Written answers

Tuesday, 10 February 2009

9:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 195: To ask the Minister for Finance if, with regard to the recent Budgetary Projections 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department, the GDP, GNP and tax forecasts published in the addendum are projected on a budget neutral basis before the impact of fiscal consolidation measures. [4297/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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In preparing the GDP, GNP and tax forecasts recently published in the Addendum to the Stability Programme Update, account was taken of the macroeconomic and fiscal impact of a reduction in Government expenditure of up to €2 billion. While the specific details of what the Government announced last week were not known when the Department published the Addendum, the broad order of magnitude of the necessary expenditure reductions were taken account of in arriving at the overall forecasts of GDP growth of -41⁄2 per cent and a contraction of tax revenue of about -91⁄4 per cent for 2009.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 196: To ask the Minister for Finance the way, with regard to table six in the recent Budgetary Projections 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department, he has allocated the fiscal consolidation objective between different components of revenue and expenditure. [4298/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Table 5 of the Addendum to the Irish Stability Programme Update sets out the likely evolution of the public finances and the necessary amount of adjustment required the current budget to balance by 2013.

Table 6 sets out the budgetary prospects for the General Government for 2008-2013 by detailing first, the breakdown of the GGB by sub-sector of government, and then the breakdown of estimated levels of revenue and expenditures into its component parts. All data in the table is expressed as a percentage of the GDP of the particular year in question.

While the projections in Table 6 of the SPU are a technical representation of what is required to achieve the overall fiscal adjustments over the period out to 2013, and are ultimately subject top future policy decisions by Government. The detailed breakdown between the revenue and expenditure decisions that will be required will be set out in future Budgets.

Last week the Government took decisions on saving €2 billion and the focus was on expenditure. In the Addendum, the need for further adjustments in each of the years out to 2013 was set out. In this regard the work of the Special Group on Public Services Numbers and Expenditure Programmes and the work of the Commission on Taxation will be important factors in forming next year's budgetary parameters which will inform future adjustments. While no decisions have been taken yet, all aspects of expenditure, both current and capital, as well as taxation will play a part in securing the necessary adjustments.

In presenting the Addendum to the European Commission, it was necessary to distribute the adjustments in order to ensure the technical completion of the required tables. This distribution was broadly undertaken on a two-thirds to one-third basis of expenditure to revenue but in no way pre-empts future decisions of Government which could result in a different apportionment in the light of emerging budgetary conditions in the period 2010 to 2013.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 197: To ask the Minister for Finance if, with regard to the latest Budgetary Provisions 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department, the projections include expenditures for bank recapitalisation and receipts under the charge of the bank guarantee for the covered institutions. [4299/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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In relation to the issue of recapitalisation of banking institutions, the Government has made clear that any injection of capital into the banks will be made with the expectation of a return on the investment. In this case, in line with EUROSTAT guidelines, the transaction is treated as a financial transaction, and consequently, will have no impact on the General Government Balance. It was not necessary, therefore, to include the expenditures on recapitalisation in the latest fiscal projections.

The recently published Addendum to the Stability Programme Update outlines the latest economic and fiscal forecasts for the period 2009-2013. The projections outlined in the Addendum do not take account of the receipts under the charge of the bank guarantee for the covered institutions. The charge is being credited to a dedicated account maintained at the Central Bank. It is anticipated that at the expiry of the Guarantee Scheme, any amount standing to the account will be transferred to the Exchequer as revenue. At that stage the amount transferred will then be reflected in the General Government Balance.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 198: To ask the Minister for Finance the breakdown of the projected capital resources and capital appropriations-in-aid with regard to the latest Budgetary Provisions 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department. [4300/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The breakdown of estimated capital Appropriations-in-Aid for 2009 is shown by Department in the following table and was published in Budget 2009. We provide an aggregate estimate for 2010 and 2011 as determination of capital A in A's by Department will be part of future annual Estimates processes. The aggregate figure for 2010 amounts to €481m and €479m for 2011. The aggregate 2012 and 2013 estimates published in the Addendum to the Irish Stability Programme in January 2009 were assumed to equate to the 2011 aggregate level.

Capital Receipts/A in A's 2009 in €m
2009
V25 — Environment500
V26 — Education9,000
V27 — CRAGA18,500
V30 — Communications, ENR250
V31 — Agriculture1
V32 — Transport429,375
V34 — Enterprise80
V36 — Defence1,000
V40 — HSE7,000
Contingency Vote — APPROPRIATIONS IN AID0
Vote AIA Total465,706

Capital resources are made up of EU receipts, FEOGA loan repayments, the sinking fund provision and certain other miscellaneous receipts. In 2008 €1,398 million was received in capital resources of which, €113.5 million was received in ERDF receipts, €740 million in FEOGA repayments and €488 million for the sinking fund provision.

