Written answers

Thursday, 22 October 2015

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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146. To ask the Minister for Finance if an estimate has been made of the available fiscal space for budget 2017 and budget 2018, based on current information; and if he will make a statement on the matter. [37134/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Estimates of the gross and net fiscal space for the period 2017 to 2021 can be found in Tables A8 and A9 on pages C.50 and C.51 of the Budget 2016 book. The estimated net fiscal space available for 2017 is €0.5 billion and 2018 is €1.1 billion.

Table A9 shows the walk from gross fiscal space to net fiscal space. The former is simply the permitted fiscal space arising from applying the estimated growth rate permitted under the expenditure benchmark to the 2016 expenditure aggregate. These amounts are not final and are estimates based on the GDP deflators, benchmark reference rates and convergence margins forecast for each of the years in Budget 2016. The actual deflator, reference rate and margin values used by the Commission to assess compliance with the rules each year beyond 2016 will be based on Commission estimates as set out in their forecasts in each relevant year.

The net fiscal space takes account of expenditure projections as set out in Table 10 on page C.22 of the Budget book. These include the annual cost of providing for demographic spending pressures together with a number of other anticipated elements such as the Public Capital Plan, the cost of the Lansdowne Road Agreement and a number of other calls on the Central Fund. The estimated cost of indexing the tax system is included in tax revenue forecasts in Table 10. The additional revenue that could be generated from a decision not to proceed with indexation is included as an option in the discretionary revenue measure line in Table A9. This will be a matter for decision by the Government of the day.

These available amounts of fiscal space could potentially be used by the government in power to reduce the debt, to fund tax reductions or to finance spending increases.

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