Pearse Doherty (Donegal South West, Sinn Fein)
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Question 2: To ask the Minister for Finance if he will detail structural deficit projections for 2016, 2017 and 2018 and the adjustments and or growth projections that will be required to move from the structural deficit target of 3.5% which he projects for 2015 and the 0.5% rule that the he will have to meet after 2015; and if he will make a statement on the matter. [25884/12]

Joe Higgins (Dublin West, Socialist Party)
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Question 3: To ask the Minister for Finance if he will outline his economic growth and structural deficit and national debt projections in the five years after Ireland makes its scheduled exit from the EU-IMF Programme of Financial Support and the corresponding projections for Ireland's debt to GDP ratio; if he will estimate the scale of adjustments required during this timeframe in order that Ireland meets it structural deficit and debt to GDP ratio targets contained in the Fiscal Compact Treaty. [25725/12]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 2 and 3 together.

As part of the corrective arm of the Stability and Growth Pact, once an excessive deficit has been identified, the focus of budgetary policy is on reducing the headline deficit to below 3% of GDP. Following agreement with the ECOFIN Council in December 2010, we are required to correct our excessive deficit by 2015, a timeframe that balances the need for consolidation as well as the need to support economic recovery. Under the European semester, member states are required to produce macroeconomic and fiscal forecasts for the current year and for the following three years. The Department does not have detailed macroeconomic and fiscal forecasts beyond 2015 as this is not the norm.

Once a member state corrects its excessive deficit, it is subject to the preventive arm of the Stability and Growth Pact, where the focus is on targeting a structural budgetary position that ensures fiscal sustainability over the medium and longer-term. This is the so-called medium-term budgetary objective, MTO, which for Ireland is currently a structural deficit of 0.5% of GDP. As is it part of the Stability and Growth Pact, we are required to target this MTO irrespective of the stability treaty. Post-2015, therefore, we will be required to make progress towards meeting our MTO. This will be done on a phased basis on the basis of a timeline to be agreed with the Commission.

However, as I have outlined before, the exact size of the structural component of the deficit in 2015 is highly uncertain and contingent on policy measures yet to be announced or to take effect. The range of estimates by different institutions is currently quite large and I would point out that, in the context of the stability treaty, participating member states are not bound by the EU harmonised methodology. For national purposes, a methodology adapted to Irish circumstances can be used. Moreover, not only do technical estimates differ depending on the approach used, but it is also the case that estimates of the structural balance further out on the forecast horizon are not fixed. Policies being implemented at present, together with future measures, can be expected to impact positively on the current point-in-time projections.

As I have said previously, reducing the structural element of the deficit will require policy action, though not necessarily taxation and expenditure adjustments. Other options are available and it is the Government's intention to pursue these. Such measures include labour market reforms, together with investment in technology and infrastructure. By boosting the productive capacity of the economy, the ambitious programme of micro-economic reforms that is already under way is expected to help reduce the structural element of the deficit by the middle part of the decade. For example, the Action Plan for Jobs 2012 and the Pathways to Work initiative include reforms aimed at addressing some of the skills mismatch in the labour market, which should help permanently lower the unemployment rate. This would have a structurally beneficial impact on the public finances, on both the revenue and expenditure sides. In summary, therefore, there are many moving parts and all of these make estimates of the budgetary impact of meeting our medium term objective subject to a high degree of uncertainty.

As part of the reforms to the Stability and Growth Pact contained in the so-called six pack of legislative reforms, member states with a debt-to-GDP ratio in excess of 60% will have to reduce the part of their debt ratio above the 60% threshold by one 20th annually. This will have to be done irrespective of the stability treaty, although it also forms part of the treaty.

Ireland and the other member states currently in excessive deficit on the basis of the deficit criterion are not subject to the debt correction rule at this time. In Ireland's case we must first stabilise our debt-to-GDP ratio. It is forecast that this will be achieved next year. After coming out of the current excessive deficit procedure and as a programme country we will be able to avail of a three year transition period before the full one 20th rule will apply. This means Ireland will not be fully bound by the one 20th rule until 2019, although in the 2016-18 period we will need to make sufficient progress in terms of reducing our debt ratio.

I reiterate the point that when it comes to meeting the debt requirement it is reasonable to expect that economic growth will do most of the heavy lifting. To suggest otherwise is misleading.

Pearse Doherty (Donegal South West, Sinn Fein)
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I agree with the Minister regarding the difficulty in predicting the structural deficit for 2015 and beyond. A range of moveable factors will impact on the figures to improve them or make them worse. However, let us deal with the Department's best predictions based on the models and expertise available to it. Does he agree that the statement on the programme update issued by the Department in April indicated a structural deficit of 3.5% in 2015? That would leave a gap of 3% or €5.4 billion based on GDP. Setting aside our agreement regarding the difficulty of making projections, the Department's best attempt reveals a structural gap of €5.4 billion between the medium term objective of 0.5% and its projected figure of 3.5%

The IMF is the only organisation to project the structural deficit post-2015. Its country specific report, which was released earlier in the spring, indicated that the structural deficit in 2016 and 2017 would decrease marginally by 0.1% in the absence of further adjustments, even based on a growth rate of 4.9%. Does the Minister agree that further adjustments will be needed and, in meeting those adjustments and closing the gap, will he rule out additional tax increases or cuts?

Michael Noonan (Limerick City, Fine Gael)
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I draw Deputy Doherty's attention to a statement made on "Prime Time" last night by the eminent economist, John McHale, who is chair of the fiscal advisory council. He took the view that no additional consolidation would be required to meet the structural deficit even under very conservative assumptions about growth. One takes note of what somebody with the stature of Professor McHale says.

