asked the Minister for Finance the criteria applied in deciding whether a service is to be deemed capital or current.
Ceisteanna—Questions. Oral Answers. - State Service Classification.
28.
In general, a State service is classified as capital for financing purposes when it helps to create assets or benefits of a lasting nature. Examples are schools, houses and factories and such schemes as the bovine tuberculosis and brucellosis eradication schemes. Since capital expenditure is normally financed by borrowing the effect of classifying expenditure as capital is to spread the cost over a relatively long period of years.
Does the Minister not consider that the distinction has become so blurred now that it has very little value in budgetary policy due to the decision of the Government to include a number of services as capital which would normally be included as current if strict principles were being applied?
I agree that there is a certain blurring but I could give the Deputy examples of items treated as capital which might well be treated as current and vice versa. I would not agree that the distinction is completely valueless; I think it has value. I would also point out to the Deputy that we in the recent budget budgeted for a planned deficit. We did not change the category of items to switch items from capital to current or vice versa but rather budgeted for a deficit.
Question No. 29.
Would the Minister say that there has been a significant change in the Government's policy in regard to the categorisation of these services over the last ten or 15 years and a greater tendency to deem services capital as time passes?
I do not think that would be correct.
Indeed, it would.
Would the Minister agree that the present classification system is entirely arbitrary and that items are classified as capital or current to some degree according to whether in the year in which they were introduced the Government of the day—it was, I think, Fianna Fáil at all relevant times—were hard up or not hard up and would he not agree that it would be better to have some consistent classification, such as the national accounts classification, which at least is consistent, and would he consider moving over to some kind of consistent classification of that kind?
I certainly would not agree with the "I think" statement and certainly the implication in what the Deputy said was that changes of this kind were made only by a Fianna Fáil Government. No changes of any substance have been made for quite a number of years. The classification to which he refers has always had certain inconsistencies as between what is done in the budgetary sense and in the national income sense. There have always been these inconsistencies and the switch to the scheme suggested by the Deputy would itself create certain inconsistencies too. I do not think there is any great confusion about this matter. There have been no changes in recent years and I think, subject to what I said at the beginning, that there are certain areas in which one might say that there is blurring at the edges; the major categorisation is clear and I think acceptable to most people.
Question No. 29.
Would the Minister not agree that to treat the lime and fertiliser subsidies as capital when they were first introduced because the money was available and then when they were further increased to treat the increase as current is utterly inconsistent and confusing and would he not agree that in the light of that kind of inconsistent treatment of the same items there must be a tidying-up operation done on these figures?
For what purpose would the Deputy wish such a tidying-up operation to be done?
In order to have a consistent basis of classification and not to have the Government of the day deciding arbitrarily whether to treat something as current or capital.
And having done that, what would the Deputy think would have been achieved?
We would then know where we stood in our budget——
We do know where we stand.
——and it would not be necessary to do economic research on a fair scale to discover whether there is or is not a deficit.
We know where we stand.
But you are not prepared to let the people know.
They know, too.
Does it really matter tuppence, considering that the Minister is budgeting for a deficit on current account this year of £35 million, whether things are treated as capital or current any longer?
Oh, yes. It makes a difference.
I agree it makes a difference, in words.