Written answers

Tuesday, 16 June 2015

Department of Public Expenditure and Reform

Stability and Growth Pact

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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287. To ask the Minister for Public Expenditure and Reform if he agrees with the Irish Fiscal Advisory Council that the budgetary projections in the 2015 stability programme update do not present a full picture of the likely costs of demographic aging and cost pressures in delivering existing programmes, as well as not taking into account explicit Government commitments to reduce taxes; and if he will make a statement on the matter. [23092/15]

Photo of Brendan HowlinBrendan Howlin (Wexford, Labour)
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The Spring Economic Statement (SES) and the corresponding Stability Programme Update (SPU) 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 those publications are based on a technical assumption of a budgetary package of €1.2 billion in 2016 which will be split evenly between expenditure increases and tax reductions.   

For the post-2016 period, the published fiscal projections 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. In addition, given the forecast improvements in the labour market with unemployment forecast to fall from 9.6% in 2015 to 6.9% in 2020 certain Live Register savings and savings from efficiencies and policy measures will make funds available to meet expenditure and other priorities.

The pace of annual structural adjustment consistent with this no-policy-change scenario, averaging 1.1% of GDP per annum, would significantly exceed the minimum required under the preventive arm of the Stability and Growth Pact (SGP) which has been set at greater than 0.5% of GDP. 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. This means that additional fiscal space will be available.

The Government will take decisions regarding the distribution of this fiscal space each year as part of the Budget. These decisions, and the dialogue and analysis which underpins them, will reflect the most up-to-date information on economic and fiscal conditions, including any emerging cost pressures, so as to optimise the impact of public expenditure on investment and service delivery.

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