Dáil Éireann debate -
Thursday, 20 Mar 1997

Vol. 476 No. 6

Written Answers. - Spending Targets.

Ivor Callely

Question:

61 Mr. Callely asked the Minister for Finance the Government's original spending targets in 1996; the outcome in this regard for 1996; the impact, if any, overruns had on other matters; the targets set for 1997; the alterations, if any, to date; the increase in gross current day-to-day spending as against inflation in 1996; and if he will make a statement on the matter. [7836/97]

Minister for Finance (Mr. Quinn)

The Government's spending targets for the period 1995-7 are set out in the policy programme A Government of Renewal. This states that over the period of this programme it is intended that the growth of current supply services spending will be constrained to a maximum of 6 per cent, in nominal terms in 1995, and to an average annual rate of 2 per cent in real terms over the following two years of the programme.

The provisional outturn for 1996 shows that gross non-capital supply services expenditure increased by 4.4 per cent in real terms. The overrun in spending in 1996, while unwelcome, did not impact in any serious way on the overall budgetary position in 1996, which saw a general Government deficit outturn of only 1.0 per cent of GDP.

The 1997 budget estimate for gross non-capital supply services spending is £12,950 million, an increase of 4.7 per cent in real terms over 1996. Since the budget, the Government has decided to accept the Labour Court recommendation on nurses' pay which is estimated to cost an additional £49 million in 1997. However, the Government has also agreed measures to offset the additional cost of the nurses' award in full. Provision for the nurses' pay agreement will be included in the Revised Estimates Volume, due to be published shortly. The 1997 departmental spending allocations included in the volume will also incorporate the measures agreed to offset the additional nurses' pay costs. Therefore, there will be no increase in the allocation for gross non-capital supply services spending provided in the Revised Estimates Volume. Allowing for some other minor adjustments, the allocation in the volume will be £12,949 million.

The Government has decided to reappraise and amend the hepatitis C scheme of compensation. It is not possible to quantify the additional costs that will flow from that decision.

The increase in spending in 1996 was due mainly to exceptional and unavoidable factors such as the EU disallowances or beef fines and BSE related costs. In 1997, increases in pay and social welfare account for 75 per cent approximately of the total increase in gross current spending. Full details of the increase in spending in 1997 were given in my statement on the publication of the Abridged Estimates Volume and in my Budget Statement.

Taking 1996 and 1997 together, the increase in gross current spending in real terms will exceed the target of an annual average rate of 2 per cent for those years. However, the 2 per cent spending target must be seen in the context of the overall commitment in the Government's programme to keep Government borrowing prudently below 3 per cent of GNP. The overall level of Government borrowing is by far the most important budgetary target set in the Government programme. The Government has made certain that the increases in spending have not resulted in an increase in borrowing above its target levels. In fact, the record shows that the Government has succeeded by a comfortable margin in meeting its borrowing target. In this year's budget the general Government deficit is estimated at 1.5 per cent of GDP; in 1996, the general Government deficit was 1 per cent of GDP. This budgetary performance stands comparison with any of our EU partners.

1 After adjusting the 1996 outturn to exclude £98 million in rate support grant funding which was taken off the 1997 figures as part of the new local authority funding arrangements.