7 Dec 2018, 09.59

Dáil Éireann has been asked by Government to approve Supplementary Estimates in relation to sixteen Votes; twelve of which are substantive, i.e. they require significant additional net Voted allocations. PBO Briefing Paper 16 of 2018 compares the Supplementary Estimates 2018 with the original Revised Estimates for Public Services 2018 previously approved by the Dáil. The net amounts sought, in respect of substantive Supplementary Estimates, ranges from €3.5 million to €655 million; the individual Vote percentage increases range from 1.5% to 5%. The Supplementary Estimates are currently being scrutinised by the relevant sectoral Select Committees.

The Director of the Parliamentary Budget Office, Annette Connolly, commenting on the Supplementary Estimates 2018 stated that:
“When Budget 2019 was presented by Government to the Dáil, I noted as a matter of concern the fact that in addition to the significant increases in expenditure for 2019, it appeared that this year’s expenditure would also be increased by over €1 billion by way of Supplementary Estimates (many of which recur annually). This increase has now transpired to be almost €1.3 billion. No performance data has been presented that would clarify how Departments’ output targets are going to change as a result. The substantial increase in expenditure this year should be considered in conjunction with the significant additional expenditure set out in Budget 2019 and the real possibility of further increases in 2019 (also by way of Supplementary Estimates).
This is of particular concern in relation to the Health Vote and the HSE’s National Service Plan. My Office has identified challenges in relation to this expenditure that should be immediately addressed to help mitigate the risk of a Supplementary Estimate in 2019."

"Other issues of concern include that only four Votes have made significant off-setting savings, that Departments are seeking additional capital allocations while under-profile (in capital expenditure) with only one month left in the year, and that pensions expenditure which is again being significantly under-estimated in some Votes is obscuring what is being spent on today’s public services." 

"Finally, I note that the practice of savings within the Employment Affairs and Social Protection Vote paying for the non-contributory Christmas Bonus has come to an end. This strengthens the case for including the Christmas Bonus in the Revised Estimates for Public Services rather than having Supplementary Estimates each year. This echoes similar advice by the Fiscal Advisory Council.”

The key issues identified by the PBO are that:

The request from Government to Dáil Éireann for Supplementary Estimates in 2018 amounts to €1.288 billion which is 2.6 times higher than that approved for 2017. The number of Votes seeking Supplementary Estimates this year has also grown by a quarter from last year (sixteen Votes in 2018 from twelve in 2017);

Looking at the increase in expenditure from 2017 to 2019, including the additional expenditure announced in Budget 2019 and the clear risk that substantive Supplementary Estimates will be sought in 2019, it is clear the Voted expenditure is growing at a faster rate than economic growth. Unless accompanied by sustainable increases in tax revenue this is not a prudent approach;

In addition to the recurring nature and significant amount of the proposed increase in expenditure it is of concern that it was not accompanied by any data relating to changes in performance targets;

In the context that the Dáil approved Budget 2018 and that specific Voted allocations were included therein, it could be expected that Departments would manage the services to be provided within those allocations. That has not proven to be the case again this year. Most Departments have not made significant savings to offset the additional expenditure now being sought – for example, significant savings were made in respect of only four of the twelve Votes where substantive Supplementary Estimates are sought;

The total increase in gross capital expenditure in the Supplementary Estimates is approximately €167.6 million. The increase in the allocation for Local Authority Housing of €120 million is the most significant amount. It represents a 21.4% increase in the original allocation to Local Authority Housing. At this late stage of the annual budgetary cycle, and in the absence of known overspends, this allocation invites further scrutiny. Questions that arise include whether the additional allocation can be spent in-year and, presuming it can, how many additional housing units will be delivered as a result?

The Supplementary Estimate being requested in 2018 by the Department of Health for Vote 38 is €655 million. This is equal to 4.4% of the original net allocation for the Vote. Supplementary Estimates under the Health Vote, or the HSE Vote prior to 2015, are a recurring feature of the annual budgetary process. The additional allocation of €655 million is not accompanied by any changes in performance output targets. In order to decrease the likelihood of future large Supplementary Estimates, issues with the budgetary framework of the health service should be addressed;

Education and Skills has a pattern of recurring annual Supplementary Estimates for pensions expenditure. This additional funding for pensions does not affect the current service levels being funded by the Vote, i.e. the Supplementary Estimate 2018, while appearing to increase investment in the Education Sector, does not do so. Pensions are the legacy cost of the provision of public sector services. A more robust forecasting model should be used to underpin public pension funding requirements in the Budget, thus avoiding the need for such Supplementary Estimates. In addition, amendments could be made (as previously suggested by the PBO) to the format of Votes to ensure that pension costs do not obscure what is being spent on current services rather than legacy costs;

In order, partly, to provide for a 100% Christmas Bonus a Supplementary Estimate of €139 million is being sought in respect of the Employment Affairs and Social Protection Vote. In recent years Live Register savings have been used to pay for the Christmas Bonus. This year there are no significant Live Register related savings forecast to be made. It therefore appears that the non-contributory Christmas Bonus 2018 payments now require additional Voted expenditure.

The publication can also be found here

For the attention of editors

Established in August 2017, the Parliamentary Budget Office is a key source of financial and budgetary intelligence for Members of the Oireachtas and in particular for the Dáil Committee on Budgetary Oversight as it conducts ex-ante scrutiny on budgetary matters. It is an independent specialist unit within the Houses of Oireachtas Service.

The need for the office was identified by the OECD in its review of budget oversight by the Irish Parliament. The Oireachtas Sub-Committee on Dáil Reform, in its final report in May 2016, recommended that the office be established.
The PBO has published a wide range of publications and these are available on the Houses of the Oireachtas website.

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