Thursday, 20 June 2019

Questions (9)

Barry Cowen


9. Deputy Barry Cowen asked the Minister for Public Expenditure and Reform the purpose of the three-year expenditure ceilings; his views on whether they are useful in controlling spending; his further views on the analysis from the Irish Fiscal Advisory Council; and if he will make a statement on the matter. [25802/19]

View answer

Oral answers (14 contributions) (Question to Public)

The question speaks for itself but it relates to departmental expenditure ceilings. I am conscious of the commitment made by the Minister yesterday regarding departmental benchmarks, which seems to suggest he agrees with our contention that the departmental ceilings have become a thing of the past and there is a need for a change.

I did not make any comment yesterday that could be interpreted as saying these ceilings are a thing of the past, as Deputy Cowen knows. Nonetheless, the Irish Fiscal Advisory Council expressed views on the implementation of expenditure ceilings. In the next few weeks, our expenditure report of 2019 will set out the revised baseline for current expenditure to 2021, taking account of pre-commitments relating to demographic pressures mentioned earlier, public service pay agreements and the estimated carry-over impact of certain budget measures. The ceilings also contain an amount of unallocated resources in 2020 and 2021, based on the fiscal projections at budget time last year. This will allow choices to be made for next year and the years thereafter. The approach currently adopted in the management of expenditure ceilings is consistent with our efforts to manage public expenditure. In recent years, growth in current expenditure has averaged approximately 4%, whereas the figure a decade ago was 11%

The expenditure ceilings have been significantly exceeded. Last year, for example, the figure for current expenditure was €57 billion but outturn was almost €63 billion. It would appear that despite the best of intentions in setting these ceilings, they are consistently not met in many areas and there are no repercussions or changes in how they are dealt with thereafter. Yesterday, the Minister indicated he wanted to put in place departmental expenditure benchmarks. I would like him to elaborate on that statement. Is this in response to the fact that some Departments consistently exceed their ceilings with no obvious repercussions or mechanism to arrest the process? There are no consequences because of the windfall in corporation tax receipts.

I was referring to a different matter yesterday. I said that with the economy in a surplus position, if the fiscal rules in the coming years were interpreted as they were drafted, it would allow a higher rate of expenditure growth than is appropriate for an economy growing at the current rate. This is the approach we used in last year's budget when a decision was made to try to get to a position of balance, and that came about. I indicated that we should have a debate in the Oireachtas on whether different rules should be put in place for expenditure growth in the coming years, given the rate of growth in the economy, the level of employment and the fact that we are aiming to move to a budgetary surplus this year.

Deputy Cowen made a point on different Departments but a small number of these Departments have been in breach of the expenditure ceilings.

That is not to underestimate those consequences.

Perhaps the Minister might expand on his final comment regarding not underestimating those consequences, if he will not expand on any other point. There has been, as I have said, a growing dependency in recent years on being lucky with the corporation tax windfall. Those funds have been used to pay down on the various ceilings that have been exceeded. If the Minister is conscious of some consequences that need to be addressed, perhaps he might elaborate.

The consequence I was referring to in my earlier remark was the understandable debate that has now arisen regarding the variation in our in-year spending for the implementation of the budget. It is particularly varied in respect of spending in the Department of Health. On the point Deputy Cowen made regarding reliance on corporation tax receipts, I have acknowledged and do acknowledge that that is a risk. That is, however, the reason that this year we put up the VAT rate on the hospitality and services sector. That increase was facilitated by many parties within this House precisely because of the need to broaden our tax base and ensure that we do not become too reliant on a particular tax head. That is also the reason why we have built our budgetary figures for this year off a lower level of corporate tax collection than we received last year.

The Minister is referring to broadening the tax base rather than to tax cuts.

It is correct to say that there is a risk but that is why we are continuing on our journey to ensuring that this reliance does not build.

It is a broadening of the tax base-----

No, I am sorry Deputy Cowen.

-----rather than a reduction of taxes.

The Minister should ask his leader.

We must move on. I understand that the Minister is taking Questions Nos. 10, 15 and 16 together. Deputy Jonathan O'Brien has agreed to let the Minister answer without introducing his question. All Members can ask questions once the Minister has given his reply.