Pearse Doherty (Donegal, Sinn Fein)
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157. To ask the Minister for Finance the number of quarters Ireland has been in compliance with the fiscal rules since entering into the preventive arm; and if he will make a statement on the matter. [29747/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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Compliance with the Stability and Growth Pact is assessed in annual, as opposed to quarterly, terms.  Since Ireland’s transition into the Preventive Arm of the Pact in 2016, fiscal policy has been, and will continue to be, shaped by the expenditure benchmark (EB) and balanced budget rule. 

Ireland submitted its Draft Budgetary Plan (DBP) following the publication of Budget 2017 in October of last year for assessment by the European Commission. The DBP was found to be ‘broadly compliant’ by the European Commission. This included an expected deviation under the EB of approximately €200 million in relation to increased national contributions to the EU Budget.

In January of this year the Commission published its updated version of the 2017 Vade Mecum which included a methodological change around the treatment of one-offs. In the past one-offs were not included in the assessment of compliance with the EB whereas they will be taken systematically into account in the assessment process going forward. However, the Commission appears to have retrospectively applied this change in its calculations to the EB assessment for 2016 and the combined EB assessment for 2016/2017. As I have previously stated for the Deputy in PQs number 143 of the 30th of May and number 296 of the 19th of June I do not accept retrospective application of methodological changes, particularly relating to 2016 and the 2016/2017 average. The Commission themselves have admitted that there may be legal uncertainty with the approach taken and the 2017 version of the Vade Mecum states that “in order to preserve Member States’ legitimate expectations, compliance with already adopted Council recommendations will continue to be assessed on the basis of methodologies described in the 2016 version of the Vade Mecum." My officials continue to engage bilaterally with the Commission on this point.

Further, the Irish Fiscal Advisory Council (IFAC) found Ireland to be ‘strongly compliant’ with the EB in the 2016 Ex-post Assessment of compliance with the Domestic Budgetary Rule 2016. Therefore there could not have been a significant deviation under the two-year assessment. The next assessment of compliance with the EB will the DBP due to be submitted in October of this year.

Based on the European Commission’s final ex-post assessment of compliance with the balanced budget rule, Ireland is estimated to have reduced its structural deficit by 0.3 per cent in 2016. This improvement is considered to be consistent with broad compliance with the requirements of the Stability and Growth Pact. For 2017, my Department forecasts a further structural improvement of 0.3 per cent, indicating continued broad compliance with the balanced budget rule. For 2018, a structural improvement of 0.6 per cent is projected, consistent with full compliance with the requirements of the Stability and Growth Pact. Importantly, my Department estimates that Ireland remains on track to achieve our medium-term objective of a structural deficit of 0.5 per cent of GDP in 2018. Achievement of the MTO represents an important milestone in ensuring the sustainability of the public finances.