Michael McGrath (Cork South Central, Fianna Fail)
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96. To ask the Minister for Public Expenditure and Reform his views on the Irish Fiscal Advisory Council's claim that the ratio of non-interest Government spending to gross domestic product is projected to fall by over five percentage points between 2015 and 2020 and this would appear very challenging to achieve while maintaining current services and meeting demands for increases in public services, due to demographic and other pressures; and if he will make a statement on the matter. [22925/15]

Michael McGrath (Cork South Central, Fianna Fail)
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97. To ask the Minister for Public Expenditure and Reform the way he envisages the system of multi-year ceilings will operate under the revised EB framework; his views on the finding of the Irish Fiscal Advisory Council that the multi-year expenditure ceilings system is not working effectively because the Government has consistently made adjustments to the ceilings; and if he will make a statement on the matter. [22927/15]

Brendan Howlin (Wexford, Labour)
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I propose to take Questions Nos. 96 and 97 together.

The Spring Economic Statement (SES) outlined that fiscal space of the order of €1.2 to €1.5 billion is expected to be available for Budget 2016. The fiscal projections contained in the SES and the Stability Programme Update (SPU) are based on a technical assumption of a budgetary package of €1.2 billion in 2016, split evenly between expenditure increases and tax reductions. 

Post 2016, the fiscal forecasts included in the SES and the SPU, and all related general government expenditure ratios, reflect a no-policy-change scenario from an expenditure perspective, other than provision being made for a €300 million increase in gross voted expenditure per annum to offset demographic pressures. 

This no-policy change scenario would result in the pace of structural adjustment in the period 2017 to 2020 significantly exceeding the minimum annual rate of greater than 0.5 per cent of GDP required under the preventive arm of the Stability and Growth Pact (SGP).  However, it is the Government's firm intention - stated clearly in the SES - to make only the minimum adjustment required under the rules of the SGP in these years, which means that additional fiscal space will be available. 

Decisions regarding the application of this fiscal space will fall to be taken each year, as part of the Budget, taking account of the prevailing economic conditions and Government's commitments to investing in public infrastructure and services. As these resource allocation decisions are made by Government, the ratios in relation to general government expenditure will adjust accordingly.

The Medium Term Expenditure Framework, with multiannual ceilings, was introduced in 2011 during a period of significant fiscal consolidation and has been very successful in assisting Government to meet its fiscal targets each year.  Working within this framework, the Government has been able to achieve its fiscal targets and also allocate additional resources to areas of priority as these became available. 

The Medium Term Expenditure Framework operates within the broader context of the SGP, in particular the Expenditure Benchmark. The recent refinements in relation to the application of the Expenditure Benchmark now allow calculations of the reference rate for potential expenditure growth to be updated annually. This ensures that the rules take account of the most up-to-date outturn and outlook for potential GDP growth. This change has resulted in some 0.4 per cent of GDP in additional fiscal space in 2016. With an annual update to the Expenditure Benchmark reference rate, it is reasonable that the expenditure ceilings should be revised to take account of the most up-to-date data.