Dáil Éireann debate -
Tuesday, 17 Nov 1998

Vol. 496 No. 6

Written Answers - Departmental Estimates.

Brian O'Shea

Question:

52 Mr. O'Shea asked the Minister for Finance the methodology used to agree the budgetary financial envelopes with individual Departments; the measures, if any, required to ensure that these envelopes are not exceeded in future years; and if he will make a statement on the matter. [23715/98]

Minister for Finance (Mr. McCreevy)

A multi-annual budgeting system is being introduced under the strategic management initiative. The aim is to put in place a framework within which the Government can consider overall budgetary, taxation and expenditure priorities in a mediumterm context.

The last two budgets made significant progress with the introduction of the new system. A multi-annual projection of the major revenue and expenditure aggregates on the assumption of unchanged policies was published with the 1997 budget. The spending data were in summary form, without a breakdown by Vote group.

The 1998 budget included, as part of the medium-term assessment, projections of expenditure by ministerial Vote group for the period 1998-2000, again on the basis of a "no-policychange" assumption.

In my 1998 budget speech, I said that I will be considering, in preparing the 1999 budget, the next stage of the move to multi-annual budgeting. This would involve the Government making decisions on resource allocation over a three year period covering the main budgetary aggregates. Current and capital expenditure would be disaggregated into financial envelopes for each ministerial Vote group. In effect, the financial envelopes would show the amounts that would be allocated to Departments for the period 1999-2001.

To allow Departments to plan their spending programmes, the allocations would show the resources the Government was prepared to allocate, provided that the economy develops as predicted.

The methodology for the financial envelopes is as follows: aggregate limits on spending, current and capital, are decided by the Government, on my recommendation, for the relevant period — at present the period is 1999-2001; the Estimates and Public Capital Programme are decided by the Government for the first year of the period and the associated "no-policy-change" costings for the later years are agreed and decided; and the difference between the decided aggregate spending limits and the aggregate "no-policy-change" costs is the margin by which planned spending should change — this margin and any created by the reallocation of resources across Vote groups is allocated to Vote groups and when added to their agreed "no-policy-change" costings equals their financial envelopes.

During this year, "no-policy-change" costings have been updated and decided, most recently after the 1999 Abridged Estimates were decided.

My Department is now working to present to me proposed financial envelopes for the years 2000 and 2001. My proposals on the matter will be submitted to the Government and I aim to publish with the budget the allocations decided by the Government.

It is essential to the success of the new approach that Departments contain their spending within the parameters laid down by the Government. The wider managerial reforms which are also being introduced under the strategic management initiative aim to ensure that Departments have the capacity to do this.