Failure in fiscal consolidation would lead us to scenarios involving further contraction and further losses in employment and welfare. The exceeding of the deficit targets last year has highlighted the difficulty of correcting fiscal dynamics in adverse cyclical situations. But it has also revealed the faults existing in the monitoring, early warning and budgetary control procedures then in force, especially for the regional governments, which the budgetary stability law currently before Parliament and which I shall refer to later must correct. In this respect, the experience of the last two years shows how important it is that budgets be prepared on the basis of a prudent macroeconomic scenario and that the measures are suitably designed to ensure their effectiveness. It is also important to have early information available on the budget outturn, so that any deviations can be corrected in time. These principles affect both the Stage Budget, the reason for my appearance here today, and the regional government budgets, which I am not going to discuss, although I do wish to take this opportunity to convey my concern regarding the obsolescence of some of the assumptions on which the latter were prepared during the latter months of 2011. These assumptions need to be updated and the appropriate measures urgently adopted to ensure that the regional governments achieve their targets. Allow me to refer briefly to the delicate cyclical situation that frames the context of the State budget for 2012.
Admittedly, as I have noted on previous occasions in this House, the evidence on the effectiveness of previous fiscal consolidation processes implemented in other developed economies shows that it increases when they are concentrated on public expenditure, in unproductive expenditure. However, the scale of the adjustment required in our country is so great that we need to make use of all the instruments available, including taxes. The 2012 Budget envisages an increase in revenue from tax measures falling basically on household and corporate income. Also, a special charge is imposed for the regularisation of hidden assets. The revenue-raising potential of these measures is expected to offset the fall in revenue due to the unfavourable trend in tax bases deduced from the macroeconomic scenario accompanying the Budget. Last year’s experience, when the bulk of the budget deviation stemmed from the adverse performance of government revenue, showed that it is essential to budget prudently for this variable. In this respect, the projected course of overall budget revenue is subject to downside risks. The reasons for this are various. First, because both the expected corporate income tax receipts and any other tax revenue will depend on the ultimate effectiveness of the numerous legislative changes, which is particularly uncertain in the case of the special charge on undeclared income.