Dáil Éireann Debate, Tuesday - 3 July 2018
2. Deputy Jonathan O'Brien asked the Minister for Public Expenditure and Reform the way in which departmental deficits and overruns accumulated throughout 2018 will be addressed as carry-over costs in 2019; and the way in which this will impact upon budget 2019 and the fiscal stance for 2019. [29111/18]
View answerManaging the delivery of public services within their budgetary allocations is a key responsibility of Ministers and their Departments. Given the scale of overall voted expenditure, the cash basis of Government accounting and the funding implications that unexpected events can have on expenditure requirements, variances or changes from spending profiles can occur for a number of reasons that may result in a requirement for Supplementary Estimates.
The summer economic statement sets out a general Government deficit of 0.2% of GDP in 2018, reducing to 0.1%. To remain within these deficit targets, any overrun in a particular sector would need to be offset by additional revenue or offsetting underspends in other areas.
The driver of any overrun would also impact on the extent of any carry-over cost into 2019. For example, an overrun arising from faster than anticipated progress on a capital project may result in expenditure being brought forward from the following year, whereas an overrun arising from additional unplanned recruitment, not provided within a Department's allocation for the year, would result in an increased carry-over impact in the following year.
The 2018 expenditure report sets out estimated carry-over costs of certain budget measures in the areas of social protection, education and justice. The 2018 summer economic statement provides an updated assessment of €300 million in respect of these costs. This assessment takes into account the budgetary policy as set out in the Revised Estimates Volume, REV, of 2018. To the extent that the Government decides to allocate additional resources this year, it will impact on this policy and potentially on the carry-over costs into 2019, depending on the underlying reason for the overrun.
I want to discuss the Department of Health. The reason for the overspend last year as well as this year is, as we know from statements issued by the Department, the demand for services. As such, these are not once-off costs but are costs which will continue to apply in the next and subsequent years. The Department estimates that we are looking at an overrun to the end of June of €300 million with some suggestions that the Department may seek a Supplementary Estimate at the end of the year of close to €600 million. Surely, that will have an impact on next year's budgets. While I acknowledge that most of the costs have to be borne by the Department itself and that other Departments may not spend all of their budget allocations, I would like the Minister to outline whether this will have an impact in any way on the fiscal space of €800 million for next year. Is it possible it could impact on that?
It will depend on the reason for the overrun. If one looks at the structure of the summer economic statement, one of the major reasons for carry-over costs is the impact of costs generated in the previous year where there is a reasonable expectation that those costs will carry forward into the next year. We are now documenting that more publicly than has been the case in the past. If the Department of Health, or any other Department, incurs a cost and there is a reasonable expectation that it will carry forward into the next year, it can affect the budget calculations for the following year. That is the answer to the Deputy's question. I am now working with the Minister for Health, Deputy Harris, on the drivers of the HSE spending level and seeking to understand forensically what the reasons for it are. As the Deputy knows, we allocated more than €15 billion to the health services for 2018. While the June figures will be published later this evening, expenditure was up 10% at the end of May versus the previous year. The Minister, Deputy Harris, and I are working on the causes of this.
The director general of the HSE is coming before the Committee of Public Accounts on Thursday and today he provided us with the opening statement he intends to make. In that statement, he outlines some of the reasons for those overruns. In the acute hospitals area, the figure last year was €139 million and the director general provides a breakdown in that regard. There were income shortfalls of €73 million, while the main driver of the rest of the figure was the additional activity in service demand, which he expects will continue year on year. While I understand that the Minister is discussing these matters with the Minister, Deputy Harris, when will he have a better idea of whether there will be an impact on the fiscal space available next year? Will we just have to wait for the budget to find that out?
It will be later on in the year because we have to better understand all of the causes of the overspend versus the figures the HSE has published to date. We will have to know what those are in advance of the budget. As such, it will be known before that. I will be working closely with the Minister, Deputy Harris, on that. The director general of the HSE will no doubt put forward a comprehensive view as to the causes of the current spending levels. What is very striking to me is the current change in recruitment levels within our health services. Between the start of January 2018 and the end of April, the HSE has recruited an additional 1,519 whole-time equivalents. This translates as an average of 318 new people being hired to work in our health services every month. That does not sit with some of the narratives that are at times painted about the recruitment difficulties we have with our health services. I am working closely with the Minister for Health on this and we will have to be clear as to where this matter stands in advance of the budget.
