I move:
That Dáil Éireann commends the 2005 Estimates for Public Services (Abridged) published by the Minister for Finance on 18 November, 2004.
The Estimates are an important instrument of Government economic and social policy. They set out, on a pre-budget basis, planned spending of €43.5 billion in key social areas such as health and education and in key economic areas such as infrastructure and enterprise promotion. The budget, which I will present next week, will detail the full picture of the Government's economic strategy for 2005 and will contain important provisions in the areas of taxation and spending.
Nonetheless the vast bulk of 2005 spending is already provided for in the Estimates before the House today. As such, they are a statement of the public expenditure priorities of the Government. I will elaborate on these priorities and resultant allocations later in my address.
I am acutely conscious that what we are talking about today is the expenditure of €43.5 billion of taxpayers' money. The individuals and businesses that pay the taxes to make this level of expenditure possible require that the Government takes account of their priorities in deciding on how the resources are allocated.
People look to the Government to invest in areas of real concern to themselves and their families — health, education, social welfare payments and infrastructure are particularly important. It is through the implementation of the correct economic policies and the creation of an efficient and enterprise friendly taxation system that we can provide the funds that help advance these priorities.
Taxpayers also rightly expect that they will get value for money for the expenditure of their taxes. As I will outline later, there has been impressive improvement in public services in recent years and the 2005 Estimates will build on this development. I am, however, determined that Departments and offices will intensify their efforts to ensure the best possible value for money from the very significant funds being provided in the Estimates.
The Estimates must also contribute to our general economic and social development. It is the objective of the Government by making the correct decisions in the Estimates to promote sustainable economic growth. In this context we must keep expenditure increases at sustainable levels. Put simply, there must be a close correlation between the growth in revenue and expenditure if we are to avoid excessive borrowing.
As a result of the international downturn that began in 2001, the Government had to keep a tight rein on public spending in recent years. We have reduced the gap between revenue and public spending growth and managed to consolidate our fiscal position. Managing public spending growth in line with the growth in resources and in a manner sustainable in the medium term remains essential. The Government intends continuing with this general approach so as not to undermine the hard work of recent years, which ensured that we are now better placed than most to take advantage of the current international economic upturn.
An expenditure spree in buoyant economic circumstances would simply overheat the economy, lead to inflationary pressures and excessive wage demands and cause serious damage to our international competitiveness. Throwing money at problems will not resolve problems either in the short term or on a sustainable basis. Targeted resources and reform in service delivery with everyone working for shared objectives and placing a quality service to our citizens at the centre of our concerns is the best guarantee of an improvement for all.
While the world economic outlook is now improving and we are experiencing an economic upturn, our economy will not return to the very high growth rates we saw in the period up to 2001. The consensus among most commentators is that economic growth in 2004 will be about 5%. This is a continuation of last year's positive trend. There are, however. a number of risks to our economic performance next year. These include oil prices, the dollar and a possible weakening of the US economy. A combination of these events could lead to a slowdown in domestic economic activity. However, despite these risks I would say that the economic prospects for 2005 and beyond facing into my first budget as Minister for Finance are fairly positive.
The Government's successful management of the public finances and the economy has resulted in a major reduction in the debt burden, with the general Government debt falling from a level close to 100% of GDP in the early 1990s to its current level around 31% of GDP. Similarly the cost of servicing debt has reduced very significantly in terms of the resources available to us. The cost of servicing the national debt in 1990 took up 29% of tax revenue; it is expected to take up in the region of 7% of tax revenue this year. Reducing debt has turned what were debt interest payments into money which is available on an ongoing annual basis for funding real improvements in public service provision.
While making significant progress in managing the public finances and reducing the national debt the Government has more than doubled total spending on public services to more than €41 billion between 1997 and 2004. We have managed to do this without recourse to large-scale borrowing and increased taxes.
Large surpluses enjoyed until 2000 are now replaced with a position much closer to balance. When the downturn came, the general Government surplus of €4.5 billion for 2000 turned into a deficit of €300 million in 2002. This indicates how important it is to prudently manage public services at the top of an economic cycle so that services are not totally disrupted and set back when the downturn sees tax revenues ebb away.
In 2004, because of higher than expected economic growth and consequent higher tax revenue buoyancy, the budget position is turning out about €2 billion better than had been targeted. However, a significant element —€670 million — of this improvement is due to Revenue special investigation receipts which are once-off in nature.
This year, public expenditure is expected to grow by 7.5%. This compares with a projected economic growth rate of 5% and an annual inflation rate of 2.2%. Overall, there is a forecast saving of €150 million on gross spending for 2004. Higher receipts of €100 million across a few Departments will result in a net total forecast saving of €250 million between current and capital. This equates to about 0.4% of the total gross provision in the 2004 Revised Estimates Volume. Of the €150 million saving on gross spending, a saving of €70 million is forecast on current spending.
