The Minister for Finance has refused to support the Labour party’s contention that the next budget will be softer as a result of the deal on the promissory notes, according to Fianna Fáil Finance Spokesperson Michael McGrath.
Deputy McGrath stated, “The deal on the promissory notes is estimated to yield a saving of €1 billion in the general government deficit over the period to 2015. Over the past two weeks, Labour party Ministers have been telling all and sundry that the next budget will be easier because of the deal on the promissory note.
“However, in a Dáil reply to me, Minister Noonan is striking a far more sober note when he says ‘As we are less than two months into the year, I will not be drawn into speculation on the composition of the next Budget and the impact that this deal will have on it.’ On the basis of this, the Labour party Ministers have no basis for saying that the deal will have a direct impact on Budget 2014. We can certainly take it that there has been no government decision to use the savings from the deal to reduce the planned €3.1bn budget adjustment in 2014.
“The Labour Party won’t take comfort from the fact that the man who has the Minister’s ear – Department of Finance Secretary General John Moran – has already said his view is that the savings from the promissory note deal should not be used to reduce the planned budget adjustments.
“I fully understand that no final decision on the budget adjustment for 2014 can be made until closer to the time. However, the government is in a position to say that – provided economic indicators remain in line with projections – the intention to give some dividend to the Irish people in the next budget. The Minister for Finance and his Labour party cabinet colleagues seem to be on a very different page on that.”
The PQ reply to Deputy McGrath from Minister Noonan is included below.
To ask the Minister for Finance if it is his intention, provided all other economic indicators remain in line with the projections made in Budget 2013, to use the circa €1 billion improvement in the general Government balance as a result of the deal on the promissory notes to reduce the planned €3.1 billion adjustment in Budget 2014; and if he will make a statement on the matter.
– Michael McGrath.
* For WRITTEN answer on Thursday, 21st February, 2013.
Ref No: 9477/13
Minister for Finance ( Mr Noonan) : First of all it is important to note that some aspects of the promissory note deal are yet to be finalised. For example, the liquidator is in the process of overseeing a valuation and sales process for the assets of IBRC, while the final payments made under the ELG Scheme have not yet been determined.
Nevertheless, as referred to by the Deputy, simulations ran by my Department estimate that the General Government deficit will improve by approximately €1 billion per annum over the coming years, which will bring us €1bn closer to attaining out 3% deficit target by 2015. This means that the expenditure reductions and tax increases will be of the order of €1 billion less to meet the 3% deficit (there will be negligible impact in 2013 as a result of the payout under ELG). However, this has to be seen in the light of the most recently published General Government deficits of €8.9bn and €5.3bn in 2014 and 2015.
While this agreement is a significant step forward in restoring sustainability to our public finances, this Government is well aware that there remains a considerable gap between what we get in revenue and what we spend. This situation is not sustainable over the longer term. In addition to the requirements to bring our deficit to under 3% of GDP by 2015 as per the EDP, it makes sense that we bring balance back to the public finances and stabilise and reduce our debt burden.
As we are less than two months into the year, I will not be drawn into speculation on the composition of the next Budget and the impact that this deal will have on it. There are a lot of other moving parts to be considered such as economic growth, tax take and expenditure performance. All of the above, including the impact of the promissory note deal, will form the basis of Government decisions regarding the Budget.