Question to the Minister for Finance (Michael Noonan, TD)
To ask the Minister for Finance if he envisages that further tax increases or spending reductions will be required over the next three years to meet the Government’s commitment to reduce the budget deficit; and if he will make a statement on the matter. – Jerry Buttimer
For WRITTEN ANSWER on : Wednesday, 14 January 2015.
REPLY
As the Deputy will be aware, the anchor for fiscal policy over recent years has been to achieve a deficit of less than 3% of GDP by 2015 and exit the Excessive Deficit Procedure (EDP). Through the EDP process, Ireland’s targets have always been set in headline deficit terms, for example, a deficit of less than 5.1% of GDP in 2014.
For 2015, the Budget forecasts a deficit of 2.7% of GDP, which provides a prudent buffer to achievement of the deficit target. We were able to do this while also reducing taxes and increasing expenditure in key areas.
For 2016 and 2017, we expect Ireland to have exited the EDP, we will be subject to the preventive arm of the Stability & Growth Pact, where our deficit targets are no longer in headline terms but are actually set in structural terms. In terms of Ireland’s requirements under the fiscal rules, Ireland will have to make an annual improvement of more than 0.5% of GDP in structural terms per annum until it reaches its Medium Term Budgetary Objective (MTO) of a balanced budget.
In this context, decisions on taxation and expenditure would need to be considered in the context of the annual budgetary process. Our most recent Budgets forecasts indicate future compliance with the fiscal rules without the inclusion of aggregate tax increases or nominal expenditure cuts.