Michael McGrath (Cork South Central, Fianna Fail)
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44. To ask the Minister for Finance the gross and net fiscal space for each year up to 2023 if the expenditure benchmark and the medium term objective is met accounting for contributions to the rainy day fund, pre-committed expenditure and the non-indexation of tax system irrespective of the economy's position on the business cycle; and if he will make a statement on the matter. [46343/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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As I have previously outlined, the concept of ‘fiscal space’ is no longer an appropriate one. This is because a myopic focus on what is technically permissible under the fiscal rules would lead to pro-cyclical budgetary policies that jeopardise the sustainability of our public finances.

As such, in formulating budgetary policy the Government is instead guided by the fiscal stance – the position that is right for the economy at this point in time and that will support steady and sustainable improvements in public services and living standards.

Whereas ‘fiscal space’ was calculated based on the structural balance and expenditure benchmark rules, the correct fiscal stance can only be determined when accounting for the position in the economic cycle – when there is spare capacity in the economy it may be appropriate to use fiscal policy to help absorb this spare capacity, while when the economy is operating at full capacity adopting an expansionary fiscal policy would be imprudent.