Appropriation Bill 2016: Second and Subsequent Stages

I move: "That the Bill be now read a Second Time."

Deputies will be aware that this is a somewhat technical Bill so my comments will, inevitably, be technical in nature. However, I am sure they will spur a broader debate on budgetary policy, in which I will happily engage, both in this House and outside it.

I want to start by explaining that the Bill is an essential element of financial housekeeping that must be concluded by the Dáil this year. It has two primary purposes. First, the Bill is necessary to authorise in law all of the expenditure that has been undertaken in 2016 on the basis of the Estimates that have already been voted on by the Dáil during the year. The amounts included in the Bill all relate to amounts included in the Revised Estimates for 2016 of €44.2 billion in aggregate, voted on by the Dáil in April and July this year, as well as the Supplementary Estimates of €400 million agreed by the Dáil last week. These Estimates were subject to consideration by the relevant select committee, or on the floor of the House, before being agreed by the Dáil. These Estimates provided capital funding for necessary repair work to transport infrastructure arising from flood damage at the start of the year, expenditure arising on school building works and additional funding for the Department of Jobs, Enterprise and Innovation. In addition, the Supplementary Estimates reflected the element of the Christmas bonus to long-term social welfare recipients funded from the Social Protection Vote.

Taking into account expenditure of the Social Insurance Fund and the National Training Fund, gross voted expenditure is forecast to total €56.1 billion in 2016, in line with the estimate set out in the expenditure report for 2017, published on budget day in October. This represents a 2.75% increase on the 2015 out-turn. The expenditure report outlines that gross voted expenditure is to increase by just over 3% in 2017. Given the need for the continuation of a responsible approach to fiscal and expenditure policy, these increases are both prudent and sustainable.

The second purpose of the Bill is to provide a legal basis for spending to continue into 2017. The passage of the Bill allows continued funding, in the period before the Dáil votes on the 2017 Estimates, of social welfare payments from the Social Protection Vote, Exchequer pay and pensions and other voted expenditure. Additionally, under the rolling multi-annual capital envelopes introduced in budget 2004, Departments may carry over, from the current year to the following year, unspent capital up to a maximum of 10% of voted capital. This is designed to improve effectiveness and efficiency. It recognises the difficulties inherent in the planning process and the profiling of capital expenditure. This facility allows for a portion of unspent moneys, which have been lost to the capital programmes and projects concerned under the annual system of allocating capital, to be made available for spending on programme priorities in the following year.

The Act determines definitively the capital amounts which may be carried over to the following year. In the Bill we are discussing, the aggregate amount of proposed capital carryover is just under €76.5 million, which represents less than 2% of the total Exchequer capital programme of €4.2 billion for 2016. In 2015 an amount of just under €112 million in capital expenditure savings was carried over into the following year. The amount of €4.2 billion allocated to capital expenditure in 2016 represents an increase of over 10% on gross voted capital expenditure in 2015. The expenditure report for 2017 sets out a capital expenditure amount of €4.5 billion for 2017.

The proposed amounts in unspent capital to be carried over by Vote are set out in Schedule 2 of the Bill. The 2017 Revised Estimates volume, to be presented to the House and circulated to Deputies tomorrow, will set out detailed financial and key performance information for Departments and offices.

Deputies will also be aware that certain Exchequer pay and pensions and social welfare payments, in particular child benefit, are due for payment by electronic funds transfer on 3 January 2017. With the banking system closed on 2 January 2017, funding will need to be in place in departmental bank accounts by 30 December 2016 to meet those liabilities on a timely basis. In addition, An Post needs to be pre-funded before the end of 2016 in respect of these child benefit payments due in the first week of next year in order to convert electronic funds transfer payments from the Department of Social Protection into real cash and physically transfer it to its network of post offices throughout the country.

These Exchequer pay and pension and social welfare payments will form part of the supply services for 2017 and, consequently, the funds to cover these costs will be included in amounts disbursed from the Central Fund to the Paymaster General's supply account as part of the 2017 supply issues. These costs will come under moneys voted by the Dáil in 2017 in respect of which the usual processes and mechanisms for voted moneys in that year will apply. However, as the funds need to be available in the Paymaster General's supply account before the end of the year in order to facilitate timely payment, section 3 of the Appropriation Bill includes a specific provision to allow for an advance from the Central Fund to the Paymaster General's supply account. Any amounts advanced to the supply account would then be repaid to the Central Fund in January. The Bill provides that the amounts so advanced shall not exceed €200 million.

