my Department. The Department needs to assess all this information before the Government is in a position to put precise figures on the sum required in budget 2010.

Michael Noonan (Limerick East, Fine Gael)
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I would have thought that once Brussels requires budgetary profiles for the next four budgets that the first step would be to set the targets and then fill in the profiles to achieve those targets. Is the Minister saying he does not know what the targets are but that his Department is working on the profiles? If that is the answer, perhaps he will tell us the level of detail Brussels expects on the profiles. Will it accept global figures or will each expenditure cut have to be underpinned by a policy decision? Will the tax increases have to be nominated with an indication of annual yield?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am glad the Deputy asked that question. Brussels has not required anything in terms of this process. It is a decision of the Government to introduce a four-year plan. I certainly discussed the matter with the Commissioner for Economic and Monetary Affairs, Mr. Rehn, in general terms, but no specific requirements were imposed on Ireland by Brussels and there is no suggestion of that. It was obvious to the Department and to me as Minister that the data in September were mixed and that there were risks on the downside which required to be addressed. Indeed the Governor of the Central Bank indicated some time ago that reprogramming was necessary and I discussed the matter with him as well.

I cannot speak for the Governor, but there are clearly imbalances in the public finances which require to be addressed and which are outside of the difficulties faced by our banking sector. There is a significant and unsustainable gap between the State's revenue and expenditure and downside risks in relation to growth. Consequently, tax projections for 2011 were part of the downside risk identified at my Department. For that reason work is under way in the Department in assessing these risks and devising sustainable forecasts for next year. I am not going to prejudge the eventual figure, which the Government will have to arrive at, at this stage. In regard to the €3 billion figure, it is the indicative figure agreed with the Commission and stated in the Stability and Growth Pact, but events have superseded that figure.

Joan Burton (Dublin West, Labour)
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Question 2: To ask the Minister for Finance if his attention has been drawn to the fact that the most recent Quarterly National Accounts indicated a contraction of 1.2% in GDP in the three months to June 2010 and a further contraction in GNP of 0.3%; his views on the most recent economic indicators; if his further attention has been drawn to the fact that the most recent Exchequer returns showed a €1.865bn drop in tax revenues over the same period in 2009; if he is aware that the most recent Quarterly National Household Survey showed a drop of 79,400 in the numbers at work in the past year; the way he expects the economy to evolve over the coming 12-18 months and if he will provide revised economic forecasts for the period 2011 to 2014; and if he will make a statement on the matter. [34438/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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First, I assure the Deputy that my attention is, of course, drawn to all of the important economic and fiscal data as they become available. The quarterly national accounts figures published by the Central Statistics Office last week show that GDP declined by 1.2% between the first and second quarters of this year. This figure must be seen in context, however, as it follows an increase of 2.2% in the first quarter. In other words, taken together, the figures for the first two quarters suggest that GDP has stabilised. The quarterly figure for GNP was a decline of 0.3% between the first and second quarters, pointing towards stabilisation in this measure of economic activity. In annual terms, GDP fell by 1.8% in the second quarter.

Personal consumption and investment moved in line with expectations while exports continued to perform well. However, a somewhat unexpected surge in imports reduced the overall level of GDP in the second quarter. The improvement in our export performance evident in the quarterly figures is encouraging, as is the fact that the export base has broadened in recent quarters. This suggests the significant improvements in competitiveness in recent years are having the desired effect.

The more recent economic indicators paint a somewhat mixed picture. On the domestic front retail sales have weakened over the summer months. On the external front the indications are that exports continue to perform well, which is to be welcomed. The most recent Exchequer returns show that in the first eight months of the year, €18.9 billion in tax revenue was collected. While this was almost €1.9 billion below what was collected in the same period in 2009, it was in line with what my Department had expected. In fact, tax revenues to the end of August were just 0.7% below target.

In terms of the labour market, employment fell sharply over the course of last year and this is reflected in the annual decline in the second quarter of this year. Shorter-term indicators point towards stabilisation. For instance, the seasonally adjusted quarter-on-quarter decline in employment in the second quarter was 0.4%. While we all regret any loss in employment, it is important to note this was the lowest rate of employment loss in more than two years. The unemployment rate picked up over the summer. However, much of this was due to seasonal factors, and this was confirmed yesterday with the publication of the September live register figures showing a very substantial reduction in the live register as well as a seasonally adjusted reduction.

