Written answers

Thursday, 9 May 2013

Department of Finance

Croke Park Agreement Issues

Photo of Mary Lou McDonaldMary Lou McDonald (Dublin Central, Sinn Fein)
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58. To ask the Minister for Finance further to Parliamentary Question No. 319 of 16 April 2013, if he will confirm that his Department did not calculate the specific reduction of GDP growth directly attributed to the proposed Croke Park 2 cuts to public sector pay and pension of €1 billion between 2013 and 2015. [21966/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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As the Deputy is no doubt aware, fiscal consolidation in the form of adjustments to both expenditure and taxation is being implemented in order to reduce the fiscal deficit. In turn this lowers the cost of borrowing, helps to put public debt on a declining path and contributes to increased investor confidence. Having said that I fully recognise that there will be a short term reduction in economic activity before these medium to long-term growth benefits associated with a lower sovereign risk premium and the subsequent pass-through to private sector sentiment is realised. In recent years this strategy has shown some results for the non-traded sector. Inward investment remains strong and exports from Ireland are now considerably above their pre-crisis level. In addition, bond yields on government debt have fallen sharply. The economic forecasts underpinning Budget 2013 were drawn up to be consistent with the expenditure consolidation set out on Budget day and included provisions for savings through a reduction in the public service pay bill of €300m in 2013 and an overall reduction of €1bn by 2015. As set out in the forecasts, the government consumption component of GDP is set to decline in every year to 2015, consistent with policy-related objectives of reducing the wage bill. These forecasts were updated at the end of last month for the Irish Stability Programme – April 2013 Update. They continue to reflect the consolidation envelope laid out at Budget time as well as the outturn for 2012 as estimated by the CSO.

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