Vol. 492 No. 2
24 Mr. R. Bruton asked the Minister for Finance the measures, if any, he will take to combat the growth in public expenditure in 1999 and 2000; and if all tax receipts in excess of Estimates will be used in 1998 to increase the budget surplus. [13849/98]
The advent of economic and monetary union from 1999 will require adherence by all participating countries to strict budgetary discipline as set out in the stability and growth pact. The Government is fully committed to pursuing the necessary budgetary policies to help achieve and sustain the stable economic conditions which are essential to the success of the single currency. Prudent management of public expenditure will play a crucial role in this process.
The Government is committed to managing public expenditure in a way which will seek to maintain firm control on the growth in overall spending while ensuring that adequate additional resources are targeted at addressing the many problems of disadvantage in society which continue to require attention. The Government's policy as set out in An Action Programme for the Millennium is to limit net current spending growth to 4 per cent and capital spending growth to 5 per cent on average up to 1999 and to reduce overall Government spending as a share of national output.
In my budget speech I said the task of achieving the Government target of limiting the increase in net current spending to 4 per cent on average will be challenging. The projections of expenditure on a no policy change basis in the period 1998 to 2000 published with the budget, which showed an average annual increase of 3.8 per cent, were within the Government target and the increase in 1999 was projected to be 4.8 per cent.
The Government fully recognises that, with the projected average increase on the basis of unchanged policies running close to the 4 per cent programme limit, holding to that limit while at the same time implementing new policy commitments as set out in its programme will not be easy. It will require making choices in allocating resources so that the additional costs of new or expanded services are met within the average annual limit of 4 per cent.
The proposed move to a full system of multi-annual budgeting with effect from the 1999 budget which I spoke of in my 1998 Budget Statement should help in this regard. This will involve the Government making decisions for resource allocation over a three year period covering the main budgetary aggregates. Voted expenditure, current and capital, would be disaggregated into financial envelopes for ministerial Vote groups.
Additional Information
These will be the amounts allocated to Departments for the three years and within which they will be expected to contain their spending, including the cost of any new policies or improvements in existing services. The comprehensive programme of expenditure reviews being carried out as part of a three year programme under the strategic management initiative should also assist in making decisions on priorities within and between spending programmes.
The communiqué issued on behalf of EU Finance Ministers and Central Bank governors last March following the revaluation of the Irish pound's central rate in the ERM noted "the firm resolve of the Irish authorities not to exceed the expenditure commitments in the 1998 budget and to ensure that any revenues above those anticipated in the budget are used to raise the primary surplus, and thus the general government surplus, above the planned figures."
Furthermore, the Commission's recommendation for the broad guidelines of the economic policies of the member states and the Community, states that "in view of the present strong growth of the [Irish] economy and the possibility of overheating, any revenues received over and above those anticipated in the 1998 budget should be used to raise the budget surplus. Moreover, a tight fiscal stance is required in Ireland to reduce the risk of overheating."
I am monitoring expenditure trends this year and aim to hold expenditure close to the budget provision. My statement on the end of March Exchequer returns said that spending in the first quarter was broadly in line with expectations. It is my intention that tax revenues in excess of the budget provision should have the effect of increasing the budget surplus.
Is the Minister indicating that the financial envelope for 1999 on the current side will provide for 4.8 per cent growth? Will he be sticking to a no policy change framework for the 1999 spending Estimates? If he is not willing to commit to that figure, does it mean the Government will be bringing forward extra spending to 1999 at a time when the economy is allegedly moving towards overheating, thereby restricting and undermining the opportunity of using fiscal policy to slow down economic growth?
In my Budget Statement of 3 December I said it was the intention of the Government to abide by its commitment in its programme which sets the limits for net current spending to an average annual increase of 4 per cent over the period. In this context the figure for 1999 on a no policy change basis will be 4.8 per cent. The commitment in the Government's programme is to an annual average increase in net current spending over the period.
We should not fool ourselves. Is it not true that the Minister will present to his EU colleagues on 1 July indications of his financial strategy for 1999? He must surely be in a position to tell the House whether the figure will be 4 per cent or 4.8 per cent in 1999. It is not acceptable for the Minister to fudge issues which must be central to his budgetary strategy.
Regarding the use of the surplus, the Minister has made a commitment in 1998 that the surplus will only be used for debt reduction. As indicated in the communiqué from Europe of 1 May, has the Minister also made a commitment that any surplus in 1999 will be used solely for debt reduction? Does this curtail his ability to offer tax relief in 1999?
The statement following the meeting of 1 May repeated the words used in the communiqué issued in mid March on foot of the 3 per cent aggregate revaluation. It sets out the Government's commitment to a budgetary policy of keeping down inflation and the use of any unanticipated revenue arising in 1998 to increase the primary surplus rather than to increase expenditure. This formed part of the broad economic guidelines at the ECOFIN meeting.
It is my intention to abide by the commitments set out in the programme for Government, those given to the Commission and those in the communiqué on revaluation. This means not doing anything which would overheat the economy or exacerbate inflationary pressures.
Is it the Minister's intention to seek a below average increase in spending in 1999 compared to the overall period of Government so that at a time when the economy is overheating, according to the Central Bank and others——
We must proceed to the next question. As Deputy McDowell is not present in the House, Question No. 25 falls and we proceed to Question No. 26.
Is it the case that, under the new rules, a Minister has two minutes to reply to a question and we must move on after six minutes have expired, irrespective of who is in possession?
That is correct.
Is it not possible for me to substitute for Deputy McDowell?
No substitution can be allowed at this stage. Any substitution should have been notified to my office some time ago.
I was of the opinion that such notification was made.
It should have been notified prior to the printing of the Order Paper.
