Michael McGrath (Cork South Central, Fianna Fail)
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1. To ask the Minister for Finance his projection for the deficit for 2014; the adjustment needed to bring the deficit below 3% and 2%, respectively; if a neutral budget will exclude the impact of already announced measures such as water charges; and if he will make a statement on the matter. [37399/14]

Michael McGrath (Cork South Central, Fianna Fail)
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The purpose of this question is to establish some baseline data for budget 2015. I should not really have to use a priority question to obtain this information, but, unfortunately, I do because we in opposition are still working from a document that dates from last April. We are relying on the odd scrap of information thrown into the public domain by Ministers who are talking in broad terms about a "neutral budget". Therefore, I tabled this question to try to establish the baseline position against the backdrop of the improving Exchequer figures and economic data to determine what it actually meant in budgetary terms.

Michael Noonan (Limerick City, Fine Gael)
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The stability programme update, SPU, published in April forecast a deficit of 4.8% of GDP for this year. However, the Deputy should be aware that there have been a number of important changes since April, most notably the performance of taxes and the impact of the European system of national and regional accounts, ESA 2010 statistical reclassification.  Cumulative tax revenue was up some €971 million or 4.1% on profile by the end of August. This, coupled with continued expenditure restraint, means that we will over-perform on the 4.8% of GDP forecast by a comfortable margin. The next official forecast of the 2014 deficit will be contained in the White Paper on Receipts and Expenditure which will be published at midnight on Friday, 10 October. 

Changes in European statistical standards have led to the upward revision of the level of GDP in Ireland going back a number of years. These were first presented by the CSO in July 2014 and budget 2015 will be the first publication based on the new standard. Overall, GDP in 2013 was revised up by the CSO by €10.7 billion or 6.5%, from €164.1 billion to €174.8 billion. The bulk of the upward revision, some €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.

Turning to budget 2015, the Government's overarching fiscal policy continues to be the delivery of a deficit below 3% of GDP.

While there are still moving parts, it is expected that this target will be achieved with a broadly neutral budget.

Additional information not given on the floor of the House

The budgetary arithmetic will include the impact of measures already introduced, although it is estimated that there will be a very limited revenue carryover into 2015 as a result of budget 2014 measures.  However, it should be noted that the pension levy of 0.6 percentage points is not included in the budgetary arithmetic for 2015.  I also make the point that the moneys raised from water charges will be received by Irish Water which, as a commercial semi-State company, will not be a part of general government. As such, these receipts do not count as general Government revenue and, accordingly, will not impact on the deficit. 

With regard to achieving a deficit of 2% of GDP, I would normally be able to advise the Deputy that an improvement in the deficit of 1% of GDP equates to a specific nominal change.  However, owing to timing factors relating to the submission of macroeconomic forecasts to the IFAC for endorsement and the significant impact of the ESA 2010 GDP uplift, I am not able to provide a definitive figure at this time.  At SPU time, an improvement in the deficit of 1% of GDP equated to an improvement in the nominal deficit of €1.75 billion.  The quantum of consolidation necessary to deliver this improvement would be dependent on the composition of consolidation measures and their impact on economic growth.

Michael Kitt (Galway East, Fianna Fail)
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I thank the Minister and call Deputy Michael McGrath.

Michael McGrath (Cork South Central, Fianna Fail)
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I would like the Minister to continue with his answer.

Michael Kitt (Galway East, Fianna Fail)
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I am sorry, but the rules of the House state the Deputy has one minute in which to respond.

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister was just about to get to the important part. He has restated what was said publicly, that is, a broadly neutral budget will be sufficient to bring the deficit below 3% of GDP in 2015, which is to be welcomed. As he indicated, statistical reclassification has had an important impact on the opening position, but I can only speak for Fianna Fáil when I say that, as we try to finalise proposals, it is unfortunate that reform of the budgetary process has not happened and that the White Paper on Receipts and Expenditure, setting out the opening position for budget 2015, is to be published only at midnight on the Friday before the budget. Will the Minister elaborate on what he means when he refers to "a broadly neutral budget"? Does it take account of anticipated savings from the early repayment of International Monetary fund loans? Does it take account of the expected €300 million to be raised from domestic water charges? Will the Minister give the House information beyond what is already in the public domain? What is meant by "a broadly neutral budget" and will it lower the deficit to a little under or well under 3% of GDP?

Michael Noonan (Limerick City, Fine Gael)
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I cannot announce the budget today or give the base figures the Deputy has requested, but I will give as much information as possible. As Irish Water has been set up as a commercial semi-State company, it will not be part of the general government position; anything paid will go to it - it will not be received by the Exchequer. As the pension levy of 0.6% is not included in the budget arithmetic for 2015, if it is to continue, further provision will have to be made for it.

Michael McGrath (Cork South Central, Fianna Fail)
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It is included in the figure of 0.15% for next year.

Michael Noonan (Limerick City, Fine Gael)
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We would have to add on as much again.

Michael McGrath (Cork South Central, Fianna Fail)
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That would be a policy change.

Michael Noonan (Limerick City, Fine Gael)
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As it was introduced on a four year basis, if it was to continue, further provision would have to be made for it. I think the Deputy suggested a figure of 2%, but the latest figures I have suggest a further reduction of 1% of GDP would be the equivalent of €1.75 billion. If we went from below 3% of GDP to below 2%, a further reduction of €1.75 billion would have to be made. It is a big chunk of money.

The Deputy asked what was meant by a "neutral budget". It means an opening position where receipts match expenditure on the basis of there being no policy change.

Michael McGrath (Cork South Central, Fianna Fail)
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I understand that, as announced last year and enacted, the pension levy will remain in place at 0.15% for 2015. That has been pencilled into the figures.

Michael Noonan (Limerick City, Fine Gael)
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I was referring to the 0.6% figure - the major levy introduced on the basis of there being a four year cycle. There is no provision for it as a receipt in the figures.

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister informed the House that a further 1% reduction in the deficit would mean a fiscal adjustment of an additional €1.75 billion. He has stated publicly today and previously that a neutral budget would bring us below 3% of GDP - the Minister for Public Expenditure and Reform, Deputy Brendan Howlin, has done likewise. However, some estimates indicate a broadly neutral budget woud bring us closer to a figure of 2% and these differences are important. Nobody expects the Minister to announce budgetary measures yet, but we expect information on how things stand today as the deficit impacts on all of us in our approach to the budget for 2015.

Michael Noonan (Limerick City, Fine Gael)
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I am giving the Deputy all the information I can. He will receive the White Paper in the normal way on the Friday before the budget and it will give more precise data for the opening position. It will vary with budgetary changes that will be announced on budget day.

Stephen Donnelly (Wicklow, Independent)
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Is there any way I can come in on this question?

Michael Kitt (Galway East, Fianna Fail)
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Not until the other questions have been asked.