Bernard Durkan (Kildare North, Fine Gael)
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90. To ask the Minister for Finance the extent to which he expects to be in a position in the forthcoming budget to combine prudent fiscal management with the need to accommodate the issues which affect the general population in terms of the economic downturn; and if he will make a statement on the matter. [28000/16]

Michael Noonan (Limerick City, Fine Gael)
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Significant progress have been made in returning the public finances to a sustainable footing. Last year, the underlying deficit was reduced to 1 per cent of GDP, thereby facilitating Ireland's successful exit from the excessive deficit procedure.

It is important that the public finances are maintained in a sustainable position. In this regard, our new fiscal anchor is to achieve a structural deficit of 0.5 per cent of GDP.  Based on the revised trajectory and assumptions set out in the recent Summer Economic Statement, we are on track to achieve this medium term objective, of a balanced budget in structural terms, by 2018.

Once this goal is achieved, it will provide us with more flexibility to increase expenditure on priorities over the medium term. In the short term, the estimated indicative fiscal space for 2017 is around €1 billion, with the cumulative available fiscal space over the period 2017 to 2021 projected to be around €11.3 billion. This is the amount that remains after providing for pre-committed policies such as demographics etc., while still complying with the fiscal rules.

Expenditure increases in the order of €0.6 billion in current expenditure and €0.25 billion in capital expenditure are expected from the fiscal space available for Budget 2017. These increases will allow targeted improvements in the public services, with a particular focus on health, housing, education, disability and child development and care.

One third of the available fiscal space in Budget 2017 will be allocated to taxation measures. I have long said that the burden of income tax in Ireland is too high and that I would seek to reduce it as soon as it is prudent to do so.  I introduced measures to reduce this burden in both Budgets 2015 and 2016, with a particular focus on low and middle income earners.

In the Programme for Partnership Government there is a commitment to ask the Oireachtas to continue to phase out the USC as part of a wider medium-term income tax reform plan that keeps the tax base broad, reduces excessive tax rates for middle income earners, and limits the benefit for high earners. Reductions will be introduced on a fair basis with an emphasis on low and middle income earners.

Seperately, my colleague the Minister for Public Expenditure and Reform Pascal Donohoe is considering budgetary expenditure proposals which will be subject to a seperate announcement on Budget day.