The Exchequer provision for capital expenditure in 2004 was €5.6 billion. When account is taken of €248 million capital carry-over from 2004 to 2005 under the multi-annual capital envelopes announced in budget 2004, there is a small saving on capital of €80 million, €46 million of which will be used to fund current spending on justice and transport. I will return to the subject of capital carry-over later when I deal with investment for 2005.
We are providing for an increase of €2.5 billion in gross spending on public services in 2005, bringing the total 2005 provision to €43.6 billion. This represents a 6% increase on a pre-budget basis. The Government's approach to formulating the 2005 Estimates has been to allocate resources to priority needs while being consistent with an overall public finance position that promotes sustainable economic and employment growth.
We have allocated particular priority to spending on health and education in the pre-budget Estimates. Accordingly we have provided nearly €11 billion for health, an increase of £915 million or 9%, and €7.1 billion for education, an increase of €530 million or 8% on day-to-day spending.
The Estimates provide an additional €915 million for health. These additional resources will fund improvements in services in all areas, notably 230,000 more people will now have access to free GP services, with new medical cards and a new doctor visit medical card — in total, 1.38 million people will now have access to free GP care; ten wide-ranging actions to improve accident and emergency services, including fully staffed acute medical units in major hospitals; new services for people with disabilities delivered by more than 1,000 new front line professionals to begin implementation of the Disability Bill; all new units in hospitals will be opened with current funding of €50 million; waiting times for patients will be reduced further by €20 million additional funding for the national treatment purchase fund and; and cancer services will continue to be expanded.
These significant service improvements in 2005 and later years build on the significant improvements already recorded since 1997. The cumulative increase in gross expenditure on health over the period 1997 to 2005 will amount to 205%, representing an extra €7.4 billion. Staffing levels have increased by almost 50% from a base of 66,000 in 1997 to almost 98,000 this year. This has included a significant increase in front line service staff. There is an additional 6,500 nurses, representing 21% of the increase in staff numbers, with further additional staffing increases in the provisions of therapists, dentistry and orthodontic services, medical professionals and social care professionals.
There has been a concomitant improvement in service delivery with an increase of 30% since 1997 in the number of patients treated in hospitals as inpatient and day care patients. There has also been a reduction in waiting lists with 80% of patients now waiting less than one year, which we will improve upon further, and an increase in the elective surgery rate in public hospitals of 85% between 1995 and 2002.
The gross education and science allocation will increase by €530 million or 8% to €7.1 billion in 2005. This additional spend will be targeted in particular at the following priorities: promoting the inclusion, participation and achievement in education of people from socio-economically disadvantaged areas and those with special needs; supporting our schools and teachers to ensure that we provide the best learning environment for all children and; building the knowledge society by maximising the social and economic potential of our higher education sector.
More specifically, an additional €47.6 million is being provided for measures to alleviate educational disadvantage, bringing to €462 million the total amount being spent on such measures in 2005. This increase in expenditure will facilitate measures to tackle educational disadvantage at all life stages from pre-school through the school system to access to third level education and participation in adult education and adult literacy initiatives. The area of literacy receives a particular focus, with a 40% increase in provision for early literacy programmes and a 35% increase in funding for the schools library service.
There is an increase of €67 million in the level of provision for those with special needs and disabilities. This brings the 2005 allocation for special needs to €628 million, an increase of 12% over this year. These increased amounts will fund the provision for teachers and special needs assistants, special grants and the funding of dedicated units.
The Estimates also make provision for increases in the school capitation grants at primary and secondary levels. The teachers' pay provision will fund the full year cost of the 700 additional teachers and 700 additional special needs assistants who have been assigned to primary and post-primary schools.
In addition to the promotion of the knowledge society the Estimates provide significant additional funding for research at third level. In this context, the roll-out of broadband ICT facilities in our schools is also a key component of the Government's strategy. A total of €145 million, current and capital funding, has been invested in the schools ICT programme since 1998. Next year will see an increase of 28% in current funding for this programme.
Again, the 2005 allocation builds on service expansion in education in recent years. Since 1997 there has been a very significant increase in the numbers of teachers employed in our primary and secondary schools. The provision of educational services for our children with special educational needs has been transformed since 1997. From a base of 400 in 1999 we now have more than 4,000 resource and learning support teachers. In addition, there are almost 6,000 special needs assistants employed in our schools as against a base of fewer than 300 in 1998.
