The National Recovery Plan 2011 – 2014

 

Our roadmap to economic and fiscal recovery

 

 

The major announcement on the 24^th of November 2010 by Minister for Finance Brian Lenihan was that of the details of The National Recovery Plan, a strategic framework that will guide Ireland to economic and fiscal recovery. The foundation for such a plan is constructed upon a directive issued by the European Union to reduce the annual deficit to less than 3% of Gross Domestic Product. The plan outlines the government’s intention to achieve this objective through a combination of tax increases and spending cuts and they are set out as follows

 
A total adjustment in the sum of € 15 billion with € 10 billion coming from expenditure cuts and € 5 billion from taxation increases.

In relation to expenditure, current spending is set to decrease by 12% over the period but capital spending is to be reduced by over 40% and by 2014 will be more than one-third of peak spending in 2008.

 
With regard to taxation increases the main focus of such an increase is Income Taxation. Bands and Credits will be reduced by 16.5% and will generate more than one third of the total increase in new taxation revenues.

 

The success of such a plan is dependent on the accuracy of the government’s economic assumptions. Gross Domestic Product to reach almost 2% next year and exceed 3% in 2012 The Department of Finance has released a year by year breakdown of hits income and expenditure throughout this four year plan.

 

Budgetary Projections in relation to the National Recovery Plan (€ BN)

 

	2010	2011	2012	2013	2014
Gross Current Expenditure	54.8	52.8	50.90	49.40	48.0
Central Fund	6.4	6.8	8.8	10.0	11.0
Tax Revenue	31.5	33.4	36.3	39.20	42.20
Additional Revenue	16.5	14.7	14.10	14.30	14.8
Capital Spending	6.1	4.7	4.3	3.9	3.5
General Government Balance	-49.9	-14.7	-11.7	-9.6	-5.0
GDP (Nominal)	157.3	161.2	168.1	175.4	183.5
% of GDP	-31.7%	-9.1%	-7.0%	-5.5%	-2.7%

Source Department of Finance

 

 The above table clearly sets out how the government plans to achieve such an objective. As previously stated the foundation for such an objective is the economic growth of Ireland as provided with regard to the following table

 

Economic Assumptions (% change)

 

	2010	2011	2012	2013	2014
Nominal GDP	-4.5%	2.0%	3.5%	4.0%	4.3%
Real GDP	-2.0%	1.0%	2.5%	2.5%	2.5%
Nominal GDP	-1.5%	2.5%	4.3%	4.3%	4.5%
Real GDP	0.3%	1.8%	3.3%	3.0%	2.8%

Source Department of Finance

 

Over the four-year period nominal GDP is forecast to grow by over 16%, or almost 4% per annum.

 

Expenditure Cuts

 

The National Recovery plan outlines proposed cuts in relation to expenditure totalling € 10 billion. This shall be allocated to a € 7 billion reduction in current expenditure and the remaining € 3 billion will come from cuts to Capital Spending. The € 7 billion in current expenditure

 

 

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