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Government Expenditure

Dáil Éireann Debate, Wednesday - 4 May 2016

Wednesday, 4 May 2016

Questions (71)

Pearse Doherty

Question:

71. Deputy Pearse Doherty asked the Minister for Public Expenditure and Reform the Departments that are facing spending pressures over the next five years; the monetary value of these pressures; and how they will impact on the fiscal space, in tabular form, given the 2016 stability programme which states that while his Department will do everything possible to maintain expenditure within existing allocations, it is likely that over the course of the year, voted spending pressures amounting to circa 0.25% of gross domestic product could materialise. [9088/16]

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Written answers

As outlined in the 2016 Stability Programme Update (SPU) it is currently estimated on the technical no policy change basis on which the SPU was prepared that over the course of the year, voted spending pressures amounting to c. ¼ per cent of GDP could materialise while, at the same time, there is potential upside to the revenue projections. As stated in the SPU It is envisaged that this level of spending pressure in 2016 can be accommodated within the fiscal rules.

At this stage of the year, the amounts of spending pressures by Department cannot be accurately assessed. However, the end-March Exchequer Returns provide some indications of areas where there may be some pressures.  As outlined in the analysis of Gross Voted Expenditure published with the Exchequer Returns, at the end of the first quarter, Health gross current spending was over profile by €38 million (1.1%). This would indicate that there is a risk that Health may exceed the allocation set out in the Revised Estimates for Public Services (REV) 2016.

Following the flooding in late 2015 and the early part of this year, it is estimated that an additional allocation for the Department of Transport, Tourism and Sport will be required this year to enable necessary recovery and repair work on transport infrastructure.

While not evident in the end quarter Exchequer returns, it can be anticipated that Departments will have demands for additional resources. These demands can arise in relation to both current and capital expenditure. For example, in the Education sector, re-phasing of funding for the school building programme to 2016 would allow earlier completion of some projects.

It should also be noted that the aggregate level of spending pressures may be somewhat mitigated by savings across Government Departments that can emerge later in the year.

The estimates of fiscal space for the period 2017-2021 set out in Table A.9 of the Department of Finance's Budget 2016 publication sets out the walk between the gross fiscal space consistent with the forecast Expenditure Benchmark and the net fiscal space available over the medium term estimated at Budget time in October 2015 that after taking account, in relation to Voted expenditure, of:

- projected expenditure pressures in Health, Education and Social Protection arising from demographics;

- projected additional expenditure in Agriculture arising from the roll-out of the Rural Development Programme;

- the projected carry over impact of certain Budget 2016 measures;

- the capital expenditure increases in the Public Capital Plan; and

- savings arising from expected lower numbers on the Live Register.

Given that the fiscal space in Table A.9 of the Budget book is calculated by reference to the Expenditure Benchmark estimated in October 2015, additional expenditure in 2016 may become part of the base expenditure for 2017 and consequently should not be expected to impact on the fiscal space available for subsequent years. However, as outlined above, expenditure pressures in 2016 may arise on both current and capital expenditure, and, given the favourable treatment of capital formation increases under the Expenditure Benchmark, any impacts on fiscal space can only be fully assessed when the full details of any additional expenditure in 2016 are available and also in light of consideration of the impact of the General Government Finance statistics for 2015 recently published by the CSO on updated estimates of fiscal space for 2017. 

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