I hope this gives Deputies a flavour of the contents of this Bill which is, as I have explained, a technical one but one which is vital to the prudent management of the public finances. I remarked at the outset that the Bill is an essential element of housekeeping which those of us in Dáil Éireann are required to undertake.

The passing of the Bill will authorise in law all of the expenditure undertaken in 2016 on the basis of the Estimates voted in by the Dáil during that year; ensures that payments funded from voted expenditure in 2016, such as jobseeker's allowance, disability allowance, non-contributory State pension, nurses' pay, teachers' pay and any other pay and pensions funded from voted money can continue to be funded in 2017 in the period before the Dáil approves the Estimates of that year. It meets the technicalities of the Bill as I have described them and as I have told the House the passage of this Bill takes place after the approval of additional Estimates by the House last week and provides the underpinning to allow the State on behalf of the Oireachtas to make available social welfare payments and income supports to families and citizens across the country in the early part of next year.

I thank the Minister. We will be supporting the Bill. There is not exactly a rapt Dáil Chamber here, which is extraordinary given that we are approving the expenditure of so much money. It is important to reflect that this Bill is the end of a process in terms of the scrutiny of the Supplementary Estimates by committees in recent weeks, and the important consideration that was given in the course of the Social Welfare Bill 2016 to the payments the Minister has mentioned.

In advance of next year's planned expenditure review, I take this opportunity to speak about expenditure generally. The Minister referred to the need to make the Government expenditure process more robust. There have been annual Supplementary Estimates for the Department of Health, something that we will no longer be able to do from next year yet the health service has gone beyond creaking at the seams. The seams are broken, as we can see in the pressure on accident and emergency departments, despite that continued injection of money. I hope the process next year will involve a review of how we determine expenditure ceilings for each Department to make them more accurate, relevant and accountable and make those in charge of them more accountable. Is it worthwhile having a discussion and maybe bringing in penalties where expenditure ceilings are breached? If the process is robust and they are discussed and scrutinised enough there needs to be a consequence when they are breached, otherwise the process is undermined. I understand and know, having been through the process and through the most recent budget process, that calculating expenditure ceilings is exceptionally challenging in many Departments. I include the Departments of Health and Social Protection, which we are discussing this evening. This evening we also have an allocation for flood defences. It is very difficult at times to anticipate expenditure. We need, however, to take our responsibilities as fiscal monitors more seriously and be far more responsible about expenditure ceilings.

The idea behind the multi-annual expenditure ceiling was to move away from the past where the expenditure was set on a short-term year to year basis. This system offered very little control over Government expenditure and as a result when the crisis hit it seemed much more difficult to regain control of the country’s finances. Multi-annual expenditure ceilings were introduced to ensure that Governments would think in a more long-term and strategic way about budgeting, to provide relevant Departments and their Ministers with a clearer picture of the resources available to them over several years rather than just one. In short, they were brought in to provide control of Government finances but also to allow short, medium and long-term planning for Government programmes. The current framework requires Government to set expenditure ceilings over a three-year period. It sets upper limits for each Department based on an expenditure benchmark. The system, however, is flawed and does not work.

In a recent report the Fiscal Advisory Council was explicit that the current system of expenditure ceilings is not working. In many of the budgets since 2011 the actual out-turn of expenditure has been greater than was budgeted. The council says that for 2018 and 2019 currently planned expenditure already exceeds the ceilings and therefore upward revisions to ceilings are likely to be required. That suggests the ceilings were either too low or expenditure is getting more difficult to control. We have to have a discussion and make choices about that. In many ways the Fiscal Advisory Council operates in a space where it does not have to consider the complexities of that process. We had a discussion with it at the Committee on Budgetary Oversight yesterday where it accepted that it operates in an environment very different from ours. We need, however, to have fiscal and expenditure discipline because that is one of the lessons that should surely have been learned in recent years. We need to have a sense that medium and long-term plans are properly funded in advance and the funding is there to allow those plans to come to fruition and make the impact that we all hope they will make. We are also realistic enough to know that things happen. This time last year, for example, nobody would have anticipated the impact of Brexit on our country's finances over the next three years. Events are often outside our control but that does not take away from the fact that we need a far more robust process and discussion about expenditure ceilings.

