I propose to take Questions Nos. 216, 217 and 218 together.
Table 3 on Page 22 of the Summer Economic Statement (SES) 2017 set out an amount of €3.2 billion in respect of the estimated net fiscal space for 2019. In arriving at this net amount, the fiscal space impact of certain pre-committed voted expenditure was deducted from the gross fiscal space. The nominal amounts relating to these pre-commitments were set out in Table 1.3 on Page 9 of the Mid-Year Expenditure Report (MYER) 2017, with €0.4 billion of current expenditure in respect of demographics and €0.3 billion of capital expenditure arising from increases set out in the Public Capital Plan and from prior year budget adjustments.
The SES and the MYER did not reflect the impact of the abolition of domestic water charges and the consequent change in funding arrangements for Irish Water. Irish Water expenditure was therefore included within the overall General Government expenditure amounts in the SES, and reflected increases in relation to Irish Water’s capital investment programme. With funding in respect of domestic water services now being provided through voted expenditure, €0.1 billion of the overall year-on-year increase in voted capital expenditure in 2019 arises from the change in funding arrangements for Irish Water and is therefore technical in nature. This technical change was reflected in the multi-annual capital ceilings included in the Revised Estimates Volume (REV) 2018 published in December last year.
Consequently, of the €2.6 billion in voted expenditure pre-commitments set out in the Stability Programme Update 2018, the fiscal space impact of nominal amounts of €0.4 billion in voted current expenditure and €0.4 billion in voted capital expenditure, including the €0.1 billion in relation to Irish Water capital expenditure, were taken into account in arriving at the estimated net fiscal space amount of €3.2 billion for 2019 in last year’s SES.
Table 4 on Page 23 of the SES outlines the indicative allocation of available net fiscal space for 2018-2021. This Table outlines an indicative allocation of €1.5 billion in fiscal space for expenditure in 2019, with over €0.9 billion of this amount for current expenditure and just under €0.6 billion for capital expenditure. This was the pre-Budget position and expenditure allocations made as part of the Budget Estimates process in October last year, set out in Expenditure Report 2018, utilise most of this indicative allocation.
In relation to current expenditure there are pre-commitments that arose after the SES of €0.7 billion that would need to be funded from the current expenditure fiscal space amount or from savings/reprioritisation. There is a cost of €0.4 billion arising in 2019 from the Public Service Stability Agreement (PSSA). This amount was not included as pre-committed expenditure in the SES or the MYER as the agreement at that stage was subject to ratification by the membership of the Public Service Unions and Staff Associations. In addition, as outlined in the Expenditure Report 2018, there was a cost estimated, at that time, of €0.2 billion in respect of the carryover impact of certain Budget 2018 measures that would need to be met from the available resources for 2019 or from savings/reprioritisation. The current estimate of the carryover impact into 2019 is €0.3 billion. This estimated carryover impact will be reviewed in the context of this year’s MYER to take account of expenditure developments during the first half of this year.
In Budget 2018 last October, additional capital was allocated over the four year period 2018 to 2021 following the mid-term review of the Capital Plan. Expenditure Report 2018 set out gross voted capital expenditure amounts of €5.3 billion for 2018 and €6.6 billion for 2019. These amounts were in line with the increases set out in the MYER, with just over €0.3 billion in the pre-Budget position and just under €1 billion to be allocated as part of the Budget 2018 process. The fiscal space impact of the additional capital allocated during the Budget 2018 process is in line with the indicative allocations of fiscal space for capital grants and gross fixed capital formation of just under €0.6 billion in aggregate. Consequently, these increases fully utilise the indicative fiscal space for capital grants and gross fixed capital formation set out in the SES for 2019.
The National Development Plan revised the Departmental capital expenditure ceilings for 2019 to 2021, published in REV 2018, to facilitate the early commencement of a number of funds. The voted capital expenditure amount in the Stability Programme Update for 2019 reflects the additional funding allocated in the National Development Plan in respect of the Rural, Urban, and Innovation Funds. With the cost of the funds being partly covered by an unallocated capital reserve, the additional cost arising in 2019 is less than €0.1 billion.
Consequently, the expenditure pre-commitments outlined in the Stability Programme Update that arose after publication of last year’s SES and MYER amount to €1.8 billion, with an impact of c. €1.4 billion after taking into account the estimated effect of the capital smoothing adjustment that applies under the Expenditure Benchmark.