Fiscal Responsibility Act 2012

PART 1 Interpretation

1.. Interpretation.

1.— (1) In this Act—

“1997 excessive deficit Regulation” means Council Regulation (EC) No. 1467/97 of 7 July 1997 ^1 as amended by Council Regulation (EC) No. 1056/2005 of 27 June 2005 ^2 and Council Regulation (EU) No. 1177/2011 of 8 November 2011 ^3;

“1997 surveillance and coordination Regulation” means Council Regulation (EC) No. 1466/97 of 7 July 1997 ^4 as amended by Council Regulation (EC) No. 1055/2005 of 27 June 2005 ^5 and Regulation (EU) No. 1175/2011 of 16 November 2011 ^6;

“2009 Regulation” means Council Regulation (EC) No. 479/2009 of 25 May 2009 ^7 as amended by Council Regulation (EU) No. 679/2010 of 26 July 2010 ^8;

“2012 Treaty” means the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union done at Brussels on 2 March 2012;

“annual structural balance of the general government”, in relation to a year, means the general government deficit or general government surplus for the year, cyclically adjusted and net of one-off andtemporary measures, expressed as a percentage of gross domestic product at market prices;

“Budget”, in relation to a year, means the Financial Statement and associated material presented by the Minister to Dáil Éireann, and the Estimates for Public Services, which set out the Government’s proposals for the year with regard to the raising of tax and other revenues and to public expenditure;

“budgetary rule” shall be construed in accordance with section 3;

“cyclically-adjusted” means adjusted to take account of effects estimated to be due to the operation of the economic cycle;

“Estimates for Public Services” means the estimates of expenditure submitted by the Government to Dáil Éireann for approval in relation to supply grants and appropriations-in-aid in respect of supply services for a year;

“European system of accounts” means the European system of national and regional accounts in the Community as provided for under Council Regulation (EC) No. 2223/96 of 25 June 1996 ^9, as it has effect as amended from time to time;

“exceptional circumstances” means—

(a) a period during which an unusual event outside the control of the State has a major impact on the financial position of the general government, or

(b) a period of severe economic downturn,

within the meaning of the Stability and Growth Pact;

“Fiscal Council” has the meaning given by section 7(1);

“fiscal stance” means the change in the annual structural balance of the general government, excluding interest payments on the general government debt expressed as a percentage of gross domestic product at market prices, for a year relative to the preceding year;

“general government”, in relation to the State, shall be construed in accordance with the European system of accounts;

“general government debt”, in relation to a year, means the total gross debt at nominal value of the general government of the State which is outstanding at the end of the year, as arrived at in accordance with the 2009 Regulation;

“general government deficit”, in relation to a year, means the net borrowing of the general government of the State for the year, as arrived at in accordance with the 2009 Regulation;

“general government surplus”, in relation to a year, means the net lending of the general government of the State for the year, as arrived at in accordance with the 2009 Regulation;

“gross domestic product at market prices”, in relation to a year, means gross domestic product of the State for the year at market prices, as arrived at in accordance with the European system of accounts;

“local authority” has the same meaning as in the Local Government Act 2001;

“medium-term budgetary objective” means the medium-term budgetary objective required by the 1997 surveillance and coordination Regulation;

“Minister” means Minister for Finance;

“official forecasts” means the macroeconomic and budgetary forecasts published by the Department of Finance for the purposes of fiscal planning and known as the Spring forecasts and the Autumn forecasts;

“Stability and Growth Pact” means the 1997 surveillance and coordination Regulation, the 1997 excessive deficit Regulation and the Resolution of the European Council of 17 June 1997 on the Stability and Growth Pact ^10;

“stability programme” means the stability programme required by Article 3(1) of the 1997 surveillance and coordination Regulation;

“subsector”, in relation to the general government, shall be construed in accordance with the European system of accounts.

(2) A word or expression used in this Act and in the 2012 Treaty has, unless the contrary intention appears, the same meaning in this Act as in the 2012 Treaty.

PART 2 The Fiscal Rules

2.. Duty of Government to endeavour to comply with fiscal rules.

2.— (1) The Government shall endeavour to secure that—

(a) the requirement imposed by section 3(the budgetary rule), and

(b) the requirement imposed by section 4(the debt rule),

which derive from Articles 3 and 4 respectively of the 2012 Treaty, are complied with.

(2) The official forecasts shall set out the data required to assess whether the requirement specified in subsection (1)(a)is complied with.

3.. Budgetary rule.

3.— (1) The budgetary rule is that for each year either—

(a) the budget condition (set out in subsection (2)), or

(b) the adjustment path condition (set out in subsection (4)),

is satisfied.

(2) The budget condition is that either—

(a) the budgetary position of the general government is in balance or in surplus, or

(b) the requirement in paragraph (a) is not met only as a result of exceptional circumstances and the failure to meet it does not endanger fiscal sustainability in the medium-term.

(3) The requirement in subsection (2)(a) shall be deemed to be respected if the annual structural balance of the general government is at the medium-term budgetary objective.

(4) The adjustment path condition is that either—

(a) the annual structural balance of the general government is converging towards the medium-term budgetary objective in line with the timeframe set in accordance with the 1997 surveillance and coordination Regulation, or

(b) the requirement in paragraph (a) is not met only as a result of exceptional circumstances and the failure to meet it does not endanger fiscal sustainability in the medium-term.

4.. Debt rule.