The forecast for capital resources is €1,579 million in 2009; €1,735 million in 2010; €1,868 million in 2011; €1,961 million in 2012 and €2,046 million in 2013.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 199: To ask the Minister for Finance if, with regard to the latest Budgetary Provisions 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department, he will provide an updated reconciliation between the general Government balance and the Exchequer balance for 2009 to 2013. [4301/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The Exchequer Balance is the traditional domestic budgetary aggregate which measures Central Government's net surplus or borrowing position. It is the difference between total receipts into and total expenditure out of the Exchequer Account of the Central Fund.

The projected Exchequer Balance for the year 2009 to 2013 is as follows.

20092010201120122013
€m€m€m€m€m
-17,980-16,860-13,769-11,583-8,081

The General Government Balance (GGB) measures the fiscal performance of all arms of Government, i.e. Central Government, Local Authorities, Health Boards, Vocational Education Committees and non-commercial State sponsored bodies, as well as funds such as the Social Insurance Fund and the National Pensions Reserve Fund. It thus provides an accurate assessment of the fiscal performance of a more complete government sector.

The main differences between the Exchequer Balance and the General Government Balance are the impact of various funds, including Extra Budgetary Funds, non-commercial State sponsored bodies, the Social Insurance Fund and the net borrowing of the Local Government Sector, as well as the impact of the National Pension Reserve Fund, and accrual adjustments. The estimated impact of these for the years 2009 to 2013 are as follows.

20092010201120122013
€m€m€m€m€m
Funds-1365-1727-932-750-559
Impact of the National Pension Reserve Fund2,1892,1652,2902,4572,592
Accrual Adjustments-9151319433510
General Government Balance-17,165-16,271-12,092-9,443-5,537

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 200: To ask the Minister for Finance if he will outline the assumptions he has made regarding public sector pay growth and the non-pay deflator for Government consumption in forecasting gross voted current spending with regard to the latest Budgetary Provisions 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department. [4302/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The assumptions underlying the addendum to the Irish Stability Programme Update 2009 in relation to public sector pay allow for the cost associated with the Review and Transitional pay agreement, agreed in September 2008, over all years of the forecast horizon. Last week the Government decided to defer this pay agreement until 2011, when further discussions will take place. As this decision post dates the publication of the addendum to the Irish Stability Programme this deferment will lead to a saving in 2010. Allowance was also made for changes in the demographic structure which would impact on employee numbers, notably in the case of education, which will impact on the pay bill.

Budget 2009 did not allow for any explicit non-pay deflator in the years 2009 to 2011. In January, however, the non-pay estimates were amended to allow for the costs associated with the higher Live Register and the Pig meat crisis and other pressures. A non-pay deflator (in line with the inflation forecast) was allowed for price increases in 2012 and 2013.

Capital resources are made up of EU receipts, FEOGA loan repayments, the sinking fund provision and certain other miscellaneous receipts. In 2008 €1,398 million was received in capital resources of which, €113.5 million was received in ERDF receipts, €740 million in FEOGA repayments and €488 million for the sinking fund provision.

The forecast for capital resources is €1,579 million in 2009; €1,735 million in 2010; €1,868 million in 2011; €1,961 million in 2012 and €2,046 million in 2013.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 201: To ask the Minister for Finance if, with regard to the latest Budgetary Provisions 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department, the forecast for debt service costs in non-voted current spending take account of the fiscal consolidation objective. [4303/09]

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 255: To ask the Minister for Finance the estimated reduction in general Government borrowing in 2009 as a result of the expenditure control measures announced on 3 February 2009, taking into account the impact of these measures on tax receipts. [4778/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 201 and 255 together.

The Addendum to the Stability Programme Update forecast an Exchequer Borrowing Requirement of €17,980 million for 2009. This took into account the requirement for a €2 billion adjustment. The forecast for debt service costs in 2009, estimated at €4,500 million, takes into account the fiscal consolidation objective.

The expenditure adjustments announced on 3rd February last will yield €1.8 billion in 2009 and €2.1 billion in a full year. This is broadly in line with the indicative annual adjustment as set out in Table 4 of the Addendum to the Stability Programme Update. As such it is consistent with the overall macro-economic and fiscal forecasts published in early January. Accordingly, a General Government deficit in the order of 91⁄2% of GDP is forecast in 2009.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 202: To ask the Minister for Finance if, with regard to the latest Budgetary Provisions 2008 to 2013 (Addendum to the Irish Stability Programme January 2009) published by his Department, he will clarify the competitiveness assumptions underpinning his updated economic forecasts. [4304/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The exchange rate and price developments are the main variables used to assess competitiveness. With regard to exchange rates, the norm is for my Department to use the Commission's assumptions. These hold constant the averages from a 10 day reference period. However, for the economic projections produced in the Addendum, updated assumptions were not available from the Commission. As such, and in line with international practice, the exchange rate was held constant at average levels for December 2008. This implies a 14% appreciation of the euro against sterling for this year as a whole and a 9% depreciation against the dollar. The assumed price changes were broadly in line with those of our major trading partners.

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