Seán Fleming (Laois-Offaly, Fianna Fail)
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12. To ask the Minister for Public Expenditure and Reform the manner in which European Union and national expenditure rules will impact on Budget 2016 and the public finances generally; if he expects any amendment to the way in which these rules will be applied in practice; and if he will make a statement on the matter. [33414/15]

Brendan Howlin (Wexford, Labour)
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The budgetary reforms introduced at national level, including the Medium Term Expenditure Framework, operate within the broader context of the reforms at EU level to the Stability and Growth Pact (SGP).

Ireland is currently subject to the corrective arm of the SGP. While in the corrective arm the key budgetary objective is to bring the deficit each year below the limit set under the Excessive Deficit Procedure. This Government has achieved this key target each year and, as outlined in the Spring Economic Statement (SES), Ireland is on track to exit the corrective arm of the SGP at the end of 2015 with a General Government Deficit of 2.3%. This is well below the limit of 2.9% under the Excessive Deficit Procedure.  

Budget 2016 will therefore be framed under the rules that apply under the preventive arm of the SGP that will require Ireland to adhere to an adjustment path towards the Medium Term Objective (MTO). Until the MTO is reached, a minimum annual structural improvement of greater 0.5 per cent of GDP is required. Compliance with the preventive arm is also assessed by reference to the Expenditure Benchmark. The Expenditure Benchmark links the year on year growth in expenditure to the potential growth rate of the economy.

As set out on page 34 of the SES, following discussions with the European Commission, there has been clarification on the application of the Expenditure Benchmark that is positive from an Irish perspective, with a marginal benefit in terms of fiscal space for 2016 equivalent to 0.4% of GDP.

The SES outlined that fiscal space of the order of €1.2 billion to €1.5 billion is available for Budget 2016, which affords the scope to increase Government expenditure by €750 million between 2015 and 2016.  

Compliance with the fiscal rules under the preventive arm of the SGP, will ensure that Ireland's public finances are kept on a sustainable path, with  revenues sufficient to support spending. The challenge will remain to prioritise and design Government interventions within this framework.