Michael McGrath (Cork South Central, Fianna Fail)
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73. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if the figures given for net fiscal space for 2019, 2020 and 2021 include the changes announced in budget 2018; the amount by which they impacted on the net fiscal space from budget 2018 in the each of three years; and if he will make a statement on the matter. [53732/17]

Michael McGrath (Cork South Central, Fianna Fail)
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74. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if the figures given for net fiscal space for 2019, 2020 and 2021 include the public pay agreement; the amount by which they impacted on the net fiscal space from the public pay agreement in each of the three years; and if he will make a statement on the matter. [53733/17]

Michael McGrath (Cork South Central, Fianna Fail)
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75. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if the figures given for net fiscal space for 2019, 2020 and 2021 include the changes announced in mortgage interest relief; the amount by which they the impacted on the net fiscal space from the changes in the three years; and if he will make a statement on the matter. [53734/17]

Michael McGrath (Cork South Central, Fianna Fail)
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76. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if the figures given for net fiscal space for 2019, 2020 and 2021 include indexation measures; the amount by which they impacted on the net fiscal space from indexation measures in the three years; and if he will make a statement on the matter. [53735/17]

Michael McGrath (Cork South Central, Fianna Fail)
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77. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if the figures given for net fiscal space for 2019, 2020 and 2021 include the capital envelope of €4.3 billion outlined in exchequer capital envelopes 2018 to 2021; if these effects have been smoothed over the four years; and if he will make a statement on the matter. [53736/17]

Michael McGrath (Cork South Central, Fianna Fail)
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78. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if there are outstanding costs in relation to Irish Water that will affect the net fiscal space for 2019, 2020 and 2021; if changes made in 2017 in relation to Irish Water and water provision have been factored into the base for the net fiscal space; and if he will make a statement on the matter. [53737/17]

Michael McGrath (Cork South Central, Fianna Fail)
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79. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if demographic effects have been factored into the base for the calculation of the net fiscal space for 2019, 2020 and 2021; the amount of these effects; and if he will make a statement on the matter. [53738/17]

Michael McGrath (Cork South Central, Fianna Fail)
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80. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, the way in which local property tax is accounted for in the base calculation of net fiscal space; the impact in each of the years 2019, 2020 and 2021 from local property tax; if the impact incorporates the expected revaluation of properties to take place; and if he will make a statement on the matter. [53739/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 73 to 80, inclusive, together.

As I stated in my reply to PQ number 74 of 30/11/17, the Summer Economic Statement (SES) 2016 set out estimates of gross and net fiscal space over the forecast horizon. SES 2016 also presented an indicative split between expenditure and taxation uses of these amounts as well as the provision for contributions to the Rainy Day Fund (RDF). This was subsequently updated in the SES 2017 to take account of the decision to increase capital expenditure in 2019, 2020 and 2021 by €500m by reducing the planned contributions to the RDF by the same amount. The figures given were adjusted to take into account the arithmetic set out in the Budget 2018. 

The current forecasts of general government revenue and expenditure include this allocation of fiscal space along with the measures introduced in Budget 2018.

The detailed estimates of gross and net fiscal space updated in SES 2017 resulted in additional unallocated fiscal space in each of 2019, 2020 and 2021, which was described as the margin of compliance. Based on Budget 2018 forecasts, indications are that the margin is expected to increase when the estimates of fiscal space are updated in the SES 2018 following the publication by the European Commission, in May of next year, of the reference rate, convergence margin and GDP deflator to be used for the calculations in relation to 2019. 

Net fiscal space also takes account of discretionary revenue measures that increase or decrease general government revenue such as, for example, mortgage interest relief. Further, the additional revenue generated from a political decision not to proceed with indexation of the tax bands is included in the discretionary revenue measures. The amounts set out in my previous response are inclusive of these.

Before addressing the specific issues raised, I want to stress the importance of the fiscal stance rather than the fiscal space. The economy is performing very strongly at present and full employment is now within sight. In these circumstances, it would be completely inappropriate to adopt pro-cyclical budgetary policies that simply add fuel to the fire. So, regardless of what fiscal space is available, it is my intention to do what is correct for the economy and I will not repeat the mistakes of the past.  Steady, sustainable improvements in public services are what is required, not boom and bust.

Now, turning to specific issues.

Changes announced in Budget 2018 that are recognised in 2018 go into the expenditure and revenue base and have no further effect on fiscal space. However, as set out in Table 7 of the Expenditure Report 2018, the carryover impact of Budget 2018 measures is estimated at approximately €192 million. These costs would have to come out of the unallocated fiscal space in the 2019 forecasts. Tax carryover is €14m and would need to be met out of the €590m fiscal space available for tax reductions in 2019.

The Public Service Stability Agreement (PSSA) has been ratified and the costs are included in the forecasts. The amounts are €370m in 2019, €340m in 2020, and €230m in 2021.

The tapering of mortgage interest relief (MIR), decided in Budget 2018, results in a revenue yield to the Exchequer that represents a positive discretionary revenue measure, increasing fiscal space, of €46m in 2019, €41m in 2020, and €37m in 2021. This is already included in the tax revenue forecasts.   

The existing forecasts make provision for tax reductions of €590 million, €620 million and €610 million for 2019 – 2021 respectively.

If a decision is taken to index the income tax bands then the revenue reductions included in the forecasts could be utilised for this purpose without impacting the tax forecasts for fiscal space. If social welfare payments were to be indexed then the unallocated fiscal space within the current forecasts could be utilised in the first instance.

The capital envelope is included in the baseline forecasts. As such, when calculating fiscal space, the provision for smoothing of gross fixed capital formation applies.

Irish Water’s planned expenditure as per its 2015 business plan was incorporated in the general government forecasts for 2015-2021. The reform of the funding of Irish Water due to the Water Services Act 2017 is neutral in overall general government terms and thus has no impact on calculations of fiscal space in the years 2019 – 2021. Further details on these changes were set out in chapter 7 of the Economic and Fiscal Outlook document as part of Budget 2018.

The baseline forecasts include demographic effects. These amount to €500m in 2019, €480m in 2020, and €480m in 2021.

With regard to Local Property Tax (LPT), this policy is not settled and the revaluation date has been postponed to 2019.  The position in 2019 and beyond is a matter of active consideration by Government.  In that context, my Department and the Department of Housing, Planning and Local Government in conjunction with the Revenue Commissioners will consider issues relating to the implementation of the recommendations in the Report prepared by Dr Don Thornhill.  The Government will make its position clear so that households will know well in advance what its plans are for LPT. In that regard, the forecast for LPT as set out in Budget 2018 of €470 million for 2017 remains unchanged over the forecast horizon.

As a result, there are no discretionary revenue measures relating to LPT policy changes in 2018 and no assumptions can be made in this regard for 2019 and subsequent years until the policy process described above is completed.  Accordingly, the impact of potential LPT changes on the forecasts of fiscal space out to 2021 is not included.