Bernard J. Durkan
Question:40 Mr. Durkan asked the Minister for Finance if current inflation rates and public expenditure levels constitute a danger to the economy in the next 12 months; and if he will make a statement on the matter. [12424/02]
Written Answers. - Fiscal Policy.
Inflation, as measured by annual changes in the consumer price index, CPI, was 4.8% in March. For the first quarter of the year the rate averaged 4.8% also. However, the rate of increase is projected to decelerate over the remainder of the year, partly reflecting favourable base effects associated with food prices developments. For the year as a whole, CPI inflation is forecast to average 4.2%, before falling to the more moderate level of 2.8% next year.
Higher inflation, if sustained, could be a threat to the competitiveness of our economy. Part of the reason why inflation in Ireland is currently higher than in the rest of the euro area is the strength of domestic cost pressures. It is imperative that these cost pressures are not allowed to lead to deteriorating competitiveness which would inhibit growth and prompt increased unemployment.
My plans for current and capital spending in 2002 are set out in the budget and the recently published Revised Estimates. My plans are that net total current expenditure in 2002 will grow by 12% and net total capital expenditure will grow by 13%. These figures refer to both voted and non-voted spending and, therefore, include the contribution to the national pensions reserve fund and the cost of servicing the national debt.
With respect to voted spending, I have provided for an increase of 14.3% in net voted current expenditure or an additional €2.9 billion. This money is funding pension and other benefit increases in social welfare, additional spending on health and education services as well as improving Ireland's contribution to overseas development aid. Net voted capital is up 14.7%, or €720 million, and nearly half of this will be spent by the Department of the Environment and Local Government. A further 17% of the increase is for health capital spending.
Since I came into office in 1997, I, and my Government colleagues, have provided significant additional funds for key economic and social priorities and for physical infrastructure and I do not believe that my plans for public expenditure levels in 2002 constitute a danger to the economy over the next 12 months. I believe that public capital spending on infrastructure plays a key part in protecting our competitiveness. As regards current spending, I have consistently said that we have to ensure that we get value for money from our spending.