I thank the Cathaoirleach for the opportunity to speak.
The challenges we have faced over recent years continue to be a reality which we all have to confront, as well as the enormity of the task to stabilise the public finance position faced by the Government and everyone else. In addressing these issues, we have to continue to meet and exceed all of our fiscal targets under the EU-IMF programme. We must continue to push forward the reforms that are necessary for the country to recover its economic sovereignty. The Government remains committed to balancing the books while introducing positive and prudent reforms to ensure scarce resources at our disposal are directed towards delivering well-managed and well-targeted public spending.
During this Government's short time in office, we have introduced a number of important budgetary reforms aimed at enhancing the openness and transparency of the budgetary process. We have introduced the following: a modernised and reformed annual Estimates process; performance budgeting which builds performance related information into the heart of the budgetary documentation; and an enhanced role for evidence-based policymaking.
These reforms are in keeping with the broader Government commitment that performance information should feed into the decision-making process at all levels, and that active performance management should be a key feature of how projects are delivered and continually evaluated within the public service. It goes to the heart of parliamentary oversight that Ministers and public service managers should be held accountable against clear targets set out in the budget.
The medium term expenditure framework was first introduced in the Comprehensive Expenditure Report 2012-2014, published in December 2011 by the Department of Public Expenditure and Reform. It established multi-annual ministerial gross expenditure ceilings on an administrative basis and now forms a key component of fiscal management. The Bill will put these ceilings on a solid statutory footing.
Last November, the Minister for Finance introduced the Fiscal Responsibility Act 2012 which came into effect on 31 December 2012. It imposes a duty on the Government to ensure compliance with the budgetary rule and the debt rule, which were introduced as part of wider EU fiscal reforms. It also puts the role of the Irish Fiscal Advisory Council onto a statutory basis. We had a very good discussion in the House concerning the composition of the council at the time.
Aside from these domestic reforms, Ireland is committed to adhering to the wider fiscal reform measures that have been introduced across EU member states. In this European context, this Bill operationalises the expenditure management component of the so-called six pack of five directives and one regulation which introduced, among other things, an expenditure benchmark. The purpose of the benchmark is to limit the growth in general government expenditure to a sustainable level.
I will now discuss the sections of the Bill. Section 1 provides for Government expenditure limits for the following three years to be set down by the Minister for Finance each year, having consulted the Minister for Public Expenditure and Reform. The Minister for Public Expenditure and Reform will then establish, in consultation with the Minister for Finance, ministerial expenditure ceilings. Once the Government expenditure limits for each of the subsequent three years are agreed by Government, the Government will then agree upon an apportionment of these overall limits into ministerial expenditure ceilings on the basis of a proposal from the Minister for Public Expenditure and Reform.
In the Bill, "Government expenditure" is defined in practical, operational terms as the amount of expenditure that is voted by the Dáil each year, along with the annual expenditure from the social insurance and national training funds. The Bill provides that the Government and ministerial expenditure ceilings must be laid before the Dáil as soon as may be after the decisions are made. The subsequent annual Estimates of expenditure, setting out the detailed expenditure proposals for the coming year, must not exceed in aggregate the Government expenditure ceiling for that year.
Taken together, the effect of these various provisions is as follows. The expenditure benchmark is the core expenditure rule with which the Government and the State are legally obliged to comply in the annual and multi-annual budgetary processes, by virtue of the direct effect of the regulation and the supremacy of EU law. The Government expenditure ceiling will place a limit on the level of our annual voted expenditure.
While clearly it is different from the expenditure benchmark, it must be fully compatible and compliant with the benchmark, and this compliance will be demonstrated in the annual budgetary documentation. The ministerial expenditure ceilings are an apportionment of the Government expenditure ceiling, and they may not in aggregate exceed the Government expenditure ceiling. The annual Estimates of expenditure for a year may not legally exceed the Government expenditure limit for that year.
In the past, expenditure growth was, at times, allowed to outpace the economy's underlying ability to finance it. This new approach radically changes the Estimates process and introduces a major reform by setting out clearly in advance the Government's medium-term budgetary plans and overall spending allocations, thereby allowing Departments to plan their budget structure in advance.
The Minister for Public Expenditure and Reform introduced a new section, section 2, on Committee Stage when the Bill was before the Dáil. This new section allows for the provision of information necessary for the proper and effective operation of ministerial expenditure ceilings. The section proposes that public service bodies shall provide to the Minister for Public Expenditure and Reform such information as is necessary for the purposes of the proper and effective operation of ministerial expenditure ceilings. This is a permissive section to allow public service bodies supply the necessary aggregate information to the Department of Public Expenditure and Reform to enable the Minister and Department to properly monitor and operate the expenditure ceilings set out in the Bill. Personal information, as defined by the Data Protection Acts, would not form part of this.
At the current time, many Departments and offices gather information on details of their grant spend. When the Department of Public Expenditure and Reform seeks information to enable a better estimate of expenditure to be made over the medium term, it has been the experience that the lack of a specific power to receive such information can occasionally cause delays in providing information due to a lack of clarity regarding the legal position. That has been dealt with in section 2.
Section 3 is also a new section introduced by the Minister for Public Expenditure and Reform on Committee Stage when the Bill was debated in the Dáil. It amends the Fiscal Responsibility Act 2012 to assign to the Irish Fiscal Advisory Council's statutory responsibility for endorsing the macroeconomic forecast on which Ireland's budget and stability programme will be based. The assignment of this endorsement role is a requirement of the two pack regulations, which are now EU wide. The endorsement entails the council endorsing the macroeconomic forecasts upon which the stability programme and budget are based. This means the council would endorse the macroeconomic forecast on which budgetary proposals are prepared, on which the Government then decides. In the interests of independence, the council cannot be required to endorse. Instead, it is required to fulfil the endorsement function and, should it find it appropriate to so decide, can announce it will endorse the forecasts. Section 4 states the Short Title of the Bill and provides for the commencement of the Act.
This Bill will provide in statute for the medium term expenditure framework. This will underpin confidence, at home and overseas, about the soundness of the Government's overall budgetary plans.
The framework will help to restore Ireland's public finances to a strong and sustainable position. In addition, it will facilitate greater structural planning based on core Government priorities, and will reinforce the Government's commitment to return Ireland's economy to a position of growth while ensuring sustainability of the public finances. This new framework is both sensible and practical while representing a responsible and necessary change in the approach to budgeting. I commend the Bill to the House.
