Gerald Nash (Louth, Labour)
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131. To ask the Minister for Public Expenditure and Reform his views on a recent Fiscal Advisory Council report (details supplied) which states that the Government has failed to deliver on its commitment to publish a credible medium-term strategy with SPU 2021, that the recent SPU is based on poorly-founded medium-term spending forecasts and does not incorporate major policy commitments; and if he will make a statement on the matter. [32347/21]

Michael McGrath (Cork South Central, Fianna Fail)
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Since its establishment in 2011, the Irish Fiscal Advisory Council carries out an important independent role in assessing Government’s fiscal strategy. In its recent Fiscal Assessment Report (FAR) the Council has produced a detailed analysis on the fiscal projections in the Stability Programme Update (SPU) and also on the fiscal response to the Covid crisis.

In this regard, it is important to note the Council’s assessment that the Government’s response to the pandemic to date has been both warranted and appropriate, and in particular that the Government’s decision to continue exceptional temporary supports in 2021 was appropriate.

Looking forward, consistent with the approach set out in the SPU, the FAR outlines that Government should reduce supports in a gradual way, supporting those most affected and calibrating this based on how the recovery evolves. This approach is reflected in recent Government decisions with regard to the extension of the Pandemic Unemployment Payment and the Employment Wage Subsidy Scheme.

The FAR also outlined the Fiscal Advisory Council's views regarding the need for Government to publish a credible medium-term strategy. Given the level of uncertainty in relation to the pandemic at the time the SPU was being compiled, it was decided to prepare the SPU on a technical 'no policy change' basis. In this context, from an expenditure perspective, technical core expenditure ceilings were set out in the SPU based on an average annual growth in total voted expenditure of 3½%. The FAR outlines that this level of annual growth in voted expenditure is insufficient to account for medium term ‘stand-still costs” associated with maintaining existing public services. However, it would have to be acknowledged that this 'stand-still' position is largely driven by certain assumptions in relation to medium term price effects rather than pre-committed levels of spending.

The SPU has provided a fiscal baseline that will support Government in reaching decisions in relation to a credible medium term fiscal pathway taking account of major policy priorities. It is intended that the Summer Economic Statement will set out the Government's fiscal position in more detail, taking account inter alia of the advancements in the vaccine rollout and the position with the pandemic.