In terms of the short-term evolution of the economy, there is much uncertainty at the moment. Recovery over the next year or so will probably be gradual. As I have indicated, my Department is currently assessing all relevant information and will publish revised macro-economic forecasts in the coming weeks.

Joan Burton (Dublin West, Labour)
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I thank the Minister for his reply. At the time of the 2010 budget last December, the Minister famously said that the economy had turned a corner. However, the reality is that the domestic economy remains in recession having contracted for nine straight quarters. Does the Minister agree with Professor John McHale, professor of economics, National University of Ireland, Galway, that the cause of recession in Ireland is a lack of domestic demand. Looking at our situation negatively, almost 14% of our people are out of work. However, looking at it positively, 86% of our people are in work but are, by and large, terrified to spend. Does the Minister accept that returning the Irish economy to growth is fundamental to reducing the rate of interest Ireland must pay for borrowing, putting a floor under the property market and, fixing the banks? Does the Minister accept that they are strategically the three things any Government will have to do to get Ireland out of recession?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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On turning the corner, any country with a GNP decline in its economy of the scale of 10% which then stabilised it at approximately 0% in the ensuing year would certainly be judged by any fair economic commentator as having turned a corner. That is a substantial amelioration in our position. In 2009 and the latter stages of 2008, we had a serious contraction in GNP. This year, we have seen a stabilisation, which is a turning of a corner.

I am pleasantly surprised to discover that I agree with the remainder of the Deputy's question. I believe a growth strategy is essential to stabilise the property market.-----

Joan Burton (Dublin West, Labour)
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We need a few harps to make music.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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----- to ensure that the banking system recovers and, above all, that the real economy recovers and the public finances are corrected. A growth strategy is essential and must form part of the multi-annual plan, which is now being formulated.

Brendan Howlin (Wexford, Labour)
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I will allow a brief supplementary from Deputy Burton.

Joan Burton (Dublin West, Labour)
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The Minister's statement of this morning contains a two-line reference to a four-year budgetary plan. Was this budgetary plan requested by the European Commission? Has it been agreed with the European Commission and who will prepare the plan? Everybody agrees that the growth forecast previously used by the Minister erred on the side of optimism. Will the four-year plan be drawn up independently, as suggested by some people?

Will the Minister provide, as was done in the United Kingdom prior to the general election for George Osborne and Vincent Cable, a direct line of information to me, as Labour Party spokesperson on finance and other finance spokespersons, from the Department of Finance and whoever else is drawing up the plan?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy has asked a number of questions. My Department did not err on the side of optimism in its growth forecast for this year. In fact, the first quarter GDP out performed the departmental forecast. On the question of who decided there should be a four-year plan, the Government, on my recommendation as Minister for Finance, decided we should have a four-year plan. There is no question of the authorities in Brussels dictating or suggesting to Ireland it should have a four-year plan.

Joan Burton (Dublin West, Labour)
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Did they raise it in conversation?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There are at all stages ongoing discussions with the Commission. Naturally, there were intensive discussions between the Commission and myself prior to this morning's important announcement. I made clear at that stage that we are embarked on such a course, following Government decision. There was no request from Europe for such a plan although Europe is happy to endorse it, as has been made clear by the euro-group. I participated in the euro-group meeting this morning by telephonic contact.

The following is an important point. The reason we need a four-year plan is not because anyone in Brussels believes we need it but because the crucial element in the stability and growth pact is meeting the 3% target by 2014. To do this, and to demonstrate this can be done, a credible pathway must be shown. I accept we have made substantial progress. I mentioned that we have already executed a 7.5% correction in GDP terms. Clearly, meeting a quantitative target in a given year is not sufficient to establish the credibility of the plan.

Brendan Howlin (Wexford, Labour)
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We must move on. We have gone well over time on this question.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would like to respond to one other question. The credibility of that trackway requires a detailed programme of decisions over a number of years. On the request made by Deputy Burton, on her own behalf and that of the Fine Gael party, for information in the period approaching a general election, I will consider that but I am not aware there is a general election pending. I appreciate the request and will raise with my Department the possibility of meeting it during an election period.