Michael McGrath (Cork South Central, Fianna Fail)
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To ask the Minister for Finance in view of the latest fiscal and macro-economic projections available, if an adjustment of €3.5 billion in Budget 2013 is still deemed the most appropriate and sufficient for the State to come within the deficit limits for 2013; and if he will make a statement on the matter. [50717/12]

Michael Noonan (Limerick City, Fine Gael)
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The latest economic and fiscal projections from my Department were published yesterday, 14 November, in the updated medium-term fiscal statement, MTFS. Real GDP growth for 2013 is now estimated at 1.5%. This represents a one quarter of a percentage point downward revision on the previous forecast for 2013 as set out in the stability programme update in April. However, it is not simply a matter of suggesting that if growth forecasts are lowered, additional consolidation will be required to meet a deficit target; it is more complex than that. The achievement of fiscal targets is driven by a range of factors, including overall economic performance as well as specific developments that affect revenue and expenditure patterns in a given year. Positive base effects from a more positive outturn than was targeted for this year should also assist the position next year.

Broadly speaking, it is nominal rather than real GDP developments that drive revenue growth. Nominal GDP growth has been slightly above expectations this year. Although the nominal GDP growth estimate for 2013 has also been revised down by half a percentage point compared to the previous forecast from April, I believe the 7.5% of GDP deficit target for 2013 is still achievable based on the level of adjustment set out by the Government in late 2011 and reiterated in the MTFS yesterday.

The Government is firmly committed to meeting fiscal targets. We should remember that despite likely lower real GDP growth this year than was originally estimated in budget 2012 last December, we are on track to meet our fiscal targets this year. This is consistent with the outturn for last year when we also met fiscal targets despite GDP growth being somewhat lower than was originally estimated in budget 2011 in December 2010. It is worth bearing in mind that the European Commission's most recent forecasts, which were published last week, also predict our achieving the 7.5% of GDP deficit target next year. The Commission is forecasting real GDP growth of 1.1% for 2013.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister for his response. The announcement yesterday that the projected adjustment in the budget will be no greater than €3.5 billion despite the reduction in the growth forecasts for next year and 2014 was a small crumb of comfort to people. The most disappointing aspect of yesterday's document was the recognition or acceptance that we will have unemployment of approximately 14% in the coming years.

According to yesterday's document, the adjustment of €3.5 billion will bring us in at precisely the deficit limit of 7.5% of GDP next year. People want certainty and the budget will be announced in less than three weeks' time. Will the Minister indicate at this remove, in terms of the work ongoing in preparation of the budget, whether he will continue to base the budget on the three pillars of maintaining the Croke Park agreement, income tax and welfare rates? Is that the basis on which the Minister is building the budget at this point? Do those commitments still hold?

Michael Noonan (Limerick City, Fine Gael)
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The closer we get to the budget, the less free I am to give out detailed information about either elements of the budget or the approach. However, in general terms the approach outlined in the medium term projections published during the week holds. We will achieve a target of 7.6% of GDP if we do a correction of €3.5 billion. The Deputy many not have noticed it but in the revised forecast downward, the forecast for 2012 has actually increased and it is now 0.9%. I believe it will come in at 1% and this will change the base. That is the first thing we should remember. These things will continue to move within margins during the next three weeks as most of the data comes in.

Deputy McGrath will have noticed this morning that the sale of the telephone spectrum achieved a far higher price than was pencilled in. It appears that more than €400 million will accrue to the 2012 accounts. It appears we will come in at lower than the €8.6 billion which is in the arithmetic for the year. That was the budget position but it will probably be lower than the €8.3 billion that was predicted in the forecast in the latter part of the year. It is moving within parameters but at this stage since we have done the first cut of the arithmetic on the budget we are confident that an adjustment of 3.5 billion will be sufficient to get us to a deficit of 7.6% of GDP.

Michael McGrath (Cork South Central, Fianna Fail)
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It is to be welcomed overall that the deficit reduction programme is on target, but I imagine the Minister will accept that most people measure the strength of the economy by the number of jobs being created and the amount of disposable income in their pockets. I do not expect the Minister to reveal important elements of the budget today.

People will seek reassurance and it is reasonable for me to ask the Minister whether the fundamental commitments, that date to before the election and are enshrined in the programme for Government, on maintaining income tax, welfare rates and the preservation of the Croke Park agreement, form the basis of the preparation of the budget.

Michael Noonan (Limerick City, Fine Gael)
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As Deputy Michael McGrath will be well aware, it is not customary to give details of the approach to the budget when we come this close because we would then be revealing provisions that may be in the budget. The Deputy should accept that. When one is farther away from the budget one can speculate about policy and one is freer, as a Minister, to give information.

On the basis that people measure the progress of the economy on any particular set of statistics, it depends on one's perspective. Unemployment is far too high and it is a priority of the lower it. The good news this week was not only that we are on target. Bank of Ireland was able to go back into the market and raised very significant funds. ESB went back into the market on Monday and raised very significant funds. Fitch, the rating agency, took us from negative to stable last night. The Deputy will appreciate that this is the first upgrade of any eurozone country since the European crisis began. One swallow does not make a summer but a great deal happened this week. Then there was the sale of the spectrum for which last year's budget pencilled in a much lower figure, and it is coming in at approximately €850 million. Some of that is money up-front and some of it is working right out to 2020. I am not sure how it will be reflected yet in the Government accounts, but it seems to me that it improves the year end deficit position and I would be confident now that the budget deficit will be significantly lower than 8.6% of GDP.

Michael Kitt (Galway East, Fianna Fail)
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As Deputy Pearse Doherty is not here, we will go on to Question No. 3 in the name of Deputy Higgins.