Seán Fleming (Laois-Offaly, Fianna Fail)
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1. To ask the Minister for Public Expenditure and Reform the way in which European Union and national expenditure rules will impact on budget 2016, and the public finances generally; if he expects any amendment to how these rules will be applied in practice; if he will confirm that Ireland will stay within budgetary provisions in 2015 and in 2016; and if he will make a statement on the matter. [33645/15]

Seán Fleming (Laois-Offaly, Fianna Fail)
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I wish to ask the Minister for Public Expenditure and Reform the way in which European Union and national expenditure rules will impact on budget 2016 and the public finances generally, if he expects any amendment to how these rules will be applied in practice and if he will confirm that Ireland will stay within budgetary provisions in 2015 and 2016.

Brendan Howlin (Wexford, Labour)
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Wide-ranging reforms to the budgetary architecture have been implemented by this Government with a view to supporting the efficient use of public funds to deliver effective services for our people. The medium-term expenditure framework and periodic comprehensive reviews of expenditure have provided the opportunity to move discussions about expenditure decisions away from consideration of short-term issues to a broader strategic debate about key challenges facing public expenditure and public services.

The reforms introduced at national level operate within the broader context of the EU level reforms to the Stability and Growth Pact, SGP. For 2015, with Ireland in the corrective arm of the SGP, the key budgetary fiscal target is to bring the general Government deficit below 3% of GDP as required under the excessive deficit procedure. As outlined in the spring economic statement, Ireland is on track to exit the corrective arm at the end of 2015 with a general Government deficit of 2.3%. This is well below the 2.9% that we set as our target. Thereafter, Ireland will become subject to the preventive arm of the SGP with budget 2016 being framed within that context. The new fiscal rules under the preventive arm will serve as a tool to help us responsibly manage our recovery. With future increases in public expenditure linked to potential economic growth, all areas of current and capital expenditure need to be managed to ensure that public expenditure is sustainable and delivers the maximum benefit.

Ireland's entry into the preventive arm of the SGP in 2016 afforded the opportunity for the spring economic statement to set out the parameters of next year's budget. Fiscal space of the order of €1.2 billion to €1.5 billion is available for budget 2016, with this amount split evenly between expenditure and tax measures. In this context, the material published at budget time will reflect an estimated expenditure outturn for this year, taking account of any additional expenditure planned for the year.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I thank the Minister for his reply.

I just want to ask one or two specific questions. We understand what the Minister is saying about the move from the corrective arm to the preventive arm. With regard to the target, we are expected to be at 2.3% this year. The Minister did not tell us what level of reduction will be required for 2016. I think we have to make a reduction of the order of 0.6%. The Minister mentioned that the increase in public expenditure will be linked to the potential growth in the economy. I do not think that is the full picture. I suggest it would be more accurate to say that expenditure will be linked to the average potential growth in the economy over a ten-year horizon. This ten-year horizon was mentioned in replies to previous parliamentary questions, but the Minister studiously avoided any reference to it in the reply to this question. Was that an oversight or has there been a change in policy? Is the Minister trying to unlink himself from the previous ten-year horizon? I think people would be concerned if there was a move away from it. The Minister might tell us whether the costs of the Lansdowne Road agreement will be included in those figures.

Brendan Howlin (Wexford, Labour)
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I think I need to explain this because the new rules are quite complex. The two measures that will underpin whether we meet the rules - the judgment criteria - next year are the expenditure benchmark and the annual structured adjustment. Under the expenditure benchmark, public expenditure can only grow at rates determined by the potential growth of the economy, less a convergence margin if the member state is not at its medium-term objective. We have set our medium-term objective of a structurally balanced budget and we expect to reach it by about 2018. In the interim, we have to make progress towards that at a rate greater than 0.5% of GDP. The ten-year horizon referred to by the Deputy has been renegotiated. It is now a three-year horizon, which suits Ireland better. Obviously, we did not want to be trapped within a horizon that covered the depression years. A horizon of growth potential for the economy that looks at what happened last year and this year will be much more favourable to us in terms of giving us fiscal space.

Seán Fleming (Laois-Offaly, Fianna Fail)
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The Minister might tell the House when the ten-year rule was changed to become a three-year rule. This change has fundamental implications for the forthcoming budget because a ten-year horizon would cover many years in which negative growth figures were recorded.

Brendan Howlin (Wexford, Labour)
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That is the point.

Seán Fleming (Laois-Offaly, Fianna Fail)
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We have had significant and strong growth from a relatively low base in the past couple of years. This percentage increase based on a three-year horizon is phenomenal. One would hope that the Government does not intend to use that short-term figure excessively to increase expenditure at an enormous rate and thereby add fuel to an economy that is growing. The Minister might tell us when this change was completed. Can he give some indication of the percentage increase in expenditure that the Government will facilitate in the budget that is to be announced in this House less than two weeks from now?

Brendan Howlin (Wexford, Labour)
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We sought a three-year horizon in our negotiations because an annualised horizon would not have been very helpful to us. A three-year horizon was negotiated by my colleague, the Minister for Finance, at ECOFIN and agreed there. I will have to check the exact date for the Deputy. We set out the space we will have for next year in the spring economic statement and we are sticking to that. The space will be of the order of €1.5 billion, which is at the upper end of what we set out in April. The adjustment will be divided equally between expenditure and taxation. Expenditure over the outturn figure for 2015 will be of the order of €750 million.