I hope we will reach a point where revisions are rare and with the new fiscal rules we have to get to that point because if one Department breaches expenditure ceilings another will have to pay for them. That means a cut in services or plans for another Department. That sets the context for the next six months. It will be a busy year for the Minister in respect of the expenditure review, the capital plan review, public service pay talks, all in the first six months. On the night that is in it we wish him a good break before what lies ahead. Let us learn the lessons of the past few years and not have a situation arise where a Minister has to cut the life out of programmes because of fiscal rectitude. We owe it as legislators to take the lessons of the crash on board in so many areas, be they housing or services, but in respect of expenditure and controlling expenditure we need to get real.

I thank Deputy Calleary for his very helpful and constructive contribution. As he has outlined, and as I said, while this is a technical Bill the total expenditure and funding to be made is €44.2 billion, an extraordinary amount of money. I hope the relative lack of debate in the Chamber this evening reflects a consensus on expenditure. If, however, such a consensus has been reached I expect it to change rapidly in the new year.

The Minister will have to look out.

I will indeed. I look forward to putting my side of the case in respect of the use of taxpayers' resources in 2017 and working and debating with colleagues in the House and where possible reaching agreement with them.

Some critics argue that there has been a huge increase in Government expenditure not planned for or adequately funded. As we move into next year the rate of increase in total expenditure for 2017 will be less than the rate of growth of our entire economy. We are doing that because of the focus on eliminating our deficit so that if the global economy does move into more turbulent waters in the coming weeks, months and years the impact of that on the fortunes of citizens will be reduced.

That is why we are being so careful in terms of the additional expenditure allocated for next year.

On the broad point Deputy Calleary made about multi-annual expenditure ceilings I, as one would expect, am committed to finding ways in which they can work better, while acknowledging that they do a lot of good work at the moment. I would like to give an example of that good work, while also pointing to the limitations of that approach that I will have to grapple with in 2017. An example of their good work is that the Minister for Children and Youth Affairs, Deputy Zappone, is going to embark on a very significant and much needed reform of the quality and costs of the child care sector. The Minister and her Department have an approximate indication of the funding that will be available to them in 2018 and 2019. Of course, that is going to change when the Estimates negotiations for next year take place. However, at least there is some indication of what spending trends could look like in the coming years to provide some more certainty around policy choices that could be made.

The expenditure ceilings also have limitations. As Deputy Calleary acknowledged, their first limitation is dealing with the unexpected. If the Government had not made an additional €100 million available to deal with flooded roads and ruined bridges earlier on in the year, we would have justifiably been criticised for not doing so when the damage of that flooding became apparent. While there has been some criticism of the additional funding that was supplied to the Department of Health across 2016, I am sure that the criticism of policy failures or difficulties in the latter half of this year would have been greater if that funding had not been made available to the Department.

There are also limitations relating to policy changes that governments may make. Ministers change and governments change. I believe it is absolutely essential to the vitality of our democratic institutions that if a Minister changes or a Government comes in with a new outlook, they have the flexibility to reflect their own policy views or the views of those who elected them. If we reach a point at which such latitude is not available to governments, whatever benefits that may be gained by fiscal rectitude will be quickly dispersed by the further undermining of supports that people have stemming from how governments function and spend taxpayers' money.

I will conclude on that point. In this job, I never know when I am going to have the opportunity to address the House next, but if I do not have that opportunity before the end of the year, I want to wish Deputy Calleary, Deputy Munster and all of the Deputies that I have worked with across 2016 and their families a happy Christmas and a peaceful new year. I thank all of the staff and the Ceann Comhairle for all of their work across the year. I will certainly be taking Deputy Calleary's advice and I will be having a break. I offer that advice to everybody else here tonight.

I hope the Minister continues to take my advice.

The first half of 2017 in particular looks like it will be exciting. The second half of 2017 leads on to the budget of 2018. I look forward to that journey and to completing it with all of you.

I thank the Minister for his wise counsel.

Question put and agreed to.
Bill reported without amendment, received for final consideration and passed.

The Bill, which is certified to be a money Bill in accordance with Article 22.2.1° of the Constitution, will now be sent to the Seanad.