Barry Cowen (Offaly, Fianna Fail)
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115. To ask the Minister for Finance further to Parliamentary Question No. 74 of 30 November 2017, if the portion of the Exchequer capital spending in 2019, 2020 and 2021 per Table 3.1 is in addition to that previously allocated and so would not be accounted for in the net fiscal space referenced (details supplied); the adjusted net fiscal space for each of the three years accounting for the Exchequer spending in Table 3.1; and if he will make a statement on the matter. [17150/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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Apart from the net increase explained in the following table, the Exchequer gross voted allocations in Table 3.1 of the National Development Plan (NDP) are consistent with previous allocations as per Table 8 in the Economic and Fiscal outlook document for Budget 2018, when account is taken of the technical adjustments arising from the passing of the Water Services Act 2017.  A key element of these technical adjustments was that domestic water services provided by Irish Water are funded through voted expenditure.  So for 2018, the change in capital allocations from €5.3bn to €5.8bn was €500m as set out on page three of the Revised Estimates for Public Services 2018. 

As these are simply reallocations of the source of funding of capital expenditure, with no resulting increase in overall general government expenditure, this has no impact on the general government balance. 

As there was no change to general government expenditure, there was no impact on fiscal space for 2018.

This change also carries through to 2019, 2020 and 2021. Further to this, the NDP announced four funds which will begin operating from 2019.  These are the Rural, Urban, Innovation and Climate Action Funds.

The funds will be partly covered by an unallocated capital reserve in the first instance, leaving an additional cost, which will both pre-commit unallocated fiscal space and worsen the Exchequer Borrowing Requirement (EBR).

The net nominal EBR increase resulting from the three funds is set out in the last row of the following table.

As the Climate Action Fund, set out in the following table, will be funded from the National Oil Reserves Agency (NORA) levy, it will have no impact on Voted Expenditure or the EBR.

In calculating the impact on net fiscal space under the Expenditure Benchmark, it is assumed that both the Urban and Rural Funds will be recorded as gross fixed capital formation (i.e. subject to ‘capital smoothing’ over four years) and that the Innovation and Climate Action Funds will be treated as capital grants (i.e. not smoothed). A further assumption is that the funding from the capital reserve will offset the Rural and Urban Funds.

Should the operation of the funds change these assumptions then the figures that follow will need to be amended.

The cost, in fiscal space terms, of the four funds is therefore:

While updated estimates of fiscal space will be published in the Summer Economic Statement 2018, I have repeatedly said that budgetary policy will be framed in the context of what is right for the economy, what is sustainable and not by what is legally allowed.  The Government will not repeat the budgetary mistakes of the past.