Vol. 474 No. 8
2 Mr. McCreevy asked the Minister for Finance the way in which he proposes to meet the commitments laid down in Partnership 2000 in relation to keeping current Government spending increased as close as possible to 2 per cent in real terms; and if he will make a statement on the matter. [4008/97]
The limits on expenditure growth set out in Partnership 2000 are an integral part of a balanced fiscal policy which will promote the continued growth over the medium term of a strong, competitive economy. As the Deputy is aware, in my Budget Statement I said that constraining the growth of public expenditure will be central to achieving the Government's medium term budgetary goals. I acknowledged that, to date, we have not been as effective in this area as we would wish and that it is essential to improve our performance. The key to making this improvement is to manage expenditure properly in a medium term budgetary framework. Work on creating that framework has been under way for some time.
The way to manage public expenditure better is to implement the wide-ranging programme of financial reforms set out in "Delivering Better Government". This will involve moving to a devolved, medium term approach to expenditure which will underline the primary responsibility of spending Departments for managing their expenditure programmes within settled allocations and taking accountability for the results achieved. We need to settle expenditure priorities and to examine the rationale for existing programmes in changing circumstances. To meet this need, I announced in the budget that a rolling programme of expenditure reviews will begin this year. This will lead to evaluation over a three year period of all major departmental spending programmes.
The second key step is to create the medium term budgetary framework within which expenditure will be managed. I announced in the 1996 budget the introduction of a multi-annual planning framework designed to assist the Government, in settling the annual budget, including its expenditure dimension, in taking account of the medium term budgetary effects. The first steps in this initiative were taken during 1996, culminating in the publication with this year's budget of projections for 1998 and 1999 of the main budgetary aggregates based on the provision of the existing levels of service and of the additional Partnership 2000 commitments on spending and taxation. Further development of the multi-annual budgetary approach is now under way and the intention is to publish expenditure projections for 1999 and 2000 with the 1998 budget based on existing levels of service disaggregated to Vote Group level.
Multi-annual budgeting will put in place a strategic expenditure control framework under which there will be agreement on overall expenditure limits. Settling departmental financial allocations will act as a major incentive for Departments to improve the management of programmes, to reorder priorities and to ensure that value for money is obtained. Under the new system the Government will retain its responsibility for settling the annual Estimates. The ultimate responsibility for ensuring that spending remains within the Partnership 2000 limits rests with the Government and it is determined to meet that responsibility. A significant reduction in the rate of growth of public expenditure since 1990 will be required.
In summary, the Government is determined to meet the targets for public expenditure growth set out in Partnership 2000 and we are already advanced in designing and constructing the necessary improved arrangements.
I am interested in finding out what the Minister means by the term "as close as possible to 2 per cent in real terms" because that was the form of words used in the Partnership 2000 document.
Six to 8 per cent.
Does it mean that gross current spending can increase by 20 per cent, as happened over the life of this Government, as against a cumulative inflation rate of 6 rate which certainly does not amount to 2 per cent in real terms? What is the Minister's interpretation of "as close as possible to 2 per cent in real terms"? Does it mean an overspend of 0.5 per cent or does it mean anything?
It means precisely what it says, as close as possible to 2 per cent. That is what the real growth should be and no more. Adhering to that target has not been possible for reasons which I have stated on a number of occasions in this House. I await suggestions from critics on the other side as to where cuts could be made to achieve that target. No one would for one second suggest that it is an easy task.
The regional education boards would be a start.
To answer the question, "as close as possible to 2 per cent" means as close as possible to 2 per cent.
I take it from the Minister's reply that it therefore means as much as the stated aim in A Government of Renewal of inflation plus 2 per cent which meant nothing at all. Does the Minister not agree that to be almost 300 per cent out in the last few years is not "as close as possible"? If English is to mean anything, does he not agree that, by being out by nearly 300 per cent during the life of the Government from the 1994 programme's targets, means "as close as possible" can mean to be out by 300 per cent during the life of Partnership 2000, or does it mean something else?
To be out by that rate would distort, if not destroy, all other figures which are contained in the macro-economic forecasts and predictions for Partnership 2000. I accept the valid criticism that we have exceeded the target we set ourselves. If we had not set such a target, the growth in expenditure would have been higher.
I do not see how it could have been.
It has served a useful purpose but has not been as effective as I would like.
The Partnership 2000 document was published a few days before the budget. It was announced on budget day that post-budget gross spending would have to increase by another 1 per cent from pre-budget figures, from 6 to 7 per cent, which would be an increase of 16 per cent if one wished to be pedantic about it. Is that the idea of keeping as close as possible to 2 per cent?
I disagree with the Minister's assertion that, if he had not set the target of inflation plus 2 per cent in 1994 growth in public spending would have been worse. It could not have been worse, and the Minister knows that. I am not saying he could have controlled his colleagues better if he had laid down other criteria, but——
The Deputy is debating.
——putting down criteria does not appear to have inhibited them in any way.
The Deputy has been over this ground on a number of occasions. I do not accept his conclusions or the thrust of his argument.
The Minister should have resigned.
