Mary Lou McDonald
Question:183. Deputy Mary Lou McDonald asked the Minister for Public Expenditure and Reform the projected annual increase in public expenditure over the next three years. [18406/15]
View answerTuesday, 12 May 2015
Questions (183)
Oral answers (6 contributions)
My question relates to projected increases in public expenditure over the next three years.
I raise it in light of the spring economic statement, in which, to much fanfare, the Government announced that the bad times were over and that the good times were dawning. In the course of making that series of announcements, the Government identified a 50:50 split in respect of taxation and expenditure, but provided precious little detail on the level of expenditure on investment in public services.
As outlined in the spring economic statement, SES, Ireland is on track to reduce the general Government deficit to 2.3% of GDP this year. This will enable us to exit the excessive deficit procedure, EDP, at the end of the year. After we exit the EDP, we will enter the preventive arm of the Stability and Growth Pact, SGP, which will require that we make sustained progress towards achieving the medium-term budgetary objective, MTO. In Ireland's case, the MTO is to achieve a balanced budget in structural terms. Our progress towards achieving the MTO will be judged against two fundamental pillars, namely, compliance with the expenditure benchmark and making the minimum structural adjustment of greater than 0.5% of GDP every year.
Ireland has fully supported the EU fiscal governance reforms, given that we understand all too well the consequences of irresponsible management of public resources. We also understand, however, that the rules need to be applied in a sensible manner. Following interventions by Ireland, changes have been agreed on the technical application of the rules.
The SES outlined that fiscal space of approximately €1.2 billion to €1.5 billion will be available for budget 2016. The fiscal forecasts contained in the SES are based on a technical assumption of a budgetary package of €1.2 billion in 2016, split evenly between expenditure and tax. This provides the opportunity to reduce the tax burden for low and middle income earners, encourage further economic growth and increase investment in public services.
The fiscal forecasts included in the SES post-2016 have been compiled on a "no policy change" basis, with provision made for a €300 million increase in gross expenditure to offset demographic pressures. While policy changes must be made, the only issue being taken into account beyond next year is the unavoidable demographic pressures in areas such as social protection, health and education.
The SES assumes that after 2017, the voted capital expenditure allocations are left unchanged in nominal terms. This is a technical assumption. These amounts will be finalised by the Government in the coming weeks and announced in the capital review next month.
The concern is that, while moving outside the EDP and into the preventative arm, investment in real terms in essential public services will not see the kind of boom at which the Minister hinted during the spring economic statement. In the Minister's Comprehensive Expenditure Review Report 2015-2017, the planned investment in areas such as health and education were underwhelming. It suggests a Government strategy not of any great investment in such services, which have borne the brunt of very serious cuts, but of a holding position. The Minister will agree with me that he cannot argue from one side of his mouth that there will be relief in terms of investment in services while adopting an "as you were" position on real investment.
In Sinn Féin's response to the spring statement, it accused us both of trying to buy the election and of being parsimonious in our expenditure. Sinn Féin cannot have it both ways, although it tries. We have been under pressure to provide a balanced budget. We have reduced the deficit in actual terms from 30% of GDP in 2010, an underlying deficit of 11%, to 2.3% projected for this year. Given that we are moving into the preventative arm, we have more flexibility.
We have said there will be space of approximately €1.5 billion next year which will be divided in a 50:50 expenditure and tax reduction process. Beyond this, we obviously have to look at how the economy will grow. We have only given indicative figures for expenditure on the current side to cater for inflation and demographics. We will see what real capacity we have closer to the budget in October.
It is the Government which wants to have it both ways. On the one hand, it wants to send a message to the electorate that it will dispense largesse from the Government’s coffers. When one actually looks at and drills into the figures, however, one finds that this is not the case. I am working on the assumption that the projections made in the comprehensive expenditure report still hold. Will the Minister clarify that nothing in this document has changed in the light of the spring economic statement or from the forecasting in the Department of Public Expenditure and Reform or the Department of Finance? For all of the rhetoric and the Minister’s compliance with the various rules and regulations for which he argued at the time of their introduction by way of treaty change, the reality is that the health system is still stuck in gridlock, with patients on hospital trolleys in accident and emergency departments and long waiting lists. I cite the example of the Department of Health because, of all Departments, it is the one in need of the largest propping up year-on-year.
The economy, thankfully, has improved since we published the figures included in the budgetary documentation last October and we have progressed further. Last October the deficit we expected in 2015 was 2.7%. The spring economic statement indicated that it would be 2.3%. We have made more progress, with more people back at work and the unemployment rate falling quicker than we envisaged. Thankfully, this is all good news and will give more scope to address issues such as, for example, the demographic pressures we are facing. We have started recruiting gardaí again, as well as 1,700 teachers, including resource teachers, and 1,000 nurses. That is the capacity we have because of the improvement in the economy.