The gross allocation for social and family affairs is €11.4 billion on a pre-budget basis. On budget day I will announce the provision for increases in social welfare payment rates next year. Evidence of the Government's commitment to the needy in society is that we have doubled spending on social welfare since 1997 even though, over the same period, the unemployment rate has fallen from over 10% to less than 5%.
The provision of child benefit expenditure, which has been identified as a key mechanism for reducing consistent poverty in Ireland has been supported hugely by the Government. Expenditure on child benefit has increased from under €500 million in 1996 to a pre-budget allocation of €1.8 billion this year.
A particular priority for the Government is services for people with disabilities. The 2005 Estimates provide over €2.8 billion for disability specific services. This represents an increase of €290 million or 11% on the 2004 provision, nearly twice the general overall increase in expenditure, on a pre-budget basis, of 6%. Over the period 1997 to 2004, €230 million in additional funding has been provided for the maintenance and development of services to people with physical and sensory disabilities. Furthermore, an additional 1,700 residential places for people with an intellectual disability and almost 3,000 new day places have been provided since 1997.
When the Disability Bill was published, the Government committed itself to the introduction of a multi-annual investment programme for high priority disability support services which would involve both capital and current spending. In budget 2005, I will announce details of the additional current expenditure which the Government will provide in 2006-09 for high priority disability support services and I will include an additional capital allocation for disability services as part of a revised multi-annual capital envelope for 2005-09.
Overseas development aid has been accorded a very high priority by the Government. We are providing an additional €60 million, a 15% increase on the current year's allocation, for ODA. This will bring our contribution to €535 million next year. That represents an increase of 240% since 1997 and is a remarkable achievement when one considers that the equivalent provision in 1997, when we came into office, was only €158 million.
The gross provision for Exchequer-funded public service pay and pensions is €15.3 billion, an increase of €1 billion or 7% on 2004. The increase makes full provision for the carryover of the first phase of Sustaining Progress, the payment of the final tranche of benchmarking and the increases due in 2005 under the mid-term review of Sustaining Progress.
In budget 2003, in order to control public service numbers, the Government decided to cap numbers at the existing authorised level and to reduce numbers by 5,000 by the end of 2005. As part of our commitment to address priority areas of service we subsequently agreed some adjustments to the figures for health, education and the Garda Síochána in respect of front-line staff. Outside the health and education sectors, the numbers serving in 2004 indicate that the 2004 targets for a reduction in public service numbers will be met.
The Government remains committed to the control of public service numbers given the size of the public service pay and pensions bill as a component of overall Government expenditure. The Government is determined that the full effect of the reduction in numbers will materialise in 2005 and 2006.
In budget 2004, my predecessor announced the introduction of five-year rolling, multi-annual capital envelopes designed to improve the efficiency and effectiveness of the planning, management and implementation of capital programmes and projects by providing a relatively secure medium-term financial framework. As part of this initiative, Departments were permitted to carry forward to the next year capital savings up to a maximum of 10% of voted capital. This is a highly important innovation because under the old annualised system Departments were faced with a "lose it or use it" situation towards year end. If they took the former option, funds were surrendered to the Exchequer and lost to the investment programme. The latter option had the potential to encourage non-priority investment. The carryover facility will enable much better management of capital programmes and projects.
The total amount of capital carryover from 2004 to 2005 is estimated at close to €250 million or 4.5% of the 2004 voted capital allocation. The 2005 pre-budget Exchequer capital allocation in the Abridged Estimates volume is €5.7 billion. When account is taken of the carryover of €250 million, Departments will have on a pre-budget basis some €730 million additional cash for capital spend in 2005, which is 14% higher than this year.
The 2004 budget five-year envelope provided for total capital investment in 2005 of €6.3 billion, comprising €5.715 billion Exchequer and €585 million PPP funded by annual Exchequer payments. The Exchequer figure included an unallocated reserve of €120 million. On budget day I will announce a revised multi-annual capital envelope for the period 2005-09 and in the process will allocate the €120 million reserve in 2005.
It is now clear that there will be a major shortfall on the 2005 PPP component of the existing envelope. The new five-year envelope for 2005-09 will take into account the cash already available to Departments in 2005, the PPP situation and the overall budgetary situation. It will also include a multi-annual provision for high-priority disability services.
The 2005 Estimates provide an extra €2.5 billion bringing total planned expenditure on services to over €43.5 billion. They allocate significant provision for the key areas of health, education and infrastructure provision while retaining a prudent approach to overall expenditure policy. In conjunction with the measures I will be announcing on budget day, the Estimates focus on areas of concern to the people and will promote economic and social development.
I commend the motion to the House.