Pearse Doherty (Donegal South West, Sinn Fein)
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2. To ask the Minister for Finance the scope for tax cuts in budget 2015 and the steps he will take to make sure budget 2015 is a progressive budget. [37263/14]

Pearse Doherty (Donegal South West, Sinn Fein)
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My question is broadly similar to the last one as it refers to a progressive budget for 2015 and relates to the definition of a "neutral budget". There has been much talk of political reform and stroke politics in recent weeks, but the manner in which the budget is being prepared is not good enough. Arming the Opposition with information in order that alternatives can be provided is simply not good enough. Deputy Michael McGrath and I have had to use Priority Questions to elicit information, but we have not received further clarity. The Minister has said a neutral budget means no change in policy, but policy announcements have been made. For example, the student contribution has been raised by €250 to €3,000 this year. Is this included in the arithmetic for a neutral budget as it is now policy? Can it be pulled back? Other measures such those involving capitation cuts and lone parents have already been announced. Are these measures needed to allow for a neutral budget?

Michael Noonan (Limerick City, Fine Gael)
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The Government's overarching fiscal policy for 2015 continues to be delivering a budget deficit below 3% of GDP. Delivering this target will take account of the improved performance of the economy and tax revenue.  A further factor is the impact of the European system of accounts, ESA, 2010 statistical changes introduced by the European Union.

Regarding taxes, cumulative tax revenue was up some €971 million, or 4.1%, on profile by the end of August.  A considerable part of this over-performance against profile will have a positive base effect on forecast 2015 tax revenues. The introduction of the ESA 2010 European statistical standard has led to the upward revision of the level of GDP in Ireland over a number of years. These impacts were first presented by the Central Statistics Office, CSO, in July 2014 and budget 2015 will be the first publication based on the new standard.

Overall, GDP in 2013 was revised upwards by €10.7 billion, or 6.5%, by the CSO, from €164.1 billion to €174.8 billion. The bulk of the upward revisions, €7 billion, relates to the inclusion of research and development as capital formation. However, other revisions, mainly relating to revised estimates for exports and the inclusion of illicit activity, have added about €3.7 billion. These revisions have had a small positive impact on growth rates in previous years. It is expected that the budgetary objective of a deficit of less than 3% of GDP can be achieved with a broadly neutral budget.

The Deputy will be aware that I have stated numerous times that I believe the income tax burden is currently too high in Ireland and that it needs to be reduced. I have also stated that, although it is my intention to alleviate the burden, I can only do so when the public finances allow it. With budget 2015 only two weeks away, I am not prepared to be drawn into speculation on specific budgetary measures at this time. However, I will say that, as part of the normal budgetary preparations, I am examining potential options for changes to the tax system as part of the overall budget package to be agreed by the Government.

Regarding progressivity, Ireland already has a very progressive income tax system in that those on higher incomes pay proportionately higher rates of tax on their incomes than those on lower incomes. It is an important feature of the tax system and one of the factors taken into account in the formulation of tax policy proposals.

The Deputies did not have to table Priority Questions as they could have received this information through written questions on the first day of this term.

Michael McGrath (Cork South Central, Fianna Fail)
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That is not the truth. These questions are not being answered.

Pearse Doherty (Donegal South West, Sinn Fein)
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I submitted a written question and the Minister answered, but I want to tease it out. He says a neutral budget for 2015 is possible outside outstanding policy commitments. The Tánaiste and Minister for Social Protection, Deputy Joan Burton, yesterday said €750 million of cuts need not proceed, but the Government has already announced some cuts in 2015. We legislated for such cuts in the Finance Bill. I am not asking the Minister for specific details on the budget, but I raise the example of the student contribution which is set to rise by a further €250 to the maximum figure of €3,000 in 2015.

Are the other measures that have been legislated for in education and other areas, including social welfare for lone parents, necessary to achieve the neutral budget? Will the savings that accrue from that suite of measures, already announced as Government policy, be necessary for the neutral budget, or are we starting from a point at which the neutral budget is possible without anything that has not taken effect to date taking effect? If we are to have real parliamentary debate and if real alternatives are to be provided, it is important that the Department, through the Minister, give the Opposition information so that we can produce as good an alternative budget as possible.

Michael Noonan (Limerick City, Fine Gael)
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The answer to the Deputy’s question depends on the effective date of the policy change. If the effective date was 2014, the Minister responsible would have to provide for it within the 2014 Estimates by way of savings from elsewhere in the Votes or by way of Supplementary Estimate. If, on the other hand, the changes are with effect from some date after 1 January 2015, it is not in the base and must be provided for in the Book of Estimates and the budget.

Pearse Doherty (Donegal South West, Sinn Fein)
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That is welcome. Any measure that has been announced, such as the student contribution fee, would have an effective implementation date after 1 January 2015. Therefore, the savings that would accrue from that are not included in the budget arithmetic to make up a neutral budget.

Michael Noonan (Limerick City, Fine Gael)
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That is next year’s base.

Pearse Doherty (Donegal South West, Sinn Fein)
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If it is next year’s base, we are starting from a point at which that does not have to be provided for to achieve a neutral budget.

With regard to what the Minister terms a broadly neutral budget, providing the receipts and expenditure at midnight on Friday, three days before the budget is announced, is not sufficient. We need to change that system. Can the Minister give us his analysis, based on his best judgment, of what effect a no-change policy today will have on the 3% level? We will not hold him to this, because he has used rule-of-thumb analyses and has been forthright with information in the past. Will we come in at €200 million or €300 million below that figure, or will we be just close enough to it? Can he give us some indication that will help us prepare? We in the Opposition do not have the luxury of waiting till midnight on Friday to come up with an alternative budget within a few hours.

Michael Noonan (Limerick City, Fine Gael)
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For the purpose of illustration I will talk through this, but the Deputy is not to tie me to the precise figures. The opening position last April was that we needed an adjustment of €2 billion to get the deficit down below 3%. That was to be divided in a proportion of 2:1, with roughly €1.3 billion from expenditure cuts and €700 million from tax increases. As the budgetary position improved over the year, the level of adjustment estimated by officials in the Department began to narrow. It is at such a point now that, if I did nothing in a fortnight’s time - if we brought no budget in - there would be roughly enough money in the Exchequer to run the country on the basis of no policy change in 2015 while bringing the deficit down to €2.9 billion, or around there.

Michael McGrath (Cork South Central, Fianna Fail)
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Is that based on the growth estimate?

Michael Noonan (Limerick City, Fine Gael)
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It is not so much based on the growth estimate as on the flow of taxes. Growth is tenuous because it is a projection. The bulk of what we are talking about is money already collected. It is the €970 billion in advance of budget at the end of August. That is not put in a safe. As it comes in, because it is not spent, it begins to reduce the deficit. If the Deputy looks at the statement on the August Exchequer returns he will see that the deficit was €1.3 billion below budget forecast at the end of August this year. It is progressive. As the taxes come in the deficit goes down. The deficit is probably somewhere below €4 billion at this point in the year, and we can project where it will land at the end of the year. I use the word “broadly” to cover the fact that it might be €50 million or €100 million above or below the line, but in general terms approximately €2 million has come in that was not estimated. That means far fewer cuts.