Deputy Doherty followed a good line of argument but it contained fallacies. The 3.5% figure which the Department produced last April included the Commission's figure because it was based on the latter's calculation. All these forecasts are done at a point in time. Put simply, the point in time in this instance was that if no policy changes occurred between last April and 2015, the Department estimated that the structural deficit would be 3.5%. However, the Government is evolving policy on a monthly basis. The jobs plan drawn up by the Minister for Jobs, Enterprise and Innovation provides for 232 different initiatives and is being driven by the Taoiseach in a Cabinet sub-committee. A timeline has been devised for Departments and they have to report back to the Taoiseach and provide an explanation if they are not delivering.

During the boom years when the building industry was going great, we appeared to have a surplus but while we had one in nominal terms in fact we had a structural deficit. If the Government of the day had taken the heat out of the building industry rather than continuing to rely on the transaction taxes the industry produced it would have addressed the structural deficit and we would not have faced the problem in 2010. Similarly today if we retrain building workers so they do not remain permanently unemployed we can take them off the live register and do not have to pay social welfare. We will thereby address the structural deficit. Of course it has to be corrected but not by means of tax increases or cuts. It is structural and if we change the structure we will address the flaws.

Joe Higgins (Dublin West, Socialist Party)
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Many eminent economists take a very different view from that of Mr. McHale. These views, which are supported with facts, figures and actual projections, indicate that severe cuts and tax increases will be necessary to reduce the structural deficit to 0.5%. Does the Minister acknowledge that many aspects of these decisions and the implementation of the targets are being taken out of the hands of the Irish Government and placed under the control of the European Commission, which under article 3 of the austerity treaty will determine the size and pace of cuts?

Where will the Minister find the growth that he claims will do most of the heavy lifting when all the evidence shows that austerity here and in Europe is savaging growth? We experienced a decrease of 2.5% in GNP last year and the domestic economy slumped over the last two quarters of 2011. That process is likely to continue as long as the Government continues to pile cuts on the Irish people.

As a Member of the Dáil elected by the people of Limerick, is the Minister in any way disturbed by the increasing harassment and bullying of our people by all kinds of economic agencies? The people are told they must vote "Yes" irrespective of what the treaty contains or else they will be isolated by the speculators in the markets. They are thereby invited to divert our attention from the details of the fiscal compact treaty and its implications for our economy. Is that not a reprehensible situation?

Michael Noonan (Limerick City, Fine Gael)
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The only harassment and bullying I have seen in the past couple of weeks involved supporters of the "No" campaign harassing and bullying the Taoiseach as he campaigned across the country. They tried to prevent him from explaining the situation to ordinary, decent citizens. Deputy Higgins should exercise influence over his supporters, if he has any, to stop this harassment of the Taoiseach and respect the dignity of his office and the offices we hold as Members of this Parliament. He should not go for street politics when he can express himself freely in here.

Joe Higgins (Dublin West, Socialist Party)
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Our supporters harass and bully nobody.

Michael Noonan (Limerick City, Fine Gael)
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I cited Professor McHale because of his eminence as an economist and the position he occupies as chair of the Fiscal Advisory Council. We should give weight to what he says. I cited his comments so that Deputies will know he made them and can give them due weight. Of course there are other voices on the "Yes" side as well as the "No" side and some people exaggerate the position. Our target is a nominal deficit below 3% by 2015. Part of the nominal deficit will be structural. It is not possible at present to say what the structural deficit will be because all estimates are based on the assumption of no policy changes that will reduce or increase the structural deficit over the next four years. That is pure theory but does not work in practice. We will have a number of years to deal with the structural deficit and get it down to 0.5% of GDP. There are four ways of doing it: we can tax, we can cut, we can get the economy to grow or we can address the structural flaw. One of the big contributors to the structural deficit is the 150,000 people who became redundant from the building industry. If we can retrain many of them and get them back to work as well as re-employing some in the building industry through initiatives such as the one announced by NAMA this morning, we are dealing with the social welfare bill, moving away from long-term unemployment and reducing the structural deficit. It is alarmist so to say it will be slash and burn fiscal economics for three or four years after 2015, with no choice but to cut services and tax. That is not true. Professor McHale said the heavy lifting will be done by growth on very modest growth assumptions, without addressing the structural flaws in the economy.

Michael Kitt (Galway East, Fianna Fail)
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We have gone over time. The next question is in the name of Deputy Michael McGrath.

Pearse Doherty (Donegal South West, Sinn Fein)
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This is a Priority Question at a very important time. A decision was made to group Priority Questions and this denied a supplementary question for this Priority Question. It is inappropriate.

Michael Kitt (Galway East, Fianna Fail)
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We can take up that point but we cannot deal with it now. I will take it up with the Office of the Ceann Comhairle.

Pearse Doherty (Donegal South West, Sinn Fein)
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It is utterly inappropriate that the option has been denied to us. It is our right to have a supplementary question on the Minister's argument. The grouping of this question by people who are opposed to the treaty is absolutely wrong.

Michael Kitt (Galway East, Fianna Fail)
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The general principle is that it is a matter of time rather than the number of supplementary questions.

Pearse Doherty (Donegal South West, Sinn Fein)
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Did I go over the time allocated to me? It is not my fault if the Minister went over his allocated time.

Michael Kitt (Galway East, Fianna Fail)
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I ask Deputy Doherty to resume his seat. We can take up the point with the Ceann Comhairle.

Joe Higgins (Dublin West, Socialist Party)
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I support Deputy Doherty.

Michael Noonan (Limerick City, Fine Gael)
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It is fair to point out the grouping is a decision of the Office of the Ceann Comhairle.

Finian McGrath (Dublin North Central, Independent)
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It is very serious.

Pearse Doherty (Donegal South West, Sinn Fein)
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It is wrong.