Secretary General Derek Moran statement to Select Committee on Budgetary Oversight
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I want to thank the Chairman for this opportunity to appear before the Committee and discuss the issues set out in the invitation letter. I am joined by John McCarthy (Chief Economist) and John Palmer (Central Budget Office).
Economic and Fiscal Position
Our last official forecasts were in Budget 2017 and our next official forecasts will be published next week in the draft Stability Programme Update or SPU. I understand the Committee has already invited Minister Noonan to discuss the draft SPU.
In Budget 2017, we forecast real GDP growth would be 4.2% in 2016 and 3.5% in 2017. Since then, the CSO has published quarter 3 and quarter 4 returns that showed that the second half of 2016 was much stronger than had been assumed. It would be reasonable to expect the figure next week to improve to between 4 and 4 ¼% for this year.
In fiscal terms, Budget 2017 forecast and outturn general government deficit of 0.9% of GDP for 2016. The forecasts for 2017 was for a general government deficit of 0.4% of GDP.
With regard to these deficit forecasts, the Excessive Deficit Procedure or Maastricht Returns were submitted to Eurostat by the CSO on the 31th of March and are now subject to a clarification process. These figures are confidential but some matters already in the public domain give an indication of the likely direction for the outturn for 2016. For example, the general government balance is adjusted each year for VAT accrual - VAT received in January and February that was collected by businesses in November and December of the previous year is accrued back to the previous year. As we already know that VAT for January and February this year is about €400 million more than the same months in 2016 it would be reasonable to expect that the general government deficit for 2016 will be lower than the 0.9% forecast last October.
Looking at the first quarter this year, taxes have come in at just under €11½ billion, some €350 million or nearly 3½% up on the first quarter of 2016. However, this is below profile by €280 million or about 2.4%. Based on these figures, it is unlikely that we will be adjusting our revenue forecast for 2017 in the draft SPU.
Revised forecasts for 2018 out to 2021 will also be included in the draft SPU. As I noted already, the Minister will be here to present these next week but it is to be anticipated that the macroeconomic and fiscal forecasts for the outer years will reflect increased levels of external uncertainty.
Engagement between the Department and the Committee
The Department has assisted the Select Committee on Budgetary Arrangements and this Committee since it has been set up. My officials have been available and responded to all requests for information or assistance received. This will continue. I believe that anything that increases knowledge of and the level of informed debate about fiscal and budgetary policy is to be welcomed.
Obviously, engagement will be driven primarily by the annual Budgetary calendar. We have offered to brief the Committee each quarter on the Exchequer Returns to give the Committee a presentation on the results and to answer questions you may have. There will be other events involving the Minister and the Department such as the SPU, which the Minister will present to you next week and the macroeconomic forecasts in advance of the Budget which John McCarthy presents to you after IFAC has endorsed them.
Information Requirements of the Committee and of the PBO
I understand that there is progress with regard to the establishment of the Parliamentary Budget Office. While there have been suggestions over the years that an independent budgetary office should be established, the Minister, in response to a PQ in February 2015, said he was coming to the view that the proposal should be considered in depth.
The focus at that time was on independent costings of alternative budgets from opposition parties. Since then, the OECD published its review and, based on this, the Oireachtas has decided to widen the remit but costings will remain a critical component. As you know, both Departments have provided a costing service for election manifestos for many years and, more recently, for budgets.
The Department produces a huge amount of budget relevant information each year. Late last year, we circulated a list with links and also provided a copy of the publications to the Committee Secretariat. We will continue to forward the links to each publication to the Secretariat as soon as we put them up. Assimilating this information and having it to hand in a format that enables the Oireachtas to carry out its functions is a key challenge.
The PBO will potentially have a critical role to play in answering this challenge. We will continue to share all the information we can with the PBO and the Committee to facilitate this. A Memorandum of Understanding between the PBO and the Department on the sharing of information and operational modalities will be important in this regard as that office is developed.
Again, I would like to thank the Committee for this invitation and colleagues and I will do our best to address your questions.
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