Dáil debates

Wednesday, 23 March 2011

1:00 pm

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Question 10: To ask the Minister for Finance the way the new jobs fund will be resourced in view of the fact that the measures contained in the jobs fund will have a cost to the Exchequer; the way the revenue will be made up following the introduction of these measures; the fiscal impact of these proposals given the commitment to the aggregate adjustment as set out in the National Recovery Plan for the period 2011 to 2012 and the expenditure on these proposals will need to be offset by further revenue raising measures; if he has undertaken an economic impact assessment, or commissioned one, into these proposals and any measures that will be taken to offset this expenditure; and if he will make a statement on the matter. [5514/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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To the extent that the proposals for a jobs fund as set out in the programme for Government involve additional costs, these costs will have to be counterbalanced by offsetting measures to reduce expenditure or raise revenue. Over the coming weeks, I will be examining the options in this regard in conjunction with colleagues on the Economic Management Council and with the wider Cabinet. Full details of the measures, including the impact in 2011 and subsequent years, will be provided in the context of the Government's jobs fund, to which we are fully committed and will be bringing forward as a matter of priority.

The programme for Government sets out the measures that will be implemented as part of this process. These include, among others, a commitment to reverse the cut in the minimum wage, reduce the lower rate of VAT, halve the lower rate of PRSI, abolish the air travel tax conditional on the airlines fulfilling certain conditions and provide for an additional 15,000 places in training, work experience and educational opportunities for those who are out of work.

The Deputy will be aware that the Government has committed, in order to enhance international credibility, to adhere to the aggregate fiscal adjustment for the combined period 2011-12, as set out in the national recovery plan. As such, it is expected that the fiscal impact of the measures to be introduced will, in itself, be broadly neutral.

We are fully conscious of our responsibilities in terms of commitments that have been set out in the context of the joint EU-IMF programme of financial support for Ireland, both with regard to the fiscal adjustment measures that are to be implemented and the quantitative fiscal targets that must be met. During the recent meetings which the Minister, Deputy Howlin, and I attended with the programme partners, the external authorities agreed in principle that the conditions set out in the memorandum of understanding which underpinned the programme entered into last November could be amended to accommodate the new programme for Government, provided the overall targets remained unchanged.

As part of the new European semester to ensure proper ex ante co-ordination and surveillance of economic policies, member states, including Ireland, are required to submit an updated stability programme update to the European Commission by the end of April. Work is currently ongoing in the Department of Finance, in the context of the stability programme update, to update the economic and fiscal outlook. The stability programme update will contain revised economic and fiscal projections for 2011 and the period 2012-15.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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The Minister stated that the budget he will introduce following the first 100 days will be counterbalanced. That is the key to this question. If we consider three of the proposals referred to in the programme for Government, namely, the cutting of the 13.5% VAT rate to 12%, the halving of the lower 8.5% employers' PRSI up to 2013 and the abolition of the airport travel tax, those measures will in a full year cost €779 million, based on Fine Gael's estimates - €327 million for VAT, €369 million for PRSI and €83 million for the airport travel tax. Given that two of those measures will extend to 2013, they will result in a reduction of the take by the Government of €1.8 billion up to the end of 2013. While the Government has announced it will introduce a jobs budget, this will include the offsetting of those two measures at a cost of €1.8 billion, and the other measures will add to that figure. Therefore, we are facing revenue raising measures in excess of €2 billion in regard to the resources that will be part of this jobs fund. In addition, the Exchequer returns are very sluggish at this time and if they continue on the same trajectory, we are probably facing a deficit of €900 million.

Is this the reality? Will we see a mini-budget from the Government that will entail a significant revenue raising exercise to offset or, as the Minister said, counterbalance the proposals outlined in the programme for Government and which will total in excess of €2 billion up to 2013?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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In our discussions with the IMF and the European partners, they made it quite clear, and we assented quite willingly because we made it quite clear during the election, that whatever changes we made to the conditions in the memorandum of understanding would be fiscally neutral. In other words, if we substituted a range of measures, whether taxes or expenditure savings, by another range of measures, the fiscal impact would be the same. That is the position. Of course, we will bring forward counterbalancing measures. The Department of Finance is examining a range of such measures and we will announce them in the context of the budget in due course. We will not resile from any commitment we made given that one set of measures will be substituted by another set of measures of equal value or, to put it more correctly, equal fiscal impact.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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I take it from the Minister's response that the proposed budget will include measures which will increase revenue in the period up to the end of 2013 by in excess of €2 billion. For this year alone, the three measures I outlined will cost €779 million. Is there any indication what measures the Minister proposes to introduce to bring in this money to the State? Are we facing a finance Bill and a social welfare Bill as part of this budget? What economic impact assessment has been undertaken in regard to the measures the Minister has outlined in the programme for Government and the counterbalancing measures that are being discussed in the Department at this time?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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With regard to the measures I outlined in my reply, the measures for 2011 have a cost of €220 million and €640 million in a full year. We slightly overestimated our costs during the campaign so they are somewhat lower than the figures the Deputy has quoted.