Budget 2015 will include 'reality check' list of risks
Published 01/08/2014 | 00:00
BUDGET 2015 will set out more clearly the risks posed to the State's economic and fiscal forecasts after criticism from the State's budgetary watchdog that this was largely missing from recent projections.
Finance Minister Michael Noonan, pictured below, has also admitted the make-up of Budget 2014 could have been set out in a clearer way.
The issues were detailed in letters sent by the minister to the Fiscal Advisory Council.
In its latest assessment report, the Fiscal Advisory Council said that while this year's Budget contained a so-called Statement of Risk, updates to the Budget forecasts published in April's Stability Programme Update (SPU) provided only brief detail on the possible threats that could derail the new projections.
Specific risks were not outlined, the council said.
Responding to the criticism in a letter last week, Mr Noonan said a risk statement would now be provided in future.
And he added: "By way of background, my department intends to improve the comprehensiveness of the statement of risk in the upcoming Budget, which should address some of the concerns of the council."
Risks set out in the SPU included the fragility of the external recovery, low inflation, the concentrated nature of the strong IT services sector in Ireland and issues surrounding household indebtedness. But the council called for more detail.
The role of the Fiscal Advisory Council, which was established in 2011, is to review the macroeconomic projections underpinning both the Budget and the SPU. It also assesses the official forecasts published by the Department of Finance and produces two assessment reports each year.
The council has called on the Government to stick to the planned €2bn adjustment for 2015, although Mr Noonan has said he believes a crucial deficit target can be met by doing less than that.
In a separate, earlier letter, Mr Noonan accepted that the composition of the adjustment in Budget 2014 could have been presented more clearly.
In the run-up to Budget 2014, the Fiscal Advisory Council said the Government should stick with the plan to impose €3.1bn worth of tax hikes and spending cuts over the course of 2014.
But Finance Minister Michael Noonan opted to go for a €2.5bn adjustment, and relied on savings elsewhere to make up the balance.
"I agree that the composition of the €3.1bn adjustment could have been presented in a clearer fashion in the Budgetary documentation," Mr Noonan wrote.
Meanwhile, stockbroker Davy said yesterday that the Government needs to take "little additional action" in Budget 2015 to reach the target of reducing the budget deficit to 3pc of the value of the economy by the end of next year. It suggested an adjustment of €500m would be enough.
"This of course depends on spending discipline being maintained, so that current expenditure remains in line with current plans," said Davy analysts Conall MacCoille and David McNamara.