4.— When the ratio of general government debt to gross domestic product at market prices exceeds 60 per cent, the ratio shall be reduced in accordance with the 1997 excessive deficit Regulation until the ratio reaches 60 per cent.

5.. Medium-term budgetary objective.

5.— (1) Subject to subsection (2), the lower limit of the medium-term budgetary objective shall be an annual structural balance of the general government of minus 0.5 per cent of gross domestic product at market prices.

(2) If the ratio of general government debt to gross domestic product at market prices is significantly below 60 per cent, and risks in terms of long-term sustainability of public finances are low, the lower limit of the medium-term budgetary objective shall be an annual structural balance of the general government of minus 1 per cent of gross domestic product at market prices.

6.. Correction mechanism.

6.— (1) If the Commission addresses a warning to the State under Article 6(2) of the 1997 surveillance and coordination Regulation or if the Government consider that there is a failure to comply with the budgetary rule which constitutes a significant deviation for the purposes of Article 6(3) of that Regulation, the Government shall, within 2 months, prepare and lay before Dáil Éireann a plan specifying what is required to be done for securing compliance with the budgetary rule.

(2) The plan shall—

(a) specify the period over which compliance with the budgetary rule is to be achieved,

(b) if that period is longer than a year, specify annual targets to be met in moving towards such compliance,

(c) specify the size and nature of the revenue and expenditure measures that are to be taken to secure such compliance, and

(d) outline how any revenue and expenditure measures that are to be taken will relate to different subsectors of the general government.

(3) The provision made by the plan shall be consistent with—

(a) the rules of the Stability and Growth Pact,

(b) any recommendations made to the State under the Stability and Growth Pact in relation to the period over which compliance with the budgetary rule is to be achieved and the size of measures to be taken to secure such compliance, and

(c) the current stability programme.

(4) If the Government consider that exceptional circumstances have arisen during the period specified in the plan, the things specified in the plan are no longer required to be done; but when the Government considers that the exceptional circumstances have ceased to exist, the Government shall, unless there is no longer a failure such as is mentioned in subsection (1), within 2 months prepare and lay before Dáil Éireann a new plan under that subsection.

(5) If the Government consider that a failure to comply with the budgetary rule is likely to occur the Government may, within 2 months, prepare and lay a statement before Dáil Éireann outlining the steps the Government intends to take to avoid such a failure.

PART 3 Irish Fiscal Advisory Council

7.. Irish Fiscal Advisory Council.

7.— (1) There shall be a body to be known as Comhairle Chomhairleach Bhuiséadach na hÉireann or, in the English language, the Irish Fiscal Advisory Council (in this Act referred to as the “Fiscal Council”) to perform the functions conferred or imposed on it.

(2) The Fiscal Council—

(a) is a body corporate with perpetual succession and a seal, and

(b) may sue, and be sued, in its corporate name.

(3) The Scheduleshall apply in relation to the Fiscal Council.

8.. Functions of Fiscal Council.

8.— (1) The Fiscal Council shall be independent in the performance of its functions.

(2) The Fiscal Council shall monitor, and at least once in each year provide an assessment of, whether any obligation under section 2(1)(a) or 6(1), or to do things specified in a plan under section 6(1), is being complied with.

(3) An assessment under subsection (2) shall include an assessment of whether (in the opinion of the Fiscal Council)—

(a) exceptional circumstances exist or have ceased to exist,

(b) there is a failure such as is referred to in section 6(1), and

(c) during any period specified in a plan under section 6(1), progress towards securing compliance with the budgetary rule is being made in accordance with the plan.

F1[(4) The Fiscal Council shall—

(a) endorse, as it considers appropriate, the macroeconomic forecasts prepared by the Department of Finance on which the Budget and stability programme will be based,

(b) provide an assessment of the official forecasts, and

(c) in relation to each Budget and stability programme, provide an assessment of whether the fiscal stance for the year or years concerned is, in the opinion of the Fiscal Council, conducive to prudent economic and budgetary management, including by reference to the provisions of the Stability and Growth Pact.]

(5) The Fiscal Council shall, as soon as practicable after completing an assessment under this section, give a copy of the assessment to the Minister and publish the assessment within the period of 10 days beginning on the day on which the copy is so given.

(6) If the Government do not accept an assessment of the Fiscal Council in relation to any of the matters referred to in subsection (3), the Minister shall, within 2 months of being given a copy of the assessment under subsection (5), prepare and lay before Dáil Éireann a statement of the Government’s reasons for not accepting it.

(7) The Fiscal Council has all such powers as are necessary for, or incidental to, the performance of its functions.

PART 4 Miscellaneous and Supplementary

9.. Regulations.

9.— (1) The Minister may make regulations on the basis of the common principles referred to in Article 3(2) of the 2012 Treaty.

(2) Regulations under this section may contain such incidental, supplementary and consequential provisions as appear to the Minister to be necessary or expedient for the purposes of the regulations.

(3) The Minister shall not make regulations under this section unless a draft of the regulations has been laid before, and approved by a resolution of, Dáil Éireann.

10.. Expenses.

10.— The expenses incurred by the Minister in the administration of this Act shall be paid out of moneys provided by the Oireachtas.

11.. Short title and commencement.

11.— (1) This Act may be cited as the Fiscal Responsibility Act 2012.

(2) This Act comes into operation on such day or days as the Minister may appoint by order or orders either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or different provisions.