Dáil Éireann - Volume 661 - 25 September, 2008

Written Answers. - Fiscal Policy.

Deputy Arthur Morgan asked the Minister for Finance his views on whether the proposals contained in the Programme for Government to cut income tax rates will undermine the State’s ability to fund essential public services in view of recent economic developments which demonstrate the dangers inherent in an over-reliance on taxes related to construction and consumption. [31308/08]

  Deputy Brian Lenihan:I would remind the Deputy that the Programme for Government is a five year programme, which must be judged over the full five years of this Government, taking account of the health of the public finances. Budget 2008 was the first instalment of the delivery of that programme. However, it is clear that we have now entered a period of lower economic growth than was generally envisaged in the early part of last year. As such, this process must be managed carefully so as not to jeopardise our longer term future and this is what the Government is doing.

In terms of the weakness in tax revenue, it is fair to say that over the summer months the pace of the contraction has picked up considerably. At the end of August, taxes were nearly EUR2.8 billion behind target. My Department is closely monitoring overall tax performance in the run-up to the Budget. The weakness in taxes, particularly on VAT, CGT and Stamp Duty receipts, reflect a number of factors namely, the substantial adjustment in the housing market, the ongoing difficulties in the international financial markets and slower domestic economic activity such as weaker retail sales. Ireland is not unique in facing these difficulties and many of our euro area partners are experiencing similar forces acting upon their public finances.

My Department will publish an updated view on expected tax and Exchequer positions at the end of this quarter. A comprehensive assessment of the fiscal and economic position will be contained in the Budget which will be published on 14 October 2008. As is normal, I will not comment on the contents of the Budget in advance of that date. Budget 2009 will, however, set out a comprehensive approach to ensuring that Ireland remains on course for sustainable economic and social development over the medium term.