Dáil Éireann Debate, Tuesday - 12 July 2022
343. Deputy Mairéad Farrell asked the Minister for Public Expenditure and Reform the source that the funds for additional inflation-related costs are drawn from in the Inflation Cooperation Framework; the amount that has been spent to date; and if he will make a statement on the matter. [37157/22]
View answer350. Deputy Mairéad Farrell asked the Minister for Public Expenditure and Reform the area from which the additional capital expenditure arising from the Inflation Co-operation Framework will be drawn in relation to the Summer Economic Statement Table 1; and if he will make a statement on the matter. [37825/22]
View answer351. Deputy Mairéad Farrell asked the Minister for Public Expenditure and Reform if capital cover over will be used to cover the additional costs in relation to the additional capital expenditure incurred from the establishment of the Inflation Cooperation Framework; and if he will make a statement on the matter. [37826/22]
View answerI propose to take Questions Nos. 343, 350 and 351 together.
Costs relating to implementation of the Inflation Co-operation Framework (the Framework) are to be met from within existing capital expenditure ceilings. The ceilings detailed in the National Development Plan 2021-30 (NDP) are cognisant of the overall capability of the construction sector to deliver on the NDP and of the appropriate share of National Income being devoted to infrastructure. The levels of capital spending, at close to 5% of GNI*, are already among the highest in the EU and are close to the limit of the overall capability to deliver in the coming decade.
The use of the Framework is voluntary, but participation by the parties is strongly encouraged. It represents a pragmatic and proportionate response to the current challenges caused by inflation that are not within either party’s control.
The Framework facilitates both parties to engage with one another for the purpose of addressing the impacts of this most recent onset of exceptional inflation and supply chain disruption and operates on an ex-gratia basis. It sets down the approaches and the parameters within which parties to a public works contract calculate additional costs attributable to material and energy price fluctuations, on an ongoing basis, using the specified price indices published monthly by the Central Statistics Office.
The measures available under the Framework strike an important balance between the additional costs incurred by the State to support Contractors engaged on public projects and the State’s ability to deliver the NDP including housing delivery, whilst providing value for money for the taxpayer.
The Framework applies to payments made from 1 January 2022 in recognition that inflationary pressures were further building from this point in anticipation of the invasion of Ukraine. The extent of additional payments that will arise on projects going forward will depend on the materials that are to be incorporated, the stage of the project’s development and further movement in prices which is extremely difficult to forecast at this moment.
At this point, parties have begun their initial engagement and any agreement (and costs associated with inflation) will take a period of time to be worked through. Once the initial engagement is complete and the retrospective payments are made, the specified formulae will be applied to each interim payment in the manner set out in the template agreement to determine the cost adjustment (if any) that is due for inflation.
The cost associated with the implementation of the Framework will not be collated centrally. It is managed at a project level by contracting authorities and reported to approving authorities so the impact on their overall capital ceiling can be assessed and the programme adjusted accordingly.
The 2022 capital allocation is €11,403 million. This is an increase of €0.9 billion or 8% on the 2021 allocation and an increase of almost €2.3 billion or 25% on the actual spend (exclusive of carryover) in 2021. In aggregate, including capital carryover, there is €12.2 billion available for capital spending this year. In the NDP, it was clarified that there will need to be an agile approach to funding allocations and in-plan reprioritisation of funding, particularly where underspends and policy changes are apparent.
In relation to the use of capital carryover to fund any additional costs associated with the Inflation Cooperation Framework, Section 91 of the Finance Act, 2004 makes statutory provision for capital carryover by way of deferred surrender. Carryover amounts are published in the Appropriation Act at Vote level and at subhead level in the Deferred Surrender Ministerial Order, which must be made before 31 March in the second financial year. When the resolution approving the Order is passed by the Dáil, the carryover amounts become the first charge against the subheads designated in the Order and are typically spent early in the year.
Virement of deferred surrender amounts, as designated by subhead in the Ministerial Order, is not permissible under any circumstances. Therefore, any deferred surrender amounts that are not spent under the designated subhead by the end of the second year must be surrendered to the Central Fund.
