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News : Irish Last Updated: Apr 29, 2009 - 8:39:36 AM


Lenihan presents 2009 Revised Estimates for Public Services to Dáil; Bruton says "archaic system of budgeting” does not have “a single target”
By Finfacts Team
Apr 24, 2009 - 6:37:43 AM

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The Minister for Finance, Brian Lenihan, T.D., presented the 2009 Revised Estimates for Public Services to Dáil Éireann on Thursday. He said the Revised Estimates confirm and give a fuller, more detailed breakdown of spending by each department and vote of the allocations announced in the Supplementary Budget. Fine Gael finance spokesman Richard Bruton said last night, that the Budget was “not fit for running a corner shop” and the Government was “still relying on an absolutely arcane and archaic system of budgeting” and the book of estimates did not have “a single target”.

On publication of the Revised Estimates Volume, the Minister for Finance stated: “There is a misconception that the Government has made the majority of the budgetary adjustments on the taxation side. The reality is that the expenditure reductions adopted since last July will amount to at least €4.3 billion in 2009, or 3% of GNP. The taxation increases in October’s budget and the supplementary budget were introduced to raise some €3.8 billion in 2009”

Total gross voted expenditure in 2009 will be €63.9 billion, which is an increase of 2.4% but on a net basis, i.e. taking account of the pension-related deduction and other revenue offsets, the percentage change is -3.9% overall.

Tax receipts are budgeted at €34 billion but may well fall to €32 billion or even lower.

The Minister added: “The 2009 gross allocation of €63.9 billion includes provision for the increases in the Live Register. This increase adds some €2.8 billion to overall projected expenditure in 2009, with other pressures on social welfare supports bringing the overall increase in Social Welfare to €3.6 billion. Without these increases Gross Total expenditure would have fallen by 3.3%, demonstrating the Government’s commitment to disciplined budgetary management of spending pressures generally.”

The main spending areas in the REV (Current & Capital) are:

Vote Group (Gross)

2008 (€m)

2009 (€m)

Increase (€m)

Increase (%)

Social and Family Affairs

17,712

21,271

3,559

20.1

Health and Children

16,143

15,957

(186)

-1.2

Education and Science

9,241

9,492

250

2.7

Environment

3,169

2,683

(486)

-15.3

Transport

3,720

3,103

(617)

-16.6

Justice

2,714

2,576

(138)

-5.1

Other

9,741

8,837

(905)

-9.3

Total

62,441

63,918

1,477

2.4

Capital Expenditure

Projected Gross Capital expenditure for 2009 is €1.7 billion or 19% less than 2008. The effect of these savings on the capital programme will be mitigated by the fall in construction costs that is being seen. The Minister said capital expenditure is being re-focused under the National Development Plan towards projects that promote job-creation and economic capacity. Overall capital investment is being maintained at around 5% of GNP – a very high rate by international standards – and the current competitive environment for tender prices will result in better value-for-money for State spending. Lenihan said this will allow for a continuing and substantial enhancement of public infrastructure, including in the following areas:-

(a)    completing the Major Inter-Urban routes

(b)    substantial investment in public transport;

(c)    major investment in social and affordable housing;

(d)    a major schools programme;

(e)    an Enterprise Stabilisation Fund;

(f)      investment in water services and energy efficiency.

Scale of Expenditure Consolidation Effort

The REV reflects the cumulative effect of the range of expenditure-containment initiatives undertaken by the Government over the past year:

  • the April Supplementary Budget provided for total expenditure savings of €1.46 billion in 2009 and €1.8 billion in a full year, keeping the year-on-year growth rate to 2.4% on a gross basis and -3.9% on a net basis.

  • this is in addition to the savings of around €1.8 billion announced by the Government in February this year; the "disciplined approach to expenditure management" that underpinned the October Budget allocations; and the 2009 savings and efficiencies of €1 billion that were announced in July of last year.

  • These various savings bring the overall expenditure consolidation to at least €4.3 billion in 2009, or 3% of GNP.

  • In addition, the Government has deferred the Pay increases originally due under the Towards 2016 agreement later this year, leading to further savings of up to €1 billion in 2010.

  • In addition, the Government has announced a multi-annual approach to securing further expenditure savings amounting to a minimum of €2.25 billion in 2010 and €2.5 billion in 2011.

Capital Carryover

A sum of €128.453 million in capital savings from 2008 is available for spending in 2009 under the multi-annual capital envelopes carryover facility.

Fine Gael's Richard Bruton said there was no pressure to deliver efficiencies and there were “no consequences for Ministers who fail”. Ministers reported in their annual output statements last year that over 40% of targets had not been achieved, yet“not one Minister blushed, let alone tendered their resignation”.

“If the Government had put in place the United Kingdom’s system of efficiency agreements six years ago, we would by now have €4 billion to spare out of the estimates to address economic problems,” Bruton said.

Labour’s finance spokeswoman Joan Burton said: “These estimates are the first detailed national accounts from Government for 2009. They show the huge volume of additional spending that unemployment will require.

“They also show the severe cutbacks in the capital programme. What they don’t give us is any sense of how the Government intends to use this massive spend to get people back to work.

“The increases in social welfare and health spending reflect growing unemployment, but because there has been little or no reform of the budgetary process in Ireland, there is very little opportunity to question the value for money of some of the spending.

“A huge amount of this spending will now be funded out of borrowing, which has grown increasingly expensive for Ireland because of the failure of the Government to deal properly with the banking crisis.”

Richard Bruton added: “Last year, Ministers reported in their annual output statements that over 40 per cent  of  the targets they set out to achieve in the previous year had not  been achieved... The Government really  needs  to sharpen up. It cannot continue to spend money without  any accountability... if the Government does not wise up and reform the system, people will rightly say the Government is failing them.

“This  sickens me after all the years in which Fine Gael has been demanding reform.

“We have called for reform through the Committee of Public Accounts. Members of all parties, including Fianna Fáil backbenchers, and not just members of the Opposition, issued an agreed policy statement. Yet the Government has done nothing about it.”

He continued: “The most ridiculous element of all this is that relevant Oireachtas committees can only review these estimates five months into the year.”

Finfacts Sept 2008 article: Irish Public Spending: Pre- IT/Web official policy prevails - hide as much information as possible from taxpayers

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